As filed with the Securities and Exchange Commission on ____________, 2000
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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-SB
GENERAL FORM FOR REGISTRATION OF SECURITIES
OF SMALL BUSINESS ISSUERS
Under Section 12(b) or (g) of the Securities Exchange Act of 1934
COLLECTIBLE CONCEPTS GROUP, INC.
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(Name of Small Business Issuer in its charter)
Delaware 95-4026880
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(State or other jurisdiction of (I.R.S. Employer Identification No.)
incorporation or organization)
1600 Lower State Road, Doylestown, PA 18901
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(Address of principal executive offices) (Zip Code)
Issuer's telephone number: (215) 491-1075
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Securities to be registered under Section 12(b) of the Act: None
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Securities to be registered under Section 12(g)
of the Act: Common Stock, $.001 par value
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COLLECTIBLE CONCEPTS GROUP, INC.
FORM 10-SB
TABLE OF CONTENTS
PART I......................................................................5
ITEM 1 - DESCRIPTION OF BUSINESS............................................5
(a) Business Development.............................................5
(b) CCGR's Business..................................................6
o The Company's Current Product Lines............................6
(b)(2) Marketing Strategy.............................................9
(b)(3) Status of any Publicly Announced New Products..................11
(b)(4) Competition....................................................11
(b)(5) Raw Materials..................................................11
(b)(6) Customers......................................................11
(b)(7) Patents, Trademarks, Licenses, etc.............................12
(b)(8) Governmental Approvals.........................................12
(b)(9) Governmental Regulations.......................................12
(b)(10) Research and Development.......................................12
(b)(11) Environmental Laws.............................................12
(b)(12) Employees......................................................12
ITEM 2 - MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS...............................12
ITEM 3 - DESCRIPTION OF PROPERTY............................................17
o Nature and Extent of Issuer's Facilities.............................17
ITEM 4 - SECURITY OWNERSHIP OF CERTAIN
BENEFICIAL OWNERS AND MANAGEMENT............................................18
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ITEM 5 - DIRECTORS, EXECUTIVE OFFICERS, PROMOTERS
AND CONTROL PERSONS.........................................................19
(a) Directors and Officers...........................................19
(b) Key Employees....................................................20
(c) Family Relationships.............................................20
(d) Legal Proceedings................................................20
ITEM 6 - EXECUTIVE COMPENSATION.............................................20
(a) Summary Compensation Table.......................................20
(b) Options/SAR Grants...............................................21
(c) Aggregated Option/SAR Exercises and Fiscal
Year-End Option/SAR Value........................................21
(d) Long-Term Incentive Plans........................................21
(e) Compensation of Directors........................................21
(f) Employment Contracts and Termination of
Employment and Change in Control Arrangements....................22
(g) Report on Repricing of Options/SARS..............................22
ITEM 7 - CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS.....................22
ITEM 8 - DESCRIPTION OF SECURITIES..........................................23
(a) Common Stock.....................................................23
(b) Convertible Debt.................................................24
(c) Warrants, Options and Anti-Dilution Rights.......................24
o Transfer Agent.................................................24
o Registration Rights............................................24
o Anti-Takeover Provisions.......................................25
o Authorized but Unissued Shares.................................25
o No Cumulative Voting...........................................25
o Report to Shareholders.........................................25
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PART II.....................................................................26
ITEM 1 - MARKET PRICE OF AND DIVIDENDS ON THE REGISTRANT'S
COMMON EQUITY AND OTHER SHAREHOLDER MATTERS ................................26
(a) Market Information...............................................26
(b) Holders..........................................................26
(c) Dividends........................................................26
ITEM 2 - LEGAL PROCEEDINGS..................................................27
ITEM 3 - CHANGE IN AND DISAGREEMENTS WITH ACCOUNTANTS.......................27
ITEM 4 - RECENT SALES OF UNREGISTERED SECURITIES............................27
ITEM 5 - INDEMNIFICATION OF DIRECTORS AND OFFICERS..........................28
PART F/S - FINANCIAL STATEMENTS.............................................*
PART III - ITEM 1 - INDEX TO EXHIBITS.......................................29
*Following the signature page
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PART I
ITEM 1 - DESCRIPTION OF BUSINESS
(a) Business Development
Background. Collectible Concepts Group, Inc. ("CCGR" or the "Company")
was originally formed on March 1, 1986 as "Amour Corporation". It changed its
name to "Bard Sports Corp." in September 1988, and changed its name again on
February 28, 1993 to "USA Sports Corp". The Company most recently changed its
name to "Collectible Concepts Group, Inc." on April 27, 1999. The Company is
incorporated under the laws of the State of Delaware.
The Company is focused on creating and distributing high-end and
novelty products related to both the entertainment and sports industries. During
fiscal 2000, the Company's revenues were primarily derived from the sale of
collectible products related to the Austin Powers films. In May 1999, the
Company was granted licensing rights by New Line Cinema to manufacture, sell
and distribute collectibles relating to the Austin Powers films. The Company has
shipped orders of Austin Powers merchandise to approximately 4,500 retailers
since production began in June 1999. In November, 1999 the Company was granted a
non-exclusive license by Marvel Characters, Inc. to sell and distribute
novelties and collectibles based upon certain X-Men character props as they
appear in the X-Men film scheduled to be released in July 2000. The Company also
has non-exclusive licenses to sell and distribute novelties and collectibles
based on props from the Terminator movies.
The Company sells its products through retailers, distributors,
department stores and catalogers. Currently CCGR has placed its products in over
4,500 retail locations including Spencer Gifts, Claire's Boutique, Electronic
Boutiques, We're Entertainment, Hot Topics, Halloween and costume shops, and a
growing list of retailers. CCGR has expanded its marketing horizons to Internet
E-commerce, with its websites: Austin Powers Collector's Club.com, Mini-V.com,
collectbaseball.com and soon to go online Terminator and X-MEN websites. CCGR's
products are sold on all major E-commerce sites, including Amazon.com, BigE.com,
Newline.com and Moletown.com. The Company believes that it is respected for the
quality and authenticity of its merchandise.
Prior Operations. The Company was incorporated in Delaware on March 1,
1986 to engage in the business of custom designing and importing sports
equipment and accessories. In 1991, the Company acquired the marketing rights to
All Sports Tattoos, a collection of removable tattoos licensed by the Collegiate
and National Football League. In October 1993, the Company acquired all of the
outstanding capital stock of Sports World Production, a corporation engaged in
the business of producing sports collectibles and organizing and promoting
sports autograph shows. In 1994, the Company established USA Tellcards, a new
division formed for the purpose of creating and marketing collectible and
promotional prepaid phone cards. In February 1995, the Company purchased an 80%
interest in USA Diversified Plastics, Inc., a corporation that was formed for
the purpose of manufacturing point-of-purchase plastic products and phone cards
for wholesale distribution. In 1996, the Company acquired the Atlantic City
Seagulls, a franchise purchased from the United States Basketball League. The
Company operated the franchise for one year as a general partner. The Company
discontinued operations in All Sports Tattoos, Sports World Production, USA
Tellcards and USA Diversified Plastics. In 1995 and 1996, the basketball team
and other operations were discontinued because they were not profitable, the
Company lacked working capital to support them, and because management had
identified more promising opportunities.
The Company acquired its current management team in 1992. Since this
change in management, the Company has engaged in various business activities
relating to marketing of sports-related events and collectibles. As discussed in
greater detail below, the Company is now focused on creating and distributing
high-end and novelty products related to both the entertainment and sports
industries.
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(b) The Company's Business:
The Company's Current Product Lines.
The Company believes it has developed a successful process for identifying,
designing and marketing unique products for its target markets. The Company's
development process includes researching, developing and effectively
merchandising and packaging its products in a manner consistent with its product
image. The Company enhances its product development process by giving careful
attention to design and price points and through its proven method of testing
new products with selected retailers and consumers prior to introduction. The
Company believes that its close relationships with its suppliers, retailers and
customers allow it to quickly introduce new products, accurately estimate
consumer demand, promptly identify new product categories and trends regarding
existing lines, and substantially reduce development costs.
Stadium Collectibles. In 1998, most of the Company's revenues were
derived from the sale of the Company's Stadium Collectibles product line. The
Stadium Collectibles product line includes a Yankee Stadium Lithograph, which
contains an authentic piece of a bench that was housed in Yankee Stadium in
1973, and smaller segments of the same Yankee Stadium bench and authentic bricks
from the Ebbets Field stadium rotunda. The Company's target markets for its
Stadium Collectibles product line are sports fans and collectors. The Company
intends to increase its efforts to reach the target market for its Stadium
Collectibles through Internet links and its own website.
Austin Powers Collectibles. The Company's current business plan is to
concentrate most of its effort on cultivating business relationships with film
production companies that may lead to opportunities for the Company to purchase
licensing rights to market products that are based on motion pictures. To this
end, the Company entered into a Merchandise License Agreement with Time Warner's
New Line Cinema Division in May 1999 (the "New Line License" or "Agreement").
According to the New Line License, the Company was granted the exclusive right
to manufacture, sell and distribute in the United States and Canada certain
collectibles relating to the film "Austin Powers: International Man of Mystery"
and its sequel, "Austin Powers: The Spy Who Shagged Me," which was released in
theatres in the summer of 1999. In exchange, the Company has agreed to pay New
Line a royalty in an amount equal to ten percent (10%) of the Company's gross
sales of the Austin Powers product line. In addition, pursuant to the Agreement,
the Company has paid Thirty Thousand Dollars ($30,000) to New Line as a
non-refundable advance (the "Advance"). The Advance will be applied against
royalties derived from sales made by the Company pursuant to the New Line
License. The Company also guaranteed that the minimum aggregate amount of
royalties paid to New Line during the term of the Agreement (including the
Advance) will be One Hundred Thousand Dollars ($100,000). The Company received
revenues of approximately $273,000 from Austin Powers products in the year ended
February 29, 2000, constituting approximately ninety-two percent (92%) of its
revenues. Through February 29, 2000, the Company had paid New Line approximately
Thirty Thousand Dollars ($30,000) in royalties. The term of the agreement is
through December 31, 2001. If the Company has not paid $100,000 in royalties by
that date, it will be required to pay the shortfall to New Line.
The Company considers the New Line License to be a major marketing and
sales opportunity. The Company was granted the license to manufacture and market
a unique line of collectible merchandise to commemorate the Austin Powers films.
These collectibles include various props from the films, including replicas of
Dr. Evil's ring, the Jumbo Jet, the Male and Female Charm Symbols and the
Swinger License Plate.
The Company has also developed "The Bag of Shhh!," another collectible
based on the Austin Powers films. "The Bag of Shhh!," based on a term used by
Dr. Evil, a character in the films, is silver to match Dr. Evil's costume and
bears the Dr. Evil company logo. When the bag is squeezed, it responds with an
audible "shhh!." On October 1, 1999, the Company established "The Official
Austin Powers Collectors Club" as part of its marketing program. The Company has
established a website for this club at www.powersclub.com. For $19.95, the Club
offers prospective members a unique set of items, not available elsewhere, (e.g.
Dr. Evil's money clip, and Austin Powers computer wrist pad, etc) and a variety
of other exclusive items, including "inside info" about Austin Powers and other
film characters. The Club is promoted both on the Web (links and banners) and on
radio and TV spots. The Company's target markets for its Austin Powers product
line are fans of the Austin Powers films and collectors.
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Verne Troyer License and Website. The Company has an agreement with
Verne Troyer, also known as "Mini V", who played Mini Me in the second Austin
Powers film. Under this agreement, the Company operates a Mini-V fan club and
website, and sells merchandise related to Mr. Troyer's character. The Company is
currently working with Mr. Troyer to develop new products related to his Mini V
character to be sold on the website.
Planned New Product Line: X-Men Novelties and Collectibles. In November
1999, the Company signed a License Agreement with Marvel Characters, Inc., which
grants the Company the non-exclusive right to market and sell in the U.S. and
Canada novelties and collectibles based on certain X-Men comic character props
which will appear in the new X-Men full-length Twentieth Century Fox motion
picture. The movie is scheduled for release in July, 2000 and stars Patrick
Stewart, Ian McKellan, Rebecca Romijn-Stamos and Halle Berry. The licensed
articles include the following novelties: graduation rings, dog tags, pins and
belt buckles. The licensed articles also include collectible resin replicas of
the black jet and the team motorcycle, and resin or metal replicas of Cyclop's
Visor, Magneto's Helmet, Professor X's Computer and other products. The Company
expects products offered through this license will broaden its retail and
e-commerce accounts. The Company has also been licensed to create an X-Men
Collector's Club, which will be offered via website, direct mail brochures and
display advertising in record and video stores.
The Marvel license has a term through December 31, 2002. The Company is
required to pay a royalty of ten percent (10%) on sales of licensed products,
with a minimum royalty of $45,000. The Company has paid $15,000 of the minimum
royalty and is required to pay the remainder by August 1, 2000.
Planned New Product Line: Terminator 1 and 2 Novelties and
Collectibles. In June 1999, the Company entered into licensing agreements with
Canal+ DA of France and Creative Licensing to market products related to the
films "Terminator" and "Terminator 2: Judgment Day," respectively. According to
these licenses, the Company was granted rights to manufacture, sell and
distribute certain collectibles relating to these films worldwide. In exchange,
the Company has agreed to pay Canal+ DA and Creative Licensing ten percent (10%)
of the Company's gross sales of the Terminator product lines under their
respective licensing agreements. In addition, Canal+ DA and Creative Licensing
each received a non-refundable $7,500 advance that will be applied against
royalties derived from sales made by the Company pursuant to these license
agreements. The Company also guaranteed that the minimum aggregate amount of
$15,000 in royalties will be paid to Canal+ DA and $15,000 in royalties to
Creative Licensing during the term of the licensing agreements. The licensing
agreements expire on December 31, 2001. The Company does not anticipate
significant sales of this product line until September 2000.
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Collectbaseball.com Website. In early May 2000, the Company launched
the collect baseball.com website, which is devoted to baseball fans and baseball
memorabilia collectors. While the website will offer memorabilia from different
baseball eras, it is targeted to the "Golden Age" of baseball, in the 1950's and
1960's. The products offered on this website include a proprietary product, the
Permagraph(TM), a product designed to preserve fragile autographs which are
otherwise highly likely to deteriorate over time. Each Permagraph(TM) includes
real autographs on enameled metal, mounted on an ebony-toned plaque. The
collectbaseball.com site will also include authentic memorabilia including
photos, autographs and artworks of such players as Hank Aaron, Mickey Mantle,
Nolan Ryan, Ken Griffey, Jr., Cal Ripkin and Roberto Alomar. The collection
offered on the site also includes signed baseballs, special lithographs of old
baseball stadiums, such as Ebbets Field, and other collectibles. This site began
producing a small amount of revenues for the Company shortly after its opening
in May, 2000.
The Boys of Summer. The Company has entered into a contract with JMJ
Films ("JMJ") that entitles the Company to ten percent (10%) of JMJ's net
revenue in a movie project titled "The Boys of Summer." In exchange, the Company
loaned to JMJ an aggregate of $55,000. Representatives of JMJ have assured the
Company that it will be accorded favored status with respect to licensing rights
to market memorabilia if the film is produced and distributed, however, the
parties have not signed a formal written commitment to this effect.
"The Boys of Summer" is based on a book by the same name that was
written by famed sportswriter Roger Kahn. The book was published by Harper
Collins and is now in its 42nd printing. Production of the film has not begun
and is contingent upon JMJ negotiating acceptable terms for financing and
distribution of the film. There is no assurance that the movie will receive
adequate funding or that the value of the Company's investment will be returned.
In addition, contracts relating to the financing and distribution of the film
may restrict the Company's right to market memorabilia based on the film.
S.D. Studios, Inc. In 1997, the Company entered into an Option
Agreement with S.D. Studios, Inc. ("SDS"). SDS is a manufacturer, distributor
and marketer of high-end replicas of props and weaponry for motion pictures and
television shows. SDS had obtained a license to manufacture collectibles based
on motion pictures depicting the characters James Bond and Judge Dredd. On
January 1, 1998, the Company exercised its Option and acquired a 51% ownership
interest in SDS, and, in exchange, the Company issued 1,200,000 shares of the
Company's Common Stock to SDS and agreed to make its best efforts to reduce
approximately Two Hundred and Fifty Thousand Dollars ($250,000) in debt incurred
by SDS. Later in 1998, the Company acquired an additional 16% ownership interest
in SDS in exchange for an additional 500,000 shares of Common Stock of the
Company.
Some time after its acquisition of ownership in SDS, the Company
encountered policy differences with SDS' management and decided that it would
shift its resources towards developing collectibles for a more youthful market.
To this end, the Company entered into a Business Separation Agreement with SDS
on April 28, 1999 (the "Separation Agreement"). Pursuant to this Separation
Agreement, SDS will be solely liable for all debts, obligations, undertakings,
liabilities, commitments or claims of SDS ("Obligations") incurred prior to
January 1, 1998 and after April 28, 1999. In turn, the Company will be solely
liable for all obligations incurred between January 1, 1998 and April 28, 1999.
Both the Company and SDS agreed to indemnify the other against any liability or
claims arising from their respective obligations. Further, under the terms of
the Separation Agreement, the officers and directors of the Company agreed to
resign from all positions they held as directors, officers or employees of SDS
and tender to SDS their shares of the SDS's Common Stock. Similarly, the
officers and directors of SDS agreed to resign from all positions they held as
directors, officers or employees of the Company and tender to the Company their
shares of the Company's Common Stock. The SDS Common Stock that was ultimately
relinquished by the Company's directors, officers or employees according to the
Separation Agreement included all of the SDS Common Stock that was originally
acquired by the Company pursuant to the Option Agreement.
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Pursuant to the Separation Agreement, the Company and SDS have each
assumed a prorated amount of the outstanding balance owed by the Company and/or
SDS to vendors that performed services relating to products manufactured by SDS.
In addition, SDS has agreed to manufacture forty-five briefcases relating to the
James Bond films, and the Company has agreed to pay One Hundred Dollars ($100)
for each briefcase. The Company retains the right to sell these briefcases and
collect all profits realized on their sale. In addition, SDS will make a
reasonable effort to sell sixty attaches relating to the James Bond films, and
the Company is entitled to receive a royalty payment of One Hundred Dollars
($100) on the sale of each attache.
The Separation Agreement provides that the Company is entitled to
receive a five percent (5%) royalty payment on the first One Hundred Thousand
Dollars ($100,000) of sales made by SDS to any member of the client base
established through the Company's efforts. Upon receiving the first royalty
payment, the Company will be entitled to receive a six percent (6%) royalty
payment on the next One Hundred and Fifty Thousand Dollars ($150,000) of future
sales and another five percent (5%) on the next Two Hundred and Fifty Thousand
Dollars ($250,000) of future sales, with such entitlement to royalty payments
expiring five years from the date of the Separation Agreement.
(b)(2) Marketing Strategy:
The Company creates and markets unique collectible products for the
entertainment and sports markets. The Company is not a manufacturer, but rather
sources its products from a wide range of manufacturing partners throughout the
world.
The Company markets its products through various sales organizations
that collectively cover all of North America. The Company utilizes outside sales
representatives calling on the toy, gift, electronic, auto, novelty, Halloween
costume, food and drug chains and distributors. The Company also markets "clubs"
and other merchandise online on its own websites. The Company's independent
representatives call on mass merchandisers such as Target, Wal-Mart and K-Mart
as well as smaller chains and independently owned stores. As of May 5, 2000,
products from the Austin Powers product line were available in over 4,500 retail
locations.
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The Company also plans to market its products internationally. For
example, there is strong demand for Terminator merchandise in Europe. The
Company's Terminator licenses permit worldwide distribution of the Company's
products. The Company's other licenses are generally only for U.S. and Canadian
distribution. The Company plans to request an expansion of its current licenses
for other products to include worldwide distribution of its products. This will
permit response to growing demand for the Company's products in the U.K.,
France, and a growing list of foreign markets.
The Company's marketing program is focused on: (1) the creation of
unique collectible products tied to well known licensed properties, (2) the
establishment of the Company as the premier firm in the creation and management
of web-based "Collectors Clubs" and (3) utilization of the Company's reputation
in authenticity of collectibles to establish "the Collectory" as an Internet
clearing house.
The Company plans to expand its product line to include more
entertainment-based collectibles and novelty products. It also plans to develop
and market more sports-related products and intensify its efforts to market its
existing sports collectibles product line. The Company intends to maximize and
expand its business through a variety of marketing efforts, including the
development of its own Internet website, participation in trade shows, and
posting of advertisements on the internet and at point-of-purchase retail
displays. Of course, this marketing strategy will require increased funding and
there is no assurance that the Company will obtain the necessary funding to
effect its marketing plan.
Exclusive Licensing Agent Agreement. In August 1998 the Company entered
into an Exclusive Licensing Agent Agreement with Building Q. At the initiation
of this Agreement, Building Q received 3,000,000 shares of the Company's common
stock. Building Q is entitled to a commission of 2% of all Company sales from
licenses negotiated, acquired or introduced during the term of the Agreement,
and is paid a $2,500 per month as a consulting fee. The Agreement runs for terms
of one year, beginning with August 1, and can be terminated upon at least 60
days notice prior to the expiration of the current term.
Required Financial Resources. In addition to posing substantial risks,
the Company's business plan requires substantial amounts of capital to begin,
and later to continue to expand, the Company's operations. The Company has
substantial accrued expenses and loans payable. The Company does not currently
have sufficient financial resources to meet these obligations and will depend on
new outside financing to satisfy its pending obligations. The Company also lacks
adequate financial resources to purchase inventory and meet all of the financial
commitments necessary to enter into new product ventures, and will depend on new
outside financing to further these efforts. There can be no assurance that the
Company will obtain adequate outside financing to purchase inventory, meet its
current obligations or continue to expand its operations.
Further, the Company's success in marketing products based upon motion
pictures is largely dependent upon the box office success of the films. Thus,
there can be no assurance that any licensing rights that the Company may obtain
will prove profitable.
Potential Acquisitions. The Company is seeking to expand its product
line by strategic acquisitions. The Company currently is negotiating for two
acquisitions, although no definitive agreements have been executed. One of the
potential acquisition targets is a company which markets autographed and other
collectible music album cover artwork. The other is a company which markets
novelties under license with professional and amateur sports teams.
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(b)(3) Status of Publicly Announced New Products:
The Company's current planned new product lines, X-Men novelties and
collectibles, Terminator 1 and 2 novelties and collectibles and the
collectbaseball.com website are described above. The Company has designed and
contracted with manufacturers for the production of the various X-Men products.
As of May 16, 2000, the Company had received approximately $500,000 in purchase
orders for X-Men products, mostly from retail outlets. As of that date,
production had begun on all of the products for which the Company had orders,
and the Company expects to ship these products no later than the end of May
2000. The Company expects that it will not offer significant Terminator products
until a new Terminator movie is released.
(b)(4) Competition:
The Company believes that direct competition for obtaining licenses in
its primary business line, reproductions and collectibles based on movie props,
is not a factor. Generally, the Company believes it will receive licenses in
most of the cases where it seeks them. However, most of these licenses will be
non-exclusive. Even though these licenses are non-exclusive, the Company has not
experienced direct competition in the form of other companies licensing and
producing the same collectibles. The Company experiences its most significant
competition in obtaining shelf space in retail outlets for its products. For
example, a large toy company might offer products on a movie for which the
Company is selling prop replicas. Even though the large toy company's product is
not the same as the Company's product, a retail outlet may decide that it only
wants to allocate a certain amount of space to products based on that movie, and
may be more likely to give the shelf space to the large toy company that is its
regular supplier.
There are numerous outlets and venues for baseball collectors to obtain
the baseball memorabilia and collectibles offered by the Company. However, the
Company believes that some of its products are unique and that the
collectbaseball.com website will provide a unique venue for sale of these
products.
(b)(5) Raw Materials:
The Company does not manufacture its own products, but relies on
outside manufacturers. Most of these outside manufacturers are in Hong Kong and
China. The Company believes that there are sufficient numbers of manufacturers
that it will not have to rely upon any single source and will be able to obtain
alternative manufacturing facilities if chosen manufacturers do not perform. The
Company generally enters into exclusive manufacturing agreements with its
manufacturers for a single product, but may use various manufacturers for all of
the products in a series. The main raw materials used by the Company's
manufacturers are plastics, pewter, resins and packaging material. The Company
does not believe that there is any significant risk of shortages in these raw
materials, nor is fluctuation and the price of these raw materials likely to
have an adverse impact on the Company's costs or profit margins. All of the
Company's manufacturing agreements are U.S. dollar denominated, so the Company
generally does not face exchange rate risks.
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(b)(6) Customers: In the fiscal year 2000, 27.3 percent of the
Company's sales were to Spencer Gifts, 7.6 percent of the Company's sales were
to New Line Cinema (representing sales of Austin Powers merchandise that the
Company sold to New Line for New Line to use for promotional purposes) and 5.6
percent of sales were to Tower Records stores. The Company does not believe that
sales in fiscal 1999 were representative of its sales in 2000 or in the future.
(b)(7) Patents, Trademarks, Licenses, etc.: The Company has several key
licenses on which the continued success of its business is dependent. These
include the license with New Line for collectibles related to the Austin Powers
films and the licenses for planned new products including the license with
Marvel Characters for collectibles related to the X-Men film, the licenses with
Canal + DA and Creative Licensing for products related to the Terminator films.
(b)(8) Governmental Approvals: The Company's operations are not
dependent on any specific government approvals.
(b)(9) Governmental Regulations: The Company's operations are not
significantly impacted on any specific government regulations.
(b)(10) Research and Development: The Company has no significant
research and development activities.
(b)(11) Environmental Laws: The Company's operations are not
significantly affected by environmental regulations.
(b)(12) Employees: As of May 2, 2000, the Company had twelve full-time
employees, two part-time employees and three independent consultants. The
Company has not had any material employee relations problems or disputes.
ITEM 2 - MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
General
The Company receives revenues from distributing high-end and novelty
products related to both the entertainment and sports industries and sells those
products through retailers, distributors, department stores, the internet and
catalogers. During the fiscal year ended February 29, 2000 ("fiscal 2000"),
licensing agreements were signed with Time Warner's New Line Cinema Division,
Marvel Characters, Creative Licensing Corp., and Canal+ DA, for the manufacture,
sale and distribution of products related to the Austin Powers, Terminator and,
soon to be released, X-Men movies. The signing of these agreements was part of
the Company's ongoing plan to become a media-based, sports and entertainment
product company. Consistent with this growth, a substantial portion of the
current year's revenues was attributable to the sales of products from the
Austin Powers movies. During fiscal 1999 and prior fiscal years, the Company's
revenues were derived exclusively from the sale of products related to the
sports industry.
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In the second quarter of calendar year 2000, the Company will begin to
ship to its established retail outlets, products related to the upcoming X-Men
movie. The Company has already received, and continues to receive, orders for
these products. In addition to the sale of products provided for by the
licensing agreements, the Company has the right to operate official fan clubs
associated with these movies. As of February 29, 2000, the Austin Powers
internet fan club was fully functioning and producing revenue for the Company.
The remaining movie-related internet based fan clubs are currently under
development Also, just completed is a website devoted to the "Golden Age of
Baseball" (www.collectbaseball.com).
As a result of the Company's association with the Austin Powers movie,
in addition to the sale of related products, it has obtained the promotional
rights to Vern Troyer, the diminutive star who played "Mini-Me" in the Austin
Powers movie,"Austin Powers: The Spy Who Shagged Me". The Company also has the
right to manage the Mini-V fan club, and market its products on the Mini-V
website.
Cost of sales in fiscal 2000 were predominately the costs associated
with the sale of the products related to the Austin Powers movies which include
the cost of the product and related freight and handling charges. These products
are contract manufactured for the Company by both domestic and foreign companies
to specifications developed by the Company and approved by New Line Cinema. The
favorable arrangements the Company has with its manufacturers allows it to order
product on an "as needed" basis. Even though the Company does not feel this
places it at risk for filling future orders on a timely basis, it has developed
relationships with alternate suppliers for most of its products. Several of its
manufacturers will also store and ship product directly to a customer, thereby
reducing shipping time and eliminating the costs the Company would incur if the
product was first shipped to its location. The Company also feels it is not at
risk for any currency fluctuations in its dealing with its foreign manufacturers
since all orders are based on U. S dollars and its does not have any long term
purchase commitments.
Selling, general and administrative expense consists of payroll and
related fringes, royalties, commissions paid to manufacturers sales
representatives, advertising, rent, depreciation and other related fixed
overhead expenses. Also included in this category are the expenses related to
the replication of movie props to ready them for mass production by the contract
manufacturers, as well as the non-cash costs related to services satisfied by
the issuance of Company stock. The services provided were in direct support of
the operations of the Company on both an ongoing basis and in anticipation of
the increased business expected from the sales of product related to the Austin
Powers movies and the release of the X-Men movie. As the Company grows, through
acquisitions and the sales of current product, it anticipates it will have to
rely less on the issuance of stock for services as its access to capital
increases. The benefits to the Company from these stock transactions are reduced
use of cash which allowed the Company to devote the maximum resources to
expanding the business, increased awareness of the Company which provides the
opportunity for greater stock support and created a positive relationship when
price appreciation occurs. For recording purposes, the Company valued these
services at the fair market value of the services rendered or the fair market
value of the stock at time of issuance, whichever is more readily determinable.
13
<PAGE>
The amount and timing of the revenue generated from the sales of movie
related products is not possible to accurately predict because of the length of
time it may take the project to be commercially successful, if at all. As a
result, the Company's revenues and net income may fluctuate significantly
between comparable periods. Additionally, since the Company's inception, it has
experienced significant operating and net losses that it has been able to fund
by obtaining private capital. The Company, therefore, can not predict if and
when it will generate income from operations and if it will be able to raise
sufficient capital necessary to fund future operations.
The Company has taken significant steps to ensure its fiscal viability
in the future and continues to pursue additional licenses to even out any
fluctuations in the revenue stream. It is also looking to acquire companies that
have licenses not only related to movies but in the sports area. In support of
the sports area, the Company recently opened its collectbaseball.com website.
Which will generate revenues from the sale of baseball related merchandise and
memberships that will provide each member with the ability to purchase the
merchandise at a reduced price. Subsequent to February 29, 2000, the Company has
raised approximately $700,000 (net of fees) through the sale of common stock
under a private placement and through the private placement of secured
debentures to three private investment funds .
Results of Operations
Twelve Months Ended February 29, 2000 compared to Twelve Months Ended February
28, 1999.
Net revenues for the year ended February 29, 2000 of $296,261 increased
by $283,586 as compared to net revenues for the year ended February 28, 1999 of
$12,675. This increase in revenues was solely attributable to the sales of
product related to the Austin Powers movies. Revenues from Spencer Gifts, Tower
Records and New Line Cinema collectively accounted for approximately 40.5% of
net revenues for fiscal year 2000.
Cost of sales for fiscal year ended February 29, 2000 of $199,224
increased by $146,405 from fiscal year ended February 28, 1999 of $52,819. This
increase was mainly attributable to the increased volume of sales, primarily
products related to the Austin Power movies. In fiscal 2000, the Company's gross
margin was approximately 32% of sales. Comparisons to the previous year's gross
profit are not meaningful because of the significant difference in the amount
and type of sales. With the addition of sales of baseball related products on
its newly opened baseball website and the sale of products based upon the X-Men
movie to be released later this year, the Company expects an improved gross
margin if the expected sales are realized.
14
<PAGE>
Selling, general and administrative expenses for fiscal year ended
February 29, 2000 increased to $3,064,285 or $2,809,559 from fiscal year ended
February 28, 1999 of $254,726. As previously mentioned, the Company has issued a
significant amount of stock for services, therefore, selling, general and
administrative charges include non-cash charges of $2,058,000 in fiscal year
ended February 29, 2000 and $143,750 for the fiscal year ended February 28,
1999. The services obtained with the issuance of stock included internal
accounting and financial services, internet website creation, marketing
assistance, insurance program review, and general management consulting. Shares
were also issued to satisfy pre-existing anti-dilution clauses with certain
investors. Increases in selling, general and administrative expenses related to
payroll cost, royalties and product pre-production cost. Staffing increased to
twelve full time and three part consultants for marketing and licensing for
fiscal year ended February 29, 2000 from two full time and one part time
employee for fiscal year ended February 28, 1999. Royalty expense increased to
approximately $36,600 for fiscal year ended February 29, 2000 as compared to $0
for fiscal year ended February 28, 1999. As previously mentioned, the Company
incurs charges to bring the product to market. These charges relate to the cost
for producing the samples as well as the related package design cost for
approval by the licensee prior to full production runs of the product. For
fiscal year ended February 29, 2000 the Company incurred charges of
approximately $72,000 versus cost of approximately $4,000 for fiscal year ended
February 28, 1999.
The Company incurred interest expense of approximately $64,000 for
fiscal year ended February 29, 2000 as compared to approximately $12,000 for
fiscal year ended February 28, 1999 due to increased borrowings.
As a result of the above the Company had a net loss of $3,031,312 for
fiscal year ended February 29, 2000 as compared to a net loss of $307,205 for
fiscal year ended February 28, 1999.
Liquidity and Capital Resources
As of February 29, 2000, the Company had a working capital
deficiency of approximately $800,000 that was the direct result of the
unprofitable operations of the current year that resulted in a cash loss of
approximately $700,000. Even with this cash loss, the Company had an ending cash
balance of approximately $247,000, principally due to the infusion of $600,000
in February 2000 from a previously mentioned private placement.
During fiscal year ended February 29, 2000 the Company's purchase of
equipment was primarily computer equipment of approximately $23,000. The Company
does not foresee any significant capital expenditures needed in the next twelve
months unless the result of a future acquisition.
The Company has financed its losses through private sales of equity and
debt securities, the issuance of stock for services, and deferrals of salary by
its President and certain other employees. During the fiscal year ended February
29, 2000 the Company received cash from loan borrowings of approximately
$205,000 less debt repayments of approximately $28,000. These borrowings were
unsecured and were in the form of notes and convertible debentures. During the
fiscal year ended February 29, 2000, approximately $56,000 of debt was converted
into approximately 4.5 million shares of common stock. In fiscal year ended
February 29, 2000 the company also received cash from the issuance of common
stock of approximately $783,000, net of approximately $101,000 in fees.
15
<PAGE>
The Company also entered into a "Purchase and Sale Agreement" with a
factor whereby the Company is permitted to, but not required to, sell certain
accounts receivable to the factor subject to their approval. The advance rate
from the factor is 75% of the face value of the accounts. There is no recourse
to the Company in the event of insolvency, as defined in the agreement, by the
customer. There is recourse to the Company for all other events of non-payment
by the customer. At February 29, 2000 there were no accounts/amounts outstanding
under this agreement. The agreement expires July 1, 2000. The Company does not
intend to utilize this facility any longer and will let it expire.
Subsequent to the end of fiscal 2000, the Company has received the
following capital infusions; $340,000 net of fees from issuance of common stock
and $363,000 in convertible debentures. Additionally, the Company received
notice from the holders of $25,000 of convertible debentures outstanding as of
February 29, 2000 requesting conversion into 1,250,000 shares of common stock.
In the opinion of management, the Company believes that it will be able
to obtain new licenses and thereby increase revenues, and will pursue an
aggressive acquisition strategy to acquire profitable companies However, the
Company will require additional capital infusions during 2000 in order to
continue to operate until such time as revenues are sufficient to finance
operations. The Company will also continue to pay for services with equity,
where appropriate, until it has achieved positive cash flow. However there can
be no assurance that the Company will be able to obtain sufficient equity or
debt capital to meet its operating needs. In early May, 2000, the Company
granted a security interest in substantially all of its assets to a private
investor group, which purchased $400,000 in convertible debentures. Until the
obligations related to these debentures are satisfied, the Company will not be
able to use its assets as security for other financings.
As of February 29, 2000, the Company had $367,587 in outstanding notes
and loans payable and $70,000 in outstanding convertible debentures. As of May
1, 2000, the Company received notice from holders of $20,000 of the convertible
debentures requesting conversion into shares of Company common stock. It also
made approximately $12,000 of scheduled payments against the remaining debt that
matures at varying dates through February 2001. The Company feels its cash flow
will be sufficient to satisfy these debts given the expected success of the
X-Men movie and its baseball.com website that has already generated positive
results. In addition, the Company has been successful at renegotiating the
repayment terms on its debt in the past and feels that it would be able to do so
in the future if needed.
Forward Looking Statements
Sections of this Report contain forward looking statements, including
without limitation, statements concerning possible or assumed future results of
operations of the Company preceded by, followed by or that include the words
"believe," "expects," "anticipate," "estimates," "intends," "plans," or similar
expressions. For those statements, we claim the protection of the safe harbor
for forward-looking statements contained in the U.S. Private Securities
Litigation Reform Act of 1995.
16
<PAGE>
Forward-looking statements are not guarantees of future performance.
They involve risks, uncertainties, and assumptions. Due to the fact that the
Company faces competition from other licensors for shelf space, the ability of
the Company to obtain additional licenses and the uncertainty of the public's
response to the Company's properties as well as uncertainty as to the Company's
ability to raise sufficient capital to fund losses from operations actual
results or outcomes may differ materially from any such forward-looking
statements.
ITEM 3 - DESCRIPTION OF PROPERTY
Nature and Extent of Issuer's Facilities:
The Company's executive and principal administrative offices are
located at 1600 Lower State Road, Doylestown, Pennsylvania 18901, where the
Company currently occupies approximately 2,600 square feet of office space
pursuant to a lease entered into with Hartsville Real Estate. The term of the
lease is three years, expiring in September 2001. The monthly rental payments
under the lease are $1,680. The Company believes that this facility is
sufficient for its current and planned operations in the near future. The
Company stores some inventory at this location; other inventory is held in
outside storage facilities as well as by the manufacturers pending delivery to
customers.
ITEM 4 - SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth information as of May 2, 2000 with
respect to the beneficial ownership of the Company's securities by officers and
directors, individually and as a group, and all holders of more than 5% of the
shares of any class of the Company's voting securities. Unless otherwise
indicated, all shares are beneficially owned and sole investment and voting
power is held by the beneficial owners indicated.
On May 2, 2000, there were 173,951,697 shares of Common Stock
outstanding.
17
<PAGE>
<TABLE>
<CAPTION>
Common Stock
--------------------------------------------------------
Name and Address of Beneficial Owner Number of Shares Percent of Class
- ------------------------------------ --------------------------- ----------------------------
<S> <C> <C>
(a) Officers and directors:
Paul S. Lipschutz 33,515,568(1) 19.27%
1600 Lower State Road
Doylestown, PA 18901
Jeffrey Andrews 800,000 *%
1600 Lower State Road
Doylestown, PA 18901
Daryle Seidman 2,075,000 1.19%
1600 Lower State Road
Doylestown, PA 18901
Officers and Directors as a group (3 persons) 36,390,568 20.47%
(b) Other beneficial owners: N/A N/A
</TABLE>
* Less than 1%
(1) Does not include 1,075,000 shares owned by Marilyn Lonker, as to which he
disclaims beneficial ownership. Includes 26,333 shares owned by the estate
of Harvey Benson, of which Mr. Lipschutz serves as Executor. Also includes
10,000,000 options issued on January 1, 1999 under an arrangement in which
the ratio of those options to the total shares outstanding when the options
were issued would always be maintained until all 10,000,000 options were
exercised. At the original issue date, this ratio was 11.52%. As of May 2,
2000, CCGR had issued 173,951,697 shares of common stock. As of that date,
Mr. Lipschutz was eligible to exercise options worth 11.52% of 173,951,697
shares. This equals options worth 20,039,235 of underlying common stock.
Also included are 500,000 options the Company issued to Mr. Lipschutz on
November 30, 1995. Mr. Lipschutz may exercise these options to purchase
500,000 shares of common stock for $.10 per share. The options expire on
December 1, 2005.
18
<PAGE>
ITEM 5 - DIRECTORS, EXECUTIVE OFFICERS, PROMOTERS AND CONTROL PERSONS
(a) Directors and Officers:
The directors and executive officers of the Company are as follows:
-----------------------------------------------------------------------
Name Age Position
----------------------- ------ ----------------------------------------
Paul S. Lipschutz 53 Chief Executive Officer and Director
----------------------- ------ ----------------------------------------
Jeffrey Andrews 48 Chief Financial Officer and Director
----------------------- ------ ----------------------------------------
Daryle Seidman 33 President of Internet Division, Director
-----------------------------------------------------------------------
All directors hold office until the next annual meeting of stockholders
of the Company and until their successors have been elected and qualified. There
are no family relationships among the directors and officers.
Paul S. Lipschutz has served as Chief Executive Officer and director for the
Company since 1992. Mr. Lipschutz' experience includes strategic planning,
product development, operational systems development and sales management for
numerous companies. Mr. Lipschutz is also a recognized expert in the direct
response marketplace. Mr. Lipschutz is a 1967 graduate of The Wharton School of
Finance and Commerce of the University of Pennsylvania.
Jeffrey Andrews was appointed Chief Financial Officer for the Company in May
1999, and became a director since October, 1999. Mr. Andrews is a certified
public accountant and has extensive financial and accounting experience in the
private and public sectors. He has worked for several public companies and was
directly involved in the roll-up of a publicly held subsidiary into an IPO. From
May 1996 to March 1999, Mr. Andrews was the Chief Financial Officer and Vice
President of Strategic Planning for the Judge Group, a publicly traded staffing
company. Prior to joining the Judge Group, Mr. Andrews had his own consulting
firm from 1995 to May 1996 and worked for Ernst & Young from 1993 to 1995 in the
area of corporate finance. Mr. Andrews received a Bachelors of Arts degree from
Villanova University in 1974.
Daryle Seidman has served as a Director of the Company since 1996. On January
24, 2000, Mr. Seidman was appointed President of the Internet Division. From
January, 1999 until March 2000, Mr. Seidman was Global Account Director for
AT&T, where he led a team in the development of e-business strategies for AT&T's
large global accounts. Mr. Seidman was Mid-Atlantic Regional Director for
Teleport Communications Group's ("TCG") CERFnet internet and Advanced Data Group
form March 1998 until TCG was acquired by AT&T in December, 1999. From December
1996 to March 1998 he was Vice President of Sales & Marketing at US Online,
where he was responsible for developing and building that company's e-commerce
service offerings, marketing and support operations. From 1995 through 1996, Mr.
Seidman was Strategic Marketing Analyst for Chase Kettering Advertising, where
he assisted clients with conducting strategy sessions to identify product growth
areas, coordinated market segmentation and life-cycle studies, prepared analyses
of resources and strengths, advised clients regarding entry into new market
areas, and identified, researched, and developed new product introductions and
pilot programs. Mr. Seidman pursued a Bachelor of Arts degree in Marketing
Communications at Glassboro State College and attended the AT&T School of
Business.
19
<PAGE>
There can be no assurance that these persons will remain affiliated with the
Company or that the scope of their involvement will not change.
(b) Key Employees: There are no key employees in addition to those
mentioned above.
(c) Family Relationships: There are no family relationships among the
directors and officers.
(d) Legal Proceedings: None of the directors and officers have been
involved in any bankruptcy proceeding, proceeding under the Federal or State
Securities Laws or Commodities Futures Law, any proceeding adverse to the
Company or any other legal proceeding material to their evaluation as an officer
or director.
ITEM 6 - EXECUTIVE COMPENSATION
(a) Summary Compensation Table: The following table describes the
compensation of the company's five most highly compensated officers:
Summary Compensation Table
<TABLE>
<CAPTION>
====================================================================================================================================
Annual Compensation Long Term Compensation
------------------- ----------------------
Awards Payouts
Restricted Securities
Other Stock Underlying LTIP All Other
Name and Salary Bonus Annual Award(s) Options/SARs Payouts Compensation
Principal Position Year ($) ($) Compensation ($) (#)
(a) (b) (c) (d) (e) (f) (g) (h) (i)
- ---------------------- ------ ------------- --------- ------------ ---------- ------------- --------- --------------
<S> <C> <C> <C> <C>
Paul S. Lipschutz 2000 108,000(1) 503,250 8,650,000*
Chief Executive 1999 108,000 9,000 10,000,000
Officer
Jeffrey Andrews 2000 76,770(2) 67,000
Chief Financial 1999
Officer
Daryle Seidman 2000 6,000(3) 70,500
President, Internet 1999 2,750
Division
====================================================================================================================================
</TABLE>
* Mr. Lipschutz did not receive any option awards in fiscal year 2000. However,
he received an option for 10,000,000 shares in fiscal year 1999. Pursuant to
anti-dilution terms described below under "Employment Contracts and Termination
of Employment and Change In Control Arrangements," these options became
exercisable for an additional 8,650,000 shares in Fiscal 2000. As of May 2,
2000, these options were exercisable for 20,039,235 shares.
20
<PAGE>
(1) Mr. Lipschutz agreed to defer his $108,000 salary in each of fiscal 1999
and 2000 due to the financial condition of the Company and to help the
Company secure financing. In addition, Mr. Lipschutz received an aggregate
4,950,000 shares of Common Stock as compensation for services in fiscal
2000.
(2) Mr. Andrews received $52,770 in cash compensation from March 1, 1999
through February 29, 2000. He also deferred compensation in the amount of
$24,000 during that period, due to the financial condition of the Company.
In addition to his salary, Mr. Andrews also received a total of 800,000
shares of Common Stock as compensation for services in fiscal 2000.
(3) Mr. Seidman's salary is remuneration for his position as President of the
Internet Division, which commenced on January 24, 2000. In addition to his
salary, Mr. Seidman also received a total of 600,000 shares of Common Stock
in fiscal 2000 as compensation for services.
The salary deferred by Mr. Lipschutz and Mr. Andrews has been accrued
on the Company's financial statements and will be paid when the Company has
sufficient cash flow. Mr. Andrews will receive a salary of $96,000 in fiscal
2001, and Mr. Seidman will receive a salary of $78,000 in fiscal 2001.
(b) Options/SAR Grants: The only options granted to executive officers in
fiscal year 2000 were the options for an additional 8,650,000 shares
received by Mr. Lipschutz by virtue of anti-dilution rights in options
granted in fiscal 1999. No SARs were granted in fiscal 2000.
Option/SAR Grants in Last Fiscal Year
Individual Grants
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------
(a) (b) (c) (d) (e)
Number of % of Total
Securities Option/SARs
Under-lying Granted to
Options/SARs Employees in Exercise or Base
Name Granted (#) Fiscal Year Price ($/Sh) Expiration Date
---- ------------ ----------- ---------------- ---------------
<S> <C> <C> <C> <C> <C>
Paul S. Lipschutz 8,650,000 100% $.01 1/1/04
</TABLE>
(c) Aggregated Option/SAR Exercises and Fiscal Year-End Option/SAR Value: None.
(d) Long-Term Incentive Plans: None.
(e) Compensation of Directors: The Company issues to its directors 50,000
shares of common stock each quarter as a director's fee.
21
<PAGE>
(f) Employment Contracts and Termination of Employment and Change in Control
Arrangements:
Mr. Lipschutz has an Employment Agreement with the Company which became
effective on January 1, 1999 and which originally expired on January 1, 2004. At
each anniversary date of the Employment Agreement, the Employment Agreement will
extend for another year, unless either Mr. Lipschutz or the Company gives ninety
days prior notice of intent not to have the Agreement renewed. No notice was
given on January 1, 2000; therefore the Employment Agreement has been extended
to January 1, 2005. If no notice is given on January 1, 2001, the term of the
Employment Agreement will be extended to January 1, 2006.
Under the Employment Agreement, Mr. Lipschutz was also granted an
option originally exercisable for 10,000,000 shares of the Company's Common
Stock at a price of $.01 per share (the "Option"). The Option may be exercised
in whole or in part through January 1, 2004, but partial exercises of the Option
must be made in lots of 100,000 shares or greater. The Option will continue to
be exercisable for its original term after in the event of Mr. Lipschutz' death
or the termination of his employment with the Company. Under the Employment
Agreement, the number of shares for which the option is exercisable has
anti-dilution protection so that the option will always be exercisable for
11.52% of the Company's outstanding Common Stock. Currently, the option is
exercisable for 20,039,235 shares.
Mr. Lipschutz initial base salary under the Employment Agreement for
calendar year 1999 was $104,000. During the calendar year 2000 and for each year
thereafter, Mr. Lipschutz is entitled to an additional salary based on the gross
sales of the Company as follows:
- ---------------------------------------------- ---------------------------------
Annual Revenues Additional Salaries
- ---------------------------------------------- ---------------------------------
$1,000,000 to $1,999,999 $25,000
- ---------------------------------------------- ---------------------------------
$2,000,000 to $2,999,999 $50,000
- ---------------------------------------------- ---------------------------------
$3,000,000 to $4,999,999 $75,000
- ---------------------------------------------- ---------------------------------
Each $1,000,000 increment thereafter $25,000
- ---------------------------------------------- ---------------------------------
Beginning with the fiscal year 2001, Mr. Lipschutz's base salary will increase
by 15% of the sum of his previous year's base salary and additional salary under
the table above for the immediately preceding year.
(g) Report on Repricing of Options/SARS: Not Applicable.
ITEM 7 - CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
The Company believes that the terms of the transactions described below
were as favorable to the Company as would have been obtained by the Company in
arms-length negotiations.
22
<PAGE>
Beginning in fiscal year 1996, Mr. Lipschutz made various loans to the
Company to assist it with meeting its important expenditures. From that period
to the present, the Company repaid Mr. Lipschutz various amounts at unscheduled
times. Repayments and new loans were made during the same fiscal periods. The
aggregate outstanding principal balance of the loans have accrued interest at 10
% per annum, and continues to accrue interest at that rate. At February 28,
1998, the Company owed Mr. Lipschutz $83,464 in principal on the loan. In
addition, for that year the loan had accumulated $10,313 in interest, and the
loan had total accrued interest of $52,376 at February 28, 1998. The total
amount owed to Mr. Lipschutz, with interest and principal on the loan, at
February 28, 1998 was $135,840.
At February 28, 1999, the principal amount of Mr. Lipschutz's loan had
decreased to $67,101 through net repayments. The loan accumulated $7,528 in
interest during Fiscal Year 1999, and the loan had total accrued interest of
$59,904 at February 28, 1999. The total amount owed to Mr. Lipschutz, with
interest and principal on the loan, at February 28, 1999 was $127,005.
At February 29, 2000, the principal amount of Mr. Lipschutz's loan had
decreased to $50,376 through net repayments. The loan accumulated $5,890 in
interest during Fiscal Year 2000, and the loan had total accrued interest of
$65,794 at February 29, 2000. The total amount owed to Mr. Lipschutz, with
interest and principal on the loan, at February 29, 2000 was $116,170.
ITEM 8 - DESCRIPTION OF SECURITIES
(a) Common Stock
The Company is authorized to issue 350,000,000 shares of Common Stock,
$.001 par value per share. As of May 2, 2000, 173,951,697 shares were issued and
outstanding. Holders of Common Stock are entitled to one vote for each share of
Common Stock owned of record on all matters to be voted on by stockholders,
including the election of directors. The holders of Common Stock are entitled to
receive such dividends, if any, as may be declared from time to time by the
Board of Directors, in its discretion, from funds legally available therefor.
The Common Stock has no preemptive or other subscription rights, and
there are no conversion rights or redemption provisions. All outstanding shares
of Common Stock are validly issued, fully paid, and nonassessable.
(b) Convertible Debt.
In May, 2000, the Company issued $400,000 in convertible debentures.
These debentures are convertible at an exercise price of the lesser of $.04 per
share or 50% of the market value at the time of exercise.
As of May 2, 2000 the Company has outstanding $90,000 in other debt
convertible into 2,300,000 shares of common stock on demand. Requests have been
received to convert $20,000 of this debt into 1,050,000 shares. This debt has
been issued to various holders and may be converted at various rates. No holder
owns enough of the convertible debt to convert into shares totaling in excess of
1% of the Company's issued common stock.
23
<PAGE>
(c) Warrants, Options and Anti-Dilution Rights.
In connection with the $400,000 convertible debentures referenced
above, the Company issued warrants exercisable for 4,000,000 shares of the
Company's Common Stock at $.17 per share. These warrants expire in 2005. The
documents governing these convertible debentures and warrants contain provisions
prohibiting conversion or exercise to the extent that such conversion or
exercise would cause the holder to beneficially own more than 4.999% of the
Company's outstanding common stock. This provision is waivable by the holder on
five days prior written notice to the Company.
The Company's President, Paul S. Lipschutz, has an option currently
exercisable for 20,039,235 shares of common stock at an exercise price of $.01
per share. This option is exercisable through January 1, 2004. The number of
shares for which the option is exercisable has anti-dilution protection so that
the option will always be exercisable for 11.52% of the Company's outstanding
Common Stock. Mr. Lipschutz also has an option exercisable for 500,000 shares at
$.10 per share, which expires on December 1, 2005. In January 2000, the Company
agreed to issue stock options at the rate of 50,000 per month for twelve months
in connection with obtaining the rights to the Mini-V Website. These options are
exercisable at $.01 per share and have no expiration date.
Under an agreement made in connection with a November 1999 investment
in the Company, an investor currently holding approximately 2,700,000 shares of
common stock has anti-dilution rights requiring the Company to issue additional
shares to the investor required from time to time so as to maintain the
investor's percentage of the Company's outstanding shares, assuming exercise of
all options and warrants and conversion of all convertible debt, at 1.238%.
Transfer Agent.
The Company's transfer agent is American Register & Transfer, 342 East
900 South, Salt Lake City, UT 84111.
Registration Rights
The Company has agreed with the holders of the $400,000 convertible
debt and related warrants referenced above to file a Registration Statement
covering the sale of the shares issuable upon conversion of the convertible
debentures and exercise of the warrants, no later than August 1, 2000. At the
time the Registration Statement becomes effective, the holders of the
convertible debentures will have the right to purchase an additional $400,000 in
convertible debentures, also convertible at the lesser of $.04 or 50% of the
market value at the time of conversion, and receive additional warrants for
4,000,000 shares of Common Stock. The additional debentures and additional
warrants will also be covered by the Registration Statement.
24
<PAGE>
An aggregate of 25,000,000 shares of outstanding Common Stock have
"piggyback" registration rights. If the Company registers any of its securities
for sale pursuant to a Registration Statement under the Securities Act, the
Company will be required to offer the holders of those shares the opportunity to
register such shares without cost to the holders thereof, subject only to the
managing underwriter advising the Company that the inclusion of such shares of
Common Stock would not have a material adverse affect upon its ability to
consummate the sale of the securities proposed to be sold by the Company.
Anti-Takeover Provisions
Although the Board of Directors is not presently aware of any takeover
attempts, the Certificate of Incorporation and Bylaws of the Company and
Delaware law contain certain provisions which may be deemed to be
"anti-takeover" in nature in that such provisions may deter, discourage or make
more difficult the assumption of control of the Company by another corporation
or person through a tender offer, merger, proxy contest or similar transaction
or series of transactions.
Authorized but Unissued Shares: The authorized capital stock of the
Company includes 350,000,000 shares of Common Stock. These shares of capital
stock were authorized for the purpose of providing the Board of Directors of the
Company with as much flexibility as possible to issue additional shares for
proper corporate purposes, including equity financing, acquisitions, stock
dividends, stock splits, employee stock option plans, and other similar purposes
which could include public offerings or private placements.
No Cumulative Voting: Neither the Company's Articles of Incorporation
nor its Bylaws contain provisions for cumulative voting. Cumulative voting
entitles each stockholder to as many votes as equal the number of shares owned
by him multiplied by the number of directors to be elected. With cumulative
voting, a stockholder may cast all these votes for one candidate or distribute
them among any two or more candidates. Thus, cumulative voting for the election
of directors allows a stockholder or group of stockholders who hold less than
50% of the outstanding shares voting to elect one or more members of a board of
directors. Without cumulative voting for the election of directors, the vote of
holders of a plurality of the shares voting is required to elect any member of a
board of directors and would be sufficient to elect all the members of the board
being elected.
Report to Shareholders
The Company will distribute to its shareholders annual reports
containing audited financial statements prepared by independent certified public
accountants. In addition, the Company shall, from time to time, issue unaudited
financial statements and corporate reports.
25
<PAGE>
PART II
ITEM 1 - MARKET PRICE OF AND DIVIDENDS ON THE REGISTRANT'S COMMON EQUITY AND
OTHER SHAREHOLDER MATTERS
(a) Market Information
The Company's Common Stock was traded over-the-counter on the
electronic bulletin board operated by the National Association of Securities
Dealers under the symbol "CCGR". The following table sets forth the high and low
bid prices quoted for the Company's Common Stock as of May 2, 2000. The
Company's stock was removed from the bulletin board on May 2, 2000 for failure
to have this Registration Statement become effective. The Company's Common Stock
is currently trading on the "pink sheets" maintained by the National Quotation
Bureau.
High Low
---- ---
Calendar year 1999
First Quarter $.000 $.000
Second Quarter $.135 $.000
Third Quarter $.125 $.060
Fourth Quarter $.097 $.027
Calendar year 2000
First Quarter $.590 $.055
Second Quarter
(through May 2, 2000) $.590 $.030
The above quotations reflect inter-dealer prices, without retail mark-up,
markdown or commission and may not represent actual transactions.
(b) Holders
As of May 1, 2000, there were approximately 661 record holders of the
Company's Common Stock.
(c) Dividends
The Company has never declared or paid any cash dividends on its Common
Stock. The Company currently anticipates that all future earnings will be
retained by the Company to support its growth strategy. Accordingly, the Company
does not anticipate paying cash dividends on the Common Stock in the foreseeable
future. The payment of dividends on Common Stock will be at the discretion of
the Company's Board of Directors and will depend upon, among other things,
future earnings, operations, capital requirements, the general financial
condition of the Company, contractual restrictions and general business
conditions.
26
<PAGE>
ITEM 2 - LEGAL PROCEEDINGS
In December, 1999, the Company and Mr. Lipschutz were sued by Frederick
Davies in the Superior Court for Atlantic County, New Jersey. Mr. Davies claims
that he had an agreement with the Company under which he was entitled to receive
approximately 550,000 shares of common stock and employment with the Company
pursuant to a business transaction that occurred in 1993. While the Company did
employ Mr. Davies, the Company subsequently terminated him and believes that it
had the right to terminate him. The Company believes it provided Mr. Davies with
all the consideration to which he was entitled. The Company's counsel has
communicated to Mr. Davies counsel that company counsel believes there are
significant legal and factual deficiencies with the complaint. The plaintiff's
counsel orally informed the Company's counsel, in mid-March, 2000, that the
plaintiff would either withdraw or amend the complaint. Neither the Company nor
its counsel has heard from Mr. Davies counsel since that time. The Company does
not believe it has any significant exposure in this matter.
ITEM 3 - CHANGE IN AND DISAGREEMENTS WITH ACCOUNTANTS
Not Applicable
ITEM 4 - RECENT SALES OF UNREGISTERED SECURITIES
Common Stock
In fiscal year 1998, the Company issued the following shares of common
stock: 9,658,000 shares were purchased for cash by 47 non-affiliates for a total
cash payment of $168,380. In exchange for services, the Company issued
11,310,000 shares to 35 non-affiliates with a total market value of $132,217.
One individual and one venture capital fund received an aggregate of 1,800,000
shares in exchange for the conversion of $187,096 in debt. One individual
received 3,500,000 shares as an inducement for making a loan. Officers and
directors (including, for purposes of this Item 4, Marilyn Lonker) were issued
22,100,000 shares for services provided to the Company, with a total fair market
value of $214,000.
In fiscal year 1999, the Company issued the following shares of common
stock: 2,700,000 shares were issued to the shareholders of SD Studios, Inc., in
connection with the acquisition of a 51% interest in S.D. Studios, Inc. by the
Company. Those shares had an aggregate value of $27,000. 8,490,000 shares were
purchased for cash by 32 non-affiliates for a total amount of $74,600. The
Company issued an aggregate 9,525,000 shares to 25 non-affiliates in exchange
for services, with a total fair market value of $95,250. One individual received
1,965,000 shares in exchange for conversion of $184,973 in debt. Two individuals
received an aggregate of 300,000 shares as inducements for making and
restructuring loans. Officers and directors were issued 1,850,000 shares with a
total value of $18,500, for services provided to the Company.
27
<PAGE>
In fiscal year 2000, the Company issued the following shares of common
stock: The Company issued 15,000,000 shares in February, 2000, in a Rule 504
offering described below. An additional 23,532,232 shares were purchased for
cash by 59 non-affiliates for a total amount of $284,818. The Company issued
19,543,750 shares for services to 62 non-affiliates, with a total market value
of $1,895,629 (the Company has accounted for these shares at a discounted value
of $1,489,843). Eleven (four of whom were related) individuals received a total
of 4,529,183 shares in exchange for $56,002 in debt. Nine individuals and one
corporation received an aggregate 2,776,964 shares in exchange for other
consideration, including making or restructuring loans, and the effect of
anti-dilution provisions. These shares had a total market value of $134,950, and
the Company accounted for these shares at a discounted value of $109,257.
Officers, directors and their relatives were issued 6,600,000 shares for
services, with a total market value of $667,000; the Company accounted for these
shares at a discounted value of $533,600.
Since February 29, 2000, the Company has issued the following shares of
Common stock: The Company issued 10,000,000 shares in a Rule 504 offering
described below. An additional 2,389,000 shares were issued to 14 individuals
for an aggregate cash purchase price of $86,200 through April 24, 2000. No
shares have been issued for cash since April 24, 2000. 4,849,000 shares were
issued for conversion of an aggregate $100,979 in debt. 55,000 shares were
issued as hiring incentives to two employees and one lender received 600,000
shares as consideration for extension of the maturity date of debt.
The Company conducted an offering under Securities Act Rule 504 in
February 2000 and March 2000. In February 2000, three entities purchased a total
of 15,000,000 shares for a total price of $600,000. In March, 2000, the same
three entities purchased an additional 10,000,000 shares for $400,000. The
Company paid consulting fees of an aggregate of $130,000 upon the receipt of the
proceeds of this offering. In addition, the Company paid an attorney fees of
$20,000 in cash and 60,000 shares of common stock in connection with making
certain introductions.
Rule 506 Offering of Convertible Debentures and Warrants
On May 2, 2000, the Company issued an aggregate of $400,000 principal
amount of Convertible Debentures to three accredited investors. The Debentures
are convertible to Common Stock at the lower of $.04 per share or 50% of the
market value per share at the time of conversion. The investors also received
warrants exercisable for 4,000,000 shares of common stock at $.17 per share.
This transaction was conducted pursuant to Securities Act Rule 506. The Company
paid certain consulting fees in an aggregate of $52,000 upon the receipt of the
proceeds of this offering.
Other Debt
In fiscal 1999, the Company issued promissory notes to five individuals
for a total of $41,750 in debt.
In fiscal 2000, the Company issued promissory notes, convertible by
their original terms, to eleven individuals for a total of $150,000 in debt. In
fiscal 2000, the Company issued promissory notes, not originally convertible, to
five individuals, for a total of $44,479 in debt. In addition, in fiscal 2000,
one investor, together with members of his family and employees, loaned the
Company an aggregate $54,007 under promissory notes in fiscal 2000.
28
<PAGE>
Except as stated above, no commissions or fees were paid in connection
with any of the above-referenced transactions.
Except in connection with the offerings under Rule 504 and Rule 506,
the Company relied upon the exemption provided in Section 4(2) of the Securities
Act of 1933 in connection with the above referenced transactions. The Company
relied on Section 4(2) as no public solicitation was employed, all of the shares
were issued with restrictive legends and the acquirers of the shares had access
to the type of information which would be contained in a registration statement
and had sufficient sophistication so as to not require the protection afforded
by registration under the Securities Act.
ITEM 5 - INDEMNIFICATION OF DIRECTORS AND OFFICERS
The Company's Certificate of Incorporation contains a provision
permitted by the Delaware General Corporation Law ("DGCL") which eliminates the
personal liability of the Company's directors for monetary damages for breach of
their fiduciary duty of care which arises under state law. Although this does
not change the directors' duty of care, it limits legal remedies which are
available for breach of that duty to equitable remedies, such as an injunction
or rescission. The provision of the Company's Certificate of Incorporation has
no effect on directors' liability for: (1) breach of the directors' duty of
loyalty; (2) acts or omissions not in good faith or involving intentional
misconduct or known violations of law; and (3) approval of any transactions from
which the directors derive an improper personal benefit.
The DGCL empowers the Company to indemnify officers, directors, employees and
others from liability in certain circumstances such as where the person
successfully defended himself on the merits or acted in good faith in a manner
reasonably believed to be in the best interests of the corporation. The
Company's Bylaws require indemnification, to the fullest extent permitted by the
DGCL, of any person who is or was involved in any manner in any investigation,
claim or other proceeding by reason of the fact that such person is or was a
director or officer of the Company, or of another corporation serving at the
request of the Company, against all expenses and liability actually and
reasonably incurred by such person in connection with the investigation, claim
or other proceeding.
Insofar as indemnification for liabilities arising under the Securities Act may
be permitted to directors, officers, and controlling persons of the Company
pursuant to the foregoing provisions or otherwise, the Company has been advised
that in the opinion of the Securities and Exchange Commission, such
indemnification is against public policy as expressed in the Act and is,
therefore, unenforceable.
29
<PAGE>
PART F/S
FINANCIAL STATEMENTS
The Index to Financial Statements and the Company's financial statements
required to be contained in this registration statement follow the signature
page of this report
PART III
ITEM 1 - INDEX TO EXHIBITS
Exhibit Description
- ------- -----------
3.1 Certificate of Incorporation
3.2 Bylaws.
4.1 Form of Debenture used in outstanding debt of approximately $70,000 as
of 2/29/00.
4.2 Form of Debentures Due April 2001 (aggregate $400,000)
4.3 Form of Warrants issued in connection with 4.2 (exercisable for an
aggregate 4,000,000 shares).
4.4 Form of Registration Rights Agreement with holders of 4.2 and 4.3.
10.1 Paul S. Lipschutz Employment Agreement
10.2 Exclusive Licensing Consultant Agreement with Building Q.
10.3 Merchandise License with New Line Productions, Inc. for Austin Powers
products.
10.4 Royalty Agreement with Galena Industries.
10.5 License Agreement with Creative Licensing Corporation for Terminator
Products.
10.6 License Agreement with Canal+ DA for Terminator 2 products.
10.7 Financial Consulting Agreement with NIR Group, LLC.
10.8 License Agreement with Marvel Characters, Inc. for X-Men products.
10.9 Lease for 1600 Lower State Road.
10.10 Agreement with Verne Troyer and TC Ventures.
27 Financial Data Schedule
30
<PAGE>
SIGNATURES
In accordance with Section 12 of the Securities Exchange Act of 1934,
the registrant caused this registration statement to be signed on its behalf by
the undersigned, thereunto duly authorized.
COLLECTIBLE CONCEPTS GROUP, INC.
By: /s/Paul S. Lipschutz
------------------------------
Paul S. Lipschutz,
Chief Executive Officer
Date: May 24, 2000
Pursuant to the requirement of the Securities and Exchange Act of 1934,
this registration statement has been signed by the following persons on behalf
of the registrant and in the capacities and on the date indicated.
Signatures Title Date
- ---------- ----- ----
/s/ Paul S. Lipschutz Chief Executive May 24, 2000
- --------------------- Officer and Director
Paul S. Lipschutz
/s/ Jeffrey Andrews Chief Financial Officer May 24, 2000
- ------------------- and Director
Jeffrey Andrews
/s/ Daryle Seidman President Internet Division May 24, 2000
- ------------------ and Director
Daryle Seidman
<PAGE>
FINANCIAL STATEMENTS
COLLECTIBLE CONCEPTS GROUP, INC.
YEARS ENDED FEBRUARY 29, 2000 AND FEBRUARY 28, 1999
Table of Contents
-----------------
PAGE(s)
-------
INDEPENDENT AUDITORS' REPORT F-2
BALANCE SHEET F-3
STATEMENTS OF OPERATIONS F-4
STATEMENTS OF STOCKHOLDERS' DEFICIENCY F-5
STATEMENTS OF CASH FLOWS F-6
NOTES TO FINANCIAL STATEMENTS F-7 - F-17
<PAGE>
INDEPENDENT AUDITORS' REPORT
Board of Directors and Shareholders
Collectible Concepts Group, Inc.
Doylestown, Pennsylvania
We have audited the accompanying balance sheet of Collectible Concepts
Group, Inc. as of February 29, 2000 and the related statements of operations and
shareholders' deficiency and cash flows for each of the two years in the period
ended February 29, 2000. 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 present fairly, in all material
respects, the financial position of Collectible Concepts Group, Inc. as of
February 29, 2000, and the results of their operations and their cash flows for
each of the two years in the period ended February 29, 2000 in conformity with
generally accepted accounting principles.
The accompanying financial statements have been prepared assuming the
Company will continue as a going concern. As discussed in Note 2 to the
financial statements, the Company has suffered recurring losses from operations
and at February 29, 2000 has negative working capital and a shareholders'
deficiency. These conditions raise substantial doubt about its ability to
continue as a going concern. Management's plans in regard to these matters are
also described in Note 2. The financial statements do not include any
adjustments that might result from the outcome of this uncertainty.
Rudolph, Palitz LLC
May 8, 2000
Blue Bell, PA
F-2
<PAGE>
COLLECTIBLE CONCEPTS GROUP, INC.
BALANCE SHEET
FEBRUARY 29, 2000
ASSETS
CURRENT ASSETS
Cash and cash equivalents $ 247,491
Accounts receivable - trade and other
(net of allowance for doubtful accounts of $1,500) 12,386
Inventories 149,408
Prepaid royalties 28,821
Prepaid expenses and other 69,300
-----------
Total current assets 507,406
-----------
PROPERTY AND EQUIPMENT 34,558
Less - accumulated depreciation 16,772
-----------
Net property and equipment 17,786
-----------
Total assets $ 525,192
===========
LIABILITIES AND SHAREHOLDERS' DEFICIENCY
CURRENT LIABILITIES
Notes and loans payable $ 367,587
Convertible debentures 70,000
Accounts payable and accrued expenses 369,537
Accrued payroll 405,708
Payroll taxes payable 11,015
Accrued interest 78,469
Accrued royalties 5,462
-----------
Total current liabilities 1,307,778
-----------
COMMITMENTS
SHAREHOLDERS' DEFICIENCY
Capital stock, $.001 par value,
350,000,000 shares authorized;
162,703,418 issued and outstanding 162,704
Additional paid-in capital 7,063,794
Accumulated deficit (8,009,084)
-----------
Total shareholders' deficiency (782,586)
-----------
Total liabilities and shareholders' deficiency $ 525,192
===========
See Notes to Financial Statements.
F-3
<PAGE>
COLLECTIBLE CONCEPTS GROUP, INC.
STATEMENTS OF OPERATIONS
YEARS ENDED FEBRUARY 29, 2000 AND 1999
2000 1999
------------- -------------
SALES $ 296,261 $ 12,675
COST OF SALES 199,224 52,819
------------- -------------
GROSS PROFIT (LOSS) 97,037 (40,144)
SELLING, GENERAL AND ADMINISTRATIVE
EXPENSES (NOTE 7) 3,064,285 254,726
------------- -------------
LOSS FROM OPERATIONS (2,967,248) (294,870)
OTHER EXPENSE
Interest expense 64,064 12,335
------------- -------------
NET LOSS $ (3,031,312) $ (307,205)
============= =============
NET LOSS PER SHARE:
BASIC AND DILUTED ($ 0.03) $ 0.00
============= =============
WEIGHTED AVERAGE SHARES USED IN NET
LOSS PER SHARE CALCULATIONS:
BASIC AND DILUTED 116,713,182 81,278,221
============= =============
See Notes to Financial Statements.
F-4
<PAGE>
COLLECTIBLE CONCEPTS GROUP, INC.
STATEMENTS OF STOCKHOLDERS' DEFICIENCY
YEARS ENDED FEBRUARY 29, 2000 AND FEBRUARY 28, 1999
<TABLE>
<CAPTION>
Common Stock Additional
------------------------- Paid-in Accumulated
Shares Amount Capital Deficit Total
----------- ----------- ----------- ----------- -----------
<S> <C> <C> <C> <C> <C>
Balance, March 1, 1998 65,891,289 $ 65,892 $ 3,778,143 $(4,670,567) $ (826,532)
Common stock issued for
cash and services rendered 22,865,000 22,865 195,485 -- 218,350
Conversion of convertible debentures, notes
and loans payable to common stock 1,965,000 1,965 183,008 -- 184,973
Net loss for the year ended
February 28, 1999 -- -- -- (307,205) (307,205)
----------- ----------- ----------- ----------- -----------
Balance, February 28, 1999 90,721,289 90,722 4,156,636 (4,977,772) (730,414)
Common stock issued for
cash and services rendered 67,452,946 67,453 2,855,685 -- 2,923,138
Conversion of convertible debentures, notes
and loans payable to common stock 4,529,183 4,529 51,473 -- 56,002
Net loss for the year ended
February 29, 2000 -- -- -- (3,031,312) (3,031,312)
----------- ----------- ----------- ----------- -----------
Balance, February 29, 2000 162,703,418 $ 162,704 $ 7,063,794 $(8,009,084) $ (782,586)
=========== =========== =========== =========== ===========
</TABLE>
See Notes to Financial Statements.
F-5
<PAGE>
COLLECTIBLE CONCEPTS GROUP, INC.
STATEMENTS OF CASH FLOWS
YEARS ENDED FEBRUARY 29, 2000 AND FEBRUARY 28, 1999
<TABLE>
<CAPTION>
2000 1999
----------- -----------
<S> <C> <C>
OPERATING ACTIVITIES
Net loss $(3,031,312) $ (307,205)
Adjustments to reconcile net loss to
net cash used in operating activities:
Depreciation 5,885 1,163
Provision for doubtful accounts 6,077 --
Common stock issued for services rendered 2,070,520 143,750
Changes in operating assets and liabilities:
(Increase) decrease in:
Accounts receivable (13,670) (4,793)
Inventories (140,532) 3,322
Prepaid royalties (28,821) --
Prepaid expenses and other 2,000 (2,000)
Increase in:
Accounts payable and accrued expenses 189,185 20,642
Accrued interest 28,219 16,192
Accrued payroll 201,441 26,667
Payroll taxes payable 10,892 123
Accrued royalties 5,462 --
----------- -----------
Net cash used in operating activities (694,654) (102,139)
----------- -----------
INVESTING ACTIVITIES
Net cash used in investing activities, purchase
of property and equipment (22,902) --
----------- -----------
FINANCING ACTIVITIES
Borrowings 205,161 48,084
Proceeds from issuance of common stock, net 783,318 74,600
Repayments of notes and loans payable (27,614) (16,363)
----------- -----------
Net cash provided by financing activities 960,865 106,321
----------- -----------
INCREASE IN CASH AND CASH EQUIVALENTS 243,309 4,182
CASH AND CASH EQUIVALENTS, BEGINNING 4,182 --
----------- -----------
CASH AND CASH EQUIVALENTS, ENDING $ 247,491 $ 4,182
=========== ===========
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:
Cash paid during the year for interest $ 34,033 $ --
=========== ===========
</TABLE>
See Notes to Financial Statements.
F-6
<PAGE>
COLLECTIBLE CONCEPTS GROUP, INC.
NOTES TO FINANCIAL STATEMENTS
YEARS ENDED FEBRUARY 29, 2000 and FEBRUARY 28, 1999
NOTE 1. DESCRIPTION OF BUSINESS AND SUMMARY OF SIGNIFICANT ACCOUNTING
POLICIES
Description of Business
Collectible Concepts Group, Inc. (formerly USA Sports
Group, Inc.) (the "Company") distributes high-end and novelty
products related to both the entertainment and sports
industries. The Company sells its products through retailers,
distributors, department stores, the internet and catalogers.
Accounts Receivable
The Company's trade accounts are unsecured with an
allowance for bad debts provided for those amounts whose
collectiability is uncertain.
Property and Equipment and Depreciation
Property and equipment consists principally of office
and computer equipment and are stated at cost. Upon sale or
retirement, the cost of the asset and the related accumulated
depreciation is removed from the accounts and the resultant
gain or loss, if any, is included in income. Depreciation is
computed using the straight-line method based on the estimated
useful lives of the related assets, principally five to seven
years. Depreciation expense amounted to $5,885 in 2000 and
$1,163 in 1999.
Inventories
Merchandise inventories are valued at lower of cost or
market on the first in, first out (FIFO) method. The Company
provides an allowance for obsolete merchandise, as deemed
necessary, with an allowance of approximately $25,000 recorded
as of February 29, 2000.
Cash and Cash Equivalents
Cash and cash equivalents consist of cash in bank and
other short-term investments with original maturities of three
months or less.
The Company maintains cash balances at financial
institutions. These balances are insured by the Federal
Deposit Insurance Corporation up to $100,000 at each
institution.
Advertising Expense
The Company participates in various advertising
programs. All costs related to advertising are expensed in the
period incurred. Advertising expense amounted to approximately
$25,000 in 2000 and $1,000 in 1999.
F-7
<PAGE>
COLLECTIBLE CONCEPTS GROUP, INC.
NOTES TO FINANCIAL STATEMENTS
YEARS ENDED FEBRUARY 29, 2000 and FEBRUARY 28, 1999
NOTE 1. DESCRIPTION OF BUSINESS AND SUMMARY OF SIGNIFICANT ACCOUNTING
POLICIES (Continued)
Fair Value of Financial Instruments
The estimated fair values of substantially all of the
Company's financial instruments are approximately equal to
their carrying values for all periods presented.
Income Taxes
Deferred taxes are accounted for in accordance with
Statement of Financial Accounting Standards ("Statement") No.
109 "Accounting for Income Taxes." The Statement requires the
use of the liability method to account for income taxes.
Deferred income taxes are provided for the difference between
the tax basis of an asset or liability and its reported amount
in the financial statements and at the tax rates that are
expected to be in effect when the taxes are actually paid or
recovered.
Deferred income taxes arise principally from
differences between financial and income tax reporting,
including amounts recorded for inventory, the allowance for
doubtful accounts, accrued expenses, the availability of net
operating loss carryforwards and certain other temporary
differences.
Deferred income tax assets are reduced by a valuation
allowance when, based on the weight of evidence available, it
is more likely than not that some portion or all of the
deferred tax assets will not be realized. The determination of
the requirement for a valuation allowance is an estimate which
is reasonably possible to change in the near term.
Earnings (Loss) Per Share
The Company follows Statement of Financial Accounting
Standards No. 128 ("FAS No. 128") "Earnings Per Share". Basic
and fully diluted loss per share amounts are computed based on
net loss and divided by the weighted average number of shares
actually outstanding. The number of shares used in the
computation were 116,713,182 in 2000 and 81,278,221 in 1999.
The assumed conversion of convertible debt and exercise
of outstanding options to purchase shares of common stock were
not included in the computation of diluted earnings (loss) per
share in 2000 and 1999 because the assumed conversion and
exercise would be anti-dilutive due to net losses incurred in
both years.
F-8
<PAGE>
COLLECTIBLE CONCEPTS GROUP, INC.
NOTES TO FINANCIAL STATEMENTS
YEARS ENDED FEBRUARY 29, 2000 and FEBRUARY 28, 1999
NOTE 1. DESCRIPTION OF BUSINESS AND SUMMARY OF SIGNIFICANT ACCOUNTING
POLICIES (Continued)
Significant Customer
Approximately $81,000 (27%) of the Company's sales for
the year ended February 29, 2000 were to one customer.
Management Estimates
The preparation of financial statements in conformity
with generally accepted accounting principles requires
management to make estimates and assumptions that may affect
certain reported amounts and disclosures. Accordingly, actual
results could differ from those estimates.
NOTE 2. GOING CONCERN
The Company's financial statements have been prepared
in conformity with generally accepted accounting principles,
which contemplates the continuation of the Company as a going
concern. Since inception, the Company has not generated
sufficient revenues to meet its operating expenses and has
incurred significant operating losses and net losses. At
February 29, 2000, the Company has a shareholder's deficiency
of $782,586 and a working capital deficiency of $800,372.
These factors raise substantial doubt about the Company's
ability to continue as a going concern. The financial
statements do not include any adjustments relating to the
recoverability and classification of recorded assets, or the
amounts and classification of liabilities that might be
necessary in the event the Company cannot continue in
existence.
To generate additional revenues and the working capital
needed to continue and expand operations, the Company has
accomplished the following:
o Signed a licensing agreement with Time Warner's New
Line Cinema Division in May 1999 for the right to
manufacture, sell and distribute in the United
States and Canada certain collectibles relating to
the Austin Powers films;
o Signed a licensing agreement with Marvel Characters
in November 1999 providing the right to manufacture,
sell and distribute in the United States and Canada
certain collectibles relating to the X-Men film
scheduled to be released in June 2000;
o Signed a licensing agreement with Creative Licensing
Corp and Canal+ DA for the right to manufacture,
sell and distribute worldwide certain collectibles
relating to the Terminator films;
F-9
<PAGE>
COLLECTIBLE CONCEPTS GROUP, INC.
NOTES TO FINANCIAL STATEMENTS
YEARS ENDED FEBRUARY 29, 2000 and FEBRUARY 28, 1999
NOTE 2. GOING CONCERN (Continued)
o The Company entered into an agreement in December
1999 to purchase the website, rights, logo's, and
customer base of www.mini-v.com. "Mini-V" is actor
Verne Troyer, a.k.a. Mini-Me, the diminutive star of
the Austin Powers sequel;
o The Company has developed and currently operates the
following websites in addition to the
CollectibleConcepts.com website:
o powersclub.com
o mini-v.com
o collectbaseball.com;
o The Company has reserved several additional website
names for future use, including the following:
o collectyankees.com
o terminatorclub.com
o x-menclub.com;
o The Company has signed an agreement with an
experienced management/consulting firm for the
purpose of raising $5,000,000 of additional capital
to fund future operations, including acquisitions.
As of February 29, 2000, the Company has received
$600,000 with $400,000 received subsequent to
year-end (in March 2000).
NOTE 3. ACCOUNTS RECEIVABLE - FACTORING AGREEMENT
The Company has entered into a "Purchase and Sale
Agreement" (the "agreement") with a factor whereby the Company
is permitted to, but not required to, sell certain accounts
receivable to the factor subject to approval by the factor.
The advance rate is 75% of the face value of the specific
accounts. There is no recourse to the Company in the event of
insolvency, as defined in the agreement, by the customer.
There is recourse to the Company for all other events of
non-payment by the customer. At February 29, 2000, there were
no accounts/amounts outstanding under this agreement. The
agreement expires July 1, 2000.
Subsequent to February 29, 2000, the Company terminated
the agreement in accordance with certain provisions in the
agreement.
F-10
<PAGE>
COLLECTIBLE CONCEPTS GROUP, INC.
NOTES TO FINANCIAL STATEMENTS
YEARS ENDED FEBRUARY 29, 2000 and FEBRUARY 28, 1999
NOTE 4. NOTE RECEIVABLE
During fiscal 1995, the Company loaned $55,000 to JMJ
Films, Inc. for the production of a motion picture. The terms
of the agreement require that the Company will be repaid from
the first revenues generated by the release of the picture.
The note agreement also stipulates the Company will receive a
10% profit participation on gross receipts. The note is
non-interest bearing and is secured by Jim and Joyce Music,
Inc. No progress has been made regarding the production of
this film and, accordingly, the Company has fully reserved the
$55,000.
NOTE 5. NOTES AND LOANS PAYABLE
At February 29, 2000, notes and loans payable consists
of various unsecured notes and loans payable to certain
individuals and investors. The notes and loans bear interest
at various rates ranging from 8.0% to 12.0% and mature during
the fiscal year ending February 28, 2001.
Included in notes and loans payable is $50,000 due to
the Company's President. During 2000 and 1999, the Company
accrued interest of approximately $6,000 and $7,500 relating
to these loans to its President and at February 29, 2000
approximately $66,000 in accrued interest was payable relating
to these loans.
Subsequent to February 29, 2000, approximately $76,000
of notes and loans payable outstanding at February 29, 2000
were converted into 4,400,000 shares of Company common stock.
NOTE 6. CONVERTIBLE SUBORDINATED DEBENTURES
At February 29, 2000, the Company has outstanding
$70,000 of convertible debentures which mature at various
times through February 2001 and bear interest at 12% per
annum. Each $1,000 unit is convertible into between 10,000 and
50,000 shares of Company common stock.
Subsequent to February 29, 2000, an additional $20,000
of convertible subordinated debentures were issued with
substantially the same terms and conditions as the existing
debentures. In addition, during March 2000 holders of $20,000
of debentures outstanding at February 29, 2000 have requested
conversion of their debentures into 1,000,000 shares Company
common stock.
F-11
<PAGE>
COLLECTIBLE CONCEPTS GROUP, INC.
NOTES TO FINANCIAL STATEMENTS
YEARS ENDED FEBRUARY 29, 2000 and FEBRUARY 28, 1999
NOTE 6. CONVERTIBLE SUBORDINATED DEBENTURES (Continued)
During the year ended February 28, 1999, the Company
issued a $25,000 secured convertible note payable to an
individual in July 2000 with interest at 10% per annum. This
note and related accrued interest was converted into 2,747,300
shares of Company common stock in February 2000. In addition,
the holder of $150,000 of convertible debentures issued in
March 1996 converted such debentures and related accrued
interest into 1,965,000 shares of Company common stock during
the year ended February 28, 1999.
NOTE 7. COMMON STOCK
In 1995, the Company issued its president and majority
shareholder the option to purchase 500,000 shares of common
stock any time before December 1, 2005 for $.10 per share. In
January 1999, the Company issued an additional 10,000,000
options at an exercise price of $.01 per share with an
expiration date of January 2004. The agreement also contains
an anti-dilution provision that has the effect of increasing
the options by 8,650,000 as of February 29, 2000. All
additional options have the same expiration date of January
2004. These options have not been exercised and remain
outstanding as of February 29, 2000.
In January 2000, the Company entered into an agreement
to issue 50,000 stock options per month for twelve months to a
non-employee for consulting services to be rendered. The
options are exercisable at $.01 per share and have no
expiration date. In accordance with SFAS No. 123, "Accounting
For Stock-Based Compensation" (SFAS No. 123"), the Company
recorded an expense of $11,500 and an increase to additional
paid-in capital for such options issued in January 2000 and
February 2000.
The Company has adopted the disclosure-only provisions
of SFAS No. 123 but applies APB Opinion 25 ("Accounting for
Stock Issued to Employees") in accounting for stock options
issued to employees. Accordingly, no compensation has been
recognized in 2000 or 1999. Compensation cost that would have
been recognized in accordance with the basis of fair value
pursuant to SFAS No. 123, if the Company had so elected, would
have been immaterial in 1999 and 2000 and would not have
affected net loss per share. The method of determining
proforma compensation costs was based on certain assumptions,
including the past trading range of the Company's stock, a
risk free interest rate of 6.5%, expected lives of options of
5 years and no expected payment of dividends.
F-12
<PAGE>
COLLECTIBLE CONCEPTS GROUP, INC.
NOTES TO FINANCIAL STATEMENTS
YEARS ENDED FEBRUARY 29, 2000 and FEBRUARY 28, 1999
NOTE 7. COMMON STOCK (Continued)
During 2000 and 1999, the Company received $783,318
(net of $101,000 of financing costs) and $74,600,
respectively, from the issuance of common stock through
private placements to various investors.
From time to time, the Company has issued common stock
in exchange for the performance of services or as an
alternative to the payment of interest on outstanding debt.
The benefits to the Company from these transactions are as
follows:
o Reduced use of cash which allows it to devote the
maximum resources to expanding the business;
o Increased awareness of the Company which provides
the opportunity for greater stock support;
o Creates positive relationships as share price
appreciation occurs.
The dollar value of these activities included in the
selling, general and administrative expenses was approximately
$2,058,000 in 2000 and $144,000 in 1999.
NOTE 8. LEASE COMMITMENTS
The Company leases its offices and certain office
equipment under various operating lease agreements expiring
through February 2002.
The minimum annual lease payments due under these lease
agreements are as follows:
YEAR ENDING
FEBRUARY 28, AMOUNT
------------ -------
2001 $28,000
2002 20,000
-------
$48,000
=======
Rent expense was approximately $19,500 in 2000 and
$3,000 in 1999.
F-13
<PAGE>
COLLECTIBLE CONCEPTS GROUP, INC.
NOTES TO FINANCIAL STATEMENTS
YEARS ENDED FEBRUARY 29, 2000 and FEBRUARY 28, 1999
NOTE. 9. INCOME TAXES
The Company accounts for income taxes in accordance
with SFAS No. 109, "Accounting for Income Taxes".
The Company incurred no income tax expense in 2000 or
1999 due to net operating losses incurred.
The net deferred tax asset at February 29, 2000
included the following:
Deferred tax asset $3,001,000
Valuation allowance (3,001,000)
----------
Net deferred tax asset, after
valuation allowance $ -
==========
The tax effects of major temporary differences that
gave rise to the Company's net deferred tax asset are as
follows:
Net operating loss carryforwards $2,842,000
Accrued expenses 148,000
Other 11,000
----------
$3,001,000
==========
The Company has experienced significant losses since
inception. As a result of various common stock transactions
over the years, certain of the accumulated net operating loss
carryforwards generated by these losses, which total
approximately $7,700,000, may be lost and/or substantially
limited. Notwithstanding such effect, any deferred tax asset
recorded as a result of potential net operating loss
carryforwards would be available to offset future taxable
income, would be offset by an equivalent valuation allowance,
since Management believes that is more likely than not that
such deferred tax asset will not be realized. These
carryforwards expire through 2020.
F-14
<PAGE>
COLLECTIBLE CONCEPTS GROUP, INC.
NOTES TO FINANCIAL STATEMENTS
YEARS ENDED FEBRUARY 29, 2000 and FEBRUARY 28, 1999
NOTE 10. COMMITMENTS
Employment Agreement
The Company has an employment contract (the
"agreement") with its President through January 1, 2005 which
provides for minimal annual salary and bonuses based on
Company revenues. The agreement also provides for one-year
extensions every January 1 unless notice is given by the
Company. In addition, the Company granted this person
10,000,000 stock options with anti-dilution provisions (see
Note 7).
Licensees
The Company has entered into various licensing
agreements (the "agreements") for the right to manufacture,
sell and distribute certain collectibles and novelties
relating to current and future movie characters. The
agreements expire at various dates through December 31, 2002
and generally require the Company pay a royalty of 10% of
sales, with certain minimum royalty payments required. The
total remaining minimum guaranteed royalty as of February 29,
2000 for all agreements is $140,000. As of February 29, 2000,
the Company has paid $30,000 in advances against this minimum.
Royalty expense amounted to approximately $37,000 in 2000.
Consulting Agreement
During 2000, the Company entered into a consulting
agreement with an investment advisor for the period March 2000
through February 2001 requiring monthly payments of $5,000.
NOTE 11. RELATED PARTY TRANSACTIONS
The Company has an employment agreement with its
president (see Note 10), who has elected to defer a portion of
his salary in support of the cash needs of the Company. At
February 29, 2000 and February 28, 1999, the amount of salary
deferred was $234,000 and $126,000, respectively.
NOTE 12. SUBSEQUENT EVENTS
Subsequent to February 29, 2000, the following occurred:
o The Company received $400,000 in financing from the
issuance of 1,000,000 common shares pursuant to a
Rule 504 Regulation D filing February 8, 2000. The
net proceeds to the Company were $340,000;
F-15
<PAGE>
COLLECTIBLE CONCEPTS GROUP, INC.
NOTES TO FINANCIAL STATEMENTS
YEARS ENDED FEBRUARY 29, 2000 and FEBRUARY 28, 1999
NOTE 12. SUBSEQUENT EVENTS (Continued)
o The Company issued $20,000 in one-year subordinated
debentures in March 2000, convertible into 200,000
shares of the Company's stock and paying quarterly
interest at 12%;
o In March 2000, the Company received notice from
holders of $20,000 of debentures at February 29,
2000 requesting conversion into 1,000,000 shares of
Company common stock;
o In March/April 2000, the Company converted
approximately $76,000 of notes and loans payable
(see Note 5) into 4,400,000 shares of Company common
stock;
o Issued $400,000 of convertible debentures for net
cash proceeds of $348,000; the debentures mature
April 2001, are secured by substantially all the
Company's assets and bear interest at 10% per annum
payable quarterly; the debentures are convertible
into common stock at the lessor of $.04 per share or
50% of market value; the debentures also have
warrants to purchase 4,000,000 shares of common
stock at 110% of the market value on the closing
date (in connection with the issuance of warrants,
the Company will record interest expense of
approximately $300,000 over the life of the related
debentures); the debenture holders also have certain
rights in the event the Company files a registration
statement.
NOTE 13 STATEMENT OF CASH FLOWS
During 2000 and 1999, the Company entered into the
following non-cash transactions:
o Converted approximately $56,000 and $185,000,
respectively of notes and loans payable and related
accrued interest into equity.
o Issued common stock in 2000 for services to be
rendered during the year ending February 28, 2001
($69,000).
F-16
<PAGE>
FILED
FEB. 11, 1986
CERTIFICATE OF INCORPORATION
OF
AMOUR CORPORATION
ARTICLE I
The name of the corporation is Amour Corporation.
ARTICLE II
The registered office of the Corporation in the state of Delaware is Corporation
Trust Center, 1209 Orange, Wilmington, Delaware, county of New Castle. The
registered agent in charge thereof at such address is The Corporation Trust
Company.
ARTICLE III
The nature of the business, and the objects and purposes proposed to be
transacted, promoted and carried on, are to do any or all things herein
mentioned, as fully and to the same extent as natural person might or could do,
and in any part of the world, viz.:
"The purpose of the Corporation is to engage in any lawful act
or activity for which corporations may be organized under the
General Corporation Law of Delaware."
ARTICLE IV
The amount of the total authorized capital stock of this Corporation is Two
Hundred Thousand Dollars ($200,000) divided into 200,000,000 shares of $0.001
par value each. All shares shall be designated as common stock.
ARTICLE V
The name and mailing addresses of the incorporators of the Company are:
Stanley G. Schwartz 9813 Layton Road
Philadelphia, PA 19115
Scott M. Schmerelson 100 N. Catalina Street
Los Angeles, CA 90004
Emanuel German 11010 Philmont Terrace
Philadelphia, PA 19116
<PAGE>
ARTICLE VI
The powers of the incorporator(s) shall terminate upon the filing of this
Certificate of Incorporation, and the names and mailing addresses of the persons
to serve as directors until the first annual meeting of stockholders and until
successors are elected and qualify are:
Name of Director Mailing Address
---------------- ---------------
Stanley G. Schwartz 9813 Layton Road
Philadelphia, PA 19115
Scott M. Schmerelson 100 N. Catalina Street
Los Angeles, CA 90004
Emanuel German 11010 Philmont Terrace
Philadelphia, PA 19116
The number of members of the Board of Directors shall be fixed from time to time
by the Board of Directors. If any vacancy occurs, the remaining directors by an
affirmative vote of a majority thereof, may elect a director to fill the vacancy
until the next annual meeting of stockholders.
ARTICLE VII
No contract or transaction between the Corporation and one or more of its
Directors or Officers, or between the Corporation and any other corporation,
partnership, association, or other organization in which one or more of its
directors or officers are Directors or Officers, or have a financial interest,
shall be void or voidable solely for this reason, or solely because the director
or officer is present at or participates in the meeting of the board of
committee thereof which authorizes the contract or transaction, or solely
because his or their votes are counted for such purpose, if:
1. The material facts as to his interest and as to the contract or transaction
are disclosed or are known to the Board of Directors or the committee, and the
Board or committee in good faith authorizes the contract or transaction by a
vote sufficient for such purpose without counting the vote of the interested
director or directors; or
2. The material facts as to his interest and as to the contract or transaction
are disclosed or are known to the stockholders entitled to vote thereon, and the
contract or transaction is specifically approved in good faith by vote of the
stockholders; or
3. The contract or transaction is fair as to the Corporation as of the time it
is authorized, approved or ratified, by the Board of Directors, a committee
thereof, or the stockholders.
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 the
contract or transaction.
The undersigned, for the purpose of forming a corporation under the laws of the
state of Delaware, does make, file and record this certificate, and does certify
that the facts stated herein are true; and has executed this Certificate of
Incorporation.
<PAGE>
STATE OF PENNSYLVANIA :
: ss.
COUNTY OF PHILADELPHIA :
On the 6th day of February, 1986, personally appeared before me Stanley G.
Schwartz, Scott M. Schmerelson, and Emanuel German, who acknowledged to me that
they are the persons who signed the foregoing Articles of Incorporation as
incorporators and that they have read the foregoing Articles of Incorporation
and know the content thereof, and that the same is true of their knowledge as to
those matters upon which they operate on information and belief, and as to those
matters believe them to be true.
/s/
-----------------------
Stanley G. Schwartz
/s/
-----------------------
Scott P. Schmerelson
/s/
-----------------------
Emanuel German
SUBSCRIBED AND SWORN TO before me this 6th day of February, 1986.
/s/
-----------------------
NOTARY PUBLIC
Residing at Holland, PA
My Commission Expires:
- -------------------------
Ronald W. Rudolph
Notary Public, Phila. Co.
My Commission Expires May 17, 1988
<PAGE>
Filed
3 p.m.
SEP 30 1988
CERTIFICATE OF AMENDMENT
OF
AMOUR CORPORATION
Pursuant to Section 242 of the General Corporation Law of the State of
Delaware.
The undersigned, pursuant to the provisions of the General Corporation Law of
the State of Delaware, does hereby certify and set forth as follows:
FIRST: The name of the Corporation is Amour Corporation.
SECOND: The amendment to the Certificate of Incorporation to be effected hereby
is as follows:
RESOLVED, that Articles I and II of the Certificate of
Incorporation of Amour Corporation are amended to read as
follows and a new Article VIII in the form set forth below is
added:
ARTICLE I
The name of the corporation is Bard Sports Corp.
ARTICLE II
The registered office of the corporation in the State of Delaware is c/o United
Corporate Services, Inc., 410 South State Street in the City of Dover, County of
Kent. The name of the registered agent of the corporation at such address is
United Corporate Services, Inc.
ARTICLE VIII
No director shall be liable to the Corporation or any of its stockholders for
monetary damages for breach of fiduciary duty as a director, except with respect
to (a) a breach of the director's duty of loyalty to the Corporation or its
stockholders, (b) acts or omissions not in good faith or which involve
intentional misconduct or a knowing violation of law, (c) liability under
Section 174 of the General Corporation Law or (d) a transaction from which the
Director derived an improper personal benefit, it being the intention of the
foregoing provision to eliminate the liability of the Corporation's Directors to
the Corporation or its stockholders to the fullest extent permitted by Section
102(b)(7) of the Delaware General Corporation Law, as amended from time to time.
The corporation shall indemnify to the fullest extent permitted by Sections
102(b)(7) and 145 of the Delaware General Corporation Law, as amended from time
to time, each person that such sections grant the Corporation the power to
indemnify.
<PAGE>
THIRD: The Amendment effected herein was authorized by the affirmative vote of
the holders of a majority of the outstanding shares entitled to vote thereon
pursuant to a written consent executed in accordance with Section 228 of the
General Corporation Law of the State of Delaware.
IN WITNESS WHEREOF, I have hereunto set my hand and seal this 30TH day of
September, 1988.
AMOUR CORPORATION
By: /s/
------------------------
MITCHELL LOMBARD,
President
ATTEST: /s/
--------------------
JOHN TORNGA,
Secretary
<PAGE>
STATE OF DELAWARE
SECRETARY OF STATE
DIVISION OF CORPORATIONS
FILED 09:00 A.M. 11/09/1993
CERTIFICATE FOR
RENEWAL AND REVIVAL OF CHARTER
OF
BARD SPORTS CORP.
Bard Sports Corp. Inc., a corporation organized under the laws of Delaware, the
certificate of incorporation of which was filed in the office of the Secretary
of State on the 11th day of February 1986, and recorded in the office of the
Recorder of Deeds for Kent County, the charter of which was voided for
non-payment of taxes, now desires to procure a restoration, renewal and revival
of its charter, and hereby certifies as follows:
1. The name of the Corporation is Bard Sports Corp.
2. Its registered office in the State of Delaware is located at United
Corporate Services, Inc. 15 East North Street, in the City of Dover,
County of Kent, State of Delaware, 19901. The name of its registered
agent at that address is United Corporate Services, Inc.
3. The date when the restoration, renewal, and revival of the charter of
this company is to commence the 20th day of February, 1993, same being
prior to the date of the expiration of the charter. This renewal and
revival of the charter of this corporation is to be perpetual.
4. This corporation was duly organized and carried in the business
authorized by its charter until the lst of March, 1993 at which time
its charter became inoperative and void for non-payment of taxes and
this certificate for renewal and revival is filed by authority of the
duly elected directors of the corporation in accordance with the laws
of the State of Delaware.
IN TESTIMONY WHEREOF, and in compliance with the provisions of Section 312 of
the General Corporation Law of the State of Delaware, as amended, providing for
the renewal, extensions and restoration of charters, Paul Lipschutz, the last
acting President and Kathleena Howard, the last acting Secretary of Bard Sports
Corp, Inc., have hereunto set their hands to this certificate this 28th day of
October, 1993.
By /s/
-------------------------
Paul Lipschutz, President
ATTEST:
By: /s/
---------------------------
Kathleena Howard, Secretary
<PAGE>
STATE OF DELAWARE
SECRETARY OF STATE
DIVISION OF CORPORATIONS
FILED 09:00 AM 04/13/1994
CERTIFICATE OF AMENDMENT
OF
Certificate of Incorporation
Of Bard Sports Corp.
Ooo00ooo
The undersigned officer of Bard Sports Corp. (a Delaware corporation) hereby
certifies that the
following amendments to said corporation's Certificate of Incorporation have
been duly adopted in accordance with applicable provisions (including ss. 242)
of the Delaware General Corporation Law, in that written consents adopting said
amendments have been signed by holders of more than a majority of said
corporation's outstanding shares and given in accordance with --- and written
notice given a provided in --- ss.228 of the Delaware General Corporation Law,
to-wit:
FIRST: Article I of the corporation's Certificate of Incorporation has
been (and is by this Certificate) amended to provide in its entirety:
ARTICLE I
The name of the Corporation is "USA SPORTS GROUP, INC.".
SECOND: Article IV of the corporation's Certificate of Incorporation
has been (and is by this Certificate) amended to provide in its entirety:
<PAGE>
ARTICLE IV
The corporation is authorized to issue 200,000,000
shares of $.001 per value common stock.
The consents referred to also declare the purpose and intent of the
corporation's stockholders in adopting said amendment to Article IV to be in
respect of a 1 for 29 split of the corporation's stock "declared" and
implemented by a previous board of directors on or about September 30, 1988 ---
in that the corporation then reduced the total of its issued shares in its
accounting (by dividing the total shares then issued by 29) and thereafter
proceeded (without recording any change in the number of shares it was and/or is
authorized to issue nor the par value thereof) to issue new form certificates
(bewaring the name "Bard") representing one share for each 29 shares of the
corporation represented by old form certificates (bearing the corporation's then
prior name "Amour") presented for transfer (with fractional shares of .50 or
larger being rounded up to one whole share and fractional shares smaller than
.50 being eliminated), and to be: (a) to first split the shares which the
corporation has authority to issue from 200,000,00 shares of $.001 par value
stock into 6,896,555 shares of $.029 par value stock; (b) to then decrease the
par value of the corporation's shares (authorized, and to any extent ever deemed
or contended to be necessary its presently issued shares) to $.001 par share;
and, (c) to then increase the number of shares which the corporation is
authorized to issue from 6,896,555 to 200,000,000 shares.
Accordingly the only provision necessary to effect any change in stock
after this Certificate becomes effective is that the corporation will issue new
form certificates bearing the name "USA Sports Group, Inc." in replacement of
such old form certificates bearing the name "Bard" as are hereafter presented
for transfer on a share for one basis, and will continue to issue its said new
form certificates representing one share of the corporation for each 29 shares
as are represented by such old form certificates bearing the name "Amour" as
might be presented for transfer (with fractional shares of .50 or greater being
rounded up to one whole share and fractional shares less than .50 being
eliminated).
EXECUTED and hereby ACKNOWLEDGED on this 11th day of April ,1994 by:
/s/
---------------------------
Paul Lipshutz
President
Attested to by:
/s/
- ---------------------------
Kathleena Howard
Secretary
<PAGE>
CERTIFICATE OF AMENDMENT
OF
CERTIFICATE OF INCORPORATION
USA SPORTS GROUP, INC.
USA Sports Group, Inc., a corporation organized and existing under and by virtue
of the General Corporation Law of the State of Delaware,
DOES HEREBY CERTIFY:
FIRST: The (i) by unanimous written consent of the Board of Directors of USA
Sports Group, Inc. (the "Corporation"), pursuant to Section 141(f) of the
General Corporation Law of the State of Delaware and (ii) by written consent of
the holders of a majority of the outstanding capital stock of the Corporation
pursuant to Section 228(a) of the General Corporation Law of the State of
Delaware, the following resolution approving a proposed amendment to the
Certificate of Incorporation of the Corporation was approved:
RESOLVED, that Article Articles I and IV of the Certificate of
Incorporation of the Corporation be amended to read as follows:
"ARTICLE I: The name of the Corporation is Collectible
Concepts Group, Inc."
"ARTICLE IV: The total number of shares of stock which the
Corporation shall have authority to issue is 350,000,000
shares of Common Stock, par value $0.001 per share."
SECOND: That notice of adoption of the foregoing resolution by the written
consent of the holders of a majority of the outstanding Common Stock of the
Corporation in accordance with Section 228(a) of the General Corporation Law of
the State of Delaware was duly given to each other shareholder of record of the
Corporation in accordance with Section 228(d) of the General Corporation Law of
the State of Delaware.
THIRD: That said amendments have been duly adopted in accordance with the
provisions of Section 242 of the General Corporation Law of the State of
Delaware.
<PAGE>
IN WITNESS WHEREOF, USA Sports Group, Inc. has caused this
certificate to be signed by Paul Lipschutz, its President this
26th day of April, 1999.
USA SPORTS GROUP, INC.
BY: /s/
-------------------------
Paul Lipschutz, President
ATTEST:
BY:________/s/________________
<PAGE>
BY-LAWS
OF
USA SPORTS GROUP, INC.
<PAGE>
BY-LAWS
OF
USA SPORTS GROUP, INC.
ARTICLE I - Stockholders
1.1 Place of Meetings. All meetings of stockholders shall be held at
such place within or without the State of Delaware as may be designated from
time to time by the Board of Directors (the "Board") or the President or, if not
so designated, at the registered office of the Corporation.
1.2 Annual Meeting. The annual meeting of stockholders for the election
of directors and for the transaction of such other business as may properly be
brought before the meeting shall be held on May 1 of each year, or such other
date as the Board may determine, at a time fixed by the Board or, if not so
fixed by the Board, by the President. If this date shall fall upon a legal
holiday, then such meeting shall be held on the next succeeding business day at
the same hour.
1.3 Special Meeting. Special meetings of stockholders may be called at
any time by the Board or the President, and shall be called by the Board upon
the request of the holders of a majority of the outstanding shares of stock of
the Corporation entitled to vote at the meeting. Business transacted at any
special meeting of stockholders shall be limited to matters relating to the
purpose or purposes stated in the notice of meeting.
1.4 Notice of Meetings. Except as otherwise provided by law, written
notice of each meeting of stockholders, whether annual or special, shall be
given not less than ten (10) nor more than sixty (60) days before the date of
the meeting to each stockholder entitled to vote at such meeting. The notices of
all meetings shall state the place, date and hour of the meeting. The notice of
a special meeting shall state, in addition, the purpose or purposes for which
the meeting is called.
1.5 Voting List. The officer who has charge of the stock ledger of the
Corporation shall prepare, at least ten (10) days before every meeting of
stockholders, a complete list of the stockholders entitled to vote at the
meeting, arranged in alphabetical order, and showing the address of each
stockholder and the number of shares registered in the name of each stockholder.
Such list shall be open to the examination of any stockholder, for any purpose
germane to the meeting, during ordinary business hours, for a period of at least
ten (10) days prior to the meeting, at the place where the meeting is to be held
or, if such place is specified in the notice of the meeting at a place within
the city which the meeting is to be held other than the place of the meeting.
The list shall also be produced and kept at the time and place of the meeting
during the whole time of the meeting, and may be inspected by any stockholder
who is present.
1.6 Quorum and Required Vote. Except as otherwise provided by law or in
the Certificate of Incorporation, the holders of a majority of the shares of
stock entitled to vote on a particular matter present in person or represented
by proxy shall constitute a quorum for the purpose of considering such matter.
<PAGE>
1.7 Voting and Proxies. Each stockholder shall have one vote for each
share of stock entitled to vote and held of record by such stockholder, and a
proportionate vote for each fractional share so held, unless otherwise provided
in the Certificate of Incorporation. Each stockholder of record entitled to vote
at a meeting of the stockholders, or to express consent or dissent to corporate
action in writing without a meeting, may vote or express such consent or dissent
in person or may authorize another person or persons to vote or act for such
stockholder by proxy in accordance with applicable law.
ARTICLE II - Directors
2.1 General Powers. The business and affairs of the Corporation shall
be managed by or under the direction of the Board, which may exercise all of the
powers of the Corporation except as may be otherwise provided by law or the
Certificate of Incorporation.
2.2 Number and Term. Except as may be provided in the Certificate of
Incorporation and subject to any resolution of the shareholders, the Board shall
have the authority to determine the number of directors which shall constitute
the Board and the terms of office of directors. In the absence of a resolution
of the Board setting forth the number of directors, the number shall be three.
2.3 Regular Meetings. Regular meetings of the Board may be held without
notice at such time and place, either within or without the State of Delaware,
as shall be determined from time to time by the Board.
2.4 Special Meeting. Unless the Board shall otherwise direct, special
meetings of the Board may be held at any time and place, within or without the
State of Delaware, and shall be called at any time by or at the request of the
President and shall be called by or at the written request of one-third of the
directors, or by one director in the event that there is only a single director
in office. Notice, which need not be written, of the time and place of special
meetings shall be given to each director at least twenty-four (24) hours before
the time for which the meeting is scheduled. A notice or waiver of notice of a
meeting of the Board need not specify the purposes of the meeting. Any business
may be transacted at a special meeting.
2.5 Meetings by Telephone Conference Calls. Directors or any members of
any committee designated by the Directors may participate in a meeting of the
Board or such committee by means of conference telephone or similar
communications equipment by means of which all persons participating in the
meeting can hear each other, and participation by such means shall constitute
presence in person at such meeting.
2.6 Quorum. A majority of all the directors in office shall constitute
a quorum at all meetings of the Board.
<PAGE>
2.7 Committees. The Board may, by resolution passed by a majority of
the whole Board, designate one or more committees, each committee to consist of
one or more of the directors of the Corporation. The Board may designate one or
more directors as alternate members of any committee, who may replace any absent
or disqualified member at any meeting of the committee. In the absence or
disqualification of a member of a committee, the member or members of the
committee present at any meeting and not disqualified from voting, whether or
not such member or members constitute a quorum, may unanimously appoint another
member of the Board to act at the meeting in the place of any such absent or
disqualified member. Any such committee, to the extent provided in the
resolution of the Board and subject to the provisions of the General Corporation
Law of the State of Delaware, shall have and may exercise all the powers and
authority of the Board in the management of the business and affairs of the
Corporation.
ARTICLE III - Officers
3.1 Enumeration. The officers of the Corporation shall consist of a
President, a Secretary, a Treasurer and such other officers with such other
titles as the Board may determine.
3.2 Election. Officers shall be elected annually by the Board at its
first meeting following the annual meeting of stockholders.
3.3 Duties and Powers. Except as otherwise provided by the Board, the
officers shall have, exercise and perform the duties and powers usually incident
to their offices and as set forth herein:
(i) President. The President shall be the chief operating
officer and executive officer of the Corporation. The President shall, subject
to the direction of the Board, have general charge and supervision of the
business of the Corporation. Unless otherwise provided by the Board, the
President shall preside at all meetings of the stockholders, and if he is a
director, at all meetings of the Board.
(ii) Vice President. Any Vice President shall perform such
duties and possess such powers as the Board or the President may from time to
time prescribe. In the event of the absence, inability or refusal to act of the
President, the Vice President (or if there shall be more than one, the Vice
President in the order determined by the Board) shall perform the duties of the
President and when so performing shall have all the powers of and be subject to
all the restrictions upon the President.
(iii) Secretary. The Secretary shall perform such duties and
shall have such powers as the Board or the President may from time to time
prescribe, including without limitation the duty and power to give notices of
all meetings of stockholders and special meetings of the Board, to attend all
meetings of stockholders and the Board and keep a record of the proceedings, to
maintain a stock ledger and prepare lists of stockholders and their addresses as
required, to be custodian of corporate records and the corporate seal and to
affix and attest to the same on documents.
<PAGE>
(iv) Treasurer. The Treasurer shall perform such duties and
shall have such powers as may from time to time be assigned to him by the Board
or the President, including without limitation the duty and power to keep and be
responsible for all funds and securities of the Corporation, to deposit funds of
the Corporation in depositories selected by the Board, to disburse such funds as
ordered by the Board, to make proper accounts of such funds, and to render as
required by the Board statements of all such transactions and of the financial
condition of the Corporation.
3.4 Salaries. Officers of the Corporation shall be entitled to such
salaries, compensation or reimbursement as shall be fixed or allowed from time
to time by the Board.
ARTICLE IV - Transfer of Share Certificates
Except as otherwise established by rules and regulations adopted by the
Board and subject to applicable law, shares of stock may be transferred on the
books of the Corporation only by the registered holder or by duly authorized
attorney. Transfers shall be made only on surrender to the Corporation or its
transfer agent of the certificate representing such shares properly endorsed or
accompanied by a written assignment or power of attorney properly executed, and
with such proof of authority of the authenticity of signature as the Corporation
or its transfer agent may reasonably require. Except as may be otherwise
required by law, by the Certificate of Incorporation or by these By-Laws, the
Corporation shall be entitled to treat the record holder of stock as shown on
its books as the owner of such stock for all purposes, including the payment of
dividends and the right to vote with respect to such stock, regardless of any
transfer, pledge or other disposition of such stock until the shares have been
transferred on the books of the Corporation in accordance with the requirements
of these By-Laws.
ARTICLE V - Indemnification
5.1 Right to Indemnification. The Corporation shall indemnify any
person who was or is a party or threatened to be made a party to any threatened,
pending or completed action, suit or proceeding, whether civil, criminal,
administrative or investigative (collectively, a "proceeding"), by reason of the
fact such person is or was a director or officer of the Corporation or a
constituent corporation absorbed in a consolidation or merger (hereinafter, a
"constituent corporation"), or is or was serving at the request of the
Corporation or a constituent corporation as a director, officer, partner,
employee or agent of another corporation, partnership, joint venture or other
enterprise or entity, or is or was a director or officer of the Corporation
serving at its request as an administrator, trustee or other fiduciary of one or
more of the employee benefit plans, if any, of the Corporation or another entity
which may be in effect from time to time (any such person, an "Authorized
Representative"), against all expenses, liability and loss actually and
reasonably incurred or suffered by such Authorized Representative in connection
with such proceeding, whether or not the indemnified liability arises or arose
from any proceeding by or in the right of the Corporation, to the extent that
such Authorized Representative is not otherwise indemnified and to the extent
that such indemnification is not prohibited by law as it presently exists or may
hereafter be amended.
<PAGE>
5.2 Advance of Expenses. Absent a by-law, written agreement or
resolution of stockholders of the Corporation to the contrary, the Corporation
may, but shall have no obligation to, pay expenses incurred by an Authorized
Representative in defending a proceeding in advance of the final disposition of
such proceeding.
5.3 Procedure for Determining Permissibility. To determine whether any
indemnification under this Article V is permissible, the Board by a majority
vote of a quorum consisting of directors not parties to such proceeding may, and
on request of any Authorized Representative seeking indemnification shall be
required to, determine in each case whether the applicable standards in any
applicable statute have been met, or such determination shall be made by
independent legal counsel if such quorum is not obtainable, or, even if
obtainable, a majority vote of a quorum of disinterested directors so directs,
provided that, if there has been a change in control of the Corporation between
the time of the action or failure to act giving rise to the claim for
indemnification and the time such claim is made, at the option of the Authorized
Representative seeking indemnification, the permissibility of indemnification
shall be determined by independent legal counsel. If a claim for indemnification
under this Article is not paid in full within ninety (90) days after a written
claim therefor has been received by the Corporation, the claimant may file suit
to recover the unpaid amount of such claim, and the Corporation shall have the
burden of proving that the claimant was not entitled to the requested
indemnification under applicable law. The reasonable expenses of any Authorized
Representative in prosecuting a successful claim for indemnification, and the
fees and expenses of any independent legal counsel engaged to determine
permissibility of indemnification, shall be borne by the Corporation. For
purposes of this paragraph, "independent legal counsel" means legal counsel
other than that regularly or customarily engaged by or on behalf of the
Corporation.
5.4 Proceedings Initiated by Authorized Representatives.
Notwithstanding any other provision of this Article V, the Corporation shall be
required to indemnify an Authorized Representative in connection with a
proceeding initiated by such Authorized Representative only if the proceeding
was authorized by the Board.
5.5 Indemnification Not Exclusive; Inuring of Benefit. The
indemnification provided by this Article V shall not be deemed exclusive of any
other right to which one seeking indemnification may have or hereafter acquire
under any statute, provision of the Certificate of Incorporation, these By-Laws,
agreement, vote of stockholders or disinterested directors or otherwise, and
shall inure to the benefit of the heirs, executors and administrators of any
such person.
5.6 Insurance and Other Indemnification. The Board shall have the power
to (i) authorize the Corporation to purchase and maintain, at the Corporation's
expenses, insurance on behalf of the Corporation and on behalf of others to the
extent that power to do so has not been prohibited by applicable law, and (ii)
give other indemnification to the extent not prohibited by applicable law.
5.7 Modification or Repeal. Any modification or repeal of any provision
of this Article V shall not adversely affect any right or protection of an
Authorized Representative existing hereunder with respect to any act or omission
occurring prior to such modification or repeal.
<PAGE>
ARTICLE VI - Amendments
6.1 By the Board of Directors. These By-Laws may be altered, amended or
repealed or new By-Laws may be adopted by the affirmative vote of a majority of
the directors present at any regular or special meeting of the Board at which a
quorum is present.
6.2 By the Stockholders. These By-Laws may be altered, amended or
repealed or new By-Laws may be adopted by the affirmative vote of the holders of
a majority of the shares of the capital stock of the Corporation entitled to
vote at any regular meeting of stockholders, or at any special meeting of
stockholders, provided such change shall have been set forth, or a summary
thereof shall have been provided, in the notice of such special meeting.
<PAGE>
THE SECURITIES REPRESENTED BY THIS DEBENTURE HAVE NOT BEEN REGISTERED
UNDER THE SECURITIES ACT OF 1933 (THE "ACT") OR APPLICABLE STATE SECURITIES LAWS
(THE "STATE ACTS"), AND SHALL NOT BE SOLD, PLEDGED, HYPOTHECATED, DONATED, OR
OTHERWISE TRANSFERRED (WHETHER OR NOT FOR CONSIDERATION) BY THE HOLDER EXCEPT
UPON THE ISSUANCE TO THE COMPANY OF A FAVORABLE OPINION OF ITS COUNSEL AND/OR
SUBMISSION TO THE COMPANY OF SUCH OTHER EVIDENCE AS MAY BE SATISFACTORY TO
COUNSEL FOR THE COMPANY, TO THE EFFECT THAT ANY SUCH TRANSFER SHALL NOT BE IN
VIOLATION OF THE ACT AND THE STATE ACTS.
COLLECTIBLE CONCEPTS GROUP, INC.
A DELAWARE CORPORATION
__________________________, 2000
Number_____________________________ $________________
COLLECTIBLE CONCEPTS GROUP, INC. a Delaware corporation (the
"Company"), is indebted and, for value received, promises to pay to the order of
___________________________________ on ________________________ (the "Due
Date"), (unless this Debenture shall have been sooner called for redemption as
herein provided), upon presentation of this Debenture, ___________________
Dollars ($ ) (The "Principal Amount") and to pay interest on the Principal
Amount at the rate of ________________percent ( %) per annum as provided herein.
The Company covenants, promises and agrees as follows:
1. Interest. Interest which shall accrue on the Principal Amount shall
be payable in four (4) installments on the first day of
_________________________ in each and every calendar year until the Principal
Amount and all accrued and unpaid interest shall have been paid in full.
Notwithstanding the foregoing, interest shall be paid only to the extent of
available net income of the Company. The net income of each fiscal semi-annual
period will be determined in the regular course of the Company's business by the
duly appointed certified public accountants of the Company. After allocation of
earnings has been made to cover all existing and continuing obligations of the
Company, including any new, customary, and non-extraordinary obligations
incurred in the normal course of doing business, and after the usual
appropriations have been made for customary reserves, funds, or accounts, the
amount of earned surplus available for payment of dividends or other purposes
will be determined. All of the available earned surplus in each semi-annual
period will first be used toward this issue, to pay the holders on a pro rata
basis up to the maximum percent of interest on this Debenture. The interest
payments shall be made during the following semi-annual period. Only when all
holders are paid the maximum percentage of interest on this Debenture will the
surplus be available for payment of dividends or other purposes as the Board of
Directors determines. Any interest not paid in any particular semi-annual period
will accumulate the subsequent semi-annual period. If this Debenture shall be
issued on a date other than the first day of a calendar month, the interest
payable shall be prorated upon the number of days of such calendar month period
during which this Debenture shall have been issued and outstanding. All accrued
and unpaid interest shall be payable on the Due Date. The first payment of
interest shall be made on ___________________. All payments of principle and
interest or principle or interest shall be made at
____________________________________, or at such other place as may be
designated by the holder hereof.
<PAGE>
2. Redemption.
2.1 This Debenture is subject to redemption at the option of the
Company in whole or in part prior to the Due Date at any time and from time to
time without penalty or premium. The Company may exercise its right to redeem
this Debenture prior to maturity by giving notice (the "Redemption Notice")
thereof to the holder of this Debenture as it appears on the books of the
Company, which notice shall specify the terms of redemption (including the place
at which the holder of the Debenture may obtain payment), the principal amount
of the Debenture to be redeemed (the "Redemption Amount") and shall fix a date
for redemption (the "Redemption Date"), which date shall not be less than thirty
(30) days nor more than forty-five (45) days after the date of the Redemption
Notice.
2.2 On the Redemption Date, the Company shall pay all accrued and
unpaid interest on the Debenture up to and including the Redemption Date and
shall pay to the holder hereof a dollar amount equal to the Redemption Amount.
3. Conversion.
3.1 The holder of this Debenture shall have the right, at such
holder's option, at any time, to convert all, but not less than all, of this
Debenture into such number of fully paid and nonassessable shares of Common
Stock at .001 par value of the Company (the "Common Stock") as shall be provided
herein. The issuance of a Redemption Notice by the Company pursuant to Section 2
above shall have no effect upon the holder's conversion right as provided
herein.
3.2 The holder of this Debenture may exercise the conversion right
provided in this Section 3 by giving written notice (the "Conversion Notice") to
the Company of the exercise of such right and stating the name or names in which
the stock certificate or stock certificates for the shares of Common Stock are
to be issued and the address to which such certificates shall be delivered. The
Conversion Notice shall be accompanied by the Debenture. The number of shares of
Common Stock that shall be issuable upon conversion of the Debenture shall equal
______ Dollar ( $ 1.00 ) multiplied by the Conversion Ratio as defined and
determined in accordance with Section 4 in effect on the date the Conversion
Notice is given; provided, however, that in the event that this Debenture shall
have been partially redeemed, shares of Common Stock shall be issued pro rata,
rounded to the nearest whole share.
3.3 Conversion shall be deemed to have been effected on the date
the Conversion Notice is given (the "Conversion Date"). Within ten business days
after receipt of the Conversion Notice, the Company shall issue and deliver by
hand against a signed receipt therefor or by United States registered mail,
return receipt requested, to the address designated by the holder of this
Debenture in the Conversion Notice, a stock certificate or stock certificates of
the Company representing the number of shares of Common Stock to which such
holder is entitled and a check or cash in payment of all interest accrued and
unpaid on the Debenture up to and including the Conversion Date.
4. Conversion Ratio.
4.1 On the date hereof, the Conversion Ratio shall equal _________
( ), provided, however, that the Conversion Ratio shall be subject to adjustment
in accordance with and at the times provided in this Section 4.
4.2 In the event that the Company takes any action, whether in the
form of issuance of new securities or by adoption of changes in outstanding
securities, which has the effect of diluting the value of the holder's
conversion rights of more than twenty percent (20%), the Company will make a
corresponding adjustment in the Conversion Ratio to preserve the present value
of such rights.
4.3 Whenever the Conversion Ratio shall be adjusted as provided in
Section 4 hereof, the Company shall prepare and send to the holder of this
Debenture a statement, signed by the chief financial officer of the Company,
showing in detail the facts requiring such adjustment and the Conversion Ratio
that shall be in effect after such adjustment.
4.4 In the event the Company shall propose to take any action of
the types described in Section 4.2 hereof, the Company shall give notice to the
holder of this Debenture, which notice shall specify the record date, if any,
with respect to any such action and the date on which such action is to take
place. Such notice shall be given on or prior to the earlier of thirty (30) days
prior to the record date or the date which such action shall be taken. 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 Ratio and the
<PAGE>
number, kind or class of shares or other securities or property which shall be
deliverable or purchasable upon the occurrence of such action or deliverable
upon conversion of this Debenture. Failure to give notice in accordance with
this Section 4.4 shall not render such action ultra vires, illegal or invalid.
4.5 The Company shall pay all documentary, stamp or other
transactional taxes and charges attributable to the issuance or delivery of
shares of stock of the Company upon conversion; provided, however, 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 record holder of this Debenture.
4.6 The Company shall at all times reserve and keep available,
free from preemptive rights, unissued or treasury shares of Common Stock
sufficient to effect the conversion of this Debenture.
5. Default. The entire unpaid and unredeemed balance of the Principle
Amount and all Interest accrued and unpaid on this Debenture shall, at the
election of the holder, be and become immediately due and payable upon any
failure by the Company to issue and deliver shares of Common Stock as provided
herein upon conversion of this Debenture.
6. Waiver. No failure or delay by the holder to insist upon the strict
performance of any term of this Debenture or to exercise any right, power or
remedy consequent upon a default hereunder shall constitute a waiver of any such
term or of any such breach, or remedy at any later time or times by accepting
payment after the due date of any amount payable under this Debenture, the
holder hereof shall not be deemed to waive the right either to require payment
when due of all other amounts payable under this Debenture, or to declare a
default for failure to effect such payment of any such other amount. The failure
of the holder of this Debenture to give notice of any failure or breach of the
Company under this Debenture shall not constitute a waiver of any right or
remedy in respect of such continuing failure or breach or any subsequent failure
or breach.
7. Consent to Jurisdiction. The Company hereby agrees and consents
that any action, suit or proceeding arising out of this Debenture may be brought
in any appropriate court in the State of Pennsylvania, and/or in any other court
having jurisdiction over the subject matter, all at the sole election of the
holder hereof, and by the issuance and execution of this Debenture the Company
irrevocably consents to the jurisdiction of each such court. The Company hereby
irrevocably appoints as agent of the Company to accept service of process for
and on behalf of the Company in any action, suit or proceeding arising out of
this Debenture.
8. Transfer. This Debenture shall be transferred on the books of the
Company only by the registered holder hereof or by his attorney duly authorized
in writing or by delivery to the Company of a duly executed Assignment
substantially in the form attached hereto as Exhibit A. The Company shall be
entitled to treat any holder of record of the Debenture as the holder in fact
thereof and
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Group, Inc., 1600 Lower State Road, Doylestown, Pennsylvania 18901, and, if to
the holder of this Debenture, to the address of such holder as it appears in the
books of the Company. Any notice of communication shall be deemed given and
received as of the date of such delivery or mailing.
10. Governing Law. This Debenture shall be governed by and construed
and enforced in accordance with the laws of the state of Pennsylvania, or where
applicable, the laws of the United Sates.
<PAGE>
IN WITNESS WHEREOF, the Company has caused this Debenture to be duly
executed under its corporate seal.
ATTEST: COLLECTIBLE CONCEPTS GROUP, INC.
_____________________________ By:________________________________
_____________________, Secretary PAUL S. LIPSCHUTZ
President
EXHIBIT A
ASSIGNMENT
FOR VALUE RECEIVED, the undersigned hereby assigns to
_____________________ the five (5) year twelve percent (12%) Convertible
Debenture of Collectible Concepts Group, Inc., Number __________, and hereby
irrevocably appoints Paul S. Lipschutz, Attorney, to transfer said Debenture on
the books of the within named corporation, with full power of substitution in
the premises.
WITNESS my hand and seal this ___________ day of ___________________,
2000.
_____________________________
_____________________________
WITNESS:
_____________________________
<PAGE>
SUBSCRIPTION AGREEMENT
TO:
COLLECTIBLE CONCEPTS GROUP, INC. (the "Company"), a Delaware
corporation, proposes to offer and sell convertible debentures in an aggregate
principal amount of Five Hundred Thousand Dollars ($500,000.00) (the
"Debentures") at a purchase price of ____________ Thousand Dollars ($ ,000.00)
per Debenture to qualified purchasers. The Company may elect, in its sole
discretion, to increase the aggregate principal amount of the convertible
debentures offered hereby to One Million Dollars ($1,000,000.00). All purchasers
must be "Accredited Investors" as that term is defined by the regulations of the
United States Securities and Exchange Commission. All purchasers must execute
and return to the Company an "Accredited Investor Questionnaire" in conjunction
with the execution of this Subscription Agreement.
The undersigned ("Purchaser") agrees with the Company as follows:
1. Sales and Purchase of the Shares; Closing.
1.1 The Company hereby grants to Purchaser, subject to the terms
and conditions of this Subscription Agreement, the right to subscribe to
purchase Debentures, each Debenture to be in a principal amount of __________
Thousand Dollars ( $ , 000.00), and bear interest at an annual rate of twelve
percent (12%), which interest will accrue and be due and payable upon maturity
on _________ ___, _____. The Purchaser will have the right to covert the
Debenture into shares of the Company's common stock, on the basis of _______ (_)
shares of common stock for each dollar of principal outstanding at the time of
conversion. Thus, the Purchaser of a Debenture in the principal amount of
_______ Thousand Dollars ($ , 000.00) will have the right to convert such
Debenture into ________________ Thousand ( ,000) shares of the Company's common
stock. The Company may redeem the debenture at any time, without penalty or
premium, by paying the Purchaser the principal amount of the Debenture plus all
accrued but unpaid interest to date.
1.2 Subject to the terms of this Subscription Agreement, Purchaser
hereby agrees to purchase the number of Debentures set forth opposite
Purchaser's signature below, at the purchase price of ________________ Dollars
($ .00) per Debenture.
1.3 The purchase price per Debenture shall be paid upon execution
and return of this Subscription Agreement, by check payable to COLLECTIBLE
CONCEPTS GROUP, INC.
1.4 The Company's receipt or deposit of Purchaser's check shall
not be an acceptance of Purchaser's subscription. The Company will indicate its
acceptance by causing this Subscription Agreement to be executed. The Company
reserves the right to reject a Purchaser's subscription or to cancel its
subscription offer as to any and all Purchasers at any time. Upon the acceptance
by the Company of any subscription, the subscription funds deposited by the
Purchaser shall thereafter be immediately available to the Company for
disbursement, regardless of the aggregate amount of money raised in this
offering.
<PAGE>
1.5 Notwithstanding any provision in this Agreement to the
contrary, any Purchaser may rescind his subscription prior to acceptance by the
Company by notice to the Company and, in the event of a rescission, the
Purchaser shall have his subscription payment returned to him without any
interest thereon.
1.6 If the Company accepts Purchaser's subscription, the Company
will issue the Debenture purchased as of such date and mail to the Purchaser a
copy of this fully executed Subscription Agreement and Debenture registered in
Purchaser's name.
2. Company Overview. The Company is an OTC Bulletin Board listed broad
based marketing company with an emphasis on entertainment related products. The
purpose of this offering of Debentures is to provide capital for the Company's
operations which is marketing collectible merchandise, primarily in the
entertainment and sports markets.
Risk Factors.
In connection with the Purchaser's subscription for the Debentures
pursuant to the terms of this Agreement, Purchaser acknowledges that Purchaser
has considered, among other things, that the securities being offered hereby are
highly speculative and involve a high degree of risk.
3.2 The business in which the Company participates and intends to
participate in the future is highly competitive. Many of the Company's
competitors have greater financial and marketing resources than the Company,
greater market recognition and represent significant long-term competition for
the Company.
3.3 The Company may be required to raise additional financing in
the future to carry out its planned operations. There can be no assurance that
the Company will be able to raise additional financing or that, if raised, that
the terms of such financing will be favorable to the Company. Insufficient funds
<PAGE>
may cause the Company to delay or scale back certain of its plans and
operations.
4. Investment Representation. Purchaser represents and warrants as
follows:
4.1 The Purchaser is aware that:
a. The Company's current management has been in place since
August 1992, and the Company has had a limited financial and operating history,
and has had minimal revenues to date.
b. There are substantial risks incident to this investment in
the company.
c. No federal or state agency has passed upon the Debentures
or made any finding or determination as to the fairness of this investment.
4.2 Purchaser has the necessary knowledge and experience to
evaluate the merits and risks of the investment in the Debentures, and Purchaser
is able to bear the economic risks of losing Purchaser's entire investment. The
Purchaser understands that investment in the Company is an illiquid investment.
In particular, the Purchaser recognizes that:
a. The Purchaser must bear the economic risk of investment in
the Debentures for an indefinite period of time since neither the Debentures nor
the common shares into which the Debentures may be converted have been
registered under the Securities Act of 1933, as amended (the "Act"), and,
therefore, neither can be sold unless either they are subsequently registered
under the Act or an exemption from such registration is available; and
b. There will be no established market for the Debenture.
<PAGE>
4.3 The Purchaser's residency is as shown on the signature page
hereof.
4.4 All inquires that the Purchaser has requested of the Company
concerning the Company and its proposed activities have been answered. The
Purchaser has not been furnished any offering literature other than this
Subscription Agreement and a specimen Debenture. The books and records of the
Company have been and are available for inspection by Purchaser at Company's
place of business.
4.5 The Purchaser is acquiring the Debentures for which he or she
hereby subscribes for his or her own account, as principle, for investment and
not with the view to the resale or distribution of all or any part of such
Debentures.
4.6 The Purchaser is duly qualified to purchase and hold the
Debentures, and is not an entity which has been formed for the specific purpose
of acquiring the Debentures.
4.7 The Purchaser has adequate means of providing for Purchaser's
current needs and personal contingencies and has no need for liquidity in this
investment.
4.8 All the information which the Purchaser has furnished to the
Company is correct and complete as of the date of this Agreement and, if there
should be any material change in such information prior to Closing, the
Purchaser will immediately furnish such revised or corrected information for the
Company.
4.9 The Purchaser acknowledges that each certificate representing
(i) the Debentures, and (ii) any other securities issued in respect of the
Debentures upon any conversion, stock split, stock dividend, recapitalization,
merger or similar event (unless no longer required in the opinion of counsel for
the Company) shall be stamped or otherwise imprinted with legends substantially
<PAGE>
in the following form (in addition to any legend that may now or hereafter be
required by state law):
THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE BEEN ACQUIRED FOR
INVESTMENT AND NOT WITH A VIEW TO, OR IN CONNECTION WITH, THE SALE OR
DISTRIBUTION THEREOF. NO SUCH SALE OR DISTRIBUTION MAT BE EFFECTED WITHOUT AN
EFFECTIVE REGISTRATION STATEMENT RELATED THERETO OR AN OPINION OF COUNSEL TO THE
COMPANY THAT SUCH REGISTARTION IS NOT REQUIRED UNDER THE SECURITES ACT OF 1933,
OR, UNLESS EXEMPT PURSUANT TO RULE 144 OF SUCH ACT.
5. Miscellaneous.
5.1 This subscription is not transferable or assignable by the
Purchaser.
5.2 If the Purchaser is more than one person, the obligations of
the Purchaser shall be joint and several and the representations and warranties
herein contained shall be deemed to be made by and be binding upon each such
person and his or her heirs, executors, administrators, successors and assigns.
5.3 This subscription, upon acceptance by the Company, shall be
binding upon the heirs, executors, administrators, successors and assigns of the
Purchaser.
<PAGE>
5.4 This Subscription Agreement shall be construed in accordance
with and governed in all respects by the laws of the State of Pennsylvania.
Number of Debentures subscribed for:____________________
Amount of check enclosed: $_____________________ (Each Debenture
requires a payment of $_____________)
DATED:________________________
SIGN: _____________________________(1) ________________________________(1)
(Signature of Purchaser) (Name of Purchaser - Print)
SIGN: _____________________________(1) ________________________________(1)
(Signature of Purchaser) (Name of Purchaser - Print)
Address of Purchaser's Residence:
_____________________________________________
Number and Street
_____________________________________________
City State Zip Code
Mail Address (if different)
_____________________________________________
Number and Street
_____________________________________________
City State Zip Code
Subscription accepted as of
______________________, 2000;
COLLECTIBLE CONCEPTS GROUP, INC.
By: ________________________________
PAUL S. LIPSCHUTZ, President
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NEITHER THIS DEBENTURE NOR THE SECURITIES INTO WHICH THIS DEBENTURE IS
CONVERTIBLE HAVE BEEN REGISTERED WITH THE SECURITIES AND EXCHANGE COMMISSION OR
THE SECURITIES COMMISSION OF ANY STATE IN RELIANCE UPON AN EXEMPTION FROM
REGISTRATION UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE "SECURITIES
ACT"), AND, ACCORDINGLY, MAY NOT BE OFFERED OR SOLD EXCEPT PURSUANT TO AN
EFFECTIVE REGISTRATION STATEMENT UNDER THE SECURITIES ACT OR PURSUANT TO AN
AVAILABLE EXEMPTION FROM, OR IN A TRANSACTION NOT SUBJECT TO, THE REGISTRATION
REQUIREMENTS OF THE SECURITIES ACT AND IN ACCORDANCE WITH APPLICABLE STATE
SECURITIES LAWS.
No. 2 $175,000.00
April __, 2000
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10% SECURED CONVERTIBLE DEBENTURE
DUE APRIL ___, 2000
THIS DEBENTURE is issued by COLLECTIBLE CONCEPTS GROUP, INC., a
corporation having a principal place of business at 1600 Lower State Road,
Doylestown, PA 18901 (the "Company"), and is designated as the Company's 10%
Secured Convertible Debentures, due April 1, 2001 (the "Debentures").
FOR VALUE RECEIVED, the Company promises to pay to _________________,
or its registered assigns (the "Holder"), the principal sum of One Hundred
Seventy-five Thousand and no/100 Dollars ($175,000.00) on April 1, 2001 or such
earlier date as the Debentures are required or permitted to be repaid as
provided hereunder (the "Maturity Date") and to pay interest to the Holder on
such principal sum at the rate of 10% per annum, payable on a quarterly basis on
March 31, June 30, September 30 and December 31 of each year while such
Debentures are outstanding (each an "Interest Payment Date") and on each
Conversion Date (as defined herein) for such principal amount, commencing on the
earlier to occur of a Conversion Date for such principal amount and June 30,
2000, in cash or shares of Common Stock (as defined in Section 7). Subject to
the terms and conditions herein, the decision whether to pay interest hereunder
in Common Stock or cash shall be at the discretion of the Company. Interest
shall accrue daily commencing on the Original Issue Date (as defined in Section
7) until payment in full of the principal sum, together with all accrued and
unpaid interest and other amounts which may become due hereunder, has been made.
Any interest not paid on any Interest Payment Date shall continue to accrue and
shall be due and payable upon conversion of the Debentures. Interest hereunder
will be paid to the Person (as defined in Section 7) in whose name this
Debenture is registered on the records of the Company regarding registration and
transfers of Debentures (the "Debenture Register"). All overdue accrued and
unpaid interest shall entail a late fee at the rate of 15% per annum (to accrue
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daily, from the date such interest is due hereunder through and including the
date of payment), payable in cash. Not less than ten (10) Trading Days (as
defined in Section 7) prior to Interest Payment Date, the Company shall provide
the Holder notice of its intention to pay interest in cash or shares of Common
Stock (the Company may indicate in such notice that the election contained in
such notice shall continue for later periods until revised). If interest is paid
in shares of Common Stock, the number of shares of Common Stock issuable on
account of such interest shall equal the cash amount of such interest on such
Interest Payment Date divided by the Conversion Price (as defined below) on such
date. For purposes of determining the number of shares of Common Stock that are
issuable as payment of interest hereunder, the Conversion Price shall not be
subject to any floor to which the Conversion Price would otherwise be subject.
Notwithstanding anything to the contrary contained herein, the Company
may not issue shares of Common Stock in payment of interest on the principal
amount if:
(i) the number of shares of Common Stock at the time
authorized, unissued and unreserved for all purposes, or held as treasury stock,
is insufficient to pay interest hereunder in shares of Common Stock;
(ii) after the Interest Effectiveness Date (as defined in
Section 7) such shares (x) are not registered for resale pursuant to an
effective Underlying Shares Registration Statement (as defined in Section 7) and
(y) may not be sold without volume restrictions pursuant to Rule 144(k)
promulgated under the Securities Act (as defined in Section 7), as determined by
counsel to the Company pursuant to a written opinion letter, addressed to the
Company's transfer agent in the form and substance acceptable to the applicable
Holder and such transfer agent (if the Company is permitted and elects to pay
interest in shares of Common Stock under this clause (ii) prior to the Interest
Effectiveness Date and thereafter an Underlying Shares Registration Statement
shall be declared effective by the Commission (as defined in Section 7), the
Company shall, within three (3) Trading Days after the date of such declaration
of effectiveness, exchange such shares for shares of Common Stock that are free
of restrictive legends of any kind)
(iii) such shares are not listed or quoted on either the
Nasdaq National Market ("NASDAQ") or on the New York Stock Exchange, American
Stock Exchange or the Nasdaq SmallCap Market or OTC Bulletin Board (each, a
"Subsequent Market");
(iv) the Company has failed to timely satisfy its conversion
obligations hereunder; or
(v) the issuance of such shares would result in a violation of
Section 4(a)(ii)(A).
This Debenture is subject to the following additional provisions:
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Section 1. This Debenture is exchangeable for an equal aggregate
principal amount of Debentures of different authorized denominations, as
requested by the Holder surrendering the same. No service charge will be made
for such registration of transfer or exchange.
Section 2 Prior to due presentment to the Company for transfer of this
Debenture, the Company and any agent of the Company may treat the Person (as
defined in Section 7) in whose name this Debenture is duly registered on the
Debenture Register as the owner hereof for the purpose of receiving payment as
herein provided and for all other purposes, whether or not this Debenture is
overdue, and neither the Company nor any such agent shall be affected by notice
to the contrary.
Section 3 Events of Default.
(a) "Event of Default", wherever used herein, means any one of the
following events (whatever the reason and whether it shall be voluntary or
involuntary or effected by operation of law or pursuant to any judgment, decree
or order of any court, or any order, rule or regulation of any administrative or
governmental body):
(i) any default in the payment of the principal of, interest on or
liquidated damages in respect of, this Debenture, free of any claim of
subordination except in accordance with a subordination agreement executed
by the Holder, as and when the same shall become due and payable (whether
on the applicable Interest Payment Date, a Conversion Date or the Maturity
Date or by acceleration or otherwise);
(ii) the Company shall fail to observe or perform any other covenant,
agreement or warranty contained in, or otherwise commit any breach of any
of, this Debenture, the Purchase Agreement, the Registration Rights
Agreement (as defined in Section 7) or the Security Agreements (as defined
in Section 7), and such failure or breach shall not have been remedied
within 30 days after the date on which notice of such failure or breach
shall have been given;
(iii) the Company or any of its subsidiaries shall commence, or there
shall be commenced against the Company or any such subsidiary a case under
any applicable bankruptcy or insolvency laws as now or hereafter in effect
or any successor thereto, or the Company commences any other proceeding
under any reorganization, arrangement, adjustment of debt, relief of
debtors, dissolution, insolvency or liquidation or similar law of any
jurisdiction whether now or hereafter in effect relating to the Company or
any subsidiary thereof or there is commenced against the Company or any
subsidiary thereof any such bankruptcy, insolvency or other proceeding
which remains undismissed for a period of 60 days; or the Company or any
subsidiary thereof is adjudicated insolvent or bankrupt; or any order of
relief or other order approving any such case or proceeding is entered; or
the Company or any subsidiary thereof suffers any appointment of any
custodian or the like for it or any substantial part of its property which
continues undischarged or unstayed for a period of 60 days; or the Company
or any subsidiary thereof makes a general assignment for the benefit of
creditors; or the Company shall fail to pay, or shall state that it is
unable to pay, or shall be unable to pay, its debts generally as they
become due; or the Company or any subsidiary thereof shall call a meeting
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of its creditors with a view to arranging a composition, adjustment or
restructuring of its debts; or the Company or any subsidiary thereof shall
by any act or failure to act indicate its consent to, approval of or
acquiescence in any of the foregoing; or any corporate or other action is
taken by the Company or any subsidiary thereof for the purpose of effecting
any of the foregoing;
(iv) the Company shall default in any of its obligations under any
mortgage, credit agreement or other facility, indenture agreement or other
instrument under which there may be issued, or by which there may be
secured or evidenced any indebtedness of the Company in an amount exceeding
twenty-five thousand dollars ($25,000), whether such indebtedness now
exists or shall hereafter be created and such default shall result in such
indebtedness becoming or being declared due and payable prior to the date
on which it would otherwise become due and payable;
(v) the Common Stock shall be delisted from either the NASDAQ or a
Subsequent Market or shall be suspended from trading on the NASDAQ without
resuming trading and/or being relisted thereon or on a Subsequent Market or
having such suspension lifted, as the case may be, within two (2) days;
(vi) the Company shall be a party to any Change of Control Transaction
(as defined in Section 7), shall agree to sell or dispose all or in excess
of 50% of its assets in one or more transactions (whether or not such sale
would constitute a Change of Control Transaction), or shall redeem or
repurchase more than a de minimis number of shares of Common Stock or other
equity securities of the Company (other than redemptions of Underlying
Shares (as defined in Section 7));
(vii) an Underlying Shares Registration Statement shall not have been
declared effective by the Commission on or prior to the 150th day after the
date hereof (the "Effectiveness Date").
(viii) if, during the Effectiveness Period, the effectiveness of the
Underlying Shares Registration Statement lapses for any reason for more
than an aggregate of five (5) Trading Days (which need not be consecutive
days), or the Holder shall not be permitted to resell Registrable
Securities under the Underlying Shares Registration Statement for more than
an aggregate of five (5) Trading Days (which need not be consecutive days);
(ix) an Event (as hereinafter defined) shall not have been cured to the
satisfaction of the Holder prior to the expiration of thirty (30) days from
the Event Date (as defined below) relating thereto (other than an Event
resulting from a failure of an Underlying Shares Registration Statement to
be declared effective by the Commission on or prior to the Effectiveness
Date, which shall be covered by Section 3(a)(vii));
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(xi) the Company shall fail for any reason to deliver certificates to a
Holder prior to the tenth (10th) day after a Conversion Date pursuant to
Section 4(b) or the Company shall provide notice to the Holder, including
by way of public announcement, at any time, of its intention not to comply
with requests for conversions of any Debentures in accordance with the
terms hereof;
(xii) the Company shall fail for any reason to deliver the payment in
cash pursuant to a Buy-In within seven (7) days after notice is deemed
delivered hereunder;
(xiii) the Company shall issue any shares of Common Stock or Common
Stock Equivalents (as defined herein) in connection with or to any present
or future lender or creditor of the Company or any subsidiary thereof other
than a holder of an instrument which is outstanding on the date hereof and
expressly convertible into Common Stock or Common Stock Equivalents;
(xiv) the Company shall agree to pay or settle any litigation or claim
for an amount in stock or cash that is in excess of $25,000 and exceeds the
insurance coverage for such litigation or claim; or
(xv) the Company shall restructure any material portion of its present
or future debt obligations or payables.
(b) If any Event of Default occurs and is continuing, the full
principal amount of this Debenture (and, at the Holder's option, all other
Debentures then held by such Holder), together with interest and other amounts
owing in respect thereof, to the date of acceleration shall become, immediately
due and payable in cash. The aggregate amount payable upon an Event of Default
shall be equal to the sum of (i) the Optional Prepayment Price (as defined in
Section 7) plus (ii) the product of (A) the number of Underlying Shares issued
in respect of conversions hereunder or as payment of interest hereunder, in
either case, within thirty (30) days of the date of a declaration of an Event of
Default and then held by the Holder and (B) the Per Share Market Value (as
defined in Section 7) on the date prepayment is due or the date the full
prepayment price is paid, whichever is greater. Interest shall accrue on the
prepayment amount hereunder from the seventh day after such amount is due (being
the date of an Event of Default) through the date of prepayment in full thereof
at the rate of 15% per annum. All Debentures and Underlying Shares for which the
full repayment price hereunder shall have been paid in accordance herewith shall
be promptly surrendered to or as directed by the Company. The Holder need not
provide and the Company hereby waives any presentment, demand, protest or other
notice of any kind, and the Holder may immediately and without expiration of any
grace period enforce any and all of its rights and remedies hereunder and all
other remedies available to it under applicable law. Such declaration may be
rescinded and annulled by Holder at any time prior to payment hereunder. No such
rescission or annulment shall affect any subsequent Event of Default or impair
any right consequent thereon.
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Section 4. Conversion.
(a) (i) Conversion at Option of Holder. This Debenture shall be
convertible into shares of Common Stock at the option of the Holder, in whole or
in part at any time and from time to time, after the Original Issue Date
(subject to the limitations on conversion set forth in Section 4(a)(ii) hereof).
The number of shares of Common Stock issuable upon a conversion hereunder shall
be determined by dividing the outstanding principal amount of this Debenture to
be converted, plus all accrued but unpaid interest thereon, by the Conversion
Price. The Holder shall effect conversions by surrendering the Debentures (or
such portions thereof) to be converted, together with the form of conversion
notice attached hereto as Exhibit A (a "Conversion Notice") to the Company. Each
Conversion Notice shall specify the principal amount of Debentures to be
converted and the date on which such conversion is to be effected, which date
may not be prior to the date such Conversion Notice is deemed to have been
delivered hereunder (a "Conversion Date"). If no Conversion Date is specified in
a Conversion Notice, the Conversion Date shall be the date that such Conversion
Notice is deemed delivered hereunder. Subject to Section 4(b), each Conversion
Notice, once given, shall be irrevocable. If the Holder is converting less than
all of the principal amount represented by the Debenture(s) tendered by the
Holder with the Conversion Notice, or if a conversion hereunder cannot be
effected in full for any reason, the Company shall honor such conversion to the
extent permissible hereunder and shall promptly deliver to such Holder (in the
manner and within the time set forth in Section 4(b)) a new Debenture for such
principal amount as has not been converted.
(ii) Certain Conversion Restrictions
(A)(1) A Holder may not convert Debentures or receive shares
of Common Stock as payment of interest hereunder to the extent such conversion
or receipt of such interest payment would result in the Holder, together with
any affiliate thereof, beneficially owning (as determined in accordance with
Section 13(d) of the Exchange Act (as defined in Section 7) and the rules
promulgated thereunder) in excess of 4.999% of the then issued and outstanding
shares of Common Stock, including shares issuable upon conversion of, and
payment of interest on, the Debentures held by such Holder after application of
this Section. The Holder shall have the sole authority and obligation to
determine whether the restriction contained in this Section applies and to the
extent that the Holder determines that the limitation contained in this Section
applies, the determination of which portion of the principal amount of
Debentures are convertible shall be in the sole discretion of the Holder. The
provisions of this Section may be waived by a Holder (but only as to itself and
not to any other Holder) upon not less than 5 days prior notice to the Company.
Other Holders shall be unaffected by any such waiver.
(2) A Holder may not convert Debentures or receive shares of
Common Stock as payment of interest hereunder to the extent such conversion or
receipt of such interest payment would result in the Holder, together with any
affiliate thereof, beneficially owning (as determined in accordance with Section
13(d) of the Exchange Act and the rules promulgated thereunder) in excess of
9.999% of the then issued and outstanding shares of Common Stock, including
shares issuable upon conversion of, and payment of interest on, the Debentures
held by such Holder after application of this Section. The Holder shall have the
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sole authority and obligation to determine whether the restriction contained in
this Section applies and to the extent that the Holder determines that the
limitation contained in this Section applies, the determination of which portion
of the principal amount of Debentures are convertible shall be in the sole
discretion of the Holder. The provisions of this Section may be waived by a
Holder (but only as to itself and not to any other Holder) upon not less than 15
days prior notice to the Company. Other Holders shall be unaffected by any such
waiver.
(B) If the Common Stock is then listed for trading on the
NASDAQ or the Nasdaq SmallCap Market and the Company has not obtained the
Shareholder Approval (as defined below), then the Company may not issue in
excess of 30,000,000 shares of Common Stock upon conversions of Debentures or as
payment of interest thereon in shares of Common Stock, which number shall be
subject to adjustment pursuant to Sections 4(c)(ii), (iii), (v), (vi) and (x)
(such number of shares, the "Issuable Maximum"). The Issuable Maximum equals
19.999% of the number of shares of Common Stock outstanding immediately prior to
the closing of transactions set forth in the Purchase Agreement. If on any
Conversion Date (A) the Common Stock is listed for trading on the NASDAQ or the
Nasdaq SmallCap Market, (B) the Conversion Price then in effect is such that the
aggregate number of shares of Common Stock that would then be issuable upon
conversion in full of all then outstanding Debentures and as payment of interest
thereon in shares of Common Stock, together with any shares of Common Stock
previously issued upon conversion of Debentures and as payment of interest
thereon, would exceed Issuable Maximum, and (C) the Company shall not have
previously obtained the vote of shareholders (the "Shareholder Approval"), if
any, as may be required by the applicable rules and regulations of the Nasdaq
Stock Market (or any successor entity) applicable to approve the issuance of
shares of Common Stock in excess of the Issuable Maximum pursuant to the terms
hereof, then the Company shall issue to the Holder so requesting a conversion a
number of shares of Common Stock equal to the Issuable Maximum and, with respect
to the remainder of the principal amount of Debentures then held by such Holder
for which a conversion in accordance with the Conversion Price would result in
an issuance of shares of Common Stock in excess of the Issuable Maximum (the
"Excess Principal"), the converting Holder shall have the option to require the
Company to either (1) use its best efforts to obtain the Shareholder Approval
applicable to such issuance as soon as is possible, but in any event not later
than the 75th day after such request, or (2) pay cash to the converting Holder
in an amount equal to the OptionalPrepayment Amount for the Excess Principal. If
the Company fails to pay the OptionalPrepayment Amount in full pursuant to this
Section, the Company will pay interest thereon at a rate of 15% per annum to the
converting Holder, accruing daily from the Conversion Date until such amount,
plus all such interest thereon, is paid in full.
(b) (i) Not later than five (5) Trading Days after any Conversion Date,
the Company will deliver to the Holder (i) a certificate or certificates which
shall be free of restrictive legends and trading restrictions (provided that
either an Underlying Shares Registration Statement is effective or Rule 144(k)
shall be applicable) representing the number of shares of Common Stock being
acquired upon the conversion of Debentures (subject to the limitations set forth
in Section 4(a)(ii) hereof), (ii) Debentures in a principal amount equal to the
principal amount of Debentures not converted, (iii) a bank check in the amount
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of accrued and unpaid interest (if the Company has elected or is required to pay
accrued interest in cash), and (iv) if the Company has elected and is permitted
hereunder to pay accrued interest in shares of Common Stock, certificates, which
shall be free of restrictive legends and trading restrictions (other than those
required by Section 3.1 (b) of the Purchase Agreement), representing such shares
of Common Stock; provided, that the Company shall not be obligated to issue
certificates evidencing the shares of Common Stock issuable upon conversion of
the principal amount of Debentures until Debentures are delivered for conversion
to the Company, or the Holder notifies the Company that such Debentures have
been lost, stolen or destroyed and provides a bond (or other adequate security)
reasonably satisfactory to the Company to indemnify the Company from any loss
incurred by it in connection therewith. The Company shall, upon request of the
Holder, if available, use its best efforts to deliver any certificate or
certificates required to be delivered by the Company under this Section
electronically through the Depository Trust Corporation or another established
clearing corporation performing similar functions. If in the case of any
Conversion Notice such certificate or certificates, including for purposes
hereof, any shares of Common Stock to be issued on the Conversion Date on
account of accrued but unpaid interest hereunder, are not delivered to or as
directed by the applicable Holder by the third (3rd) Trading Day after the
Conversion Date, the Holder shall be entitled by written notice to the Company
at any time on or before its receipt of such certificate or certificates
thereafter, to rescind such conversion, in which event the Company shall
immediately return the certificates representing the principal amount of
Debentures tendered for conversion.
(ii) If the Company fails to deliver to the Holder such
certificate or certificates pursuant to Section 4(b)(i), including for purposes
hereof, any shares of Common Stock to be issued on the Conversion Date on
account of accrued but unpaid interest hereunder, by the fifth (5th) Trading Day
after the Conversion Date, the Company shall pay to such Holder, in cash, as
liquidated damages and not as a penalty, $1,000 for each Trading Day after such
fifth (5th) Trading Day until such certificates are delivered. Nothing herein
shall limit a Holder's right to pursue actual damages for the Company's failure
to deliver certificates representing shares of Common Stock upon conversion
within the period specified herein and such Holder shall have the right to
pursue all remedies available to it at law or in equity including, without
limitation, a decree of specific performance and/or injunctive relief. The
exercise of any such rights shall not prohibit the Holders from seeking to
enforce damages pursuant to any other Section hereof or under applicable law.
Further, if the Company shall not have delivered any cash due in respect of
conversions of Debentures or as payment of interest thereon by the fifth (5th)
Trading Day after the Conversion Date, the Holder may, by notice to the Company,
require the Company to issue shares of Common Stock pursuant to Section 4(c),
except that for such purpose the Conversion Price applicable thereto shall be
the lesser of the Conversion Price on the Conversion Date and the Conversion
Price on the date of such Holder demand. Any such shares will be subject to the
provision of this Section.
(iii) In addition to any other rights available to the Holder,
if the Company fails to deliver to the Holder such certificate or certificates
pursuant to Section 4(b)(i), including for purposes hereof, any shares of Common
Stock to be issued on the Conversion Date on account of accrued but unpaid
interest hereunder, by the fifth (5th) Trading Day after the Conversion Date,
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and if after such fifth (5th) Trading Day the Holder purchases (in an open
market transaction or otherwise) Common Stock to deliver in satisfaction of a
sale by such Holder of the Underlying Shares which the Holder anticipated
receiving upon such conversion (a "Buy-In"), then the Company shall (A) pay in
cash to the Holder (in addition to any remedies available to or elected by the
Holder) the amount by which (x) the Holder's total purchase price (including
brokerage commisions, if any) for the Common Stock so purchased exceeds (y) the
product of (1) the aggregate number of shares of Common Stock that such Holder
anticipated receiving from the conversion at issue multiplied by (2) the market
price of the Common Stock at the time of the sale giving rise to such purchase
obligation and (B) at the option of the Holder, either reissue Debentures in
principal amount equal the principal amount of the attempted conversion or
deliver to the Holder the number of shares of Common Stock that would have been
issued had the Company timely complied with its delivery requirements under
Section 4(b)(i). For example, if the Holder purchases Common Stock having a
total purchase price of $11,000 to cover a Buy-In with respect to an attempted
conversion of Debentures with respect to which the market price of the
Underlying Shares on the date of conversion was a total of $10,000 under clause
(A) of the immediately preceding sentence, the Company shall be required to pay
the Holder $1,000. The Holder shall provide the Company written notice
indicating the amounts payable to the Holder in respect of the Buy-In.
Notwithstanding anything contained herein to the contrary, if a Holder requires
the Company to make payment in respect of a Buy-In for the failure to timely
deliver certificates hereunder and the Company timely pays in full such payment,
the Company shall not be required to pay such Holder liquidated damages under
Section 4(b)(ii) in respect of the certificates resulting in such Buy-In.
(c) (i) The conversion price (the "Conversion Price") in effect on any
Conversion Date shall be the lesser of (A) $.04 (the "Initial Conversion Price")
and (B) 50 % of the average of the three (3) lowest Per Share Market Value
during the twenty (20) Trading Days immediately preceding the applicable
Conversion Date, provided, that such twenty (20) Trading Day period shall be
extended for the number of Trading Days during such period in which (A) trading
in the Common Stock is suspended by the NASDAQ or a Subsequent Market on which
the Common Stock is then listed, or (B) after the date declared effective by the
Commission, the Underlying Shares Registration Statement is not effective, or
(C) after the date declared effective by the Commission, the Prospectus included
in the Underlying Shares Registration Statement may not be used by the Holder
for the resale of Underlying Shares. If (a) an Underlying Shares Registration
Statement is not filed on or prior to the Filing Date (as defined under the
Registration Rights Agreement) (if the Company files such Underlying Shares
Registration Statement without affording the Holder the opportunity to review
and comment on the same as required by Section 3(a) of the Registration Rights
Agreement, the Company shall not be deemed to have satisfied this clause (a)),
or (b) the Company fails to file with the Commission a request for acceleration
in accordance with Rule 12d1-2 promulgated under the Exchange Act, within five
(5) days of the date that the Company is notified (orally or in writing,
whichever is earlier) by the Commission that an Underlying Shares Registration
Statement will not be "reviewed," or not subject to further review, or (c) the
Underlying Shares Registration Statement is not declared effective by the
Commission on or prior to the Effectiveness Date, or (d) such Underlying Shares
Registration Statement is filed with and declared effective by the Commission
but thereafter ceases to be effective as to all Registrable Securities at any
time prior to the expiration of the Effectiveness Period (as defined in the
Registration Rights Agreement), without being succeeded within ten (10) days by
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an amendment to such Underlying Shares Registration Statement or by a subsequent
Underlying Shares Registration Statement filed with and declared effective by
the Commission, or (e) the Common Stock shall be delisted or suspended from
trading on the NASDAQ or on any Subsequent Market for more than three (3)
Business Days (which need not be consecutive days), (f) the conversion rights of
the Holders are suspended for any reason or (g) an amendment to the Underlying
Shares Registration Statement is not filed by the Company with the Commission
within ten (10) days of the Commission's notifying the Company that such
amendment is required in order for the Underlying Shares Registration Statement
to be declared effective (any such failure or breach being referred to as an
"Event," and for purposes of clauses (a), (c), (f) the date on which such Event
occurs, or for purposes of clause (b) the date on which such five (5) day period
is exceeded, or for purposes of clauses (d) and (g) the date which such 10
day-period is exceeded, or for purposes of clause (e) the date on which such
three (3) Business Day-period is exceeded, being referred to as "Event Date"),
then, on the Event Date and on each monthly anniversary thereof until such time
as the applicable Event is cured, the Company shall pay to the Holder 2.5% of
the aggregate principal amount of the Debentures then outstanding in cash, as
liquidated damages and not as penalty. The provisions of this Section are not
exclusive and shall in no way limit the Company's obligations under the
Registration Rights Agreement.
(ii) If the Company, at any time while any Debentures are
outstanding, (a) shall pay a stock dividend or otherwise make a distribution or
distributions on shares of its Common Stock or any other equity or equity
equivalent securities payable in shares of Common Stock, (b) subdivide
outstanding shares of Common Stock into a larger number of shares, (c) combine
outstanding shares of Common Stock into a smaller number of shares, or (d) issue
by reclassification of shares of the Common Stock any shares of capital stock of
the Company, then the Initial Conversion Price shall be multiplied by a fraction
of which the numerator shall be the number of shares of Common Stock (excluding
treasury shares, if any) outstanding before such event and of which the
denominator shall be the number of shares of Common Stock outstanding after such
event. Any adjustment made pursuant to this Section shall become effective
immediately after the record date for the determination of stockholders entitled
to receive such dividend or distribution and shall become effective immediately
after the effective date in the case of a subdivision, combination or
re-classification.
(iii) If the Company, at any time while any Debentures are
outstanding, shall issue rights, options or warrants to all holders of Common
Stock (and not to Holders) entitling them to subscribe for or purchase shares of
Common Stock at a price per share less than the Per Share Market Value at the
record date mentioned below, then the Initial Conversion Price shall be
multiplied by a fraction, of which the denominator shall be the number of shares
of the Common Stock (excluding treasury shares, if any) outstanding on the date
of issuance of such rights or warrants plus the number of additional shares of
Common Stock offered for subscription or purchase, and of which the numerator
shall be the number of shares of the Common Stock (excluding treasury shares, if
any) outstanding on the date of issuance of such rights or warrants plus the
number of shares which the aggregate offering price of the total number of
shares so offered would purchase at such Per Share Market Value. Such adjustment
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shall be made whenever such rights or warrants are issued, and shall become
effective immediately after the record date for the determination of
stockholders entitled to receive such rights, options or warrants. However, upon
the expiration of any such right, option or warrant to purchase shares of the
Common Stock the issuance of which resulted in an adjustment in the Initial
Conversion Price pursuant to this Section, if any such right, option or warrant
shall expire and shall not have been exercised, the Initial Conversion Price
shall immediately upon such expiration be recomputed and effective immediately
upon such expiration be increased to the price which it would have been (but
reflecting any other adjustments in the Initial Conversion Price made pursuant
to the provisions of this Section after the issuance of such rights or warrants)
had the adjustment of the Initial Conversion Price made upon the issuance of
such rights, options or warrants been made on the basis of offering for
subscription or purchase only that number of shares of the Common Stock actually
purchased upon the exercise of such rights, options or warrants actually
exercised.
(iv) If the Company or any subsidiary thereof, as applicable
with respect to Common Stock Equivalents (as defined below), at any time while
Debentures are outstanding, shall issue shares of Common Stock or rights,
warrants, options or other securities or debt that is convertible into or
exchangeable for shares of Common Stock ("Common Stock Equivalents") entitling
any Person to acquire shares of Common Stock at a price per share less than the
Conversion Price, then the Conversion Price shall be multiplied by a fraction,
the numerator of which shall be the number of shares of Common Stock outstanding
immediately prior to the issuance of such shares of Common Stock or such Common
Stock Equivalents plus the number of shares of Common Stock which the offering
price for such shares of Common Stock or Common Stock Equivalents would purchase
at the Conversion Price, and the denominator of which shall be the sum of the
number of shares of Common Stock outstanding immediately prior to such issuance
plus the number of shares of Common Stock so issued or issuable, provided, that
for purposes hereof, all shares of Common Stock that are issuable upon
conversion, exercise or exchange of Common Stock Equivalents shall be deemed
outstanding immediately after the issuance of such Common Stock Equivalents.
Such adjustment shall be made whenever such shares of Common Stock or Common
Stock Equivalents are issued.
(v) If the Company, at any time while Debentures are
outstanding, shall distribute to all holders of Common Stock (and not to
Holders) evidences of its indebtedness or assets or rights or warrants to
subscribe for or purchase any security, then in each such case the Initial
Conversion Price at which Debentures shall thereafter be convertible shall be
determined by multiplying the Initial Conversion Price in effect immediately
prior to the record date fixed for determination of stockholders entitled to
receive such distribution by a fraction of which the denominator shall be the
Per Share Market Value determined as of the record date mentioned above, and of
which the numerator shall be such Per Share Market Value on such record date
less the then fair market value at such record date of the portion of such
assets or evidence of indebtedness so distributed applicable to one outstanding
share of the Common Stock as determined by the Board of Directors in good faith;
provided, however, that in the event of a distribution exceeding ten percent
(10%) of the net assets of the Company, if the Holders of a majority in interest
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of the Debentures dispute such valuation, such fair market value shall be
determined by a nationally recognized or major regional investment banking firm
or firm of independent certified public accountants of recognized standing
(which may be the firm that regularly examines the financial statements of the
Company) (an "Appraiser") selected in good faith by the holders of a majority in
interest of Debentures then outstanding; and provided, further, that the
Company, after receipt of the determination by such Appraiser shall have the
right to select an additional Appraiser, in good faith, in which case the fair
market value shall be equal to the average of the determinations by each such
Appraiser. In either case the adjustments shall be described in a statement
provided to the Holders of the portion of assets or evidences of indebtedness so
distributed or such subscription rights applicable to one share of Common Stock.
Such adjustment shall be made whenever any such distribution is made and shall
become effective immediately after the record date mentioned above.
(vi) In case of any reclassification of the Common Stock or
any compulsory share exchange pursuant to which the Common Stock is converted
into other securities, cash or property, the Holders shall have the right
thereafter to, at their option, (A) convert the then outstanding principal
amount, together with all accrued but unpaid interest and any other amounts then
owing hereunder in respect of this Debenture only into the shares of stock and
other securities, cash and property receivable upon or deemed to be held by
holders of the Common Stock following such reclassification or share exchange,
and the Holders of the Debentures shall be entitled upon such event to receive
such amount of securities, cash or property as the shares of the Common Stock of
the Company into which the then outstanding principal amount, together with all
accrued but unpaid interest and any other amounts then owing hereunder in
respect of this Debenture could have been converted immediately prior to such
reclassification or share exchange would have been entitled or (B) require the
Company to prepay the aggregate of its outstanding principal amount of
Debentures, plus all interest and other amounts due and payable thereon, at a
price determined in accordance with Section 3(b). The entire prepayment price
shall be paid in cash. This provision shall similarly apply to successive
reclassifications or share exchanges.
(vii) All calculations under this Section 4 shall be made to
the nearest 1/100th of a cent or share, as the case may be.
(viii) Whenever the Initial Conversion Price is adjusted
pursuant to any of Section 4(c)(ii) - (v), the Company shall promptly mail to
each Holder a notice setting forth the Conversion Price after such adjustment
and setting forth a brief statement of the facts requiring such adjustment.
(ix) If (A) the Company shall declare a dividend (or any other
distribution) on the Common Stock; (B) the Company shall declare a special
nonrecurring cash dividend on or a redemption of the Common Stock; (C) the
Company shall authorize the granting to all holders of the Common Stock rights
or warrants to subscribe for or purchase any shares of capital stock of any
class or of any rights; (D) the approval of any stockholders of the Company
shall be required in connection with any reclassification of the Common Stock,
any consolidation or merger to which the Company is a party, any sale or
transfer of all or substantially all of the assets of the Company, of any
compulsory share of exchange whereby the Common Stock is converted into other
securities, cash or property; (E) the Company shall authorize the voluntary or
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involuntary dissolution, liquidation or winding up of the affairs of the
Company; then, in each case, the Company shall cause to be filed at each office
or agency maintained for the purpose of conversion of the Debentures, and shall
cause to be mailed to the Holders at their last addresses as they shall appear
upon the stock books of the Company, at least 20 calendar days prior to the
applicable record or effective date hereinafter specified, a notice stating (x)
the date on which a record is to be taken for the purpose of such dividend,
distribution, redemption, rights or warrants, or if a record is not to be taken,
the date as of which the holders of the Common Stock of record to be entitled to
such dividend, distributions, redemption, rights or warrants are to be
determined or (y) the date on which such reclassification, consolidation,
merger, sale, transfer or share exchange is expected to become effective or
close, and the date as of which it is expected that holders of the Common Stock
of record shall be entitled to exchange their shares of the Common Stock for
securities, cash or other property deliverable upon such reclassification,
consolidation, merger, sale, transfer or share exchange; provided, however, that
the failure to mail such notice or any defect therein or in the mailing thereof
shall not affect the validity of the corporate action required to be specified
in such notice. Holders are entitled to convert Debentures during the 20-day
period commencing the date of such notice to the effective date of the event
triggering such notice.
(x) In case of any (1) merger or consolidation of the Company
with or into another Person that would constitute a Change of Control
Transaction, or (2) sale by the Company of more than one-half of the assets of
the Company (on an as valued basis) in one or a series of related transactions,
or (3) tender or other offer or exchange (whether by the Company or another
Person) pursuant to which holders of Common Stock are permitted to tender or
exchange their shares for other securities, stock, cash or property of the
Company or another Person; then a Holder shall have the right to (A) if
permitted under Section 3(b) hereof, exercise its rights of prepayment under
Section 3(b) with respect to such event, (B) convert its aggregate principal
amount of Debentures then outstanding into the shares of stock and other
securities, cash and property receivable upon or deemed to be held by holders of
Common Stock following such merger, consolidation or sale, and such Holder shall
be entitled upon such event or series of related events to receive such amount
of securities, cash and property as the shares of Common Stock into which such
aggregate principal amount of Debentures could have been converted immediately
prior to such merger, consolidation or sales would have been entitled, (C) in
the case of a merger or consolidation, (x) require the surviving entity to issue
shares of convertible preferred stock or convertible debentures with such
aggregate stated value or in such face amount, as the case may be, equal to the
aggregate principal amount of Debentures then held by such Holder, plus all
accrued and unpaid interest and other amounts owing thereon, which newly issued
shares of preferred stock or debentures shall have terms identical (including
with respect to conversion) to the terms of this Debenture (except, in the case
of preferred stock, as may be required to reflect the differences between equity
and debt) and shall be entitled to all of the rights and privileges of a Holder
of Debentures set forth herein and the agreements pursuant to which the
Debentures were issued (including, without limitation, as such rights relate to
the acquisition, transferability, registration and listing of such shares of
stock other securities issuable upon conversion thereof), and (y) simultaneously
with the issuance of such convertible preferred stock or convertible debentures,
shall have the right to convert such instrument only into shares of stock and
other securities, cash and property receivable upon or deemed to be held by
holders of Common Stock following such merger or consolidation, or (D) in the
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event of an exchange or tender offer or other transaction contemplated by clause
(3) of this Section, tender or exchange its aggregate principal amount of
Debentures for such securities, stock, cash and other property receivable upon
or deemed to be held by holders of Common Stock that have tendered or exchanged
their shares of Common Stock following such tender or exchange, and such Holder
shall be entitled upon such exchange or tender to receive such amount of
securities, cash and property as the shares of Common Stock into which such
aggregate principal amount of Debentures could have been converted (taking into
account all then accrued and unpaid dividends) immediately prior to such tender
or exchange would have been entitled as would have been issued. In the case of
clause (C), the conversion price applicable for the newly issued shares of
convertible preferred stock or convertible debentures shall be based upon the
amount of securities, cash and property that each share of Common Stock would
receive in such transaction and the Conversion Price in effect immediately prior
to the effectiveness or closing date for such transaction. The terms of any such
merger, sale, consolidation, tender or exchange shall include such terms so as
continue to give the Holders of Debentures the right to receive the securities,
cash and property set forth in this Section upon any conversion or redemption
following such event. This provision shall similarly apply to successive such
events.
(d) The Company covenants that it will at all times reserve
and keep available out of its authorized and unissued shares of Common Stock
solely for the purpose of issuance upon conversion of the Debentures and payment
of interest on the Debentures, each as herein provided, free from preemptive
rights or any other actual contingent purchase rights of persons other than the
Holders, not less than such number of shares of the Common Stock as shall
(subject to any additional requirements of the Company as to reservation of such
shares set forth in the Purchase Agreement) be issuable (taking into account the
adjustments and restrictions of Section 4(b)) upon the conversion of the
outstanding principal amount of the Debentures and payment of interest
hereunder. The Company covenants that all shares of Common Stock that shall be
so issuable shall, upon issue, be duly and validly authorized, issued and fully
paid, nonassessable and, if the Underlying Shares Registration Statement has
been declared effective under the Securities Act, registered for public sale in
accordance with such Underlying Shares Registration Statement.
(e) Upon a conversion hereunder the Company shall not be
required to issue stock certificates representing fractions of shares of the
Common Stock, but may if otherwise permitted, make a cash payment in respect of
any final fraction of a share based on the Per Share Market Value at such time.
If the Company elects not, or is unable, to make such a cash payment, the Holder
shall be entitled to receive, in lieu of the final fraction of a share, one
whole share of Common Stock.
(f) The issuance of certificates for shares of the Common
Stock on conversion of the Debentures shall be made without charge to the
Holders thereof for any documentary stamp or similar taxes that may be payable
in respect of the issue or delivery of such certificate, provided that the
Company shall not be required to pay any tax that may be payable in respect of
any transfer involved in the issuance and delivery of any such certificate upon
conversion in a name other than that of the Holder of such Debentures so
converted and the Company shall not be required to issue or deliver such
certificates unless or until the person or persons requesting the issuance
thereof shall have paid to the Company the amount of such tax or shall have
established to the satisfaction of the Company that such tax has been paid.
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<PAGE>
(g) Any and all notices or other communications or deliveries
to be provided by the Holders of the Debentures hereunder, including, without
limitation, any Conversion Notice, shall be in writing and delivered personally,
by facsimile, sent by a nationally recognized overnight courier service or sent
by certified or registered mail, postage prepaid, addressed to the Company, at
1600 Lower State Road, Doylestown, PA 18901 facsimile number (215-491-1079)
attention Chief Executive Officer, or such other address or facsimile number as
the Company may specify for such purposes by notice to the Holders delivered in
accordance with this Section, with a copy to The N.I.R. Group, LLC, 155 First
Street, Suite B, Mineola, NY 11501(facsimile number (516) 739-7115), attention
CSR. Any and all notices or other communications or deliveries to be provided by
the Company hereunder shall be in writing and delivered personally, by
facsimile, sent by a nationally recognized overnight courier service or sent by
certified or registered mail, postage prepaid, addressed to each Holder of the
Debentures at the facsimile telephone number or address of such Holder appearing
on the books of the Company, or if no such facsimile telephone number or address
appears, at the principal place of business of the holder. Any notice or other
communication or deliveries hereunder shall be deemed given and effective on the
earliest of (i) the date of transmission, if such notice or communication is
delivered via facsimile at the facsimile telephone number specified in this
Section prior to 6:30 p.m. (New York City time), (ii) the date after the date of
transmission, if such notice or communication is delivered via facsimile at the
facsimile telephone number specified in this Section later than 6:30 p.m. (New
York City time) on any date and earlier than 11:59 p.m. (New York City time) on
such date, (iii) four days after deposit in the United States mail, (iv) the
Business Day following the date of mailing, if send by nationally recognized
overnight courier service, or (v) upon actual receipt by the party to whom such
notice is required to be given.
Section 5. Optional Prepayment.
(a) The Company shall have the right, exercisable at any time
upon twenty (20) Trading Days prior written notice to the Holders of the
Debentures to be prepaid and accompanied by any waiver required by holders of
senior indebtedness of the Company for such prepayment (the "Optional Prepayment
Notice"), to prepay, all or any portion of the outstanding principal amount of
the Debentures which have not previously been repaid or for which Conversion
Notices have not previously been delivered. The prepayment price applicable to
such prepayments shall equal the Optional Prepayment Price (as defined in
Section 7) and shall be paid in cash. Any such prepayment shall be free of any
claim of subordination. The Holders shall have the right to tender, and the
Company shall honor, Conversion Notices delivered prior to the expiration of the
twentieth (20th) Trading Day after receipt by the Holders of an Optional
Prepayment Notice for such Debentures (the 20th Trading Day after receipt by the
Holders of an Optional Prepayment Notice is referred to herein as the "Optional
Prepayment Date").
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<PAGE>
(b) If any portion of the Optional Prepayment Price shall not
be paid by the Company by the second (2nd) Business Day following the Optional
Prepayment Date, the Optional Prepayment Price shall be increased by 15% per
annum (to accrue daily) until paid (which amount shall be paid as liquidated
damages and not as a penalty). In addition, if any portion of the optional
Prepayment Price remains unpaid through the expiration of the Optional
Prepayment Date, the Holder subject to such prepayment may elect by written
notice to the Company to either (x) demand conversion in accordance with the
formula and the time period therefor set forth in Section 4 of any portion of
the principal amount of Debentures for which the Optional Prepayment Price, plus
accrued liquidated damages thereof, has not been paid in full (the "Unpaid
Prepayment Principal Amount"), in which event the applicable Per Share Market
Value shall be the lower of the Per Share Market Value calculated on the
Optional Prepayment Date and the Per Share Market Value as of the Holder's
written demand for conversion, or (y) invalidate ab initio such optional
redemption, notwithstanding anything herein contained to the contrary. If the
Holder elects option (x) above, the Company shall within three (3) Trading Days
such election is deemed delivered hereunder to the Holder the shares of Common
Stock issuable upon conversion of the Unpaid Prepayment Principal Amount subject
to such conversion demand and otherwise perform its obligations hereunder with
respect thereto; or, if the Holder elects option (y) above, the Company shall
promptly, and in any event not later than three (3) Trading Days from receipt of
notice of such election, return to the Holder new Debentures for the full Unpaid
Prepayment Principal Amount. If, upon an election under option (x) above, the
Company fails to deliver the shares of Common Stock issuable upon conversion of
the Unpaid Prepayment Principal Amount within the time period set forth in this
Section, the Company shall pay to the Holder in cash, as liquidated damages and
not as a penalty, $2,500 per day until the Company delivers such Common Stock to
the Holder.
Section 6. INTENTIONALLY OMITTED
Section 7. Definitions. For the purposes hereof, the following
terms shall have the following meanings:
"Business Day" means any day except Saturday, Sunday and any
day which shall be a legal holiday or a day on which banking institutions in the
State of New York are authorized or required by law or other government action
to close.
"Change of Control Transaction" means the occurrence of any of
(i) an acquisition after the date hereof by an individual or legal entity or
"group" (as described in Rule 13d-5(b)(1) promulgated under the Exchange Act) of
in excess of 33% of the voting securities of the Company, (ii) a replacement of
more than one-half of the members of the Company's board of directors which is
not approved by those individuals who are members of the board of directors on
the date hereof in one or a series of related transactions, (iii) the merger of
the Company with or into another entity, consolidation or sale of all or
substantially all of the assets of the Company in one or a series of related
transactions, unless following such transaction, the holders of the Company's
securities continue to hold at least 33% of such securities following such
transaction or (iv) the execution by the Company of an agreement to which the
Company is a party or by which it is bound, providing for any of the events set
forth above in (i), (ii) or (iii).
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"Commission" means the Securities and Exchange Commission.
"Common Stock" means the Common Stock, no par value per share,
of the Company and stock of any other class into which such shares may hereafter
have been reclassified or changed.
"Exchange Act" means the Securities Exchange Act of 1934, as
amended.
"Interest Effectiveness Date" means the earlier to occur of
(x) the Effectiveness Date and (y) the date that an Underlying Shares
Registration Statement is declared effective by the Commission.
"Optional Prepayment Price" for any Debentures shall equal
120% of principal amount of Debentures to be prepaid, plus all accrued and
unpaid interest thereon.
"Original Issue Date" shall mean the date of the first
issuance of the Debentures regardless of the number of transfers of any
Debenture and regardless of the number of instruments which may be issued to
evidence such Debenture.
"Per Share Market Value" means on any particular date (a) the
closing bid price per share of the Common Stock on such date on the NASDAQ or on
such Subsequent Market on which the Common Stock is then listed or quoted, or if
there is no such price on such date, then the closing bid price on the NASDAQ or
on such Subsequent Market on the date nearest preceding such date, or (b) if the
Common Stock is not then listed or quoted on the NASDAQ or a Subsequent Market,
the closing bid price for a share of Common Stock in the over-the-counter
market, as reported by the National Quotation Bureau Incorporated or similar
organization or agency succeeding to its functions of reporting prices) at the
close of business on such date, or (c) if the Common Stock is not then reported
by the National Quotation Bureau Incorporated (or similar organization or agency
succeeding to its functions of reporting prices), then the average of the "Pink
Sheet" quotes for the relevant conversion period, as determined in good faith by
the Holder, or (d) if the Common Stock is not then publicly traded the fair
market value of a share of Common Stock as determined by an Appraiser selected
in good faith by the Holders of a majority in interest of the principal amount
of Debentures then outstanding.
"Person" means a corporation, an association, a partnership,
organization, a business, an individual, a government or political subdivision
thereof or a governmental agency.
"Purchase Agreement" means the Secured Convertible Debenture
Purchase Agreement, dated as of the Original Issue Date, between the Company and
the original Holder of Debentures, as amended, modified or supplemented from
time to time in accordance with its terms.
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<PAGE>
"Registration Rights Agreement" means the Registration Rights
Agreement, dated as of the Original Issue Date, between the Company and the
original Holder of Debentures, as amended, modified or supplemented from time to
time in accordance with its terms.
"Securities Act" means the Securities Act of 1933, as amended.
"Security Agreements" means the Security Agreement, of even
date herewith between the Company and the original Holder of Debentures, as
amended modified or supplemented from time to time in accordance with its terms.
"Trading Day" means (a) a day on which the Common Stock is
traded on the NASDAQ or on such Subsequent Market on which the Common Stock is
then listed or quoted, or (b) if the Common Stock is not listed on the NASDAQ or
a Subsequent Market, a day on which the Common Stock is traded in the
over-the-counter market, as reported by the OTC Bulletin Board, or (c) if the
Common Stock is not quoted on the OTC Bulletin Board, a day on which the Common
Stock is quoted in the over-the-counter market as reported by the National
Quotation Bureau Incorporated (or any similar organization or agency succeeding
its functions of reporting prices); provided, however, that in the event that
the Common Stock is not listed or quoted as set forth in (a), (b) and (c)
hereof, then Trading Day shall mean any day except Saturday, Sunday and any day
which shall be a legal holiday or a day on which banking institutions in the
State of New York are authorized or required by law or other government action
to close.
"Underlying Shares" means the shares of Common Stock issuable
upon conversion of Debentures or as payment of interest in accordance with the
terms hereof.
"Underlying Shares Registration Statement" means registration
statement meeting the requirements set forth in the Registration Rights
Agreement, covering among other things the resale of the Underlying Shares and
naming the Holder as a "selling stockholder" thereunder.
Section 8. Except as expressly provided herein, no provision
of this Debenture shall alter or impair the obligation of the Company, which is
absolute and unconditional, to pay the principal of, interest and liquidated
damages (if any) on, this Debenture at the time, place, and rate, and in the
coin or currency, herein prescribed. This Debenture is a direct obligation of
the Company. This Debenture ranks pari passu with all other Debentures now or
hereafter issued under the terms set forth herein. The Company may only
voluntarily prepay the outstanding principal amount on the Debentures in
accordance with Section 5 hereof.
Section 9. This Debenture shall not entitle the Holder to any
of the rights of a stockholder of the Company, including without limitation, the
right to vote, to receive dividends and other distributions, or to receive any
notice of, or to attend, meetings of stockholders or any other proceedings of
the Company, unless and to the extent converted into shares of Common Stock in
accordance with the terms hereof.
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Section 10. If this Debenture shall be mutilated, lost, stolen
or destroyed, the Company shall execute and deliver, in exchange and
substitution for and upon cancellation of a mutilated Debenture, or in lieu of
or in substitution for a lost, stolen or destroyed debenture, a new Debenture
for the principal amount of this Debenture so mutilated, lost, stolen or
destroyed but only upon receipt of evidence of such loss, theft or destruction
of such Debenture, and of the ownership hereof, and indemnity, if requested, all
reasonably satisfactory to the Company.
Section 11. This Debenture shall be governed by and construed
in accordance with the laws of the State of New York, without giving effect to
conflicts of laws thereof. The Company and the Holders hereby irrevocably submit
to the exclusive jurisdiction of the state and federal courts sitting in the
Southern District of New York, for the adjudication of any dispute hereunder or
in connection herewith or with any transaction contemplated hereby or discussed
herein, and hereby irrevocably waives, and agrees not to assert in any suit,
action or proceeding, any claim that it is not personally subject to the
jurisdiction of any such court, or that such suit, action or proceeding is
improper. Each of the Company and the Holder hereby irrevocably waives personal
service of process and consents to process being served in any such suit, action
or proceeding by receiving a copy thereof sent to the Company at the address in
effect for notices to it under this instrument and agrees that such service
shall constitute good and sufficient service of process and notice thereof.
Nothing contained herein shall be deemed to limit in any way any right to serve
process in any manner permitted by law.
Section 12. Any waiver by the Company or the Holder of a
breach of any provision of this Debenture shall not operate as or be construed
to be a waiver of any other breach of such provision or of any breach of any
other provision of this Debenture. The failure of the Company or the Holder to
insist upon strict adherence to any term of this Debenture on one or more
occasions shall not be considered a waiver or deprive that party of the right
thereafter to insist upon strict adherence to that term or any other term of
this Debenture. Any waiver must be in writing.
Section 13. If any provision of this Debenture is invalid,
illegal or unenforceable, the balance of this Debenture shall remain in effect,
and if any provision is inapplicable to any person or circumstance, it shall
nevertheless remain applicable to all other persons and circumstances.
Section 14. Whenever any payment or other obligation hereunder
shall be due on a day other than a Business Day, such payment shall be made on
the next succeeding Business Day.
Section 15. The payment obligations under this Debenture and
the obligations of the Company to the Holder arising upon the conversion of all
or any of the Debentures in accordance with the provisions hereof are secured
pursuant to the Security Agreements.
[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK
SIGNATURE PAGE FOLLOWS]
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IN WITNESS WHEREOF, the Company has caused this Secured
Convertible Debenture to be duly executed by a duly authorized officer as of the
date first above indicated.
COLLECTIBLE CONCEPTS GROUP, INC.
By:________________________________
Name:
Title:
No. 2
Attest:
By:___________________________
Name:
Title:
<PAGE>
EXHIBIT A
NOTICE OF CONVERSION
(To be Executed by the Registered Holder
in order to Convert the Debenture)
The undersigned hereby elects to convert the attached Debenture into shares of
Class A Common Stock, no par value per share (the "Common Stock"), of
____________________(the "Company") according to the conditions hereof, as of
the date written below. If shares are to be issued in the name of a person other
than undersigned, the undersigned will pay all transfer taxes payable with
respect thereto and is delivering herewith such certificates and opinions as
reasonably requested by the Company in accordance therewith. No fee will be
charged to the holder for any conversion, except for such transfer taxes, if
any.
Conversion calculations: _________________________________________________
Date to Effect Conversion
_________________________________________________
Principal Amount of Debentures to be Converted
________________________________
Number of shares of Common Stock to be Issued
_________________________________________________
Applicable Conversion Price
_________________________________________________
Signature
_________________________________________________
Name
_________________________________________________
Address
<PAGE>
THIS WARRANT AND THE SHARES ISSUABLE UPON THE EXERCISE OF THIS WARRANT
HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED.
EXCEPT AS OTHERWISE SET FORTH HEREIN OR IN A SECURITIES PURCHASE
AGREEMENT DATED AS OF APRIL __, 2000, NEITHER THIS WARRANT NOR ANY OF
SUCH SHARES MAY BE SOLD, TRANSFERRED OR ASSIGNED IN THE ABSENCE OF AN
EFFECTIVE REGISTRATION STATEMENT FOR SUCH SECURITIES UNDER SAID ACT, OR
AN OPINION OF COUNSEL IN FORM, SUBSTANCE AND SCOPE CUSTOMARY FOR
OPINIONS OF COUNSEL IN COMPARABLE TRANSACTIONS, THAT REGISTRATION IS
NOT REQUIRED UNDER SUCH ACT OR UNLESS SOLD PURSUANT TO RULE 144 UNDER
SUCH ACT.
STOCK PURCHASE WARRANT
THIS CERTIFIES THAT, for value received, or its
registered assigns, is entitled to purchase from COLLECTIBLE CONCEPTS GROUP,
INC., a Delaware corporation (the "Company"), at any time or from time to time
during the period specified in Paragraph 2 hereof, One Million Seven Hundred
Fifty Thousand (1,750,000) fully paid and nonassessable shares of the Company's
Common Stock, par value $0.001 per share (the "Common Stock"), at an exercise
price equal to $__________ (the "Exercise Price"). The term "Trading Price "
means any price at which a sale of the Common Stock is effected on the
Over-the-Counter Bulletin Board (the "OTC BB") as reported by Bloomberg
Financial Markets or an equivalent, reliable reporting service mutually
acceptable to and hereafter designated by holders of a majority in interest of
the Debentures and the Borrower ("Bloomberg") or, if the OTC BB is not the
principal trading market for such security, the trading price of such security
on the principal securities exchange or trading market where such security is
listed or traded as reported by Bloomberg. "Trading Day" shall mean any day on
which the Common Stock is traded for any period on the OTC BB, or on the
principal securities exchange or other securities market on which the Common
Stock is then being traded. The term "Warrant Shares," as used herein, refers to
the shares of Common Stock purchasable hereunder. The Warrant Shares and the
Exercise Price are subject to adjustment as provided in Paragraph 4 hereof. The
term "Warrants" means this Warrant and the other warrants issued pursuant to
that certain Convertible Debenture Purchase Agreement, dated as of April____,
2000, by and among the Company and the Buyers listed on the execution page
thereof (the "Securities Purchase Agreement").
This Warrant is subject to the following terms, provisions, and
conditions:
1. Manner of Exercise; Issuance of Certificates; Payment for Shares.
Subject to the provisions hereof, this Warrant may be exercised by the holder
hereof, in whole or in part, by the surrender of this Warrant, together with a
completed exercise agreement in the form attached hereto (the "Exercise
Agreement"), to the Company during normal business hours on any business day at
<PAGE>
the Company's principal executive offices (or such other office or agency of the
Company as it may designate by notice to the holder hereof), and upon (i)
payment to the Company in cash, by certified or official bank check or by wire
transfer for the account of the Company of the Exercise Price for the Warrant
Shares specified in the Exercise Agreement or (ii) if the resale of the Warrant
Shares by the holder is not then registered pursuant to an effective
registration statement under the Securities Act of 1933, as amended (the
"Securities Act"), delivery to the Company of a written notice of an election to
effect a "Cashless Exercise" (as defined in Section 11(c) below) for the Warrant
Shares specified in the Exercise Agreement. The Warrant Shares so purchased
shall be deemed to be issued to the holder hereof or such holder's designee, as
the record owner of such shares, as of the close of business on the date on
which this Warrant shall have been surrendered, the completed Exercise Agreement
shall have been delivered, and payment shall have been made for such shares as
set forth above. Certificates for the Warrant Shares so purchased, representing
the aggregate number of shares specified in the Exercise Agreement, shall be
delivered to the holder hereof within a reasonable time, not exceeding three (3)
business days, after this Warrant shall have been so exercised. The certificates
so delivered shall be in such denominations as may be requested by the holder
hereof and shall be registered in the name of such holder or such other name as
shall be designated by such holder. If this Warrant shall have been exercised
only in part, then, unless this Warrant has expired, the Company shall, at its
expense, at the time of delivery of such certificates, deliver to the holder a
new Warrant representing the number of shares with respect to which this Warrant
shall not then have been exercised.
Notwithstanding anything in this Warrant to the contrary, in
no event shall the holder of this Warrant be entitled to exercise a number of
Warrants (or portions thereof) in excess of the number of Warrants (or portions
thereof) upon exercise of which the sum of (i) the number of shares of Common
Stock beneficially owned by the holder and its affiliates (other than shares of
Common Stock which may be deemed beneficially owned through the ownership of the
unexercised Warrants and the unexercised or unconverted portion of any other
securities of the Company (including the Debentures (as defined in the
Securities Purchase Agreement)) subject to a limitation on conversion or
exercise analagous to the limitation contained herein) and (ii) the number of
shares of Common Stock issuable upon exercise of the Warrants (or portions
thereof) with respect to which the determination described herein is being made,
would result in beneficial ownership by the holder and its affiliates of more
than 4.9% of the outstanding shares of Common Stock. For purposes of the
immediately preceding sentence, beneficial ownership shall be determined in
accordance with Section 13(d) of the Securities Exchange Act of 1934, as
amended, and Regulation 13D-G thereunder, except as otherwise provided in clause
(i) of the preceding sentence.
2. Period of Exercise. This Warrant is exercisable at any time or from
time to time on or after the date on which this Warrant is issued and delivered
pursuant to the terms of the Securities Purchase Agreement and before 5:00 p.m.,
New York City time on the fifth (5th) anniversary of the date of issuance (the
"Exercise Period").
3. Certain Agreements of the Company. The Company hereby covenants and
agrees as follows:
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(a) Shares to be Fully Paid. All Warrant Shares will, upon issuance
in accordance with the terms of this Warrant, be validly issued, fully paid, and
nonassessable and free from all taxes, liens, and charges with respect to the
issue thereof.
(b) Reservation of Shares. During the Exercise Period, the Company
shall at all times have authorized, and reserved for the purpose of issuance
upon exercise of this Warrant, a sufficient number of shares of Common Stock to
provide for the exercise of this Warrant.
(c) Listing. The Company shall promptly secure the listing of the
shares of Common Stock issuable upon exercise of the Warrant upon each national
securities exchange or automated quotation system, if any, upon which shares of
Common Stock are then listed (subject to official notice of issuance upon
exercise of this Warrant) and shall maintain, so long as any other shares of
Common Stock shall be so listed, such listing of all shares of Common Stock from
time to time issuable upon the exercise of this Warrant; and the Company shall
so list on each national securities exchange or automated quotation system, as
the case may be, and shall maintain such listing of, any other shares of capital
stock of the Company issuable upon the exercise of this Warrant if and so long
as any shares of the same class shall be listed on such national securities
exchange or automated quotation system.
(d) Certain Actions Prohibited. The Company will not, by amendment
of its charter or through any reorganization, transfer of assets, consolidation,
merger, dissolution, issue or sale of securities, or any other voluntary action,
avoid or seek to avoid the observance or performance of any of the terms to be
observed or performed by it hereunder, but will at all times in good faith
assist in the carrying out of all the provisions of this Warrant and in the
taking of all such action as may reasonably be requested by the holder of this
Warrant in order to protect the exercise privilege of the holder of this Warrant
against dilution or other impairment, consistent with the tenor and purpose of
this Warrant. Without limiting the generality of the foregoing, the Company (i)
will not increase the par value of any shares of Common Stock receivable upon
the exercise of this Warrant above the Exercise Price then in effect and (ii)
will take all such actions as may be necessary or appropriate in order that the
Company may validly and legally issue fully paid and nonassessable shares of
Common Stock upon the exercise of this Warrant.
(e) Successors and Assigns. This Warrant will be binding upon any
entity succeeding to the Company by merger, consolidation, or acquisition of all
or substantially all the Company's assets.
4. Antidilution Provisions. During the Exercise Period, the Exercise
Price and the number of Warrant Shares shall be subject to adjustment from time
to time as provided in this Paragraph 4.
In the event that any adjustment of the Exercise Price as required
herein results in a fraction of a cent, such Exercise Price shall be rounded up
to the nearest cent.
(a) Adjustment of Exercise Price and Number of Shares upon Issuance
of Common Stock. Except as otherwise provided in Paragraphs 4(c) and 4(e)
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hereof, if and whenever on or after the date of issuance of this Warrant, the
Company issues or sells, or in accordance with Paragraph 4(b) hereof is deemed
to have issued or sold, any shares of Common Stock for no consideration or for a
consideration per share (before deduction of reasonable expenses or commissions
or underwriting discounts or allowances in connection therewith) less than the
Market Price (as hereinafter defined) on the date of issuance (a "Dilutive
Issuance"), then immediately upon the Dilutive Issuance, the Exercise Price will
be reduced to a price determined by multiplying the Exercise Price in effect
immediately prior to the Dilutive Issuance by a fraction, (i) the numerator of
which is an amount equal to the sum of (x) the number of shares of Common Stock
actually outstanding immediately prior to the Dilutive Issuance, plus (y) the
quotient of the aggregate consideration, calculated as set forth in Paragraph
4(b) hereof, received by the Company upon such Dilutive Issuance divided by the
Market Price in effect immediately prior to the Dilutive Issuance, and (ii) the
denominator of which is the total number of shares of Common Stock Deemed
Outstanding (as defined below) immediately after the Dilutive Issuance.
(b) Effect on Exercise Price of Certain Events. For purposes of
determining the adjusted Exercise Price under Paragraph 4(a) hereof, the
following will be applicable:
(i) Issuance of Rights or Options. If the Company in any manner
issues or grants any warrants, rights or options, whether or not immediately
exercisable, to subscribe for or to purchase Common Stock or other securities
convertible into or exchangeable for Common Stock ("Convertible Securities")
(such warrants, rights and options to purchase Common Stock or Convertible
Securities are hereinafter referred to as "Options") and the price per share for
which Common Stock is issuable upon the exercise of such Options is less than
the Market Price on the date of issuance or grant of such Options, then the
maximum total number of shares of Common Stock issuable upon the exercise of all
such Options will, as of the date of the issuance or grant of such Options, be
deemed to be outstanding and to have been issued and sold by the Company for
such price per share. For purposes of the preceding sentence, the "price per
share for which Common Stock is issuable upon the exercise of such Options" is
determined by dividing (i) the total amount, if any, received or receivable by
the Company as consideration for the issuance or granting of all such Options,
plus the minimum aggregate amount of additional consideration, if any, payable
to the Company upon the exercise of all such Options, plus, in the case of
Convertible Securities issuable upon the exercise of such Options, the minimum
aggregate amount of additional consideration payable upon the conversion or
exchange thereof at the time such Convertible Securities first become
convertible or exchangeable, by (ii) the maximum total number of shares of
Common Stock issuable upon the exercise of all such Options (assuming full
conversion of Convertible Securities, if applicable). No further adjustment to
the Exercise Price will be made upon the actual issuance of such Common Stock
upon the exercise of such Options or upon the conversion or exchange of
Convertible Securities issuable upon exercise of such Options.
(ii) Issuance of Convertible Securities. If the Company in any
manner issues or sells any Convertible Securities, whether or not immediately
convertible (other than where the same are issuable upon the exercise of
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<PAGE>
Options) and the price per share for which Common Stock is issuable upon such
conversion or exchange is less than the Market Price on the date of issuance,
then the maximum total number of shares of Common Stock issuable upon the
conversion or exchange of all such Convertible Securities will, as of the date
of the issuance of such Convertible Securities, be deemed to be outstanding and
to have been issued and sold by the Company for such price per share. For the
purposes of the preceding sentence, the "price per share for which Common Stock
is issuable upon such conversion or exchange" is determined by dividing (i) the
total amount, if any, received or receivable by the Company as consideration for
the issuance or sale of all such Convertible Securities, plus the minimum
aggregate amount of additional consideration, if any, payable to the Company
upon the conversion or exchange thereof at the time such Convertible Securities
first become convertible or exchangeable, by (ii) the maximum total number of
shares of Common Stock issuable upon the conversion or exchange of all such
Convertible Securities. No further adjustment to the Exercise Price will be made
upon the actual issuance of such Common Stock upon conversion or exchange of
such Convertible Securities.
(iii) Change in Option Price or Conversion Rate. If there is a
change at any time in (i) the amount of additional consideration payable to the
Company upon the exercise of any Options; (ii) the amount of additional
consideration, if any, payable to the Company upon the conversion or exchange of
any Convertible Securities; or (iii) the rate at which any Convertible
Securities are convertible into or exchangeable for Common Stock (other than
under or by reason of provisions designed to protect against dilution), the
Exercise Price in effect at the time of such change will be readjusted to the
Exercise Price which would have been in effect at such time had such Options or
Convertible Securities still outstanding provided for such changed additional
consideration or changed conversion rate, as the case may be, at the time
initially granted, issued or sold.
(iv) Treatment of Expired Options and Unexercised Convertible
Securities. If, in any case, the total number of shares of Common Stock issuable
upon exercise of any Option or upon conversion or exchange of any Convertible
Securities is not, in fact, issued and the rights to exercise such Option or to
convert or exchange such Convertible Securities shall have expired or
terminated, the Exercise Price then in effect will be readjusted to the Exercise
Price which would have been in effect at the time of such expiration or
termination had such Option or Convertible Securities, to the extent outstanding
immediately prior to such expiration or termination (other than in respect of
the actual number of shares of Common Stock issued upon exercise or conversion
thereof), never been issued.
(v) Calculation of Consideration Received. If any Common Stock,
Options or Convertible Securities are issued, granted or sold for cash, the
consideration received therefor for purposes of this Warrant will be the amount
received by the Company therefor, before deduction of reasonable commissions,
underwriting discounts or allowances or other reasonable expenses paid or
incurred by the Company in connection with such issuance, grant or sale. In case
any Common Stock, Options or Convertible Securities are issued or sold for a
consideration part or all of which shall be other than cash, the amount of the
consideration other than cash received by the Company will be the fair value of
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<PAGE>
such consideration, except where such consideration consists of securities, in
which case the amount of consideration received by the Company will be the
Market Price thereof as of the date of receipt. In case any Common Stock,
Options or Convertible Securities are issued in connection with any acquisition,
merger or consolidation in which the Company is the surviving corporation, the
amount of consideration therefor will be deemed to be the fair value of such
portion of the net assets and business of the non-surviving corporation as is
attributable to such Common Stock, Options or Convertible Securities, as the
case may be. The fair value of any consideration other than cash or securities
will be determined in good faith by the Board of Directors of the Company.
(vi) Exceptions to Adjustment of Exercise Price. No adjustment
to the Exercise Price will be made (i) upon the exercise of any warrants,
options or convertible securities granted, issued and outstanding on the date of
issuance of this Warrant; (ii) upon the grant or exercise of any stock or
options which may hereafter be granted or exercised under any employee benefit
plan of the Company now existing or to be implemented in the future, so long as
the issuance of such stock or options is approved by a majority of the
independent members of the Board of Directors of the Company or a majority of
the members of a committee of independent directors established for such
purpose; or (iii) upon the exercise of the Warrants.
(c) Subdivision or Combination of Common Stock. If the Company at
any time subdivides (by any stock split, stock dividend, recapitalization,
reorganization, reclassification or otherwise) the shares of Common Stock
acquirable hereunder into a greater number of shares, then, after the date of
record for effecting such subdivision, the Exercise Price in effect immediately
prior to such subdivision will be proportionately reduced. If the Company at any
time combines (by reverse stock split, recapitalization, reorganization,
reclassification or otherwise) the shares of Common Stock acquirable hereunder
into a smaller number of shares, then, after the date of record for effecting
such combination, the Exercise Price in effect immediately prior to such
combination will be proportionately increased.
(d) Adjustment in Number of Shares. Upon each adjustment of the
Exercise Price pursuant to the provisions of this Paragraph 4, the number of
shares of Common Stock issuable upon exercise of this Warrant shall be adjusted
by multiplying a number equal to the Exercise Price in effect immediately prior
to such adjustment by the number of shares of Common Stock issuable upon
exercise of this Warrant immediately prior to such adjustment and dividing the
product so obtained by the adjusted Exercise Price.
(e) Consolidation, Merger or Sale. In case of any consolidation of
the Company with, or merger of the Company into any other corporation, or in
case of any sale or conveyance of all or substantially all of the assets of the
Company other than in connection with a plan of complete liquidation of the
Company, then as a condition of such consolidation, merger or sale or
conveyance, adequate provision will be made whereby the holder of this Warrant
will have the right to acquire and receive upon exercise of this Warrant in lieu
of the shares of Common Stock immediately theretofore acquirable upon the
exercise of this Warrant, such shares of stock, securities or assets as may be
issued or payable with respect to or in exchange for the number of shares of
Common Stock immediately theretofore acquirable and receivable upon exercise of
this Warrant had such consolidation, merger or sale or conveyance not taken
place. In any such case, the Company will make appropriate provision to insure
that the provisions of this Paragraph 4 hereof will thereafter be applicable as
nearly as may be in relation to any shares of stock or securities thereafter
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<PAGE>
deliverable upon the exercise of this Warrant. The Company will not effect any
consolidation, merger or sale or conveyance unless prior to the consummation
thereof, the successor corporation (if other than the Company) assumes by
written instrument the obligations under this Paragraph 4 and the obligations to
deliver to the holder of this Warrant such shares of stock, securities or assets
as, in accordance with the foregoing provisions, the holder may be entitled to
acquire.
(f) Distribution of Assets. In case the Company shall declare or
make any distribution of its assets (including cash) to holders of Common Stock
as a partial liquidating dividend, by way of return of capital or otherwise,
then, after the date of record for determining stockholders entitled to such
distribution, but prior to the date of distribution, the holder of this Warrant
shall be entitled upon exercise of this Warrant for the purchase of any or all
of the shares of Common Stock subject hereto, to receive the amount of such
assets which would have been payable to the holder had such holder been the
holder of such shares of Common Stock on the record date for the determination
of stockholders entitled to such distribution.
(g) Notice of Adjustment. Upon the occurrence of any event which
requires any adjustment of the Exercise Price, then, and in each such case, the
Company shall give notice thereof to the holder of this Warrant, which notice
shall state the Exercise Price resulting from such adjustment and the increase
or decrease in the number of Warrant Shares purchasable at such price upon
exercise, setting forth in reasonable detail the method of calculation and the
facts upon which such calculation is based. Such calculation shall be certified
by the Chief Executive Officer of the Company.
(h) Minimum Adjustment of Exercise Price. No adjustment of the
Exercise Price shall be made in an amount of less than 1% of the Exercise Price
in effect at the time such adjustment is otherwise required to be made, but any
such lesser adjustment shall be carried forward and shall be made at the time
and together with the next subsequent adjustment which, together with any
adjustments so carried forward, shall amount to not less than 1% of such
Exercise Price.
(i) No Fractional Shares. No fractional shares of Common Stock are
to be issued upon the exercise of this Warrant, but the Company shall pay a cash
adjustment in respect of any fractional share which would otherwise be issuable
in an amount equal to the same fraction of the Market Price of a share of Common
Stock on the date of such exercise.
(j) Other Notices. In case at any time:
(i) the Company shall declare any dividend upon the Common Stock
payable in shares of stock of any class or make any other distribution
(including dividends or distributions payable in cash out of retained earnings)
to the holders of the Common Stock;
(ii) the Company shall offer for subscription pro rata to the
holders of the Common Stock any additional shares of stock of any class or other
rights;
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<PAGE>
(iii) there shall be any capital reorganization of the Company,
or reclassification of the Common Stock, or consolidation or merger of the
Company with or into, or sale of all or substantially all its assets to, another
corporation or entity; or
(iv) there shall be a voluntary or involuntary dissolution,
liquidation or winding-up of the Company;
then, in each such case, the Company shall give to the holder of this Warrant
(a) notice of the date on which the books of the Company shall close or a record
shall be taken for determining the holders of Common Stock entitled to receive
any such dividend, distribution, or subscription rights or for determining the
holders of Common Stock entitled to vote in respect of any such reorganization,
reclassification, consolidation, merger, sale, dissolution, liquidation or
winding-up and (b) in the case of any such reorganization, reclassification,
consolidation, merger, sale, dissolution, liquidation or winding-up, notice of
the date (or, if not then known, a reasonable approximation thereof by the
Company) when the same shall take place. Such notice shall also specify the date
on which the holders of Common Stock shall be entitled to receive such dividend,
distribution, or subscription rights or to exchange their Common Stock for stock
or other securities or property deliverable upon such reorganization,
reclassification, consolidation, merger, sale, dissolution, liquidation, or
winding-up, as the case may be. Such notice shall be given at least 30 days
prior to the record date or the date on which the Company's books are closed in
respect thereto. Failure to give any such notice or any defect therein shall not
affect the validity of the proceedings referred to in clauses (i), (ii), (iii)
and (iv) above.
(k) Certain Events. If any event occurs of the type contemplated by
the adjustment provisions of this Paragraph 4 but not expressly provided for by
such provisions, the Company will give notice of such event as provided in
Paragraph 4(g) hereof, and the Company's Board of Directors will make an
appropriate adjustment in the Exercise Price and the number of shares of Common
Stock acquirable upon exercise of this Warrant so that the rights of the holder
shall be neither enhanced nor diminished by such event.
(l) Certain Definitions.
(i) "Common Stock Deemed Outstanding" shall mean the number of
shares of Common Stock actually outstanding (not including shares of Common
Stock held in the treasury of the Company), plus (x) pursuant to Paragraph
4(b)(i) hereof, the maximum total number of shares of Common Stock issuable upon
the exercise of Options, as of the date of such issuance or grant of such
Options, if any, and (y) pursuant to Paragraph 4(b)(ii) hereof, the maximum
total number of shares of Common Stock issuable upon conversion or exchange of
Convertible Securities, as of the date of issuance of such Convertible
Securities, if any.
(ii) "Market Price," as of any date, (i) means the average of
the last reported sale prices for the shares of Common Stock on the OTC BB for
the five (5) trading days immediately preceding such date as reported by
Bloomberg, or (ii) if the OTC BB is not the principal trading market for the
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shares of Common Stock, the average of the last reported sale prices on the
principal trading market for the Common Stock during the same period as reported
by Bloomberg, or (iii) if market value cannot be calculated as of such date on
any of the foregoing bases, the Market Price shall be the fair market value as
reasonably determined in good faith by (a) the Board of Directors of the
Corporation or, at the option of a majority-in-interest of the holders of the
outstanding Warrants, by (b) an independent investment bank of nationally
recognized standing in the valuation of businesses similar to the business of
the corporation. The manner of determining the Market Price of the Common Stock
set forth in the foregoing definition shall apply with respect to any other
security in respect of which a determination as to market value must be made
hereunder.
(iii) "Common Stock," for purposes of this Paragraph 4, includes
the Common Stock, par value $0.001 per share, and any additional class of stock
of the Company having no preference as to dividends or distributions on
liquidation, provided that the shares purchasable pursuant to this Warrant shall
include only shares of Common Stock, par value $0.001 per share, in respect of
which this Warrant is exercisable, or shares resulting from any subdivision or
combination of such Common Stock, or in the case of any reorganization,
reclassification, consolidation, merger, or sale of the character referred to in
Paragraph 4(e) hereof, the stock or other securities or property provided for in
such Paragraph.
5. Issue Tax. The issuance of certificates for Warrant Shares upon the
exercise of this Warrant shall be made without charge to the holder of this
Warrant or such shares for any issuance tax or other costs in respect thereof,
provided that the Company shall not be required to pay any tax which may be
payable in respect of any transfer involved in the issuance and delivery of any
certificate in a name other than the holder of this Warrant.
6. No Rights or Liabilities as a Shareholder. This Warrant shall not
entitle the holder hereof to any voting rights or other rights as a shareholder
of the Company. No provision of this Warrant, in the absence of affirmative
action by the holder hereof to purchase Warrant Shares, and no mere enumeration
herein of the rights or privileges of the holder hereof, shall give rise to any
liability of such holder for the Exercise Price or as a shareholder of the
Company, whether such liability is asserted by the Company or by creditors of
the Company.
7. Transfer, Exchange, and Replacement of Warrant.
(a) Restriction on Transfer. This Warrant and the rights granted to
the holder hereof are transferable, in whole or in part, upon surrender of this
Warrant, together with a properly executed assignment in the form attached
hereto, at the office or agency of the Company referred to in Paragraph 7(e)
below, provided, however, that any transfer or assignment shall be subject to
the conditions set forth in Paragraph 7(f) hereof and to the applicable
provisions of the Securities Purchase Agreement. Until due presentment for
registration of transfer on the books of the Company, the Company may treat the
registered holder hereof as the owner and holder hereof for all purposes, and
the Company shall not be affected by any notice to the contrary. Notwithstanding
anything to the contrary contained herein, the registration rights described in
Paragraph 8 are assignable only in accordance with the provisions of that
certain Registration Rights Agreement, dated as of February __, 2000, by and
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among the Company and the other signatories thereto (the "Registration Rights
Agreement").
(b) Warrant Exchangeable for Different Denominations. This Warrant
is exchangeable, upon the surrender hereof by the holder hereof at the office or
agency of the Company referred to in Paragraph 7(e) below, for new Warrants of
like tenor representing in the aggregate the right to purchase the number of
shares of Common Stock which may be purchased hereunder, each of such new
Warrants to represent the right to purchase such number of shares as shall be
designated by the holder hereof at the time of such surrender.
(c) Replacement of Warrant. Upon receipt of evidence reasonably
satisfactory to the Company of the loss, theft, destruction, or mutilation of
this Warrant and, in the case of any such loss, theft, or destruction, upon
delivery of an indemnity agreement reasonably satisfactory in form and amount to
the Company, or, in the case of any such mutilation, upon surrender and
cancellation of this Warrant, the Company, at its expense, will execute and
deliver, in lieu thereof, a new Warrant of like tenor.
(d) Cancellation; Payment of Expenses. Upon the surrender of this
Warrant in connection with any transfer, exchange, or replacement as provided in
this Paragraph 7, this Warrant shall be promptly canceled by the Company. The
Company shall pay all taxes (other than securities transfer taxes) and all other
expenses (other than legal expenses, if any, incurred by the holder or
transferees) and charges payable in connection with the preparation, execution,
and delivery of Warrants pursuant to this Paragraph 7.
(e) Register. The Company shall maintain, at its principal executive
offices (or such other office or agency of the Company as it may designate by
notice to the holder hereof), a register for this Warrant, in which the Company
shall record the name and address of the person in whose name this Warrant has
been issued, as well as the name and address of each transferee and each prior
owner of this Warrant.
(f) Exercise or Transfer Without Registration. If, at the time of
the surrender of this Warrant in connection with any exercise, transfer, or
exchange of this Warrant, this Warrant (or, in the case of any exercise, the
Warrant Shares issuable hereunder), shall not be registered under the Securities
Act of 1933, as amended (the "Securities Act") and under applicable state
securities or blue sky laws, the Company may require, as a condition of allowing
such exercise, transfer, or exchange, (i) that the holder or transferee of this
Warrant, as the case may be, furnish to the Company a written opinion of
counsel, which opinion and counsel are acceptable to the Company, to the effect
that such exercise, transfer, or exchange may be made without registration under
said Act and under applicable state securities or blue sky laws, (ii) that the
holder or transferee execute and deliver to the Company an investment letter in
form and substance acceptable to the Company and (iii) that the transferee be an
"accredited investor" as defined in Rule 501(a) promulgated under the Securities
Act; provided that no such opinion, letter or status as an "accredited investor"
shall be required in connection with a transfer pursuant to Rule 144 under the
Securities Act. The first holder of this Warrant, by taking and holding the
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same, represents to the Company that such holder is acquiring this Warrant for
investment and not with a view to the distribution thereof.
8. Registration Rights. The initial holder of this Warrant (and certain
assignees thereof) is entitled to the benefit of such registration rights in
respect of the Warrant Shares as are set forth in of the Registration Rights
Agreement.
9. Notices. All notices, requests, and other communications required or
permitted to be given or delivered hereunder to the holder of this Warrant shall
be in writing, and shall be personally delivered, or shall be sent by certified
or registered mail or by recognized overnight mail courier, postage prepaid and
addressed, to such holder at the address shown for such holder on the books of
the Company, or at such other address as shall have been furnished to the
Company by notice from such holder. All notices, requests, and other
communications required or permitted to be given or delivered hereunder to the
Company shall be in writing, and shall be personally delivered, or shall be sent
by certified or registered mail or by recognized overnight mail courier, postage
prepaid and addressed, to the office of the Company at 1600 Lower State Road,
Doylestown, PA 18901, Attention: Paul S. Lipshutz, or at such other address as
shall have been furnished to the holder of this Warrant by notice from the
Company. Any such notice, request, or other communication may be sent by
facsimile, but shall in such case be subsequently confirmed by a writing
personally delivered or sent by certified or registered mail or by recognized
overnight mail courier as provided above. All notices, requests, and other
communications shall be deemed to have been given either at the time of the
receipt thereof by the person entitled to receive such notice at the address of
such person for purposes of this Paragraph 9, or, if mailed by registered or
certified mail or with a recognized overnight mail courier, upon deposit with
the United States Post Office or such overnight mail courier, if postage is
prepaid and the mailing is properly addressed, as the case may be.
10. Governing Law. THIS WARRANT SHALL BE GOVERNED BY AND CONSTRUED AND
ENFORCED IN ACCORDANCE WITH THE INTERNAL LAWS OF THE STATE OF NEW YORK WITHOUT
REGARD TO THE BODY OF LAW CONTROLLING CONFLICTS OF LAW.
11. Miscellaneous.
(a) Amendments. This Warrant and any provision hereof may only be
amended by an instrument in writing signed by the Company and the holder hereof.
(b) Descriptive Headings. The descriptive headings of the several
paragraphs of this Warrant are inserted for purposes of reference only, and
shall not affect the meaning or construction of any of the provisions hereof.
(c) Cashless Exercise. Notwithstanding anything to the contrary
contained in this Warrant, if the resale of the Warrant Shares by the holder is
not then registered pursuant to an effective registration statement under the
Securities Act, this Warrant may be exercised by presentation and surrender of
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<PAGE>
this Warrant to the Company at its principal executive offices with a written
notice of the holder's intention to effect a cashless exercise, including a
calculation of the number of shares of Common Stock to be issued upon such
exercise in accordance with the terms hereof (a "Cashless Exercise"). In the
event of a Cashless Exercise, in lieu of paying the Exercise Price in cash, the
holder shall surrender this Warrant for that number of shares of Common Stock
determined by multiplying the number of Warrant Shares to which it would
otherwise be entitled by a fraction, the numerator of which shall be the
difference between the then current Market Price per share of the Common Stock
and the Exercise Price, and the denominator of which shall be the then current
Market Price per share of Common Stock.
[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK]
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<PAGE>
IN WITNESS WHEREOF, the Company has caused this Warrant to be signed by
its duly authorized officer.
COLLECTIBLE CONCEPTS GROUP, INC.
By: ______________________________
Paul S. Lipshutz
President
Dated as of April __, 2000
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<PAGE>
FORM OF EXERCISE AGREEMENT
Dated: ________ __, 200_
To: COLLECTIBLE CONCEPTS GROUP, INC.
The undersigned, pursuant to the provisions set forth in the within
Warrant, hereby agrees to purchase ________ shares of Common Stock covered by
such Warrant, and makes payment herewith in full therefor at the price per share
provided by such Warrant in cash or by certified or official bank check in the
amount of, or, if the resale of such Common Stock by the undersigned is not
currently registered pursuant to an effective registration statement under the
Securities Act of 1933, as amended, by surrender of securities issued by the
Company (including a portion of the Warrant) having a market value (in the case
of a portion of this Warrant, determined in accordance with Section 11(c) of the
Warrant) equal to $_________. Please issue a certificate or certificates for
such shares of Common Stock in the name of and pay any cash for any fractional
share to:
Name: _________________________________
Signature:
Address: ______________________________
Note: The above signature should
correspond exactly with the name
on the face of the within
Warrant.
and, if said number of shares of Common Stock shall not be all the shares
purchasable under the within Warrant, a new Warrant is to be issued in the name
of said undersigned covering the balance of the shares purchasable thereunder
less any fraction of a share paid in cash.
<PAGE>
FORM OF ASSIGNMENT
FOR VALUE RECEIVED, the undersigned hereby sells, assigns, and
transfers all the rights of the undersigned under the within Warrant, with
respect to the number of shares of Common Stock covered thereby set forth
hereinbelow, to:
Name of Assignee Address No of Shares
- ---------------- ------- ------------
, and hereby irrevocably constitutes and appoints ___________________________ as
agent and attorney-in-fact to transfer said Warrant on the books of the
within-named corporation, with full power of substitution in the premises.
Dated: ________ __, 200_
In the presence of:
____________________________
Name: _____________________________________
Signature: ________________________________
Title of Signing Officer or Agent (if any):
__________________________________
Address: __________________________________
__________________________________
Note: The above signature should
correspond exactly with the name on
the face of the within Warrant.
<PAGE>
REGISTRATION RIGHTS AGREEMENT
This Registration Rights Agreement (this "Agreement") is made
and entered into as of April __, 2000, among COLLECTIBLE CONCEPTS GROUP, INC., a
Delaware corporation (the "Company"), and the investors signatory hereto (each
such investor is a "Purchaser" and all such investors are, collectively, the
"Purchasers ").
This Agreement is made pursuant to the Secured Convertible
Debenture Purchase Agreement, dated as of the date hereof among the Company and
the Purchasers (the "Purchase Agreement").
The Company and the Purchasers hereby agree as follows:
1. Definitions
Capitalized terms used and not otherwise defined herein that
are defined in the Purchase Agreement shall have the meanings given such terms
in the Purchase Agreement. As used in this Agreement, the following terms shall
have the following meanings:
"Advice" shall have meaning set forth in Section 3(r).
"Affiliate" means, with respect to any Person, any other
Person that directly or indirectly controls or is controlled by or under common
control with such Person. For the purposes of this definition, "control," when
used with respect to any Person, means the possession, direct or indirect, of
the power to direct or cause the direction of the management and policies of
such Person, whether through the ownership of voting securities, by contract or
otherwise; and the terms of "affiliated," "controlling" and "controlled" have
meanings correlative to the foregoing.
"Business Day" means any day except Saturday, Sunday and any
day which shall be a legal holiday or a day on which banking institutions in the
state of New York generally are authorized or required by law or other
government actions to close.
"Closing Date" means April __, 2000.
"Commission" means the Securities and Exchange Commission.
"Common Stock" means the Company's Common Stock, no par value.
"Debentures" means the Company's 10% Secured Convertible
Debentures due three years from the date of issuance thereof, issued to the
Purchasers pursuant to the Purchase Agreement.
<PAGE>
"Effectiveness Date" means the 150th day following the Closing
Date.
"Effectiveness Period" shall have the meaning set forth in
Section 2(a).
"Exchange Act" means the Securities Exchange Act of 1934, as
amended.
"Filing Date" means the 90th day following the Closing Date.
"Holder" or "Holders" means the holder or holders, as the case
may be, from time to time of Registrable Securities.
"Indemnified Party" shall have the meaning set forth in
Section 5(c).
"Indemnifying Party" shall have the meaning set forth in
Section 5(c).
"Losses" shall have the meaning set forth in Section 5(a).
"Person" means an individual or a corporation, partnership,
trust, incorporated or unincorporated association, joint venture, limited
liability company, joint stock company, government (or an agency or political
subdivision thereof) or other entity of any kind.
"Proceeding" means an action, claim, suit, investigation or
proceeding (including, without limitation, an investigation or partial
proceeding, such as a deposition), whether commenced or threatened.
"Prospectus" means the prospectus included in the Registration
Statement (including, without limitation, a prospectus that includes any
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, with
respect to the terms of the offering of any portion of the Registrable
Securities covered by the 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.
"Registrable Securities" means the shares of Common Stock
issuable (i) upon conversion in full of the Debentures, (ii) as payment of
interest in respect of the Debentures, and (iii) upon exercise of the Warrants.
"Registration Statement" means the registration statement and
any additional registration statements contemplated by Section 2(a), including
(in each case) the Prospectus, amendments and supplements to such registration
statement or Prospectus, including pre- and post-effective amendments, all
exhibits thereto, and all material incorporated by reference or deemed to be
incorporated by reference in such registration statement.
<PAGE>
"Rule 144" means Rule 144 promulgated by the Commission
pursuant to the Securities Act, as such Rule may be amended from time to time,
or any similar rule or regulation hereafter adopted by the Commission having
substantially the same effect as such Rule.
"Rule 158" means Rule 158 promulgated by the Commission
pursuant to the Securities Act, as such Rule may be amended from time to time,
or any similar rule or regulation hereafter adopted by the Commission having
substantially the same effect as such Rule.
"Rule 415" means Rule 415 promulgated by the Commission
pursuant to the Securities Act, as such Rule may be amended from time to time,
or any similar rule or regulation hereafter adopted by the Commission having
substantially the same effect as such Rule.
"Securities Act" means the Securities Act of 1933, as amended,
and the rules and regulations promulgated thereunder.
"Special Counsel" means one special counsel to the Holders,
for which the Holders will be reimbursed by the Company pursuant to Section 4.
"Underwritten Registration or Underwritten Offering" means a
registration in connection with which securities of the Company are sold to an
underwriter for reoffering to the public pursuant to an effective registration
statement.
"Warrants" means the Common Stock purchase warrants issued to
the Purchasers pursuant to the Purchase Agreement.
2. Shelf Registration
(a) On or prior to the Filing Date, the Company shall prepare
and file with the Commission a "Shelf" Registration Statement covering the
number of Registrable Securities contemplated by Section 2(b) for an offering to
be made on a continuous basis pursuant to Rule 415. The Registration Statement
shall be on Form S-1 or Form SB-2 (or on another appropriate form as mutually
agreed to by the Company and the Holders). The Company shall, within ten (10)
days of the date on which the Company becomes eligible to register the resale by
selling security holders of its securities under Form S-3 promulgated by the
Commission, convert the Registration Statement from the originally filed form to
Form S-3. The Company shall use its best efforts to cause the Registration
Statement to be declared effective under the Securities Act as promptly as
possible after the filing thereof, but in any event prior to the Effectiveness
Date, and shall use its best efforts to keep such Registration Statement
continuously effective under the Securities Act until the date which is three
years after the date that such Registration Statement is declared effective by
the Commission or such earlier date when all Registrable Securities covered by
such Registration Statement have been sold or may be sold without volume
restrictions pursuant to Rule 144(k) as determined by the counsel to the Company
pursuant to a written opinion letter to such effect, addressed and acceptable to
the Company's transfer agent (the "Effectiveness Period"), provided, however,
that the Company shall not be deemed to have used its best efforts to keep the
Registration Statement effective during the Effectiveness Period if it
voluntarily takes any action that would result in the Holders not being able to
sell the Registrable Securities covered by such Registration Statement during
the Effectiveness Period, unless such action is required under applicable law or
the Company has filed a post-effective amendment to the Registration Statement
and the Commission has not declared it effective.
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<PAGE>
(b) In order to account for the fact that the number of shares
of Common Stock issuable upon conversion of the Debentures (and as payment of
interest thereon) is determined in part upon the bid price of the Common Stock
prior to the time of conversion, the initial Registration Statement required to
be filed hereunder shall include (but not be limited to) a number of shares of
Common Stock equal to no less than the sum of (I) 200% of the number of shares
of Common Stock into which the Debentures, together with the payment of interest
thereon (assuming all interest is paid in shares of Common Stock and that the
Debentures remain outstanding for three years), are convertible, assuming such
conversion occurred on the Closing Date, the Filing Date or the date the Company
files an acceleration request with the Commission relating to the Registration
Statement, whichever yields the lowest Conversion Price (as defined in the
Debentures) and (ii) the number of shares of Common Stock issuable upon exercise
in full of the Warrants.
(c) If the Holders of a majority of the Registrable Securities
so elect, an offering of Registrable Securities pursuant to the Registration
Statement may be effected in the form of an Underwritten Offering. In such
event, and, if the managing underwriters advise the Company and such Holders in
writing that in their opinion the amount of Registrable Securities proposed to
be sold in such Underwritten Offering exceeds the amount of Registrable
Securities which can be sold in such Underwritten Offering, there shall be
included in such Underwritten Offering the amount of such Registrable Securities
which in the opinion of such managing underwriters can be sold, and such amount
shall be allocated pro-rata among the Holders proposing to sell Registrable
Securities in such Underwritten Offering.
(d) If any of the Registrable Securities are to be sold in an
Underwritten Offering, the investment banker in interest that will administer
the offering will be selected by the Holders of a majority of the Registrable
Securities included in such offering upon consultation with the Company.
3. Registration Procedures
In connection with the Company's registration obligations
hereunder, the Company shall:
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<PAGE>
(a) Prepare and file with the Commission on or prior to the
Filing Date, a Registration Statement on the form contemplated by Section 2(a)
which Registration Statement shall contain (except if otherwise directed by the
Holders) the "Plan of Distribution" attached hereto as Annex A, and cause the
Registration Statement to become effective and remain effective as provided
herein; provided, however, that not less than three (3) Business Days prior to
the filing of the Registration Statement or any related Prospectus or any
amendment or supplement thereto (including any document that would be
incorporated or deemed to be incorporated therein by reference), the Company
shall, (i) furnish to the Holders, their Special Counsel and any managing
underwriters, copies of all such documents proposed to be filed, which documents
(other than those incorporated or deemed to be incorporated by reference) will
be subject to the review of such Holders, their Special Counsel and such
managing underwriters, and (ii) cause its officers and directors, counsel and
independent certified public accountants to respond to such inquiries as shall
be necessary, in the reasonable opinion of respective counsel to such Holders
and such underwriters, to conduct a reasonable investigation within the meaning
of the Securities Act. The Company shall, within ten (10) days of the date on
which the Company becomes eligible to register the resale by selling security
holders of its securities under Form S-3 promulgated by the Commission, convert
the Registration Statement from the originally filed form to Form S-3. The
Company shall not file the Registration Statement or any such Prospectus or any
amendments or supplements thereto to which the Holders of a majority of the
Registrable Securities, their Special Counsel, or any managing underwriters,
shall reasonably object on a timely basis.
(b) (i) Prepare and file with the Commission such amendments,
including post-effective amendments, to the Registration Statement and the
Prospectus used in connection therewith as may be necessary to keep the
Registration Statement continuously effective as to the applicable Registrable
Securities for the Effectiveness Period and prepare and file with the Commission
such additional Registration Statements in order to register for resale under
the Securities Act all of the Registrable Securities; (ii) cause the related
Prospectus to be amended or supplemented by any required Prospectus supplement,
and as so supplemented or amended to be filed pursuant to Rule 424 (or any
similar provisions then in force) promulgated under the Securities Act; (iii)
respond as promptly as reasonably possible to any comments received from the
Commission with respect to the Registration Statement or any amendment thereto
and as promptly as reasonably possible provide the Holders true and complete
copies of all correspondence from and to the Commission relating to the
Registration Statement; and (iv) comply in all material respects with the
provisions of the Securities Act and the Exchange Act with respect to the
disposition of all Registrable Securities covered by the Registration Statement
during the applicable period in accordance with the intended methods of
disposition by the Holders thereof set forth in the Registration Statement as so
amended or in such Prospectus as so supplemented.
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<PAGE>
(c) File additional Registration Statements if the number of
Registrable Securities at any time exceeds the number of shares of Common Stock
then registered in a Registration Statement. The Company shall have 30 days to
file such additional Registration Statements after its receipt of notice of the
requirement thereof which the Holders may give at any time when the Registrable
Securities exceeds 85% of the number of shares of Common Stock then registered
in a Registration Statement hereunder. In such event, the Registration Statement
required to be filed by the Company shall include a number of shares of Common
Stock equal to no less than 200% of the number of shares of Common Stock into
which all then outstanding principal amount of Debentures are convertible
(assuming such conversion occurred on the Filing Date for such Registration
Statement or the date of the filing of the final acceleration request therefor,
whichever date yields a lower Conversion Price) less the shares covered by the
prior Registration Statement and any other Registrable Securities not then
registered in a Registration Statement.
(d) Notify the Holders of Registrable Securities to be sold,
their Special Counsel and any managing underwriters as promptly as reasonably
possible (and, in the case of (i)(A) below, not less than five (5) days prior to
such filing) and (if requested by any such Person) confirm such notice in
writing no later than one (1) Business Day following the day (i)(A) when a
Prospectus or any Prospectus supplement or post-effective amendment to the
Registration Statement is proposed to be filed; (B) when the Commission notifies
the Company whether there will be a "review" of such Registration Statement and
whenever the Commission comments in writing on such Registration Statement (the
Company shall provide true and complete copies thereof and all written responses
thereto to each of the Holders, which the Holders shall keep confidential); and
(C) with respect to the Registration Statement or any post-effective amendment,
when the same has become effective; (ii) of any request by the Commission or any
other Federal or state governmental authority for amendments or supplements to
the Registration Statement or Prospectus or for additional information; (iii) of
the issuance by the Commission of any stop order suspending the effectiveness of
the Registration Statement covering any or all of the Registrable Securities or
the initiation of any Proceedings for that purpose; (iv) if at any time any of
the representations and warranties of the Company contained in any agreement
(including any underwriting agreement) contemplated hereby ceases to be true and
correct in all material respects; (v) 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; and (vi) of the occurrence of any event or passage of time that makes
the financial statements included in the Registration Statement ineligible for
inclusion therein or any statement made in the Registration Statement or
Prospectus or any document incorporated or deemed to be incorporated therein by
reference untrue in any material respect or that requires any revisions to the
Registration Statement, Prospectus or other documents so that, in the case of
the Registration Statement or the Prospectus, as the case may be, 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 light of the circumstances under which they were made, not misleading.
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<PAGE>
(e) Use its best efforts to avoid the issuance of, or, if
issued, obtain the withdrawal of (i) any order suspending the effectiveness of
the Registration Statement, or (ii) any suspension of the qualification (or
exemption from qualification) of any of the Registrable Securities for sale in
any jurisdiction, at the earliest practicable moment.
(f) If requested by any managing underwriter or the Holders of
a majority in interest of the Registrable Securities to be sold in connection
with an Underwritten Offering, (i) promptly incorporate in a Prospectus
supplement or post-effective amendment to the Registration Statement such
information as such managing underwriters and such Holders reasonably agree
should be included therein, and (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; provided, however, that
the Company shall not be required to take any action pursuant to this Section
3(f) that would, in the opinion of counsel for the Company, violate applicable
law or be materially detrimental to the business prospects of the Company.
(g) Furnish to each Holder, their Special Counsel and any
managing underwriters, without charge, at least one conformed copy of each
Registration Statement and each amendment thereto, including, if requested,
financial statements and schedules, all documents incorporated or deemed to be
incorporated therein by reference, and all exhibits to the extent requested by
such Person (including those previously furnished or incorporated by reference)
promptly after the filing of such documents with the Commission.
(h) Promptly deliver to each Holder, their Special Counsel,
and any underwriters, without charge, as many copies of the Prospectus or
Prospectuses (including each form of prospectus) and each amendment or
supplement thereto as such Persons may reasonably request; and the Company
hereby consents to the use of such Prospectus and each amendment or supplement
thereto by each of the selling Holders and any underwriters in connection with
the offering and sale of the Registrable Securities covered by such Prospectus
and any amendment or supplement thereto.
(i) Prior to any public offering of Registrable Securities,
use its best efforts to register or qualify or cooperate with the selling
Holders, any underwriters and their Special Counsel in connection with the
registration or qualification (or exemption from such registration or
qualification) of such Registrable Securities for offer and sale under the
securities or Blue Sky laws of such jurisdictions within the United States as
any Holder or underwriter requests in writing, to keep each such registration or
qualification (or exemption therefrom) effective during the Effectiveness Period
and 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 a
Registration Statement; provided, however, that the Company shall not be
required to qualify generally to do business in any jurisdiction where it is not
then so qualified or to take any action that would subject it to general service
of process in any such jurisdiction where it is not then so subject or subject
the Company to any material tax in any such jurisdiction where it is not then so
subject.
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<PAGE>
(j) Cooperate with the Holders and any managing underwriters
to facilitate the timely preparation and delivery of certificates representing
Registrable Securities to be delivered to a transferee pursuant to a
Registration Statement, which certificates shall be free, to the extent
permitted by applicable law, of all restrictive legends, and to enable such
Registrable Securities to be in such denominations and registered in such names
as any such managing underwriters or Holders may request.
(k) Upon the occurrence of any event contemplated by Section
3(d)(vi), as promptly as reasonably possible, prepare a supplement or amendment,
including a post-effective amendment, to the Registration Statement or a
supplement to the related Prospectus or any document incorporated or deemed to
be incorporated therein by reference, and file any other required document so
that, as thereafter delivered, neither the Registration Statement nor such
Prospectus will 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 light of the circumstances under which they were made,
not misleading.
(l) Use its best efforts to cause all Registrable Securities
relating to such Registration Statement to be listed on the Nasdaq National
Market ("NASDAQ") or on any other stock market or trading facility on which the
shares of Common Stock are traded, listed or quoted, including, without
limitation, the OTC Bulletin Board (each a "Subsequent Market") as and when
required pursuant to the Purchase Agreement.
(m) Enter into such agreements (including an underwriting
agreement in form, scope and substance as is customary in Underwritten
Offerings) and take all such other actions in connection therewith (including
those reasonably requested by any managing underwriters and the Holders of a
majority of the Registrable Securities being sold) in order to expedite or
facilitate the disposition of such Registrable Securities, and whether or not an
underwriting agreement is entered into, (i) make such representations and
warranties to such Holders and such underwriters as are customarily made by
issuers to underwriters in underwritten public offerings (subject to the
scheduling of appropriate exceptions to insure such representations and
warranties are accurate), and confirm the same if and when requested; (ii) in
the case of an Underwritten Offering obtain and deliver copies thereof to each
Holder and the managing underwriters, if any, of opinions of counsel to the
Company and updates thereof addressed to each Holder and each such underwriter,
in form, scope and substance reasonably satisfactory to any such managing
underwriters and Special Counsel to the selling Holders covering the matters
customarily covered in opinions requested in Underwritten Offerings and such
other matters as may be reasonably requested by such Special Counsel and
underwriters; (iii) immediately prior to the effectiveness of the Registration
Statement, and, in the case of an Underwritten Offering, at the time of delivery
of any Registrable Securities sold pursuant thereto, use its best reasonable
efforts to obtain and deliver copies to the Holders and the managing
underwriters, if any, of "cold comfort" letters and updates thereof from the
independent certified public accountants of the Company (and, if necessary, any
other independent certified public accountants of any subsidiary of the Company
or of any business acquired by the Company for which financial statements and
financial data is, or is required to be, included in the Registration
Statement), addressed to the Company in form and substance as are customary in
connection with Underwritten Offerings; (iv) if an underwriting agreement is
entered into, the same shall contain indemnification provisions and procedures
no less favorable to the selling Holders and the underwriters, if any, than
those set forth in Section 5 (or such other provisions and procedures acceptable
to the managing underwriters, if any, and holders of a majority of Registrable
Securities participating in such Underwritten Offering); and (v) deliver such
documents and certificates as may be reasonably requested by the Holders of a
majority of the Registrable Securities being sold, their Special Counsel and any
managing underwriters to evidence the continued validity of the representations
and warranties made pursuant to Section 3(m)(i) above and to evidence compliance
with any customary conditions contained in the underwriting agreement or other
agreement entered into by the Company.
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<PAGE>
(n) Make available for inspection by the selling Holders, any
representative of such Holders, any underwriter participating in any disposition
of Registrable Securities, and any attorney or accountant retained by such
selling Holders or underwriters, at the offices where normally kept, during
reasonable business hours, all financial and other records, pertinent corporate
documents and properties of the Company and its subsidiaries, and cause the
officers, directors, agents and employees of the Company and its subsidiaries to
supply all information in each case reasonably requested by any such Holder,
representative, underwriter, attorney or accountant in connection with the
Registration Statement; provided, however, that any information that is
determined in good faith by the Company in writing to be of a confidential
nature at the time of delivery of such information shall be kept confidential by
such Persons, unless (i) disclosure of such information is required by court or
administrative order or is necessary to respond to inquiries of regulatory
authorities; (ii) disclosure of such information, in the opinion of counsel to
such Person, is required by law; (iii) such information becomes generally
available to the public other than as a result of a disclosure or failure to
safeguard by such Person; or (iv) such information becomes available to such
Person from a source other than the Company and such source is not known by such
Person to be bound by a confidentiality agreement with the Company.
(o) Comply with all applicable rules and regulations of the
Commission.
(p) The Company may require each selling Holder to furnish to
the Company such information regarding the distribution of such Registrable
Securities and the beneficial ownership of Common Stock held by such Holder as
is required by law to be disclosed in the Registration Statement, and the
Company may exclude from such registration the Registrable Securities of any
such Holder who unreasonably fails to furnish such information within a
reasonable time after receiving such request.
(q) If the Registration Statement refers to any Holder by name
or otherwise as the holder of any securities of the Company, then such Holder
shall have the right to require (if such reference to such Holder by name or
otherwise is not required by the Securities Act or any similar Federal statute
then in force) the deletion of the reference to such Holder in any amendment or
supplement to the Registration Statement filed or prepared subsequent to the
time that such reference ceases to be required.
(r) Each Holder covenants and agrees that (i) it will not sell
any Registrable Securities under the Registration Statement until it has
received copies of the Prospectus as then amended or supplemented as
contemplated in Section 3(h) and notice from the Company that such Registration
Statement and any post-effective amendments thereto have become effective as
contemplated by Section 3(d) and (ii) it and its officers, directors or
Affiliates, if any, will comply with the prospectus delivery requirements of the
Securities Act as applicable to it in connection with sales of Registrable
Securities pursuant to the Registration Statement.
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<PAGE>
Each Holder agrees by its acquisition of such Registrable
Securities that, upon receipt of a notice from the Company of the occurrence of
any event of the kind described in Sections 3(d)(ii), 3(d)(iii), 3(d)(iv),
3(d)(v) or 3(d)(vi), such Holder will forthwith discontinue disposition of such
Registrable Securities under the Registration Statement until such Holder's
receipt of the copies of the supplemented Prospectus and/or amended Registration
Statement contemplated by Section 3(k), or until it is advised in writing (the
"Advice") by the Company that the use of the applicable Prospectus may be
resumed, and, in either case, has received copies of any additional or
supplemental filings that are incorporated or deemed to be incorporated by
reference in such Prospectus or Registration Statement. The Company may provide
appropriate stop orders to enforce the provisions of this paragraph.
4. Registration Expenses
(a) All fees and expenses incident to the performance of or
compliance with this Agreement by the Company, except as and to the extent
specified in Section 4(b), shall be borne by the Company whether or not pursuant
to an Underwritten Offering and whether or not the Registration Statement is
filed or becomes effective and whether or not any Registrable Securities are
sold pursuant to the Registration Statement. The fees and expenses referred to
in the foregoing sentence shall include, without limitation, (i) all
registration and filing fees (including, without limitation, fees and expenses
(A) with respect to filings required to be made with the NASDAQ and any
Subsequent Market on which the Common Stock is then listed for trading, and (B)
in compliance with state securities or Blue Sky laws (including, without
limitation, fees and disbursements of counsel for the Holders in connection with
Blue Sky qualifications or exemptions of the Registrable Securities and
determination of the eligibility of the Registrable Securities for investment
under the laws of such jurisdictions as the managing underwriters, if any, or
the Holders of a majority of Registrable Securities may designate)), (ii)
printing expenses (including, without limitation, expenses of printing
certificates for Registrable Securities and of printing prospectuses if the
printing of prospectuses is requested by the managing underwriters, if any, or
by the holders of a majority of the Registrable Securities included in the
Registration Statement), (iii) messenger, telephone and delivery expenses, (iv)
reasonable fees and disbursements of counsel for the Company and Special Counsel
for the Holders, (v) Securities Act liability insurance, if the Company so
desires such insurance, and (vi) fees and expenses of all other Persons retained
by the Company in connection with the consummation of the transactions
contemplated by this Agreement. In addition, the Company shall be responsible
for all of its internal expenses incurred in connection with the consummation of
the transactions contemplated by this Agreement (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 as required hereunder.
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<PAGE>
(b) If the Holders require an Underwritten Offering pursuant
to the terms hereof, the Company shall be responsible for all costs, fees and
expenses in connection therewith, except for the fees and disbursements of the
Underwriters (including any underwriting commissions and discounts) and their
legal counsel and accountants. By way of illustration which is not intended to
diminish from the provisions of Section 4(a), the Holders shall not be
responsible for, and the Company shall be required to pay the fees or
disbursements incurred by the Company (including by its legal counsel and
accountants) in connection with, the preparation and filing of a Registration
Statement and related Prospectus for such offering, the maintenance of such
Registration Statement in accordance with the terms hereof, the listing of the
Registrable Securities in accordance with the requirements hereof, and printing
expenses incurred to comply with the requirements hereof.
5. Indemnification
(a) Indemnification by the Company. The Company shall,
notwithstanding any termination of this Agreement, indemnify and hold harmless
each Holder, the officers, directors, agents (including any underwriters
retained by such Holder in connection with the offer and sale of Registrable
Securities), brokers (including brokers who offer and sell Registrable
Securities as principal as a result of a pledge or any failure to perform under
a margin call of Common Stock), investment advisors and employees of each of
them, each Person who controls any such Holder (within the meaning of Section 15
of the Securities Act or Section 20 of the Exchange Act) and the officers,
directors, agents and employees of each such controlling Person, to the fullest
extent permitted by applicable law, from and against any and all losses, claims,
damages, liabilities, costs (including, without limitation, costs of preparation
and attorneys' fees) and expenses (collectively, "Losses"), as incurred, arising
out of or relating to any untrue or alleged untrue statement of a material fact
contained in the Registration Statement, any Prospectus or any form of
prospectus or in any amendment or supplement thereto or in any preliminary
prospectus, or arising out of or relating to any omission or alleged omission of
a material fact required to be stated therein or necessary to make the
statements therein (in the case of any Prospectus or form of prospectus or
supplement thereto, in light of the circumstances under which they were made)
not misleading, except to the extent, but only to the extent, that (1) such
untrue statements or omissions are based solely upon information regarding such
Holder furnished in writing to the Company by such Holder expressly for use
therein, or to the extent that such information relates to such Holder or such
Holder's proposed method of distribution of Registrable Securities and was
reviewed and expressly approved in writing by such Holder expressly for use in
the Registration Statement, such Prospectus or such form of Prospectus or in any
amendment or supplement thereto or (2) in the case of an occurrence of an event
of the type specified in Section 3(d)(ii)-(vi), the use by such Holder of an
outdated or defective Prospectus after the Company has notified such Holder in
writing that the Prospectus is outdated or defective and prior to the receipt by
such Holder of the Advice contemplated in Section 3(r). The Company shall notify
the Holders promptly of the institution, threat or assertion of any Proceeding
of which the Company is aware in connection with the transactions contemplated
by this Agreement.
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<PAGE>
(b) Indemnification by Holders. Each Holder shall, severally
and not jointly, indemnify and hold harmless the Company, its directors,
officers, agents and employees, each Person who controls the Company (within the
meaning of Section 15 of the Securities Act and Section 20 of the Exchange Act),
and the directors, officers, agents or employees of such controlling Persons, to
the fullest extent permitted by applicable law, from and against all Losses (as
determined by a court of competent jurisdiction in a final judgment not subject
to appeal or review) arising solely out of or based solely upon any untrue
statement of a material fact contained in the Registration Statement, any
Prospectus, or any form of prospectus, or in any amendment or supplement
thereto, or arising solely out of or based solely upon any omission of a
material fact required to be stated therein or necessary to make the statements
therein not misleading to the extent, but only to the extent, that such untrue
statement or omission is contained in any information so furnished in writing by
such Holder to the Company specifically for inclusion in the Registration
Statement or such Prospectus or to the extent that such information relates to
such Holder or such Holder's proposed method of distribution of Registrable
Securities and was reviewed and expressly approved in writing by such Holder
expressly for use in the Registration Statement, such Prospectus or such form of
Prospectus, or in any amendment or supplement thereto. In no event shall the
liability of any selling Holder hereunder be greater in amount than the dollar
amount of the net proceeds received by such Holder upon the sale of the
Registrable Securities giving rise to such indemnification obligation.
(c) Conduct of Indemnification Proceedings. If any Proceeding
shall be brought or asserted against any Person entitled to indemnity hereunder
(an "Indemnified Party"), such Indemnified Party shall promptly notify the
Person from whom indemnity is sought (the "Indemnifying Party") in writing, and
the Indemnifying Party shall assume the defense thereof, including the
employment of counsel reasonably satisfactory to the Indemnified Party and the
payment of all fees and expenses incurred in connection with defense thereof;
provided, that the failure of any Indemnified Party to give such notice shall
not relieve the Indemnifying Party of its obligations or liabilities pursuant to
this Agreement, except (and only) to the extent that it shall be finally
determined by a court of competent jurisdiction (which determination is not
subject to appeal or further review) that such failure shall have proximately
and materially adversely prejudiced the Indemnifying Party.
An Indemnified Party shall have the right to employ separate
counsel in any such Proceeding and to participate in the defense thereof, but
the fees and expenses of such counsel shall be at the expense of such
Indemnified Party or Parties unless: (1) the Indemnifying Party has agreed in
writing to pay such fees and expenses; or (2) the Indemnifying Party shall have
failed promptly to assume the defense of such Proceeding and to employ counsel
reasonably satisfactory to such Indemnified Party in any such Proceeding; or (3)
the named parties to any such Proceeding (including any impleaded parties)
include both such Indemnified Party and the Indemnifying Party, and such
Indemnified Party shall have been advised by counsel that a conflict of interest
is likely to exist if the same counsel were to represent such Indemnified Party
and the Indemnifying Party (in which case, if such Indemnified Party notifies
the Indemnifying Party in writing that it elects to employ separate counsel at
the expense of the Indemnifying Party, the Indemnifying Party shall not have the
right to assume the defense thereof and such counsel shall be at the expense of
the Indemnifying Party). The Indemnifying Party shall not be liable for any
settlement of any such Proceeding effected without its written consent, which
consent shall not be unreasonably withheld. No Indemnifying Party shall, without
the prior written consent of the Indemnified Party, effect any settlement of any
pending Proceeding in respect of which any Indemnified Party is a party, unless
such settlement includes an unconditional release of such Indemnified Party from
all liability on claims that are the subject matter of such Proceeding.
-12-
<PAGE>
All fees and expenses of the Indemnified Party (including
reasonable fees and expenses to the extent incurred in connection with
investigating or preparing to defend such Proceeding in a manner not
inconsistent with this Section) shall be paid to the Indemnified Party, as
incurred, within ten (10) Business Days of written notice thereof to the
Indemnifying Party (regardless of whether it is ultimately determined that an
Indemnified Party is not entitled to indemnification hereunder; provided, that
the Indemnifying Party may require such Indemnified Party to undertake to
reimburse all such fees and expenses to the extent it is finally judicially
determined that such Indemnified Party is not entitled to indemnification
hereunder).
(d) Contribution. If a claim for indemnification under Section
5(a) or 5(b) is unavailable to an Indemnified Party (by reason of public policy
or otherwise), then each Indemnifying Party, in lieu of indemnifying such
Indemnified Party, 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 and
Indemnified Party in connection with the actions, statements or omissions that
resulted in such Losses as well as any other relevant equitable considerations.
The relative fault of such Indemnifying Party and Indemnified Party shall be
determined by reference to, among other things, whether any action in question,
including any untrue or alleged untrue statement of a material fact or omission
or alleged omission of a material fact, has been taken or made by, or relates to
information supplied by, such Indemnifying Party or Indemnified Party, and the
parties' relative intent, knowledge, access to information and opportunity to
correct or prevent such action, statement or omission. The amount paid or
payable by a party as a result of any Losses shall be deemed to include, subject
to the limitations set forth in Section 5(c), any reasonable attorneys' or other
reasonable fees or expenses incurred by such party in connection with any
Proceeding to the extent such party would have been indemnified for such fees or
expenses if the indemnification provided for in this Section was available to
such party in accordance with its terms.
The parties hereto agree that it would not be just and
equitable if contribution pursuant to this Section 5(d) were determined by pro
rata allocation or by any other method of allocation that does not take into
account the equitable considerations referred to in the immediately preceding
paragraph. Notwithstanding the provisions of this Section 5(d), no Holder shall
be required to contribute, in the aggregate, any amount in excess of the amount
by which the proceeds actually received by such Holder from the sale of the
Registrable Securities subject to the Proceeding exceeds the amount of any
damages that such Holder has otherwise been required to pay by reason of such
untrue or alleged untrue statement or omission or alleged omission. No Person
guilty of fraudulent misrepresentation (within the meaning of Section 11(f) of
the Securities Act) shall be entitled to contribution from any Person who was
not guilty of such fraudulent misrepresentation.
The indemnity and contribution agreements contained in this
Section are in addition to any liability that the Indemnifying Parties may have
to the Indemnified Parties.
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<PAGE>
6. Miscellaneous
(a) Remedies. In the event of a breach by the Company or by a
Holder, of any of their obligations under this Agreement, each Holder or the
Company, as the case may be, in addition to being entitled to exercise all
rights granted by law and under this Agreement, including recovery of damages,
will be entitled to specific performance of its rights under this Agreement. The
Company and each Holder agree that monetary damages would not provide adequate
compensation for any losses incurred by reason of a breach by it of any of the
provisions of this Agreement and hereby further agrees that, in the event of any
action for specific performance in respect of such breach, it shall waive the
defense that a remedy at law would be adequate.
(b) No Inconsistent Agreements. Neither the Company nor any of
its subsidiaries has, as of the date hereof, nor shall the Company or any of its
subsidiaries, on or after the date of this Agreement, enter into any agreement
with respect to its securities that is inconsistent with the rights granted to
the Holders in this Agreement or otherwise conflicts with the provisions hereof.
Except as and to the extent specified in Schedule 6(b) hereto, neither the
Company nor any of its subsidiaries has previously entered into any agreement
granting any registration rights with respect to any of its securities to any
Person. Without limiting the generality of the foregoing, without the written
consent of the Holders of a majority of the then outstanding Registrable
Securities, the Company shall not grant to any Person the right to request the
Company to register any securities of the Company under the Securities Act
unless the rights so granted are subject in all respects to the prior rights in
full of the Holders set forth herein, and are not otherwise in conflict or
inconsistent with the provisions of this Agreement.
(c) No Piggyback on Registrations. Except as and to the extent
specified in Schedule 6(b) hereto, neither the Company nor any of its security
holders (other than the Holders in such capacity pursuant hereto) may include
securities of the Company in the Registration Statement other than the
Registrable Securities, and the Company shall not after the date hereof enter
into any agreement providing any such right to any of its security holders.
(d) Piggy-Back Registrations. If at any time when there is not
an effective Registration Statement covering all of the Registrable Securities
and the Underlying Shares, the Company shall determine to prepare and file with
the Commission a registration statement relating to an offering for its own
account or the account of others under the Securities Act of any of its equity
securities, other than on Form S-4 or Form S-8 (each as promulgated under the
Securities Act) or their then equivalents relating to equity 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, then the Company shall send to each holder of Registrable
Securities written notice of such determination and, if within twenty (20) days
after receipt of such notice, any such holder shall so request in writing, the
Company shall include in such registration statement all or any part of such
Registrable Securities such holder requests to be registered; provided, however,
that the Company shall not be required to register any Registrable Securities
pursuant to this Section 6(d) that are eligible for sale pursuant to Rule 144(k)
of the Commission.
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<PAGE>
(e) Amendments and Waivers. The provisions of this Agreement,
including the provisions of this sentence, may not be amended, modified or
supplemented, and waivers or consents to departures from the provisions hereof
may not be given, unless the same shall be in writing and signed by the Company
and the Holders of at least two-thirds of the then outstanding Registrable
Securities. Notwithstanding the foregoing, a waiver or consent to depart from
the provisions hereof with respect to a matter that relates exclusively to the
rights of Holders and that does not directly or indirectly affect the rights of
other Holders may be given by Holders of at least a majority of the Registrable
Securities to which such waiver or consent relates; provided, however, that the
provisions of this sentence may not be amended, modified, or supplemented except
in accordance with the provisions of the immediately preceding sentence.
(f) Notices. Any and all notices or other communications or
deliveries required or permitted to be provided hereunder shall be in writing
and shall be deemed given and effective on the earliest of (i) the date of
transmission, if such notice or communication is delivered via facsimile at the
facsimile telephone number specified in this Section prior to 6:30 p.m. (New
York City time) on a Business Day, (ii) the Business Day after the date of
transmission, if such notice or communication is delivered via facsimile at the
facsimile telephone number specified in the Purchase Agreement later than 6:30
p.m. (New York City time) on any date and earlier than 11:59 p.m. (New York City
time) on such date, (iii) the Business Day following the date of mailing, if
sent by nationally recognized overnight courier service, or (iv) upon actual
receipt by the party to whom such notice is required to be given. The address
for such notices and communications shall be as follows:
If to the Company: Collectible Concepts Group, Inc.
1600 Lower State Road
Doylestown, PA 18901
Fax 215-491-1075
Attn: Paul S. Lipshutz
If to a Purchaser: To the address set forth under such Purchaser's
name on the signature pages hereto.
If to any other Person who is then the registered Holder:
To the address of such Holder as it appears in the
stock transfer books of the Company
or such other address as may be designated in writing hereafter, in the same
manner, by such Person.
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<PAGE>
(g) Successors and Assigns. This Agreement shall inure to the
benefit of and be binding upon the successors and permitted assigns of each of
the parties and shall inure to the benefit of each Holder. The Company may not
assign its rights or obligations hereunder without the prior written consent of
each Holder. Each Holder may assign their respective rights hereunder in the
manner and to the Persons as permitted under the Purchase Agreement.
(h) Counterparts. This Agreement may be executed in any number
of counterparts, each of which when so executed shall be deemed to be an
original and, all of which taken together shall constitute one and the same
Agreement. In the event that any signature is delivered by facsimile
transmission, such signature shall create a valid binding obligation of the
party executing (or on whose behalf such signature is executed) the same with
the same force and effect as if such facsimile signature were the original
thereof.
(i) Governing Law. All questions concerning the construction,
validity, enforcement and interpretation of this Agreement shall be governed by
and construed and enforced in accordance with the internal laws of the State of
New York, without regard to the principles of conflicts of law thereof. Each
party hereby irrevocably submits to the exclusive jurisdiction of the state and
federal courts sitting in the City of New York, borough of Manhattan, for the
adjudication of any dispute hereunder or in connection herewith or with any
transaction contemplated hereby or discussed herein, and hereby irrevocably
waives, and agrees not to assert in any suit, action or proceeding, any claim
that it is not personally subject to the jurisdiction of any such court, that
such suit, action or proceeding is improper. Each party hereby irrevocably
waives personal service of process and consents to process being served in any
such suit, action or proceeding by mailing a copy thereof to such party at the
address in effect for notices to it under this Agreement and agrees that such
service shall constitute good and sufficient service of process and notice
thereof. Nothing contained herein shall be deemed to limit in any way any right
to serve process in any manner permitted by law.
(j) Cumulative Remedies. The remedies provided herein are
cumulative and not exclusive of any remedies provided by law.
(k) Severability. If any term, provision, covenant or
restriction of this Agreement is held by a court of competent jurisdiction to be
invalid, illegal, void or unenforceable, the remainder of the terms, provisions,
covenants and restrictions set forth herein shall remain in full force and
effect and shall in no way be affected, impaired or invalidated, and the parties
hereto shall use their reasonable efforts to find and employ an alternative
means to achieve the same or substantially the same result as that contemplated
by such term, provision, covenant or restriction. It is hereby stipulated and
declared to be the intention of the parties that they would have executed the
remaining terms, provisions, covenants and restrictions without including any of
such that may be hereafter declared invalid, illegal, void or unenforceable.
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<PAGE>
(l) Headings. The headings in this Agreement are for
convenience of reference only and shall not limit or otherwise affect the
meaning hereof.
(m) Shares Held by The Company and its Affiliates. Whenever
the consent or approval of Holders of a specified percentage of Registrable
Securities is required hereunder, Registrable Securities held by the Company or
its Affiliates (other than any Holder or transferees or successors or assigns
thereof if such Holder is deemed to be an Affiliate solely by reason of its
holdings of such Registrable Securities) shall not be counted in determining
whether such consent or approval was given by the Holders of such required
percentage.
[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK
SIGNATURE PAGE TO FOLLOW]
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<PAGE>
IN WITNESS WHEREOF, the parties have executed this
Registration Rights Agreement as of the date first written above.
COLLECTIBLE CONCEPTS GROUP, INC.
By: /s/
-------------------------------------
Name: Paul S. Lipshutz
Title: President
NEW MILLENNIUM CAPITAL PARTNERS II, LLC
By: FIRST STREET MANAGER II, LLC
By: /s/
-------------------------------------
Name: Glenn A. Arbeitman
Title: Manager
155 First Street, Suite B
Mineola, New York 11501
Facsimile No.: 516-739-7115
Debentures Purchase Price: $175,000
AJW PARTNERS, LLC
By: SMS GROUP, LLC
By: /s/
-------------------------------------
Name: Corey S. Ribotsky
Title: Manager
155 First Street, Suite B
Mineola, New York 11501
Facsimile No.: 516-739-7115
Debentures Purchase Price: $175,000
EQUILIBRIUM EQUITY, LLC
By: /s/
-------------------------------------
Name: Corey S. Ribotsky
155 First Street, Suite B
Mineola, New York 11501
Facsimile No.: 516-739-7115
Debentures Purchase Price: $50,000
<PAGE>
Annex A
Plan of Distribution
The Selling Stockholders and any of their pledgees, assignees and
successors-in-interest may, from time to time, sell any or all of their shares
of Common Stock on any stock exchange, market or trading facility on which the
shares are traded or in private transactions. These sales may be at fixed or
negotiated prices. The Selling Stockholders may use any one or more of the
following methods when selling shares:
ordinary brokerage transactions and transactions in which the
broker-dealer solicits purchasers;
block trades in which the broker-dealer will attempt to sell the shares
as agent but may position and resell a portion of the block as
principal to facilitate the transaction;
purchases by a broker-dealer as principal and resale by the
broker-dealer for its account;
an exchange distribution in accordance with the rules of the applicable
exchange;
privately negotiated transactions;
short sales;
broker-dealers may agree with the Selling Stockholders to sell a
specified number of such shares at a stipulated price per share;
a combination of any such methods of sale; and
any other method permitted pursuant to applicable law.
The Selling Stockholders may also sell shares under Rule 144 under the
Securities Act, if available, rather than under this prospectus.
The Selling Stockholders may also engage in short sales against the
box, puts and calls and other transactions in securities of the Company or
derivatives of Company securities and may sell or deliver shares in connection
with these trades. The Selling Stockholders may pledge their shares to their
brokers under the margin provisions of customer agreements. If a Selling
Stockholder defaults on a margin loan, the broker may, from time to time, offer
and sell the pledged shares.
Broker-dealers engaged by the Selling Stockholders may arrange for
other brokers-dealers to participate in sales. Broker-dealers may receive
commissions or discounts from the Selling Stockholders (or, if any broker-dealer
acts as agent for the purchaser of shares, from the purchaser) in amounts to be
negotiated. The Selling Stockholders do not expect these commissions and
discounts to exceed what is customary in the types of transactions involved.
<PAGE>
The Selling Stockholders and any broker-dealers or agents that are
involved in selling the shares may be deemed to be "underwriters" within the
meaning of the Securities Act in connection with such sales. In such event, any
commissions received by such broker-dealers or agents and any profit on the
resale of the shares purchased by them may be deemed to be underwriting
commissions or discounts under the Securities Act.
The Company is required to pay all fees and expenses incident to the
registration of the shares, including fees and disbursements of counsel to the
Selling Stockholders. The Company has agreed to indemnify the Selling
Stockholders against certain losses, claims, damages and liabilities, including
liabilities under the Securities Act.
<PAGE>
Exhibit 10.1
EMPLOYMENT CONTRACT
THIS EMPLOYMENT CONTRACT (this "Agreement"), made as of the first day
of January, 1999, by and between-.
COLLECTIBLE CONCEPTS GROUP, INC., a Pennsylvania corporation,
having its principal place of business at 1600 Lower
State Road, Chalfont, Penna. 18914 (The Employer)
And
Name-. Paul S. Lipschutz
--------------------------------------
Residing at-. 11 Rivers Edge, Lambertville, NJ 08530
--------------------------------------
Phone.-
--------------------------------------
1. TERM OF EMPLOYMENT:
1.1 The Employer hereby employs the Employee and the Employee
hereby accepts employment with the Employer for a period of five (5) years
beginning on the first day of January ,1999. Upon each anniversary date hereof,
i.e., commencing January 1, 1999, and on January 1 , of each successive year
thereafter, this Agreement shall be automatically extended for a period of five
(5) years unless the Employer has given notice to the Employee, as hereinafter
provided, prior to ninety (90 days before any anniversary date hereof). If such
notice of termination has been given by the Employer, this Agreement shall not
be extended for any further term, but shall remain in existence for the
remainder of the then-current five (5) year term then in effect.
2. DUTIES OF EMPLOYEE:
2.1 The Employee is hereby employed in the capacity of President,
Member of Executive Committee, Steering Committee and Board of Directors, and
shall work at such locations as the Employer shall assign from time to time.
However, it is specifically understood that the Executive may engage in other
business activities so long as they do not directly compete against the products
of Collectible Concepts Group, Inc., or conflict with the Employee's ability to
discharge his duties to the Employer.
<PAGE>
3. COMPENSATION:
3.1 As compensation for services rendered under this Agreement,
the Employee shall be entitled to receive from the Employer, a salary of One
Hundred Four Thousand ($104,000.00) per year for the period from January, 1999
through and including December 31, 1999 ("Base Salary"). During each fiscal year
thereafter (fiscal year January 1st through December 31st), Employee shall
receive additional salary based on the gross sales of all divisions of the
Employer in the following increments ("Additional Salary").
AnnualRevenues Additional Salary
-------------- -----------------
$1,000,000 to $1,999,999 $25,000
$2,000,000 to $2,999,999 $50,000
$3,000,000 to $4,999,999 $75,000
Each $1,000,000 increment thereafter $25,000
These salaries can be adjusted quarterly at the Employee's option. Employee's
Base Salary shall be increased each year by an amount equivalent to fifteen
percent (15%) of the sum of the Employee's Base Salary and Additional Salary for
the immediately preceding year.
3.2 In addition to Basic and Additional Salary, the Employee shall
be entitled to receive such annual or special bonuses as may be granted to him
at the discretion of the Directors.
4. EMPLOYEE BENEFITS:
4.1 Medical Insurance. Employer agrees to include the Employee in
the Employer's comprehensive medical benefit plan to be adopted by the Employer.
The Employee may elect to include under such coverage the Employee's spouse and
dependents.
<PAGE>
4.2 Life Insurance. The Employer agrees to provide the Employee a
universal life insurance policy in the amount of One Million($ 1,000,000)
Dollars. The Employee shall have the option to continue the policy at the
Employee's expense, if the Employee's employment is terminated. The
beneficiaries under such policy shall be selected by the Employee, and ownership
of the policy shall be vested in the Employee. Coverage shall begin with the
first day of the employment term.
4.3 Disability Insurance. In the event that the Employee is unable
to perform his normal work duties for a period of two years, he shall be
considered "disabled" for the purposes of this Agreement. Thereafter, the
Employer shall continue to pay Employee his Basic (and Additional?) Compensation
for a period of two 2 years. Following the expiration of such two (2) year
period the Employee will receive monthly payments of no less than Four Thousand
($4,000.00) Dollars pursuant to a disability insurance policy which will be
maintained by the Employer for the benefit of the Employee.
4.4 Stock Option. The Employer grants to the Employee an option
purchase Ten Million (10,000,000) shares of common stock of the Employer at a
price of One ($.0l) Cent per share, protected against dilution. This option may
be exercised in whole or in part at any time within five (5) years of the date
of this Agreement, but purchases under a partial exercise of this option may
only be made in lots of One Hundred Thousand (100,000) shares or greater. This
option shall be assignable by the Employee, in the event of Employee's death, to
a beneficiary designated in writing by the Employee. If the (Employee)
terminates the employment of the Employee for any reason, the Employee shall
retain the right to exercise any unused portion of this option within the period
which expires five (5) years from the date of this Agreement. Until the Employee
has exercised this option, in whole or in part, and has become the holder of
record of any shares subject to this option, he shall not be treated as a holder
of those shares or have any of the rights of a holder. The shares of common
stock underlying this option are restricted securities and may not be sold or
otherwise transferred by the Employee following the exercise of the option
granted hereby unless such shares have been registered with the U.S. Securities
and Exchange Commission or an appropriate exemption from registration is
available.
<PAGE>
4.5 Vacation Pay and Holidays
a. The Employee shall be entitled to an annual vacation leave of three
(3) weeks at full pay. The time for such vacation shall be selected by the
Employee and approved by the Employer and can be accrued up to twelve (12) weeks
total- in lieu of the vacation leave herein before specified, the Employee may
elect to receive payment for the whole or any portion of the vacation time to
which he is entitled, such vacation time to be valued at the amount of the Basic
Salary earned by the Employee during an equivalent period of time.
b. The Employee shall, in addition, be entitled to holidays on the
following days with full pay, plus any additional holidays granted to other
executive employees: New Year's Day Memorial Day Independence Day Labor Day
Thanksgiving Day Christmas Day One (1) Floating Holiday
4.6 Company Automobile. The Employer will furnish an automobile to
the Employee, together with the normal expenses of operating the same, including
insurance and maintenance costs. The make, model, and cost of such automobile to
be determined by the Board of Directors.
5. REIMBURSEMENT OF EMPLOYEE EXPENSES:
5.1 Business Expenses. The Employer, in accordance with the rules
and regulations that it may issue from time to time, shall reimburse the
Employee for business expenses incurred in the performance of his duties.
<PAGE>
6. PROPERTY RIGHTS:
6.1 Inventions and Patents. The Employee agrees that he will
promptly, from time to time, fully inform and disclose to the Employer all
inventions, designs, improvements, and discoveries which he may hereafter have
during the term of this Agreement which pertain or relate directly to the
products of the Employer or to any experimental work carried on by the Employer,
whether or not conceived during regular working hours. The Employee agrees,
without further consideration, to execute all documents and do all things
necessary to obtain letters patent in order to vest the Employer with full and
exclusive title, to all such inventions, designs, improvements and discoveries
deemed patentable by the Employer and protect the same against infringement by
others.
6.2 Trade Secrets. The Employee during the time of employment
under this Agreement will have access to and become familiar with various trade
secrets, consisting of formulas, patterns, devices, secret inventions, processes
and compilations of information, records and specifications, which are developed
during the term of this Agreement and owned by the Employer and which are
regularly used in the operation of the business of the Employer. The Employee
shall not disclose any of the aforesaid trade secrets, directly or indirectly,
nor use them in any way, during the term of this Agreement or at any time within
one (1) year thereafter, except as required in the course of his employment. All
files, records, documents, drawings, specifications, equipment and similar items
relating to the business of the Employer, whether prepared by the Employee or
otherwise coming into his possession, shall remain the exclusive property of the
Employer and shall not be removed from the premises of the Employer under any
circumstances whatsoever without the prior written consent of the Employer.
6.3 Consent of Non-Competition. During the term of this Agreement
and for one (1) year thereafter, the Employee shall not directly or indirectly,
either as an employee, employer, officer, agent, principal, partner,
stockholder, corporate officer, director or in any other individual or
representative capacity, engage or participate in any business that is in direct
competition in any manner whatsoever with the products of the Employer.
<PAGE>
7. TERMINATION:
7.1 By Employer. If the Employee willfully breaches or habitually
neglects the duties which he is required to perform under the terms of this
Agreement, the Employer may, at Its option, terminate this Agreement by giving
written notice of termination to the Employee without prejudice to any other
remedy to which the Employer may be entitled either at law, in equity or under
this Agreement.
7.2 By Employee, The Employee may, however, terminate this
Agreement upon ninety (90) days written notice to the Employer, in which case,
all of the Ernployer's obligations shall terminate and cease as of the effective
date of said termination. Employee, however, shall be obligated and bound to
honor the covenant contained in Paragraphs 6.2 and 6.3 for a period of one (1)
year.
8. GENERAL PROVISIONS:
8.1 Notices. Any notices to be given thereunder by either party to
the other may be effected either by personal delivery in writing or by mail,
registered or certified, postage prepaid with return receipt requested. Mailed
notices shall be addressed to the parties at the addresses appearing in the
introductory paragraph of this Agreement, but each party may change his address
by written notice in accordance with this paragraph. Notices delivered
personally shall be deemed communicated as of actual receipt- mailed notices
shall be deemed communicated as of ten (10) business days after mailing.
8.2 Inclusion of Entire Agreement Herein. This Agreement
supersedes any and all other Agreements either oral or in writing, between the
parties hereto with respect to the employment of the Employee by the Employer
and contains all of the covenants and agreements between the parties with
respect to such employment in any manner whatsoever.
8.3 Laws Governing Agreement. This Agreement shall be governed by
and construed in accordance with the laws of the State of New Jersey.
8.4 Attorney's Fees and Costs. In any action at law or in equity
is necessary to enforce or interrupt the terms of this Agreement, the prevailing
party shall be entitled to reasonable attorney's fees, costs, and necessary
disbursements in addition to any other relief to which he may be entitled.
8.5 Payment of Moneys Due Deceased Employee. If the Employee dies
prior to the expiration of the term of employment, any moneys that may be due
him from the Employer under this Agreement as of the date of his death shall be
paid to his executors, administrators, heirs, personal representative,
successors and assigns.
<PAGE>
8.6 Necessity of Employer's Written Consent. It is expressly agreed
that the Employee shall have no right or authority to make any contact or
binding promise of any nature on behalf of the Employer, whether oral or
written, without the express written consent of the Board of Directors who may,
however, grant in writing to the Employee, continuing authority to enter into
contracts within such monetary limits and for such purposes and may be
established by the Board from time to time.
IN WITNESS WHEREOF, the parties have executed this Agreement as of the day and
year set forth in the first paragraph of this Agreement above.
ATTEST: COLLECTIBLE CONCEPTS GROUP, INC.
By:______________________________
Paul S. Lipschutz, President
Board Director, Member
By:______________________________
Employee
Board of Director, Member
<PAGE>
Exhibit 10.2
July 31, 1998
Building Q
Licensing/Marketing
Mr. Paul Lipschutz
COLLECTIBLE CONCEPTS GROUP, INC.
P.O. BOX 707
Lambertville, N.J. 08530
Dear Paul:
This letter shall confirm the terms, of the agreement between your company and
Building Q whereby Building Q shall provide services to your company as follows:
1. Commencing August 1, 1998 Building Q shall act as your sole and exclusive
licensing consultant, offering advice, counsel and general assistance concerning
the licensing of your products. Our standard services to you shall include
telephone and written communications with you, seeking out, evaluating and
recommending properties for potential licenses, and, when requested, engaging in
negotiations for licenses. You agree to refer to Building Q any inquiries you
receive with respect to the licensing of your products.
2. The initial term of this agreement shall be for a period of one (1) year
beginning August 1, 1998 and continuing until July 31, 1999. Thereafter, this
agreement shall automatically be extended for an additional term of one (1)
year, and from year to year thereafter, unless either of us gives the other
written notice of termination of this agreement at least sixty (60) days prior
to the end of the then current term, such termination to be effective as of the
end of the then current term.
3. In consideration of the services rendered or to be rendered to you by
Building Q, you shall pay Building Q the following as compensation:
(a) A fee of $30,000 to take Collectible Concepts Group on as a client,
payable in common stock of USAS at the rate of $.0l (one cent per share)
for a total of 3,000,000 shares (legend) of common stock.
<PAGE>
(b) You shall also pay Building Q a commission equal to two (2%) (2.5%
FOB) percent of your company's net sales as defined by the applicable
licensing agreements from shipment of any and all Licensed Products made
under any license(s) or the renewals or extensions of any license(s) for
so long as you are shipping Licensed Products. "Licensed Product" shall
include any product bearing any elements licensed from a third party
where such license was introduced, negotiated, or acquired during the
term of this agreement, or any extensions thereof
Unless you specifically request Buildinig Qs assistance, Building Q is
under no obligation to assist you in securing renewals or extension of
any license(s), and in either case you will be obligated to pay
commissions to Building Q on licenses which are renewed or extended.
4. The commissions due under this agreement shall be paid concurrently with
the rendering of statements to the licensors with respect to Licensed
Products, and in no event less often than thirty (30) days after the end of
each calendar quarter. In the event that such commission payments are not
received by Building Q within thirty (30) days after the rendering of
statements to the licensors, or within thirty (30) days after the end of each
calendar quarter, whichever is sooner, interest thereon will accrue at the
rate of 1.5% per month or a portion thereof until paid. You shall provide
Building Q with true copies of all royalty reports you send to licensors with
respect to Licensed Products at the same time that you send such reports to
the licensors. Building Q shall be entitled to audit your records with respect
to each of your licensed entered into as a result of Building Qs services
after August 1, 1998, upon reasonable notice to you. You shall provide access
to your records and otherwise cooperate with Building Qs auditors in
connection with any audit.
5. You agree to reimburse Building Q for its Federal Express or other
overnight mail service costs, as well as Building Qs reasonable travel
expenses, including but not limited to transportation, food and lodging,
incurred in connection with the services provided hereunder, or performing any
other services reasonably requested by you and/or anyone authorized to act for
you. Building Q agrees to obtain your prior approval for such travel expenses,
and upon completion of the trip(s) shall provide you with vouchers and
receipts for expenses which shall be paid by you within thirty (30) days of
receipt of such vouchers and/or receipts.
<PAGE>
6. The expiration or termination of this agreement or of Building Qs
services under this agreement shall not affect Building Qs continuing right
to receive the compensation due Building Q under this agreement in respect of
licenses acquired before or in effect as of the date of such expiration or
termination and any renewals, extensions, and/or modifications of such
licenses occurring after the date of expiration or termination.
7. You acknowledge and agree that Building Q is an independent contractor and
no employer/employee relationship exists between us by reason of this
agreement. Building Q shall have no power or authority to bind you to any
legal relationship without your prior written approval, nor shall Building Q
be a party or signatory to any of your agreements.
8. You agree to indemnify, defend, hold harmless, release and forever
discharge Building Q and its agents, officers, managers and employees from any
and all losses, costs or damages, including, attorneys fees resulting from any
claims or demands of third parties against Building Q based upon your use of
the services rendered with regard to the subject matter of this agreement.
Building Q agrees to indemnify, defend, hold harmless, release and forever
discharge you, your agents, officers and employees from any and all losses,
costs or damages, including attorneys fees, resulting from any claim or
demands whatsoever from third parties against you resulting in a final
judgment against you, based upon wrongful conduct by Building Q that is beyond
the scope of Building Qs powers, duties and authority herein.
9. Each of the following shall constitute an event of default under this
agreement:
(a) Your failure to pay any monthly installment of the annual
retainer when due;
(b) Your failure to make any commission payments when due;
(c) Your failure to provide Building Q with true copies of the
royalty reports you send to licensors at the same time that
you send such reports to the licensors;
(d) Your refusal to permit Building Q to audit your records, or
your failure or refusal to cooperate with Building Q's
auditors in connection with any such audit; and
<PAGE>
(e) Your failure to perform or comply with any of the other
provisions of this agreement.
Upon the occurrence of any event of default, Building Q may terminate this
agreement on written notice to you, and may exercise all legal or equitable
remedies available to Building Q. In addition, Building Q shall be entitled to
recover from you any attorneys fees it incurs following an event of default.
10. This agreement shall be governed by the laws of the State of New Jersey. Any
actions, claims or suits arising out of or relating to this agreement, or the
breach of this agreement, shall be brought only in, and you consent to the
jurisdiction of, the Courts of the State of New Jersey. Notwithstanding to
foregoing, all claims, disputes and other matters in question arising out of, or
relating to this agreement, or the breach of this agreement, shall, at the sole
election of Building Q, be decided by binding arbitration conducted in Cherry
Hill, New Jersey in accordance with the rules of the American Arbitration
Association. In the event of any arbitration proceedings, the prevailing party
shall be entitled to recover its attorneys fees and costs. A judgment thereon
may be entered and enforced in any court of competent jurisdiction.
11. You acknowledge that Building Q consults with and represents, and will
consult with and continue to represent other companies on similar and different
projects and Building Qs obligation under this agreement in no way preclude such
consultations or representations. You also acknowledge that this is a
consulting/service agreement only and does not guarantee income to you.
12. Nothing contained in this agreement shall require the commission of any
act contrary to any expressed provision of law, or any rule or regulation of
any governmental authority, and if there shall exist any such conflict between
any provision of this agreement and any such applicable provision of law, rule
or regulation, the latter shall prevail. Any provision or provisions of this
agreement which shall be effected thereby, shall be curtailed, limited or
eliminated to the extent necessary to remove such conflict and if so modified,
this agreement shall remain in full force and effect.
13. Notwithstanding anything contained in this agreement to the contrary, this
agreement may be terminated by Building Q in the event that you do not provide
Building Q with copies of the royalty reports, permit an audit of your
records, or pay for services rendered or expenses incurred as set forth above,
within ten (10) days of written demand for the same. In the event of
<PAGE>
termination for these reasons Building Q shall have no further responsibilities
pursuant to this agreement other than to collect for services previously
rendered as set forth above.
14. This agreement constitutes the entire agreement between us. This agreement
may not be modified, amended or changed except with a writing signed by both of
us.
15. This agreement shall be binding upon the parties hereto and their
respective executors, administrators, successors and assigns.
Signed.
BUILDING Q
By . Date:_________________199__
C. Woodrow Browne,Principal
Signed:
By: Date:_________________199__
<PAGE>
Exhibit 10.3
MERCHANDISE LICENSE
Agreement dated as of November 18, 1998 between NEW LINE PRODUCTIONS,
INC. ("New Line") and COLLECTIBLE CONCEPTS GROUP,INC("Licensee").
1. DEFINITIONS.- For the purposes of this agreement, the following terms shall
have the following meanings-
(a) The "Available to Ship Date" means the date upon which New Line
must receive a production sample of the Licensed Articles from Licensee.
(b) "Event of Default" shall have the meaning set forth in paragraph
(c) "Indemnified Parties" shall have the meaning set forth in paragraph
20(b).
(d) "Licensed Articles" means collectible replicas of the following
props: 1:200 scale jumbo jet;
1:200 scale jumbo jet;
: I 8 scale Shaguar (subject to delivery to New Line
of documentation, in form and substance acceptable to New Line,
of prior written confirmation from Jaguar granting lights to
Licensee to create and sell such replica of the Shaguar in
accordance with the terms hereof:
l:18 scale Beetle (subject to delivery to
New Line of documentation, in form and substance acceptable to
New Line, of prior written confirmation from Volkswagen granting
rights to Licensee to Create and sell such replica of the Beetle
in accordance with the terms hereof):
1:8 scale Austin's cryogenic capsule; 1 1
scale replicas of: Dr. Evil's ring, male
symbol and female symbol (each of this
category of Licensed Articles shall be
available in base metal, sterling silver and
platinum); 12" x 16" limited edition tin
signs: and Austin Powers' pistol.
The Licensed Articles shall be priced and marketed as
limited edition collectibles.
<PAGE>
(e) The "Marketing Date" is the date by which Licensee must commence
advertising and marketing of the Licensed Articles.
(f) The "Materials" shall have the meaning set forth in paragraph 9.
(g) "Gross Sales" means Licensee's invoice price multiplied by the
number of units of such products sold, shipped, or distributed by Licensee or
its
affiliates, less actual returns (but in no event shall the amount of returns
exceed five percent [5%] of Gross Sales).
(h) The "Picture" is the motion picture entitled "Austin Powers:
International Man of Mystery,"
(i) The "Property" means the title of the Picture, the artwork title
and logo, if any, of the Picture, and the fictional names and approved visual
likeness of the following characters from the Picture: Austin Powers, Dr. Evil,
(j) The "Sequel" means the possible first theatrical sequel,
tentatively entitled "Austin Powers: The Spy Who Shagged Me," to be based upon
the Picture. Nothing herein shall be deemed to obligate New Line to develop,
produce, or distribute the Sequel.
(k) The "Sequel Property" means the title of the Sequel, the artwork
title and logo of the Sequel, and the fictional names and approved likenesses of
the following characters from the Sequel, Austin Powers, Dr. Evil.
(l) The "Term" means the period of time for which the license is
granted pursuant to this agreement.
(m) The "Territory" means the United States and Canada.
<PAGE>
2. LICENSE AND RIGHTS
(a) New Line hereby grants to Licensee a license to utilize the
Property and the Sequel Property solely in connection with the manufacture, sale
arid distribution of the Licensed Articles in the Territory during the Term. The
license is granted on a non-exclusive basis. The right to use the approved
likenesses and voice of actors is granted only to the extent of New Line's
ownership or control thereof. and then only as specifically depicted in and as
part of the Property and/or the Sequel Property. The license granted by New Line
to Licensee hereunder to utilize the Sequel Property in connection with the
Licensed Articles is conditioned upon New Line developing and producing the
Sequel, and Now Line distributing the Sequel within the Territory during the
Term; however, nothing contained herein shall be deemed to obligate New Line to
develop, produce or distribute the Sequel. Notwithstanding anything contained
herein to the contrary, the license granted to Licensee with respect to the 1:1
8 scale Shequar and 1:33 scale VW Beetle categories of the Licensed Articles is
conditioned upon delivery to New Line of documentation, in form and substance
acceptable to Now Line, of prior written confirmation from Jaguar and Volkswagen
granting rights to Licensee to create and sell such replicas of the Shaguar and
VW Beetle, respectively, in accordance with the terms hereof.
(b) No rights are granted to use the name or biographical data of any
person appearing in the Picture and/or the Sequel.
(c) DirectResponse/DirectMail/Publicity/Premium/Proional Arrangements:
Notwithstanding the foregoing, New Line reserves the exclusive right to utilize
the Licensed Articles in connection with any combination sale or premium,
giveaway, promotional tie-in arrangement, fan club, charitable and/or
fundraising activity, and direct response or direct-mail sale. Licensee agrees
to sell to New Line, if requested, such quantities of the Licensed Articles at
as low a rate and on a good terms as Licensee sells similar quantities of the
Licensed Articles to the general trade.
(d) Limitations: Other than the right to exploit the Licensed Articles
utilizing the Property and/or the Sequel Property In accordance with the terms
and conditions hereof, Licensee shall have no rights in or to the Property or
the Sequel Property; no right to use the name and likeness of any individual who
rendered services in connection with the Property or the Sequel Property unless
expressly approved in writing by the New Line; and no right to use clips or
excerpts of the Property or the Sequel Property.
<PAGE>
(e) No Assignment or Sublicense: Licensee may not assign, sublicense or
otherwise transfer all or any of the rights granted hereunder, provided.
however, that Licensee may have Licensed Articles manufactured for Licensee by a
third party, provided that Licensee has obtained the prior written approval of
New Line in each instance.
(f) All rights not specifically licensed hereunder are reserved
exclusively to New Line including, without limitation, all rights outside of the
Territory and beyond the Term and all rights in all products, services and
articles which are not Licensed Articles throughout the world in perpetuity.
(g) Notwithstanding anything contained herein to the contrary, in the
event that Licensee fails to perform its obligations hereunder, including, but
not limited to, meeting the Marketing Date or the Available to Ship Date, with
respect to the Property, Now Line, in its sole discretion, may immediately
terminate the rights granted to Licensee hereunder with respect to the Sequel
Property.
(h) Distribution: Licensee is granted the right to distribute the
Licensed Articles only through the following distribution channels (i) direct
marketing in connection with the Austin Powers Collectors Club (a direct
response marketing program designed only to offer the Licensed Articles); (ii)
QVC and HSN: (iii) retail catalog; and (iv) specialty, gift and department
stores,
3. TERM: The Term shall commence upon the signing of this agreement and shall
continue until December 31, 2001 unless sooner terminated as provided herein.
4. ROYALTY: Licensee shall pay New Line a royalty in an amount equal to ten
percent (10%) of the Gross Sales. In no event shall there be any deduction from
Gross Sales for any costs or expenses whatsoever. or from uncollectable accounts
or advertising allowances. Licensee shall pay, and hold New Line forever
harmless from, all taxes, customs, duties, levies, imposts or similar charges
now or hereafter imposed or based upon the manufacture, delivery, license, sale,
possession or use hereunder to or by Licensee of the Licensed Articles
(including, but not limited to. sales, use, inventory, income and value added
taxes on sales of the Licensed Articles), which charges shall not be deducted
from New Line's royalties.
<PAGE>
5. ADVANCE: Licensee agrees to pay a nonrefundable advance of Thirty Thousand
Dollars ($30,000) to New Line as follows: (i) Ten Thousand Dollars ($10,000)
upon the earlier of signature of this agreement by Licensee or the initial
shipment of the Licensed Articles; and (ii) Twenty Thousand Dollars ($20,000) on
Or before the initial U.S. theatrical release of the Sequel, if any. The advance
may be applied against royalties derived from sales of Licensed Articles in the
Territory.
6. GUARANTEE: Licensee guarantees that the minimum aggregate amount of royalties
paid to New Line during the Term (including the advance) shall be One Hundred
Thousand Dollars ($100,000). Licensee shall pay an amount equal to that portion
of the guarantee not previously paid pursuant to paragraphs 4 and 5 above not
later than ninety (90) days prior to the expiration of the Term.
7A. MARKETING DATE: The Marketing Date for the Licensed Articles is February 1,
1999 - New Line shall have the right upon written notice to Licensee to
terminate the rights granted to Licensee hereunder if Licensee shall fall for a
period of sixty (60) consecutive days to continue to engage in active marketing
and sales efforts regarding the Licensed Articles.
7. AVAILABLE TO SHIP DATE: The Available to Ship Date for Licensed Articles is
May 1, 1999.
8. EXPLOITATION BY LICENSEE:
(a) General Provisions: Licensee shall, during the Term, manufacture
and sell the Licensed Articles throughout the territory in quantities and
assortments sufficient to meet the public demand for the Licensed Articles and
at the prices customarily charged by Licensee similar type class and category.
Licensee shall not sell on an approval, consignment, or so-called "sale or
return" basis. Licensee's exploitation of the Licensed Articles shall be carried
out in a manner consistent with high standards of manufacture, distribution and
salesmanship as recognized in the merchandising of first-class merchandise based
upon first-class entertainment products, Licensee shall not exploit the Licensed
Articles in any manner which may in any way derogate or reflect adversely upon
the Property or the Sequel Property, New Line's trademarks, or New Line. If
Licensee sells any Licensed Articles at a special price, directly or indirectly,
to itself or its affiliate for ultimate sale to unrelated third parties or
otherwise, Licensee shall pay royalties with respect to such sales based upon
the price customarily charged the general trade by Licensee. Royalties shall be
payable hereunder on 'unbilled' goods, except for a reasonable number of samples
which may be given away in the normal course of business.
<PAGE>
(b) Hand Tags: At Licensee's sole cost, Licensee shall attach a
designated, branded property printed hang tag to each of Licensed Article and
insert a designated branded property woven label Into each Licensed Article, the
design of which hang tags and labels shall be determined by New'Line. Licensee
shall order such hang tags and labels from either a manufacturer specified by
New Line, or, if approved in writing by New Line, an alternate manufacturer
specified by Licensee.
9. "MATERIALS": New Line will make available to Licensee photographic materials
and artwork presently available to New Line with respect to the Property or the
Sequel Property ("Materials") in such quantities as New Line deems appropriate.
If Licensee requests or requires new or additional Materials, then all costs of
such new or additional Materials shall be borne by Licensee, and paid when and
as billed. All Materials, including, without limitation, all Copyrights and
trademarks used thereon, shall remain the sole property of New Line.
10. APPROVALS/QUALITY OF MERCHANDISE/WARRANTIES OF LICENSEE:
(a) Approvals: Licensee shall submit to New Line for its written
approval prior to each stage of manufacture, distribution and sale thereof, all
prototypes, in all stages of development. of each of the Licensed Articles and
of all artwork, literary text, instructions. packaging, labels, advertising,
promotional and display material and all other devices to be used in connection
with the Licensed Articles. Such approval may be granted or withheld as New Line
in its sole discretion may determine. If New Line has not responded to
Licensee's request for an approval within two (2) weeks after New Line's receipt
of a written demand for it, approval shall be deemed to not have been given. In
no event shall Licensee exploit or use, in any matter or for any purpose, any
prototypes or materials not previously approved in writing by New Line. After
prototypes and materials have been approved pursuant to this paragraph, Licensee
shall not depart therefrom without the prior written approval of New Line.
<PAGE>
(b) Inspection: Licensee agrees to cause New Line to be permitted to
enter the premises where the Licensed Articles are manufactured or stored, and
to provide New Line with such information as it may request from time to time,
to determine whether the Licensed Articles are manufactured, packaged, labeled
and shipped in full compliance herewith.
(b) Samples: Upon the commencement of distribution of each Licensed
Article, Licensee shall furnish and ship free of charge, thirty-six (35) samples
of such Licensed Article, Including all packaging materials, and fifteen (15)
samples of all advertising, promotional and display material involved or related
to such Licensed Article, to New Line, Licensee to provide New Line with "print
advertising qualm color transparencies of their Licensed Articles within fifteen
(15) days after New Line receives approved production samples, said production
samples to be sent to New Line no later than one week after production has
begun,
(d) Warranties: Licensee represents, warrants and agrees that (i) each
Licensed Article shall be merchantable, (ii) no Licensed Articles shall deviate
in any manner from the prototype approved for sale by New Line pursuant to
paragraph 10(a) above; (iii) the Licensed Articles will be exploited in
accordance with all applicable foreign, national, state and local laws,
treaties, rules and regulations: and (iv) each Licensed Article shall be safe
for public use and/or consumption, and shall be free of any defect which could
result in injury to persons using and/or consuming such Licensed Article.
11. ASSIGNMENT OF RIGHTS: Licensee hereby assigns and transfers to New Line, all
of Licensee's right, title and interest, throughout the world in perpetuity, in
all copyrights and goodwill in and to the Licensed Articles, artwork, literary
text, Instructions, cartons, containers, packing and wrapping materials, tags,
labels, devices, advertising, promotional and display materials created by or
through or arising out of Licensee's use of the Property or the Sequel Property.
Upon the request of New Line, Licensee shall sign and deliver to New Line
documentation in form and substance satisfactory to New Line confirming and
effecting the foregoing,
<PAGE>
12. TRADEMARK AND COPYRIGHT: The license granted hereunder is conditioned is
conditioned upon Licensee's strict compliance with the provisions of this notice
provisions of copyright and trademark law of the United States and of each
specific country in the Territory within which the Licensed Article will be
distributed.
(a) Notices: Licensee agrees that trademarks, copyrights and notices
pertaining thereto shall be displayed only in such form and manner as shall be
required and/or specifically approved in advance in writing by Now Line. The
following legends are hereby approved by New Line and shall appear clearly
visibly and recognizably at least once on all Licensed Articles and on all
artwork, literary text, instructions, packaging, labels, advertising,
promotional and display materials used in connection with each Licensed Article.
(1) Copyright Notice:
"(C)[year of shipping] New Line Productions, Inc. All Rights
Reserved."
(2) Trademark Designation:
"Austin Powers: "International Man of Mystery"(TM) New Line
Productions, Inc, All Rights Reserved."
"Austin powers: "The Spy Who Shagged Me"(TM)New Line Productions, Inc.
All Rights Reserved."
The symbol shall also be placed in close proximity to each applicable
trademark.
<PAGE>
(3) Use of Registered Trademark Designations:The word "Registered" or the
symbol(R) shall be utilized in the legend set forth in paragraph 12(a)2 in lieu
of the symbol "(TM)" at such time that New Line has notified Licensee that such
use is legally permitted in the Territory. Licensee further agrees to regularly
inform all persons and entities to whom Licensee distributes the Licensed
Articles as to the appropriate notices and legends required to be used in
connection with the advertising. promotion. display and sale of the Licensed
Articles.
(b) Licensee Cooperation: Concurrently with the termination or
expiration of this, agreement, Licensee will be deemed to have assigned to New
Line all trade rights, equities, good will, titles, or other rights in and to
the Property and/or the Sequel Property which may have been or will be obtained
by or vested in Licensee and Licensee will sign and deliver to New Line
documentation in form and substance satisfactory to New Line to accomplish or
confirm the foregoing, If Licensee fails to promptly sign and deliver said
documentation, New Line shall have the right to execute such documentation as
Licensee's attorney-in-fact, such right constituting a power coupled with an
interest with rights of substitution and delegation and shall be irrevocable.
Any such assignment, transfer or conveyance by Licensee to New Line shall be
without consideration other than the mutual covenants and consideration
contained in this agreement.
(c) Copyright in Ancillary Matrials: Licensee shall ensure that the
copyright and all rights in all materials created in connection with the
exploitation by Licensee of the rights granted to Licensee in this agreement
shall be owned by and in the name of New Line. Accordingly, Licensee undertakes
that all persons or entities creating such material shall sign written documents
sufficient to transfer the copyright and all fights in all such materials
directly to New Line- Copies of such documents shall promptly be forwarded by
Licensee to New Line.
(d) Protection of Copyriqhts, Tradenames and Good Will: (i) Licensee
agrees to promptly notify New Line of any actual or suspected infringements of
the Property and/or the Sequel Property or Licensed Articles which may come to
the attention of Licensee and to assist New Line, as and to the extent New Line
may request, to protect and enforce any of New Line's rights to the Property or
the Sequel Property.
<PAGE>
(ii) Licensee shall not undertake or permit any copying, duplication,
reproduction or other exploitation of the property or the Sequel property (or
any portion or element thereof) except as expressly authorized hereunder.
(iii) Licensee shall not commingle on Licensed Articles(manufactured
hereunder (or in the advertising or promotion thereof) names, characters and/or
likenesses from any individual motion picture or television program which are
included in the Property or the Sequel Property with those associated with any
other motion picture or television program without New Line's prior written
(iv) New Line may, but shall not be required to bring suits in its own
name or in the name of Licensee or join Licensee as a party thereto. Licensee
shall not institute any suit or take any action on account of any such
infringements without first obtaining the prior written consent of New Line to
do so. With respect to all of such suits, Licensee shall not have the right to
agree to any settlement thereof without the prior written consent of Now Line,
and New Line shall have the sole right to determine whether or not to appeal the
decision or verdict of any court.
13. LIABILITY INSURANCE:
(a) Insurance Coverages: Licensee shall obtain and maintain throughout
the Term at its sole cost and expense, a commercial general liability insurance
policy (including coverage for contractual liability (applying to the terms and
conditions of this agreement), product liability, personal injury liability and
advertisers liability), in a form approved by New Line, from a qualified
insurance company approved by New Line naming as additional named insureds New
Line, and each and all of the Indemnified Parties. The amount of coverage shall
be a minimum of Five Million Dollars ($5,000,000) per occurrence for bodily
injury and Five Million Dollars($5,000,000) for property damage, and any "other
insurance" or similar provision which would have the effect of making such
insurance not the primary insurance with respect to such coverage shall be
deleted. In no event shall Licensee exploit any Licensed Article prior to
receipt by New Line of evidence satisfactory to New Line that such insurance is
in force (copies of fully paid certificates of insurance naming New Line as an
insured party shall constitute satisfactory evidence of such insurance).
<PAGE>
(b) Release: Licensee hereby releases New Line and the Indemnified
Parties from all liability and responsibility for any and all liabilities
losses, costs. expenses (including attorney's fees and disbursements), damages,
claims, demands, causes of action and judgments resulting from or in connection
With any defects or failure to perform with respect to which insurance is
required to be carried by Licensee pursuant to paragraph 13(a). Said release
shall also apply to any claims under or through Licensee as a result of any
asserted right of subrogation.
14. STATEMENTS AND PAYMENTS:
(a) Statements: Thirty days after each calendar quarter following the
initial shipment by Licensee of any Licensed Article hereunder, Licensee shall
deliver to New Line statements certified to be complete and accurate by the
President or the Chief Financial Officer of Licensee setting forth separately
for each country within the Territory and for each type, class and category of
Licensed Articles, the number of Licensed Articles shipped, a description of
such Licensed Articles and the Gross Sales therefor.
(b) Payment of Royalty/Advance: All royalties payable to New Line
hereunder with respect to activity occurring during any calendar quarter shall
be due and must be paid to New Line with the statement rendered pursuant to
paragraph 14(a).
(c) No Waiver: The receipt or acceptance by New Line of any of the
statements furnished pursuant to this agreement or of any royalties paid
hereunder shall not preclude New Line from questioning the correctness thereof
at any time. and in the event that any inconsistencies mistakes or errors are
discovered in the statements or payments, they shall be immediately rectified
and the appropriate payment made by Licensee to New Line.
<PAGE>
15. INSPECTION AUDIT: Licensee agrees to keep complete. accurate and orderly
books of account and records at its principal place of business covering all
transactions relating to the rights granted hereunder, New Line's duly
authorized representatives shall have the right to examine and to make copies
and extracts of said books of account and records, Upon demand by New Line,
Licensee shall at its own expense furnish to New Line a detailed statement by an
independent certified public accountant approved by New Line showing pricing
information, the number and description of the Licensed Articles shipped and/or
sold by Licensee up to the date of New Line's demand, and any other pertinent
information New Line may request. It any audit conducted by New Line's
representative discloses that Licensee owes royalties to New Line in excess of
five percent (5%), the cost of the examination and collection shall be borne by
Licensee. If Licensee prohibits, interferes with or delays the entry of New Line
of New Lines duly authorized representative onto Licensee's premises pursuant to
the foregoing, then, in addition to any and all other remedies that New Line may
have hereunder or at law or in equity, New Line shall have the night if such
conduct has not been cured within one (1) week after Licensee's receipt of
written demand by New Line to treat the same as an Event of Default.
16. EVENTS OF DEFAULT TERMINATION:
(a) Event of Default: The occurrence of any one or more of the
following events shall constitute an "Event of Default" by Licensee hereunder:
(i) Any breach, violation or failure to perform by Licensee of any of Licensee's
material obligations under this agreement, (ii) any material breach or
inaccuracy of any representation or warranty by Licensee contained in or made in
connection with this agreement; (iii) the occurrence of any material default
under any other document entered into by Licensee with New Line or executed
pursuant thereto and (iv) any event designated as an Event of Default elsewhere
in this agreement.
(b) Statements and Certificates: If Licensee has failed to send any
statement or certification or to make any payment required under this agreement
and has not remedied such failure within five (5) business days after its
receipt of a written demand to do so then such failure shall be an Event of
Default.
<PAGE>
(c) Right of Termination: If any Event of Default shall occur, New Line
shall have the right, at is sole discretion (and in addition to any and all
other rights and remedies of New Line), at no cost or expense to New Line, by
transmission of written notice to Licensee, to (i) immediately terminate this
agreement', (ii) immediately terminate that portion of this agreement applicable
to any one or more Licensed Article or type, class or category thereof', and at
the further option of New Line, and (iii) to terminate any other agreement,
instrument or document entered into with New Line or executed pursuant hereto.
(d) Bankruptcy: If Licensee files or suffers a petition in bankruptcy
which is not discharged within sixty (60) days of its filing, or if Licensee
becomes insolvent or makes an assignment for the benefit of its creditors, or if
Licensee discontinues its business, or suspends active operations or any
substantial part thereof, or it a receiver is appointed for Licensee or its
business, then notwithstanding anything to the contrary contained in this
paragraph 16(d), to the extent permitted by law, the license hereby granted
shall automatically and immediately terminate without any notice whatsoever and
at no cost or expense to New Line. Should this license be so terminated.
Licensee, its administrators and successors, shall have no right to exploit or
in any way deal with any Licensed Articles and any other copyrighted materials,
except with and under the special prior written consent and written instructions
of New Line which Licensee or such other parties shall be obligated to follow.
That portion of Gross Sales payable to New Line as its royalty in connection
therewith shall be received by Licensee, its administrator and successors in
trust for, and paid upon receipt to, New Line.
17. EFFECT OF TERMINATION: Upon and after the expiration or earlier termination
of the Term (except as expressly provided in paragraph 18(b), all rights granted
to Licensee hereunder shall automatically and immediately revert to New Line,
and Licensee shall have no further right to exploit or any way deal with any
Licensed Articles or related materials. Immediately upon the expiration or
earlier termination of this agreement, Licensee shall at New Line's election
either (i) turn over to New Line all molds, printing plates, artwork, films,
silk-screens, and any and all other materials which reproduce or were used in
the design and exploitation of the Licensed Articles or the Property or the
Sequel Property, or (ii) provide, evidence satisfactory to New Line of their
destruction. In the event of any termination of this agreement by New Line,
Licensee shall not be relieved or released from any of its obligations existing
prior to such termination.
<PAGE>
18. INVENTORY UPON TERMINATIN OR EXPIRATION:
(a) lnventory Statement: Licensee shall furnish to New Line, not less
than sixty (60) days before the expiration of the Term. and not more than five
(5) days after receipt of a notice of termination, a statement showing the
number and description after of Licensed Articles held by or for Licensee or in
process of manufacture. New Line shall have the right to enter all premises
where the Licensed Articles are located to take a physical inventory to verify
such statement, and any refusal by Licensee to submit to such physical inventory
shall forfeit any rights Licensee may have to dispose of such Licensed Articles.
(b) Sell-Off: Concurrently with the delivery to New Line of the
inventory statement provided in paragraph 18(a) above, Licensee shall deliver to
New Line in writing Licensee's offer to sell all of Licensee's inventory of
finished and unfinished Licensed Articles to New Line at Licensee's direct
manufacturing costs thereof. If New Line does not accept such offer within
fifteen (15) days of receipt then, provided the license has not been terminated
for an Event of Default, Licensee may, on a non-exclusive basis, sell the
Licensed Articles which are on hand or in process at the expiration date or at
the time notice of terr6ination is received, for a period of sixty (60) days
following expiration or termination, at produces and terms no more favorable to
any third party than those offered to New Line. Royalties with respect to such
sale of the Licensed Articles during such sixty (60) day period shall be paid
and monthly statements shall be furnished for such sixty (60) day period, all
remaining Licensed Articles shall be destroyed, and a sworn certificate of
destruction shall be furnished by Licensee to New Line executed by the President
or the Chief Financial Officer of Licensee.
(c) Restriction on Sell-Off: Notwithstanding anything to the contrary
contained in this agreement, Licensee shall have no right to exploit any
Licensed Article after the termination of this agreement if such termination Is
based on an Event of Default. In such event, if New Line has not accepted
Licensee's offer pursuant to the first sentence of paragraph 1 B(b) above within
fifteen (15) days of receipt, the remaining Licensed Articles shall be
destroyed and a sworn certificate of destruction shall be furnished by Licensee
to New Line executed by the President or the Chief Financial Officer of
Licensee.
<PAGE>
19. NEW LINE'S REPRESENTATIONS AND WARRANTIES: New Line represents and warrants
that New Line has the right to license the Property and the Sequel Property to
Licensee in accordance with the terms and provisions of this agreement. New Line
makes no representation or warranty: (1) as to the amount of Gross Sales or any
profits Licensee will derive from the rights licensed hereunder: (2) that New
Line will obtain other licenses to merchandise, manufacture or distribute goods
or wares utilizing the Property and/or the Sequel property; or (3) that New Line
will not modify the Property or the Sequel Property or Change any
characteristics thereof,
20. INDEMNIFICATIONS: -
(a) By New Line: New Line Shall indemnity, defend and hold harmless
Licensee against any breach by New Line of any warranty or representation made
by New Line. Licensee shall give New Line prompt written notice of any such
claim or suit. New Line shall have the - option to undertake and conduct the
defense of any such suit so asserted or brought.
(b) By Licensee: Licensee shall indemnify and hold harmless New Line,
Time Warner. Turner Broadcasting Systems, Inc. and each of their successors
assigns, parents, subsidiaries, affiliates and co-venturers and all other
parties associated with the Property and/or the Sequel Property, and their
respective directors, officers, employees and agents ('Indemnified Parties')
from and against all losses, costs, expenses (including attorneys' fees),
damages, liabilities, claims, demands, causes of action and judgments that any
of the Indemnified Parties may incur or suffer arising out of or in connection
with or as a result of any breach by Licensee of any of Licensee's
representations, warranties or obligations contained in this agreement, any
unauthorized exploitation of the Property or the Sequel Property. any defect in
or use by any person or entity of any Licensed Article. any defamation or
invasion of the right of privacy, publicity or other personal or property right
any breach of any confidentiality or trade secret provision or agreement, any
use of any patent, process, method or device, or any infringement of any
copyright or trademark not licensed hereunder by New Line. New Line shall have
the fight to defend any such action or proceeding with attorneys of its own
selection at Licensee's cost and expense.
<PAGE>
21. REMEDIES:
(a) Failure to Cease Exploitation: Licensee acknowledges that its
failure (except as otherwise specifically provided herein) to cease the
exploitation of the Licensed Articles in any type, class or category thereof at
the earlier of termination or expiration of this agreement will result in
immediate and irreparable damage to New Line and to the rights of any other
licensees. Licensee further acknowledges and admits that there is no adequate
remedy at law for such failure and Licensee therefore hereby voluntarily and
knowingly stipulates and agrees that in the event of any such failure, New Line
shall be entitled to seek injunctive relief and other equitable remedies as well
as costs and attorney's fees.
(b) No Waiver by New Line: Resort to any remedies referred to in this
agreement shall not be construed as a waiver of any other rights and remedies to
which New Line is entitled at law, in equity or otherwise and all such remedies
shall be cumulative and non-exclusive. New Line shall be entitled to attorney's
fees and all auditing fees and expenses incurred in the enforcement of the
provisions of this agreement.
(c) Licensee's remedies for any breach of this agreement or of any
representation or warranty made by New Line are limited to money damages.
Licensee waives any right it may have to enjoin or interfere with any use by New
Line, its licensees or assigns of the Picture or the Sequel, the Property or the
Sequel Property.
22. JURISDICTION AND VENUE: Disputes arising out of or relating to this
agreement or the breach or alleged breach of this agreement may be resolved in
the city, state or federal courts located in the city and state of New York or
any other court having jurisdiction. The parties hereto hereby submit to the
jurisdiction and venue of the city, state and federal courts located in New
York, New York, and agree that service may be made by registered mail, return
receipt requested mailed from the United States, such service shall be deemed
personal service and shall be deemed to have been made on the date which is one
(1) week after the mailing thereof.
<PAGE>
23. COPYRIGHT: The entire copyright in all artwork and other literary and
artistic material created by or pursuant to the authority of Licensee in
connection with this agreement and the rights granted under it shall be owned by
and is hereby assigned to New Line throughout the world in perpetuity. Licensee
shall execute or cause to be executed such documents as are reasonably requested
by New Line to evidence its copyright ownership.
24. NOTICES: All notices required or desired to be transmitted hereunder shall
be in writing and shall be transmitted by registered or certified mail (postage
prepaid and return receipt requested), courier, messenger, or telecopier to the
following addresses:
LICENSEE NEW LINE
-------- --------
Collectible Concepts Group, Inc New Line Productions, Inc.
1600 Lower State Road 888 Seventh Avenue
Chalfont* PA 16914 New York, NY 10106
Attn: Paul Lipschutz Attn: David Imhoff
President Executive Vice-President
Worldwide Licensing &
Merchandising
Fax#: (215) 491-1079 Fax#: (212) 956-1941
With a copy to:
New Line Productions, Inc.
888 Seventh Avenue
New York, New York 10106
Attn: Benjamin Zinkin
Sr. Executive Vice
President,
Business & Legal Affairs
(212)956-1931
and:
New Line Productions, Inc.
888 Seventh Avenue
New York. New York 10106
Attn: Director. Royalty Accounting
Fax:(212)956-1938
<PAGE>
25. CONFIIDENTIALITY: Licensee shall not directly or indirectly disclose to the
public or to the trade any of the terms of this agreement without the prior
written consent of New Line.
26. NO JOINT VENTURE: Nothing herein contained shall be construed to place the
parties in relationship of partner or joint venturers nor constitute any party
the agent of any other party. Licensee shall have no power to obligate or bind
New Line in any manner whatsoever.
27. BLOCKED FUNDS: If by any reason of the laws of any country, Licensee's
receipts from the sale of the Licensed Articles are frozen or not remittable to
the United States, Licensee shall promptly notify New Line. Under such
circumstances, and to the extent permitted by the laws of such country, Licensee
shall make such disposition of such part of said payment to which New Line would
be notified hereunder if the funds were transmitted and paid in the United
States in accordance with the terms hereof as New Line may direct, including
deposit in or payment to any bank, trust company or other person in the
particular territory for the account of New Line or otherwise, Such disposition
shall discharge Licensee of its obligations to make any further payment or to
take any further action in respect of the funds so disposed,
<PAGE>
28. MISCELLANEOUS:
(a) Entire Agreement: This agreement sets forth the entire agreement
and understanding of the parties with respect to the subject matter hereof and
supersedes all prior agreements, arrangements and undertakings relating to the
subject matter hereof. No representation has been made which is not set forth
above.
(b) Amendments: This agreement may be amended or modified only by
written instrument executed by each party hereto.
(c) Governing Law: This agreement, its validity, construction and
effect shall be governed and construed under the laws of the State of New York
applicable to agreements entered into and wholly to be performed in the State of
New York.
By signing in the spaces provided below, the parties hereto have agreed to all
of the terms and conditions of this agreement.
COLLECTIBLE CONCEPTS GROUP,INC NEW LINE PRODUCTIONS, INC.
BY:______________________ BY:____________________
Its:_____________________ Its:___________________
<PAGE>
Exhibit 10.4
Royalty Agreement
This agreement is entered into this 1st day of Oct. 1999, by and between Galera
Industries Inc.("Association") and Collectible Concepts Group (Company) agrees
as follow.
1. Grant of License. Association grants Company the right to use, during the
term and on the conditions set forth in this Agreement, the names, symbols,
trademarks and trade names as set forth on Schedule A attached hereto and
incorporated herein by reference ("Name").
2. Term. This agreement shall continue for a period of 1 year (one) year from
the effective date of this agreement, and shall be automatically renewed for
1 year (one) additional year terms, unless at least 60 days before the
expiration of year term, either party gives to the other party notice in
writing of termination at the end of such term.
3. Scope. Company shall only use the Name for outposts of marketing,
distributing, advertising or other commercial purposes with respect to the
products, area or purposes set forth on Exhibit A attached hereto and
incorporated herein by reference. The license shall be exclusive for the
period of this contract.
4 Royalty. The royalty to be paid to Association by Company for use of the name
shall be as follows: 2% of gross sales. The royalty shall be payable within
15 days from end of month for paid sales the previous month.
5 Company's Duties. Company shall use the Name only for the purposes authorized
in this Agreement Company's use of the Name shall conform to the highest
industry standards and shall be used in a fashion to preserve the inherent
value intrinsic in the Name.
6. Termination. This Agreement shall terminate upon the earliest of the
following:
a. Expiration of the term of this Agreement as set forth in paragraph 2.
b. The mutual written agreement of the parties.
7. Relationship of Parties. Nothing in this Agreement shall be deemed to
constitute a joint venture, partnership, employment or other legal
relationship other than that of licensor and license.
8. Trade Secrets Confidentiality. Both Company and Association may share
privileged and confidential information with the other party during the term
of the Agreement. Any information that is intended to remain confidential
shall be clearly marked. The recipient shall only distribute such information
to those with a "need to know" and shall ensure that all employees or agents
maintain the confidentiality of the information received.
<PAGE>
9. Appropriate Insurance Licensing. The Company warrants and represents that it
is and will be licensed in each and every state or jurisdiction in which it
performs services pursuant to the insurance codes of the various states in
which such license is required. The Company further warrants and represents
that it will comply with all applicable rules, licensing requirements, and
other requirements of every jurisdiction in which it operates.
10. Indemnification.
10.1 Company's Indemnification. Company shall indemnify, defend and hold
harmless Association from any and all damages, claims, suits, or cost
relating to Company's product services, or activities, breach of this
Agreement and use or misuse of Name.
10.2 Cessation. Upon termination of this Agreement, Company shall immediately
cease to use the Name and shall deliver all copies of any sales material
using Name to Association or destroy it as Association shall direct.
10.3 Entire agreement. This document constitutes the. entire agreement between
the parties, all oral agreements begin merged herein, and supersedes all
prior representation.
10.2 Cumulative Remedies. No remedy or election hereunder shall be deemed
exclusive but shall whenever possible be cumulative with all other
remedies at law or in equity.
IN WITNESS WHEREOF the parties have signed this agreement on the date
first written.
___________________________________
For Collectible Concepts Group, Inc.
___________________________
For Galera Industries, Inc.
Schedule A
- ----------
Use of the image(s) of Galena's pistol, The .45 Longslide as a replica model for
production of limited edition cast replicas of the pistol. Product(s) to be
marketed internationally in any market CCGR deems financially feasible Also use
of the image in various media for Advertising purposes.
<PAGE>
Exhibit 10.5
June 28, 1999
COLLLECTIBLE CONCEPTS GROUP
1600 Lower State Road
Chalfont, PA 18914
Re: TERMINATOR
Gentlemen:
The following will confirm our agreement ("Agreement") pursuant to which
CREATIVE LICENSING CORPORATION, 2551 South Bundy Drive, Los Angeles,
California 90064 ("Licensor") grants COLLECTIBLE CONCEPTS GROUP, 1600 Lower
State Road, Chalfont, Pennsylvania ("Licensee") the exclusive right, license
and privilege of utilizing the Property (as defined below) which Licensor
represents through an agreement with CANAL+ (US), on behalf of CANAL+ DA, 301
North Canon Drive, Beverly Hills, California 90210 ("Canal+") solely in
connection with the manufacture, sale and distribution of the Licensed
Articles (as defined below) upon the following terms and conditions.
1. PROPERTY: The name, artwork, stories, characters, approved likenesses of
actors and logo for the motion picture THE TERMINATOR.
2. LICENSED ARTICLES* The Licensed Articles are:
Collectibles - Gun (solid barrel permanently attached to the
wall mount) Coin Set/Silver, Coin Set/Gold; Coin Set/Platinum;
Ceramic Mug; Sunglasses with Case; Leather Bound Script;
Collector's Club Membership; Metal Notebook' Club Premiums
All Licensed Articles shall be of high standard and shall be distributed via
direct marketing (QVC, HSN) and retail (catalogs, specialty, gift stores,
department stores).and Internet 4
3. TERM: The Term shall commence on the date hereof and continue until December
31, 2001.
4. TERRITORY: The Territory is worldwide. The Licensee agrees that it will not
make, nor authorize any use, direct or indirect, of the Property in any other
area, and that it will not knowingly sell Licensed Articles to persons who
intend or are likely to resell them in any other area.
5. MARKETING: Licensee agrees to offer for sale the Licensed Articles on or
before March 31, 2000. Licensee shall be responsible for manufacturing and
shipping sufficient amounts of the Licensed Articles to reasonably meet the
demands of the marketplace.
<PAGE>
6. ROYALTY: Licensee agrees to pay Licensor a Royalty of Ten Percent (10%) of
one hundred percent(100%) of gross sales,
7. ADVANCE: The non-returnable Advance which Licensee agrees to pay Licensor is
Seven Thousand, Five Hundred Dollars ($7,500.00) payable Three Thousand, Seven
Hundred and Fifty Dollars ($3,750.00) upon signing of this Agreement by Licensee
and Three Thousand, Seven Hundred and Fifty Dollars ($3,750.00) ninety (90) days
later. Said Advance shall be recoupable against future Royalties payable to
Licensor as per paragraph 6.
8. GUARANTEE: Licensee agrees to pay Licensor the sum of Fifteen Thousand
Dollars ($15,000.00) such sum being a Guarantee. Licensee shall receive a credit
against the Guarantee for any Royalties and Advances paid Licensor as per
paragraph 6 and 7 respectively. Any unearned portion of the Guarantee shall be
due and payable on the last day of the Term.
9. Omitted
10. INSURANCE: Licensee shall obtain and maintain during the Term of this
Agreement and the Extended Term, at its own expense, comprehensive general
liability insurance, including product and contractual liability and
advertiser's liability insurance, naming Licensor and Canal+ as additional named
insureds, from a reputable insurance carrier in the amounts of at least $1
million for personal injury, $1 million for property damage, $1 million for
advertiser's liability, with an "umbrella coverage" of at least $2 million. The
policy should provide for ten (10) days notice to Licensor and Canal+ from the
insurer in the event of any modification, cancellation, or termination and the
policy shall not be terminated or canceled unless it is it immediately replaced
with a comparable policy from a substitute reputable insurance carrier. As proof
of such insurance, a fully paid certificate of insurance naming Licensor and
Canal+ as additional named insureds will be submitted to Licensor by Licensee
within thirty (30) days of the final execution of this Agreement Licensee.
11. PROTECTION OF INTELLECTUAL PROPERTY: Licensee agrees to respect and
cooperate with Licensor and Canal+ to protect all trademarks, tradenames,
service marks and symbols, copyrights and patents related to the Property and to
cooperate with Licensor and/or Canal+ in the protection of such marks,
copyrights and patents.
12. APPROVALS: Licensor shall have the right of approval of all Licensed
Articles, including the packaging thereof, and all advertising for the Licensed
Articles issued by or under the control of Licensee. Licensee may not
manufacture, use, offer for sale, sell, advertise, promote, ship or distribute
any Licensed Article or any promotional or packaging material relating thereto
until it has received written approval of same from Licensor. In the event any
submission is disapproved, Licensee shall have the right to alter or correct the
submission and resubmit it. Said approval shall not be unreasonably withheld and
submissions shall be deemed disapproved if
<PAGE>
not approved within fourteen (14) days of submission to Licensor. Said right of
Approval shall include, without limitation, the following items, all to be
created at Licensee's expense:
(a) Approval of the initial concept for the Licensed Articles and concept
artwork to be used on the Licensed Articles,
(b) Approval of preliminary designs for the licensed Articles and of the
artwork to be used on the licensed Articles.
(c) Approval of the final designs for the Licensed Articles and artwork to
be used on the Licensed Articles.
(d) Approval of actual product samples of the Licensed Articles.
(e) Approval of all advertising and promotional materials for use in
media, including storyboards for television advertising.
Failure to provide elements for approval as indicated above, and/or failure to
produce tile Licensed Articles based on approved elements, shall constitute a
material breach of this Agreement by Licensee. After approval of such final
designs, artwork, product samples and other materials, Licensee shall not depart
therefrom in any respect without first obtaining the prior written approval of
Licensor.
13. TRADEMARK AND COPYRIGHT NOTICES: The Licensee agrees, that all Licensed
Articles and all related promotional and packaging materials shall contain
appropriate copyright, trademark and other legends, markings and notices as
required from time to time by the Licensor to give appropriate notice of
Canal+'s right, title and interest thereto. Unless Licensor notifies Licensee
otherwise, the following copyright and trademark legends shall appear at least
once on each Licensed Article and on each piece of promotional and packaging
material:
THE TERMINATOR(TM)
THE TERMINATOR(C)1990 Canal+ DA. All Rights Reserved.
Terminator is a trademark of Canal+ DA
Where patent protection is either pending or has been granted for any portion of
the Property and/or Licensed Articles, the Licensee shall further include the
appropriate patent notice on all Licensed Articles and on all pieces of related
promotional and packaging material. In the event Licensee manufactures and
distributes Licensed Articles without tile appropriate trademark and copyright
notices, Licensee shall, at its sole expense, discontinue such
manufacture, recall said Licensed Articles and correct the notice or destroy the
Licensed Articles.
14. BUY BACK PROVISION: Licensee agrees to sell to Licensor the Licensed
Articles in such reasonable quantities as Licensor requests, for non-commercial
uses, at Licensee's most favorable wholesale price.
<PAGE>
15. PAYMENTS AND STATEMENT: Unless otherwise instructed in writing by Licensor,
any and all Royalty and other payments due Licensor hereunder shall be paid in
United States dollars and remitted to Licensor at 2551 South Bundy Drive, Los
Angeles, California 90064. Licensee shall furnish to Licensor complete and
accurate statements certified to be accurate by licensee allowing the number,
description, and gross sales price for each Licensed Article distributed and/or
sold by Licensee during each calendar quarter, together with Royalty payments,
within thirty (30) days of the conclusion thereof, pursuant to the terms of this
Agreement. Such statements shall be furnished to Licensor whether or not
Licensed Articles have been sold during said period. All information shall be
shown separately for each country within the Territory and all gross sales shall
be stated in the currency of the country where they were made followed by the
equivalent amount of gross sales stated in United States dollars, followed by
the exchange rate applied. If any payment is late, interest shall accrue thereon
from tile due date at the rate of 1.5% per month compounded daily or the maximum
rate permitted by law. Acceptance by Licensor of any statement or Royalty
payment shall not preclude Licensor from questioning the correctness of such
statement or payment at any time. It shall be understood that the timely
rendering of all statements required hereunder is essential under the Terms of
this Agreement, and failure to render such statements and payments in a timely
fashion shall be deemed to be a material breach of this Agreement.
16. AUDIT: Licensee agrees to keep accurate books of account and records,
including machine sensible data if applicable, at its principal place of
business covering all transactions relating to the merchandise license herein
granted. Licensor and its duly authorized representative(s) shall have the right
once each calendar year, at all reasonable hours of the day, to examine said
books of accounts and records and all other documents and material in the
possession or under the control of Licensee with respect to the subject matter
and terms of this Agreement and to make copies and extracts thereof. In the
event any such examination reveals underpayments by the Licensee, the Licensee
shall immediately remit payment to Licensor in the amount of the underpayment
plus interest calculated at the rate of 1.5% per month, compounded daily,
calculated from the date the payment was actually due until the date the payment
is made. In the event of any underpayment in excess of One Thousand Dollars
($1,000.00), Licensee shall reimburse Licensor for the costs of the examination.
Upon demand by Licensor, but no more than once each year, Licensee shall at its
own expense furnish to Licensor a detailed statement by all independent
certified public accountant showing pricing information, the number and
description of the Licensed Articles distributed and/or sold by Licensee up to
the date of licensor's demands All books of account and records shall be kept
available for at least two (2) years after the expiration or earlier termination
of this Agreement.
17. INDEMNITY: (a) Licensee hereby imdemnifies and shall hold harmless Licensor
and Canal+, their respective officers, directors, employees, affiliates,
shareholders, assigns and agents from and against any and all costs, expenses,
losses, claims, demands, causes of action and judgements arising out of
Licensee's unauthorized use of any patent,
<PAGE>
process, method or device or out of Licensee's infringement of any copyright,
tradename or trademark, libel, invasion of the right of privacy, publicity, or
other property right, or any defect in or use of the Licensed Articles or
related promotional or packaging material, or for the breach of any of
Licensee's agreements, warranties and representations herein. Licensee shall
defend and hold harmless all of the indemnified parties whatsoever, including
but not limited to attorney's fees and court costs. Licensor shall have the
right, but not the obligation, to defend any such action or proceeding with
attorneys of its (their) own selection.
(b) Solely as to the copyright, trademark and property rights granted to
Licensee herein, Licensor and Canal+ hereby indemnify and shall hold harmless
Licensee, its officers, directors, employees, affiliates, shareholders, assigns
and agents from and against any and all costs, expenses, losses, claims,
demands, causes, of action and judgements arising out of Licensee's authorized
use of any said rights, or for the breach of any of Licensor's and/or Canal+'s
agreements, warranties and representations herein, provided that Licensee shall
give written notice to Licensor within ten (10) business days after notification
of any such cost, expense, loss, claim, demand, cause of action or judgement,
and Licensor and Canal+ shall have the right, but not the obligation, to
undertake and conduct the defense of any cause of action so brought and to
handle any such claim and/or demand. Licensor and Canal+ shall indemnify and
hold harmless all of the aforementioned indemnified parties whatsoever,
including but not limited to attorney's fees and court costs.
18. LICENSOR WARRANTY: Canal+ Licensor warrants that it has all rights necessary
to enter into this Agreement. Canal+ Licensor makes no other warranty or
representation of any kind. Canal+ and Licensor makes no claim as to the amount
of gross sales or net profits (if any) Licensee will derive hereunder.
19. BENEFITS OF UJSE: Licensee hereby agrees that its every use of the Property
including the goodwill related thereto shall inure to the benefit of Canal+ and
that Licensee shall not at any time attack Licensor's and/or Canal+'s rights and
interests in the Property. Furthermore, Licensee shall not acquire any rights in
the Property by virtue of any use it may make of the Property. Furthermore,
Licensee agrees that to the extent the Licensed Articles are copyrightable as
derivative works such copyrights shall be assigned to Canal+ and the Licensee,
its employees, successors and/or assignees shall not register the Licensed
Articles for copyright. Licensee acknowledges and agrees that Canal+ is the sole
and exclusive owner or proprietor of all rights in and to the Property and
Canal+ has granted to Licensor the exclusive right to solicit and negotitate
licenses with respect to the sale and distribution of goods and services
utilizing the Property, and, with the exception of such grant to Licensor by
Canal+ and the rights granted to Licensee hereunder, all other rights relating
to the Picture and the Property are expressly reserved by Canal+.
20. PREMIUMS AND PROMOTIONAL ARRANGEMENTS: Licensee hereby agrees that Licensor
shall have and retain the sole and exclusive right to utilize
<PAGE>
the Property in connection with any premium, giveaway or promotional
arrangement, or fan club, which retained right it may be exercised by Licensor
concurrently with the rights licensed to Licensee hereunder, without regard to
the extent to which any such right may be competitive with Licensee or the
license granted herein.
21. SAMPLES: Upon commencement of distribution, Licensee shall furnish and ship
free of charge Ten(10) samples of each and every Licensed Article, including
packaging, and two (2) samples of all advertising, promotional and display
material involving or related to the Licensed Articles to licensors at 2551
South Bundy Drive, Los Angeles, California 90064.
22. ASSIGNMENTS AND SUB-LICENSING: Notwithstanding anything herein to the
contrary, the license granted hereunder is and shall be personal to Licensees
and shall not be assignable or transferable by any act of Licensee or by
operation of law. Notwithstanding anything herein to the contrary, Licensee
shall not have Licensed Articles manufactured for Licensee by a third party
unless Licensee first obtains Licensor's approval in writing.
23. TERMINATION AND REVERSION: Either Party shall have the immediate right to
terminate this Agreement in the event the other party is bankrupt, insolvent, in
receivership, is sold, reorganizes or consents to the appointment of a receiver,
liquidator, trustee or assignee in bankruptcy, or materially breaches its
obligations under this Agreement. After expiration or termination of this
Agreement, all rights granted by Licensor to Licensee shall, as between Licensee
and Licensor, immediately revert to Licensor and Licensor shall be free to
license others to use the Property in connection with manufacture, sale and
distribution of tile Licensed Articles, and Licensee and any approved
sublicensee and assignees shall refrain from further use of the Property except
as provided in paragraph 24.
24. DISPOSAL PERIOD: Upon termination of this Agreement, Licensee may dispose of
any Licensed Articles which are on hand or in process at the time notice of
termination is received, or upon the expiration of the Term and the Extended
Term, for a period of nine (9) months after notice of termination or such
expiration date, as the case may be, provided all monies due and payable to
1icensor with respect to the Term or Extended Term are paid and statements are
furnished for that period. During the disposal period, Licensor shall receive a
Royalty for all Licensed Articles disposed as per paragraph 6, and Licensor may
itself use or license the use of the Property in any manner at any time anywhere
in the world. In the last sixty (60) days of the Term, Licensee shall not,
without Licensor's consent, manufacture more than one Hundred and ten percent
(110%) of the number of Licensed Articles manufactured by Licensee in the
previous sixty (60) days. Upon termination of this Agreement all artwork created
by or for Licensee and any other materials used to reproduce the licensed
property for the manufacture of the Licensed Articles shall, at Licensor's
request, either be destroyed by Licensee and verified proof of said destruction
sent to Licensor at the appropriate mailing address, or said artwork shall be
returned to Licensor.
<PAGE>
25. NOTICES: All notices or other communications required or desired to be sent
to either party hereto shall be in writing and shall be sent by Registered or
Certified Mail, postage prepaid, return receipt requested, or sent by facsimile,
telegram or telex service, charges prepaid. A copy of all notices retired to be
sent to Licensor shall be sent to CanaL+ (US) on behalf of Canal+ DA, 301 North
Canon Drive, Beverly Hills, California 90210. The address for all notices
required to be sent to Licensor or Licensee shall be at the mailing address
stated in the signature lines below.
26. INFRINGEMENTS: The Licensee agrees to assist the Licensor and Canal+ in the
enforcement of any rights of the Licensor or Canal+ in the Property. Licensee
agrees to promptly notify the Licensor in writing of any infringement, or
imitations by third parties of the Property, the Licensed Articles or the
promotional and packaging materials related thereto which may come to Licensee's
attention. Licensor and Canal+ shall have the right to determine whether or not
any action shall be taken on account of any such infringement or, imitation.
Licensor and/or Canal+ shall be entitled to receive and retain all amounts
awarded as damages, profits or otherwise in connection with such actions brought
by Licensor and/or Canal+. In the event Licensor and/or Canal+ decide that they
do not wish to pursue any cause of action Licensee, at its own cost, with
Licensor's permission, may pursue said cause of action and retain, all amounts
awarded therefrom as damages, profits or otherwise.
27. APPLICABLE LAW: The validity, construction and performance of this Agreement
shall be governed by, and interpreted in accordance with, the laws of the State
of California, and Licensee hereby consents to the jurisdiction of the courts of
the State of California and the United States courts located in the County of
Los Angeles, State of California, in Connection with any lawsuit, action or
proceeding arising out of or relating to this Agreement.
28. EQUITABLE RELIEF: Licensee acknowledges that its failure to commence in good
faith to manufacture with the appropriate copyright and trademark notice and to
distribute in substantial quantities any one or more of the Licensed Articles as
specified herein and to continue during the Term hereof and the Extended Term to
diligently and continuously manufacture, sell, distribute and promote the
Licensed Articles or any category thereof and to pay any and all sums due
Licensor as specified hereunder will result in immediate and irremediable damage
to Licensor. Licensee acknowledges that its failure to cease the manufacture,
sales, distribution or promotion of the Licensed Articles or any category
thereof at the termination or expiration of this Agreement or any portion
thereof will result in immediate and irremediable damage to Licensor and to the
rights of any subsequent licensee. Licensee agrees that in the event of such
failure(s) Licensor shall be entitled, in addition to any other remedy that may
be available to Licensor, to equitable relief by way of temporary and permanent
injunctions and such other and further relief as any court with jurisdiction may
deem just and proper notwithstanding any other provisions to the contrary
contained herein.
<PAGE>
29. CURE: Licensor and/or Canal+ agrees to give Licensee written notice of any
breach of this Agreement by Licensee, and Licensee shall have thirty (30) days
(seven (7) days for payments and statements) to cure said breach.
30. ENTIRE AGREEMENT: This Agreement contains the full and complete
understanding between the parties hereto and supersedes all prior
understandings, whether written or oral, pertaining to the subject matter hereof
and cannot be modified except by a written instrument signed by the parties
hereto.
AGREED & ACCEPTED:
CANAL+(US) on behalf
CREATIVE LICENSING CORPORATION CANAL+(DA)
2551 South Bundy Drive 301 North Canon Drive
Los Angeles, CA 90064 Beverly Hills, CA 90210
("Licensor") ("Canal+")
BY:
ITS:-
COLLECTIBLE CONCEPTS GROUP
1600 Lower State Road
Doylestown, PA 18901
("Licensee")
BY:______________________________
ITS:______________________________
<PAGE>
Exhibit 10.6
June 28, 1999
COLLLECTIBLE CONCEPTS GROUP
1600 Lower State Road
Chalfont, PA 18914
Re: TERMINATOR 2, JUDGEMENT DAY
---------------------------
Gentlemen:
The following will confirm our agreement ("Agreement") pursuant to which CANAL+
DA, 6, Boulevard de la Republique, 92514 Boulogne Cedex, FRANCE ("Licensor")
grants COLLECTIBLE CONCEPTS GROUP, 1600 Lower State Road, Chalfont, Pennsylvania
("Licensee") the exclusive right, license and privilege of utilizing the
Property (as defined below) which Licensor owns or controls solely in connection
with the manufacture, sale and distribution of the Licensed Articles (as defined
below) upon the following terms and conditions.
1. PROPERTY: The name, artwork, stories, characters, approved likenesses of
actors (excluding the imagery of Arnold Scharzenegger) and logo for the motion
picture 'TERMINATOR 2: JUDGEMENT DAY.
2. LICENSED ARTICLES* The Licensed Articles are:
Collectibles - Rifle (solid barrel permanently attached to the
wall mount) Coin Set/Silver--, Coin Set/Gold; Coin Set/Platinum;
Ceramic Mug; Sunglasses with Case; Leather Bound Script; Collector's Club
Membership; Metal Notebook' Club Premiums
All Licensed Articles shall be of high standard and shall be distributed via
direct marketing (QVC, HSN) and retail (catalogs, specialty, gift stores,
department stores).and Internet 4
3. TERM: The Term shall commence on the date hereof and continue
until December 31, 2001.
4. TERRITORY: The Territory is worldwide. The Licensee agrees that it will not
make, nor authorize any use, direct or indirect, of the Property in any other
territory, and that it will not knowingly sell Licensed Articles to persons who
intend or are likely to resell them in any other territory.
5. MARKETING: Licensee agrees to offer for sale the Licensed Articles on or
before March 31, 2000. Licensee shall be responsible for manufacturing and
shipping sufficient amounts of the Licensed Articles to reasonably meet the
demands of the marketplace.
<PAGE>
6. ROYALTY: Licensee agrees to pay Licensor a Royalty of Ten Percent (10%) of
one hundred percent(100%) of gross sales,
7. ADVANCE: The non-returnable Advance which Licensee agrees to pay Licensor is
Seven Thousand, Five Hundred Dollars ($7,500.00) payable Three Thousand, Seven
Hundred and Fifty Dollars ($3,750.00) upon signing of this Agreement by Licensee
and Three Thousand, Seven Hundred and Fifty Dollars ($3,750.00) ninety (90) days
later. Said Advance shall be recoupable against future Royalties payable to
Licensor as per paragraph 6.
8. GUARANTEE: Licensee agrees to pay Licensor the sum of Fifteen Thousand
Dollars ($15,000.00) such sum being a Guarantee. Licensee shall receive a credit
against the Guarantee for any Royalties and Advances paid Licensor as per
paragraph 6 and 7 respectively. Any unearned portion of the Guarantee shall be
due and payable on the last day of the Term.
9. REPRESENTATIVE: Licensor has appointed THE LICENSING GROUP LTD
("Representative") with its principal offices at 9026 Melrose Avenue, Los
Angeles, California 90069, as its, licensing agent for this Agreement.
Representative is authorized to enter into and deliver this Agreement and to
collect funds as agent for and on behalf of Licensor, but this Agreement is for
the direct benefit of Licensor and constitutes a binding agreement between
Licensor and Licensee.
10. INSURANCE: Licensee shall obtain and maintain during the Term of this
Agreement and the Extended Term, at its own expense, comprehensive general
liability insurance, including product and contractual liability and
advertiser's liability insurance, training Licensor as additional named
insureds, front a reputable insurance carrier in the amounts of at least $1
million for personal injury, $1 million for property damage, $1 million for
advertiser's liability, with an "umbrella coverage" of at least $2 million. The
policy should provide for ten (10) days notice to Licensor from the insurer in
the event of any modification, cancellation, or termination and the policy shall
not be terminated or canceled unless it is it immediately replaced with a
comparable policy from a substitute reputable insurance carrier. As proof of
such insurance, a fully paid certificate of insurance naming Licensor as
additional named insureds will be submitted to Licensor by Licensee within
thirty (30) days of the final execution of this Agreement Licensee.
11. PROTECTION OF INTELLECTUAL PROPERTY: Licensee agrees to respect and
cooperate with Licensor to protect all trademarks, tradenames, service marks and
symbols, copyrights and patents related to the Property and to cooperate with
Licensor in the protection of such marks, copyrights and patents.
12. APPROVALS: Licensor shall have the right of approval of all Licensed
Articles, including the packaging thereof, and all advertising for the Licensed
Articles issued by or under the control of Licensee. Licensee may not
manufacture, use, offer for sale, sell, advertise, promote, ship or distribute
any Licensed Article or any promotional or packaging material relating thereto
until it has received written approval of same from Licensor. In the event any
submission is disapproved, Licensee shall have the right to alter or correct the
submission and resubmit it. Said approval shall not be unreasonably withheld and
submissions shall be deemed disapproved if not approved within Fourteen (14)
days of submission to Licensor. Said right of Approval shall include, without
limitation, the following items, all to be created at Licensee's expense:
<PAGE>
(a) Approval of the initial concept for the Licensed Articles and
concept artwork to be used on the Licensed Articles,
(b) Approval of preliminary designs for the licensed Articles and of
the artwork to be used on the licensed Articles.
(c) Approval of the final designs for the Licensed Articles and artwork
to be used on the Licensed Articles.
(d) Approval of actual product samples of the Licensed Articles.
(e) Approval of all advertising and promotional materials for use in
media, including storyboards for television advertising.
Failure to provide elements for approval as indicated above, and/or failure to
produce the Licensed Articles based on approved elements, shall constitute a
material breach of this Agreement by Licensee. After approval of such final
designs, artwork, product samples and other materials, Licensee shall not depart
therefrom in any respect without first obtaining the prior written approval of
Licensor.
13. TRADEMARK AND COPYRIGHT NOTICES: The Licensee agrees, that all Licensed
Articles and all related promotional and packaging materials shall contain
appropriate copyright, trademark and other legends, markings and notices as
required from time to time by the Licensor to give appropriate notice of
Licensor's right, title and interest thereto. Unless Licensor notifies Licensee
otherwise, the following copyright and trademark legends shall appear at least
once on each Licensed Article and on each piece of promotional and packaging
material:
Trademark: T2, TERMINATOR 2, ENDOSKELETON, and the depiction of the
Endoskeleton are trademarks of Canal+ DA. All Rights
Reserved.
Copyright: (C) 1999 Canal+ DA. All Rights Reserved.
Where patent protection is either pending or has been granted for any portion of
the Property and/or Licensed Articles, the Licensee shall further include the
appropriate patent notice on all Licensed Articles and on all pieces of related
promotional and packaging material. In the event Licensee manufactures and
distributes Licensed Articles without the appropriate trademark and copyright
notices, Licensee shall, at its sole expense, discontinue such
manufacture, recall said Licensed Articles and correct the notice or destroy the
Licensed Articles.
<PAGE>
14. BUY BACK PROVISION: Licensee agrees to sell to Licensor the Licensed
Articles in such reasonable quantities as Licensor requests, for non-commercial
uses, at Licensee's most favorable wholesale price.
15. PAYMENTS AND STATESMENT: Unless otherwise instructed in writing by Licensor,
any and all Royalty and other payments due Licensor Hereunder shall be paid in
United States dollars and remitted to Licensor in care of The Licensing Group
Ltd at 9026 Melrose Avenue, Los Angeles, California 90069. Licensee shall
furnish to Licensor complete and accurate statements certified to be accurate by
licensee allowing the number, description, and gross sales price for each
Licensed Article distributed and/or sold by Licensee during each calendar
quarter, together with Royalty payments, within thirty (30) days of the
conclusion thereof, pursuant to the terms of this Agreement. Such statements
shall be furnished to Licensor whether or not Licensed Articles have been sold
during said period. All information shall be shown separately for each country
within the Territory and all gross sales shall be stated in the currency of the
country where they were made followed by the equivalent amount of gross sales
stated in United States dollars, followed by the exchange rate applied. If any
payment is late, interest shall accrue thereon from the due date at the rate of
1.5% per month compounded daily or the maximum rate permitted by law. Acceptance
by Licensor of any statement or Royalty payment shall not preclude Licensor from
questioning the correctness of such statement or payment at any time. It shall
be understood that the timely rendering of all statements required hereunder is
essential under the Terms of this Agreement, and failure to render such
statements and payments in a timely fashion shall be deemed to be a material
breach of this Agreement.
16. AUDIT: Licensee agrees to keep accurate books of account and records,
including machine sensible data if applicable, at its principal place of
business covering all transactions relating to the merchandise license herein
granted. Licensor and its duly authorized representative(s) shall have the right
once each calendar year, at all reasonable hours of the day, to examine said
books of accounts and records and all other documents and material in the
possession or under the control of Licensee with respect to the subject matter
and terms of this Agreement and to make copies and extracts thereof. In the
event any such examination reveals underpayments by the Licensee, the Licensee
shall immediately remit payment to Licensor in the amount of the underpayment
plus interest calculated at the rate of 1.5% per month, compounded daily,
calculated from the date the payment was actually due until the date the payment
is made. In the event of any underpayment in excess of One Thousand Dollars
($1,000.00), Licensee shall reimburse Licensor for the costs of the examination.
Upon demand by Licensor, but no more than once each year, Licensee shall at its
own expense furnish to Licensor a detailed statement by all independent
certified public accountant showing pricing information, the number and
description of the Licensed Articles distributed and/or sold by Licensee up to
the date of licensor's demands All books of account and records shall be kept
available for at least two (2) years after the expiration or earlier termination
of this Agreement.
<PAGE>
17. INDEMNITY: (a) Licensee hereby imdemnifies and shall hold harmless Licensor,
their respective officers, directors, employees, affiliates, shareholders,
assigns and agents from and against any and all costs, expenses, losses, claims,
demands, causes of action and judgements arising out of Licensee's unauthorized
use of any patent, process, method or device or out of Licensee's infringement
of any copyright, tradename or trademark, libel, invasion of the right of
privacy, publicity, or other property right, or any defect in or use of the
Licensed Articles or related promotional or packaging material, or for the
breach of any of Licensee's agreements, warranties and representations herein.
Licensee shall defend and hold harmless all of the indemnified parties
whatsoever, including but not limited to attorney's fees and court costs.
Licensor shall have the right, but not the obligation, to defend any such action
or proceeding with attorneys of its (their) own selection.
(b) Solely as to the copyright, trademark and property rights granted to
Licensee herein, Licensor hereby indemnify and shall hold harmless Licensee, its
officers, directors, employees, affiliates, shareholders, assigns and agents
from and against any and all costs, expenses, losses, claims, demands, causes,
of action and judgements arising out of Licensee's authorized use of any said
rights, or for the breach of any of Licensor's agreements, warranties and
representations herein, provided that Licensee shall give written notice to
Licensor within ten (10) business days after notification of any such cost,
expense, loss, claim, demand, cause of action or judgement, and Licensor shall
have the right, but not the obligation, to undertake and conduct the defense of
any cause of action so brought and to handle any such claim and/or demand.
Licensor shall indemnify and hold harmless all of the aforementioned indemnified
parties whatsoever, including but not limited to attorney's fees and court
costs.
18. LICENSOR WARRANTY: Licensor warrants that it has all rights necessary to
enter into this Agreement. Licensor makes no other warranty or representation of
any kind. Licensor makes no claim as to the amount of gross sales or net profits
(if any) Licensee will derive hereunder.
19, BENEFITS OF UJSE: Licensee hereby agrees that its every use of the Property
including the goodwill related thereto shall inure to the benefit of Licensor
and that Licensee shall not at any time attack licensor's rights and interests
in the Property. Furthermore, Licensee shall not acquire any rights in the
Property by virtue of any use it may make of the Property. Furthermore, Licensee
agrees that to the extent the Licensed Articles are copyrightable as derivative
works such copyrights shall be assigned to Licensor and the Licensee, its
employees, successors and/or assignees shall not register the Licensed Articles
for copyright. Licensee acknowledges and agrees that Licensor is the sole and
exclusive owner or proprietor of all rights in and to the Property and all other
rights relating to the Picture and the Property are expressly reserved by
Licensor.
<PAGE>
20. PREMIUMS AND PROMOTIONAL ARRANGEMENTS: Licensee hereby agrees that Licensor
shall have and retain the sole and exclusive right to utilize the Property in
connection with any premium, giveaway or promotional arrangement, or fan club,
which retained right it may be exercised by Licensor concurrently with the
rights licensed to Licensee hereunder, without regard to the extent to which any
such right may be competitive with Licensee or the license granted herein.
21. SAMPLES: Upon commencement of distribution, Licensee shall furnish and ship
free of charge Ten(10) samples of each and every Licensed Article, including
packaging, and two (2) samples of all advertising, promotional and display
material involving or related to the Licensed Articles to licensors All samples
and related materials shall be sent to Lisa Lockhart, Vice President, The
Licensing Group Ltd, 9026 Melrose Avenue, Los Angeles, California 90069. If
additional samples of either the Licensed Articles or other material referred to
hereinabove are required for legal purposes, including protection of rights or
litigation, Licensee shall provide them free of charge.
22. ASSIGNMENTS AND SUB-LICENSING: Notwithstanding anything herein to the
contrary, the license granted Hereunder is and shall be personal to Licensees
and shall not be assignable or transferable by any act of Licensee or by
operation of law. Notwithstanding anything herein to the contrary, Licensee
shall not have Licensed Articles manufactured for Licensee by a third party
unless Licensee first obtains Licensor's approval in writing.
23. TERMINATION AND REVERSION: Either Party shall have the immediate right to
terminate this Agreement in the event the other party is bankrupt, insolvent, in
receivership, is sold, reorganizes or consents to the appointment of a receiver,
liquidator, trustee or assignee in bankruptcy, or materially breaches its
obligations under this Agreement. After expiration or termination of this
Agreement, all rights granted by Licensor to Licensee shall, as between Licensee
and Licensor, immediately revert to Licensor and Licensor shall be free to
license others to use the Property in connection with manufacture, sale and
distribution of the Licensed Articles, and Licensee and any approved sublicensee
and assignees shall refrain from further use of the Property except as provided
in paragraph 24.
24. DISPOSAL PERIOD: Upon termination of this Agreement, Licensee may dispose of
any Licensed Articles which are on hand or in process at the time notice of
termination is received, or upon the expiration of the Term and the Extended
Term, for a period of nine (9) months after notice of termination or such
expiration date, as the case may be, provided all monies due and payable to
1icensor with respect to the Term or Extended Term are paid and statements are
furnished for that period. During the disposal period, Licensor shall receive a
Royalty for all Licensed Articles disposed as per paragraph 6, and Licensor may
itself use or license the use of the Property in any manner at any time anywhere
in the world. In the last sixty (60) days of the Term, Licensee shall not,
without Licensor's consent, manufacture more than one Hundred and ten percent
(11O%) of the number of Licensed Articles manufactured by Licensee in the
previous sixty (60) days. Upon termination of this Agreement all artwork created
by or for Licensee and any other materials used to reproduce the licensed
property for the manufacture of the Licensed Articles shall, at Licensor's
request, either be destroyed by Licensee and verified proof of said destruction
sent to Licensor at the appropriate mailing address, or said artwork shall be
returned to Licensor.
<PAGE>
25, NOTICES: All notices or other communications required or desired to be sent
to either party hereto shall be in writing and shall be sent by Registered or
Certified Mail, postage prepaid, return receipt requested, Or sent, by
facsimile, telegram or telex service, charges prepaid. The address for all
notices retired to be sent to Licensor or Licensee shall be at the mailing
address stated in the signature lines below.
26. INFRINGEMENTS: The Licensee agrees to assist the Licensor in the enforcement
of any rights of the Licensor in the Property. Licensee agrees to promptly
notify the Licensor in writing of any infringement, or imitations by third
parties of the Property, the Licensed Articles or the promotional and packaging
materials related thereto which may come to Licensee's attention. Licensor shall
have the right to determine whether or not any action shall be taken on account
of any such infringement or, imitation. Licensor shall be entitled to receive
and retain all amounts awarded as damages, profits or otherwise in connection
with such actions brought by Licensor. In the event Licensor decides that it
does not wish to pursue any cause of action Licensee, at its own cost, with
Licensor's permission, may pursue said cause of action and retain, all amounts
awarded therefrom as damages, profits or otherwise.
27. APPLICABLE LAW: The validity, construction and performance of this Agreement
shall be governed by, and interpreted in accordance with, the laws of the State
of California, and Licensee hereby consents to the jurisdiction of the courts of
the State of California and the United States courts located in the County of
Los Angeles, State of California, in Connection with any lawsuit, action or
proceeding arising out of or relating to this Agreement.
28. EOUITABLE RELIEF: Licensee acknowledges that its failure to commence in good
faith to manufacture with the appropriate copyright and trademark notice and to
distribute in substantial quantities any one or more of the Licensed Articles as
specified herein and to continue during the Term hereof and the Extended Term to
diligently and continuously manufacture, sell, distribute and promote the
Licensed Articles or any category thereof and to pay any and all sums due
Licensor as specified hereunder will result in immediate and irremediable damage
to Licensor. Licensee acknowledges that its failure to cease the manufacture,
sales, distribution or promotion of the Licensed Articles or any category
thereof at the termination or expiration of this Agreement or any portion
thereof will result in immediate and irremediable damage to Licensor and to the
rights of any subsequent licensee. Licensee agrees that in the event of such
failure(s) Licensor shall be entitled, in addition to any other remedy that may
be available to Licensor, to equitable relief by way of temporary and permanent
injunctions and such other and further relief as any court with jurisdiction may
deem just and proper notwithstanding any other provisions to the contrary
contained herein.
<PAGE>
29. CURE: Licensor agrees to give Licensee written notice of any breach of this
Agreement by Licensee, and Licensee shall have thirty (30) days (seven (7) days
for payments and statements) to cure said breach.
30. ENTIRE AGREEMENT: This Agreement contains the full and complete
understanding between the parties hereto and supersedes all prior
understandings, whether written or oral, pertaining to the subject matter hereof
and cannot be modified except by a written instrument signed by the parties
hereto.
AGREED & ACCEPTED:
CANAL+ DA
6 Boulevard de la Republique
92514 Boulogne Cedex
FRANCE
("Licensor")
BY:
ITS:-
COLLECTIBLE CONCEPTS GROUP
1600 Lower State Road
Doylestown, PA 18901
("Licensee")
BY:______________________________
ITS:______________________________
<PAGE>
Exhibit 10.7
CONSULTING AGREEMENT, dated as of March 1, 2000, between Collectible
Concepts Group, Inc., a ____________ corporation having an office at 1600 Lower
State Rd., Doylestown, PA 18901 (the "Company") and THE N.I.R. GROUP, LLC, a New
York limited liability company with executive offices located at 155 First
Street, Suite B, Mineola, New York 11501 (the "Consultant").
WITNESSETH:
WHEREAS, the Company, through its affiliates and principals, has
extensive experience in its areas of expertise, including, without limitation,
financial consulting, capital sourcing, strategic consulting, investment banking
and other business matters; and
WHEREAS, the Consultant has expertise in the assisting in the
development and expansion of companies such as the Company; and
WHEREAS, the Company desires to retain the services of the Consultant
to render strategic advice with respect to the development of the Company; and
WHEREAS, the Consultant wishes to render such services to the Company
upon the terms, conditions and covenants set forth in this Agreement.
NOW, THEREFORE, in consideration of the mutual promises and covenants
hereinafter set forth, and subject to the conditions contained herein, the
parties hereto hereby agree as follows:
I. Terms of Service.
Section 1.01 Duties. The Consultant will advise the Company's
management, employees, and agents with respect to the Company's field of
interest and business, and strategic and commercial matters related to the
Consultant's expertise. The Consultant will use best efforts to assist the
company in overall financial and business strategy and capital investment(s) in
the project. The Consultant will assist the Company in structuring a business
plan and the development of acquisition plans, including, without limitation,
structuring and negotiation of acquisitions and dispositions of assets. Upon
reasonable notice to the Consultant, the Company will have access to the
Consultant at reasonable times in order to discuss matters related to the
Company's business. The services to be provided by the Consultant pursuant to
the terms hereof, whether such services are performed verbally or in writing,
shall be reasonable in terms of hours per month. If no such services are
requested, the consulting fees provided for herein shall still be paid.
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Section 1.02 Term; Termination. The term (the "Term") of this Agreement
shall be twelve (12) months, commencing on the date hereof. In the event of any
earlier termination of this Agreement, the parties hereto agree that the
Consultant shall be entitled to the amounts otherwise due hereunder
notwithstanding such termination including any amounts previously deferred.
Section 1.03 Consulting Fee. In consideration of the services to be
performed hereunder, the Consultant shall receive the fee of $5,000.00 per month
in accordance with the terms hereof. Such amount shall be paid in cash, net of
taxes, excises and other governmental and other charges, payable monthly on the
first of each month in advance. Notwithstanding anything contained to the
contrary in the foregoing, the monthly fee to the Consultant shall be paid as
follow: (1) during the first three (3) months of the Term, $2,500 shall be paid
in cash and $2,500 per month shall be deferred, (2) during months 4 through 6 of
the Term, $7,500 per month in cash (which amount shall include the $2,500
previously deferred during months 1 through 3), and (3) $5,000 per month for the
remainder of the Term.
Section 1.04 Expenses. If the Company requests the Consultant to
provide any specific services hereunder that cause the Consultant to incur
expenses, the Company shall reimburse the Consultant for all reasonable expenses
upon presentation of expense vouchers or statements or such other supporting
information as the Company may require. However, notwithstanding anything
contained in the foregoing to the contrary, the Consultant shall not incur any
reimbursable expense in excess of $500.00 without the prior written consent of
the Company.
II. Confidentiality.
Section 2.01 Acknowledgments. The Consultant acknowledges that, during
the course of performing services hereunder, the Company may be disclosing
information to the Consultant related to the Company's business, projects, and
plans, as well as other Information (collectively, the "Confidential
Information"). The Consultant acknowledges that the Company's business is
extremely competitive, dependent in part upon the maintenance of secrecy, and
that any disclosure of the Confidential Information would result in serious harm
to the Company.
Section 2.02 Use of Confidential Information. The Consultant agrees
that the Confidential Information will be used by the Consultant only in
connection with consulting activities hereunder and will not be used in any way
that is detrimental to the Company.
Section 2.03 Non-Disclosure. The Consultant agrees not to disclose,
directly or indirectly, the Confidential Information to any third person or
entity, other than representatives or agents of the Company or legal advisors,
expert consultants, and other advisors utilized by the Consultant in connection
with consulting activities hereunder; provided, however, that each such advisor
agrees to keep such information confidential and to use it only in connection
with such consulting activities. The Consultant will treat all such Confidential
Information as confidential and proprietary property of the Company.
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Section 2.04 Confidential Information. The term "Confidential
Information" does not include information that (a) is or becomes generally
available to the public other than by disclosure in violation of this Agreement,
(b) becomes available to the Consultant on a nonconfidential basis (it being
understood that information that the Consultant obtained as a result of any
officer, director, or employer thereof being previously employed by, or
otherwise serving , the Company, shall be deemed to be Confidential Information,
unless otherwise exempt under this Section 2,04, or (c) was independently
developed by the Consultant after the date hereof without reference to the
information provided by the Company.
Section 2.05 Permitted Disclosure. The Consultant may disclose any
Confidential Information that is required to be disclosed by law, government
regulation, or court or administrative order or process. If disclosure is
required, the Consultant will give the Company advance notice so that the
Company may seek a protective order or take other action reasonable under the
circumstances.
Section 2.06 Return of Confidential Information. Upon termination of
this Agreement, the Consultant will promptly return to the Company all materials
containing Confidential Information, including, but not limited to, data,
records, reports, and other property furnished by the Company to the Consultant
or produced by the Consultant in connection with services rendered hereunder.
Notwithstanding such return, the Consultant shall continue to be bound by the
terms of the confidentiality provisions contained in this Article II for a
period of one year after the termination of this Agreement.
III. Miscellaneous.
Section 3.01 No Violation of Other Agreements. Each of the parties
hereto represents and warrants that execution, delivery, or performance of this
Agreement does not conflict with, or violate the terms of, any other agreement
to which it is a party or by which it is bound.
Section 3.02 Independent Contractor; Limitation of Liability.
(a)The Consultant is an independent contractor to the Company,
and nothing herein shall be deemed to constitute the Consultant or its agents as
an employee or agent of the Company.
(b) The Company acknowledges that it remains solely
responsible for the conduct and operation of its business and that the
Consultant makes no representation or warranty and assumes no liability with
respect to the outcome or result of any particular course of action or operation
of the Company's business.
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Section 3.03 Notices. Any notice provided under this Agreement shall be
in writing and shall be deemed to have been effectively given when delivered
personally, sent by private express mail service (such as Federal Express), or
sent by registered or certified mail (return receipt requested) to the address
set forth in the introductory paragraph hereof (or to other address as any party
has furnished in writing to the other parties in accordance with the provisions
of this Section 3.03).
Section 3.04 Assignment. None of the parties may assign its interest in
this Agreement or delegate its responsibilities hereunder without prior written
consent of the other party.
Section 3.05 Severability. The invalidity or unenforceability of any
particular provision of this Agreement or portion thereof shall not affect the
validity or unenforceability of any other provision thereof. If any provision of
this Agreement is adjudicated to be so broad as to be unenforceable, it shall be
interpreted to be only as broad as is enforceable.
Section 3.06 Counterparts; Governing Law. This Agreement may be
executed in any number of counterparts, each of which shall be deemed an
original, but all of which together shall constitute one and the same
instrument. This Agreement shall be governed by, and construed in accordance
with, the laws of the State of New York, without giving effect to conflict of
laws.
Section 3.07 Headings. The article and section headings in this
Agreement are solely for convenience of reference and shall be given no effect
in the construction or interpretation of this Agreement.
Section 3.08 Counterparts. This Agreement may be executed in one or
more counterparts, each of which shall be deemed an original, but all of which
together shall constitute one and the same instrument.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as
of the date first above written.
COLLECTBLE CONCEPTS GROUP, INC.
By: __________________________
Name: Paul S. Lipschutz
Title: Chief Executive Officer
THE N.I.R. GROUP, LLC
By: ___________________________
Name: Corey S. Ribotsky
Title: Member
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LICENSE AGREEMENT
License Agreement (this "Agreement"), when executed by both parties, is
effective as of the lst day of October, 1999, by and between Marvel Characters,
Inc., a Delaware corporation with an office at 10880 Wilshire Boulevard, Suite
1400, Los Angeles, California 90024 ("Marvel"), and the party identified below
("Licensee").
1. BASIC INFORMATION AND TERMS
The following information and terms appear for ease of reference in
this Section I and are set forth in greater detail in the indicated sections of
this Agreement which follow. This Section 1 is not itself a contract, but only a
part of this Agreement.
Licensee: Collectible Concepts Group
1600 Lower State Road
Chalfont, PA 18914
Attention: Paul Lipschutz
Tel: 888-801-5544, Fax: 215-491-1079 ("Licensee")
Characters: The following characters as they appear in the Marvel
"X-Men" theatrical motion picture: Professor X,
Wolverine, Magneto, Storm, Toad, Rogue, Mystique,
Sabretooth, Cyclops, Jean Grey. #2
Licensed Articles: Listed on Exhibit A #3(a)
Territory: United States and Canada #3(b)
Commencement Date: October 1, 1999 Expiration Date: December 31, 2002 #3(c)
Royalty Rates: Ten percent (10%) of Net Sales.
For Direct Sales and sales through Licensee's own Internet web-site a
royalty rate of ten percent (10%) of retail price. #5(a)
Calendar Period for royalty payments: Quarterly #5(a)
Royalty Report due with payment 30 days after end of
Calendar Period. #5(a),(d)
Minimum Royalty Guarantee: Forty Five Thousand Dollars ($45,000.00)
payable as follows: #5(b)
Advance: Fifteen Thousand Dollars ($15,000.00) payable upon signing of this
agreement. #5(b)
Remaining Balance: $15,000.00, payable on or before August 1, 2000;
$15,000.00, payable on or before June 1, 2001;
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Currency for all payments: United States Dollars #5(c)
Royalty Reports and payments sent to: Bank of America Remittance, File Number
54628, 1000 West Temple Street, Los Angeles, California 90071, Attn: Operations.
All payments must be made payable to Marvel Characters, Inc.
with a copy of reports to: Accounts Receivable, Marvel Entertainment Group,
Inc., 387 Park Avenue South, New York, NY 10016 ("Marvel's New York
Office"). #5(d)
Examination/Audit Fee: $500.00 per diem.
Examination/Audit Maximum: $2,500.00 #5(e)
Trademark and Copyright Notices:
[Name(s) of character(s)] and Copyright (c) [year of first
the distinctive likeness(es) publication of Marvel material
thereof are Trademarks of by Licensee, in Arabic numerals]
Marvel Characters, Inc. Marvel Characters, Inc.
and are used with permission. All Rights Reserved. #7(b),(h)
Notice of Supervision:
This [identify the Licensed Article] is produced under
license from Marvel Characters, Inc. #7(c)
Product Development /Submission Date: November 1, 1999 #8(a)
Submission to Marvel's New York Office for approval:
Twelve (12) samples of each Licensed Article upon completion of first
production and each different piece of Associated Material therefor
prior to sale or publication. Twelve (12) samples of each finished
Licensed Article and each different piece of Associated Material
annually thereafter. #9(a)
Insurance: A Combined Single Limit of $3,000,000 per occurrence. #10(e)
Trade Introduction Date: March 1, 2000 #15(c)
Consumer Introduction Marketing Date: June 1, 2000 #15(d)
Post-Expiration Disposal Period: Ninety (90) days #16(e)
RECITALS
(a) 1 Marvel has rights in and to the names, characters, stories,
storylines, plots, dialogue, incidents, language, artwork, symbols, designs,
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depictions, likenesses, formats, poses, concepts, themes, and graphic
photographic and other visual representations of, relating to and associated
with the Characters identified in Section 1 hereof (which names, characters,
etc. and/or each of the individual components thereof shall hereinafter be
referred to as the "Property"), said Property being known and recognized by the
general public and associated in the public mind with Marvel.
(b) Licensee desires to utilize the Property in the manner hereinafter
described.
3. GRANT OF LICENSE
(a) Licensed Articles. Upon the terms and conditions and with the
limitations and exceptions hereinafter set forth, Marvel hereby grants to
Licensee and Licensee hereby accepts the non-exclusive license right to utilize
the Property but solely upon and in connection with the sale and distribution of
the articles, products and/or services identified on Exhibit A ("Licensed
Articles").
(b) Territory. The license hereby granted extends only to the Territory
identified in Section 1. Licensee expressly acknowledges and agrees that it is
not licensed or authorized to use the Property, directly or indirectly, in any
other area, and that it is not licensed to and will not knowingly sell the
Licensed Articles to persons (excluding military exchanges for resale in such
exchanges abroad) who intend or are likely to sell them in any other area, to
the extent this provision is permitted by the applicable law at the time of such
use, license or sale.
(c) Term. The license hereby granted shall commence on the Commencement
Date and terminate automatically on the Expiration Date set forth in Section 1,
or the expiration of any renewal as provided herein, unless sooner terminated in
accordance with the provisions hereof. In the event Licensee commences any
activities in connection with the Property prior to the Commencement Date, all
provisions of this Agreement for the benefit and protection of Marvel shall
apply in full to such activities.
(d) Scope of License. Notwithstanding anything contained herein to the
contrary, nothing in this Agreement shall be construed to prevent Marvel from
granting any other licenses for the use of the Property, in connection with the
Licensed Articles, for the Territory to which this license extends, during the
Term of this license or from utilizing the Property in any manner whatsoever.
Licensee hereby acknowledges that the aforesaid licenses do not conflict with or
derogate from any rights being granted to Licensee hereunder.
4. RESERVATION OF RIGHTS
(a) Marvel hereby reserves all rights not herein specifically granted
to Licensee, including but not limited to all rights with respect to the
Licensed Articles for any and all channels of trade, modes of distribution
and/or delivery, including but not limited to premiums or giveaways, direct
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mail, electronic sales (whether made through the Internet, a commercial online
service or otherwise), and vending machines and for sale at commercial venues
presenting a live stage show based upon the Property such as an arena show or a
touring mall show. As between the parties, such reserved rights are the sole and
exclusive property of, and may be used or exercised solely by, Marvel. Any use
or license by Marvel of such reserved rights, in any manner whatsoever, shall
not be deemed unfair competition with, interference with, breach of or
infringement of any of Licensee's rights hereunder. It is also understood that
Marvel is not required to itself continue the production of the Property or any
part thereof.
(b) Television, etc. Except only for the visual reproduction or
presentation of the actual Licensed Articles licensed hereunder or of the actual
packaging therefor or as may be expressly provided in this Agreement, Licensee
shall not use the Property or Licensed Articles identified with the Property on
or in connection with any manner of television, radio, motion picture,
filmstrip, sound and/or visual recording or transmission device or media or
anything similar to the foregoing now known or hereafter developed without
Marvel's prior written approval. The name and/or likeness of any performer
portraying any character included within the Property, on radio, television, or
in any other media or form shall not be deemed to be included in the
Property, and the use thereof is not licensed.
5. ROYALTIES, PAYMENTS, REPORTS AND RECORDS
(a) Royalties. Licensee agrees to pay Marvel royalties at the Royalty
Rate identified in Section 1. Royalties shall be calculated by applying the
Royalty Rate to Licensee's Net Sales (as herein defined). Net Sales shall mean
the number of units sold by Licensee, or its Related Entities from the sale or
other exploitation of the Licensed Articles or from any use of the Property
permitted hereunder multiplied by Licensee's established wholesale price as
published in its catalog, sales sheet and/or price sheet in force at the time of
sale. No set-offs or deductions of any kind may be taken in the determination of
Net Sales or the royalties due Marvel hereunder except only that Licensee may
deduct standard trade discounts actually given and actual returns for damaged
goods in the determination of Net Sales; notwithstanding the foregoing, the
total deduction for trade discounts and actual returns may not exceed seven
percent (7%) of Licensee's total gross sales for the Licensed Articles. In the
event that any sale or other exploitation of the Licensed Articles licensed
hereunder is made at a price lower than Licensee's ordinary charge for such
items, the royalty on any such sale or exploitation shall be calculated as if
the price were that ordinarily charged by Licensee, regardless of whether or not
Marvel has consented to such reduced price pursuant to Section 13 hereof.
Royalties as specified herein shall become due on the last day of each Calendar
Period specified in Section 1, for all Net Sales accruing in that Calendar
Period and shall be paid not later than the number of days thereafter specified
in Section 1, accompanied by the Royalty Report required herein. Net Sales shall
be deemed accrued for all purposes hereunder no later than ten (10) days after
the invoice to which they relate is issued or the goods to which they relate are
shipped, whichever is first to occur.
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(b) Advance and Minimum Royalty Guarantee - Licensee agrees to pay
Marvel the Minimum Royalty Guarantee specified in Section 1 as a minimum
guarantee against royalties to be paid Marvel during the Term of this license.
As the first installment of the Minimum Royalty Guarantee, upon the signing
hereof, Licensee shall pay Marvel the Advance specified in Section 1. Any unpaid
balance of said Minimum Royalty Guarantee shall be paid to Marvel as provided in
Section 1. No part of the Advance or Minimum Royalty Guarantee shall in any
event be repayable to Licensee.
(c) Currency and Taxes. All payments to Marvel shall be made in the
currency set forth in Section 1, which amounts shall be computed at the exchange
rate existing at noon on the last business day preceding the day payment is due
to be made hereunder. If payment is late, Marvel has the option to require that
payment be made at the exchange rate existing on the day preceding payment. All
taxes, levies, charges or duties imposed on license rights, artwork or similar
material, or payments therefor, shall be paid by Licensee and no deductions for
such taxes, levies, charges or duties shall be made from amounts owed Marvel
hereunder, it being the intent hereof that all royalties payable to Marvel be
free and clear of any taxes, levies, charges or duties of any kind whatsoever.
(d) Royalty Reports. For each Calendar Period specified in Section 1,
commencing with the end of the Calendar Period following the Commencement Date
of this license and continuing until a final certification of wind-up is
delivered, Licensee shall furnish Marvel with a detailed Royalty Report
certified to be accurate by an authorized officer of Licensee, showing all
information called for by the statement form annexed hereto as Exhibit B for
each Licensed Article or item licensed hereunder (whether or not there has been
any actual manufacture or sale of said Licensed Article), additional copies of
which may be obtained from Marvel. Each such Royalty Report shall be furnished
to Marvel to the attention of the persons designated in Section 1, within the
time specified in Section 1 after the end of the Calendar Period for which such
Royalty Report is made, and shall be accompanied by payment to Marvel of any and
all monies due Marvel and by Licensee's most current standard price (setting
forth Licensee's wholesale and suggested retail prices) for the Licensed
Articles. Such Royalty Report shall be furnished to Marvel whether or not there
are any Net Sales during the preceding Calendar Period, and whether or not any
monies are then due Marvel. The failure or refusal of Licensee to timely furnish
any such Royalty Report or payment shall be deemed a substantial and material
breach of this Agreement and shall entitle Marvel to terminate this license as
set forth in Section 15(a) hereof. The receipt or acceptance by Marvel of any of
the Royalty Reports furnished pursuant to this Agreement or of any payments made
hereunder (or the cashing of any checks paid hereunder) shall not preclude
Marvel from questioning its accuracy at any time, and in the event that any
inconsistencies or mistakes are discovered in such Royalty Reports or payments,
they shall immediately be rectified and the appropriate payment made by
Licensee, together with interest on any overdue payments at the rate specified
in Section 17(c) hereof.
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(e) Records. Licensee shall maintain at its expense, detailed,
accurate, full and complete records and books of account covering all
transactions by it relating to this Agreement, and Marvel and its duly
authorized representatives shall have the right, at least twice during each
calendar year during normal business hours, to examine and/or audit such records
and books of account and all other documents and materials in the possession or
under the control of Licensee relating or pertaining to the subject matter or
provisions of this Agreement and to make copies and/or extracts therefrom. In
the event that Marvel's duly authorized representatives shall discover a
deficiency for any accounting period of five percent (5%) or more by any such
examination and/or audit, Licensee shall pay to Marvel the cost of such
examination and/or audit. The Examination Audit Fee per diem shall be as set
forth in Section 1. In no event, however, shall Licensee be charged for any
individual examination in excess of the Examination Audit Maximum set forth in
Section 1. Upon Marvel's demand, Licensee shall at its own expense furnish
Marvel with a detailed report by an independent certified public accountant on
the accuracy and preparation of the aforesaid Royalty Reports. Licensee shall
keep all such books of account and records available to Marvel for at least two
(2) years after the termination or expiration of this license. If Licensee fails
to keep and disclose such records, Marvel shall have the right to estimate, and
have payment for, such additional royalty as may be indicated owing by such
trade information as may be available.
6. MARVEL'S TITLE AND GOODWILL
(a) General. Licensee acknowledges that Marvel is the owner of all
right, title and interest in and to the Property, and further acknowledges the
great value of the goodwill associated with the Property and that the Property
has acquired secondary meaning in the mind of the public and that the trademarks
and copyrights included in the Property, and the registrations therefor, are
valid and subsisting, and further agrees that it shall not during the Term of
this license or at any time thereafter dispute or contest directly or
indirectly, or do or cause to be done any act which in any way contests, impairs
or tends to impair Marvel's exclusive rights and title to the Property, as well
as any properties owned by Marvel which are not licensed hereunder, or the
validity thereof or the validity of this Agreement, and shall not assist others
in so doing.
(b) Representations of Ownership, etc. Licensee shall not in any manner
represent that it has any ownership in the Property, or in any properties owned
by Marvel which are not licensed hereunder, or in any trademarks or copyrights
included in the Property (or registrations therefor), but may, only during the
Term of this license, and only if Licensee has complied with all laws and
registration requirements within the Territory for so doing, represent that it
is a "licensee" or "official licensee" hereunder. Licensee shall not register or
attempt to register any copyright or trademark in the Property, or in any
properties owned by Marvel which are not licensed hereunder, in its own name or
that of any third party, nor shall it assist any third party in doing so.
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(c) Use for Benefit of Marvel. Licensee agrees that any and all uses
and sales by Licensee of the Property under this Agreement shall inure to
benefit of Marvel and that neither such uses or sales nor anything contained in
this Agreement shall give or assign Licensee or any other person or entity any
right, title or interest in the Property, or in any properties owned by Marvel
which are not licensed hereunder, except the right to use the Property
specifically in accordance with the provisions of this Agreement.
7. PROTECTION OF RIGHTS-INCLUDING COPYRIGHTS AND TRADEMARKS
(a) General. Licensee shall cooperate fully and in good faith with
Marvel for the purpose of Marvel's securing and preserving Marvel's (or any
grantor of Marvel's) rights in and to the Property. Upon creation of Licensed
Articles embodying the Property, Licensee shall be deemed to have automatically
assigned to Marvel all copyrights in the Property (and all adaptations,
compilations, modifications, translations and versions thereof) embodied in the
Licensed Articles. In addition, Licensee shall execute any instruments requested
by Marvel to accomplish or confirm the foregoing and hereby irrevocably appoints
Marvel as its attorney-in-fact to execute such instruments if Licensee does not
do so. Any such assignment shall be without other consideration than the mutual
covenants and considerations of this Agreement.
(b) Trademarks. Licensee acknowledges and agrees that the names,
characters, symbols, designs, likenesses, and visual representations, among
other things, comprising the Property are owned by Marvel, and that it shall
cause to appear on everything which uses, bears or displays the Property or any
part thereof, including all Licensed Articles, tags, labels and the advertising,
promotional, packaging and display material therefor, a notice proclaiming and
identifying the relevant portions of the Property appearing therein as
properties of Marvel, as, for example, by labeling each name and character
likeness with the notice specified in Section 1, or otherwise as Marvel may deem
appropriate.
(c) Notice of Supervision. Every Licensed Article and all advertising,
promotional, packaging and display material therefor shall also bear the notice
of supervision specified in Section 1 (or an equivalent if given prior written
approval by Marvel) in order to notify the public that Marvel's standards are
maintained.
(d) Reference to Source. It is agreed that all trademarks and other
references used by Licensee in connection with the Licensed Articles which might
suggest that they are indicias of source, shall, with all of the goodwill
relating thereto, inure to the benefit of and be the sole property of Marvel,
except only that Licensee may use a house mark upon the Licensed Articles
without being deemed to have assigned it to Marvel, provided it fairly appears
only as Licensee's house mark.
(e) Confusing Use. Licensee shall not use, and shall use its best
efforts to keep others from using, the Property in any manner likely to
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cause confusion or doubt in the mind of the public as to the ownership and
control thereof or in any manner that does not make clear that the Property
owned and controlled exclusively by Marvel. In addition, Licensee shall not use
or co-mingle with the Property, and shall use its best efforts to keep others
from using or co-mingling with the Property, any other trademarks, characters or
properties, whether owned by Licensee or another, so as to suggest that such
other trademarks, etc. may have been created or may be owned, controlled,
licensed or approved by Marvel or that they are in any way related to the
Property or Marvel.
(f) Registration. Licensee agrees to fully cooperate with and assist
Marvel in the prosecution of any copyright, trademark or service mark
applications concerning the Property that Marvel may desire to file, and for
that purpose, Licensee shall, upon request, supply to Marvel enough samples of
the Licensed Articles or other material as may be required in connection with
any such application. Furthermore, Licensee shall execute any instrument Marvel
shall reasonably deem necessary or desirable to record or cancel Licensee as a
registered user of the trademarks of Marvel included in the Property, it being
understood and agreed that Licensee's right to use the Property and the
trademarks included therein in any country for which the filing of a registered
user application is required, or is requested by Marvel, shall commence only
upon the filing of such registered user application, but shall continue only so
long as this license remains in effect.
(g) Customer Complaints. Licensee shall, in connection with its duty to
use the Property so as to promote the continuing goodwill thereof, give
immediate attention and take necessary action to satisfy all legitimate customer
complaints brought against Licensee in connection with the Licensed Articles or
other materials using the Property. Licensee shall give Marvel immediate notice
of all complaints that might affect the good standing of the Property or the
reputation of Marvel and also of all complaints that might result in legal
action between Marvel and any third party, and cooperate with Marvel upon
request to achieve as good a reputation and press for the Property as possible.
(h) Copyright Notice. It is a condition of this license that prior to
public distribution, Licensee shall cause to appear the copyright notice
specified in Section 1 on all Licensed Articles, tags, labels and the
advertising, promotional, packaging and display materials therefor, or otherwise
as Marvel may instruct in writing or approve upon request.
(i) Secure Copyrights, etc. Marvel may secure, in its name (or the name
of another, including Licensee, if desired by Marvel), to the fullest extent
possible, the copyrights in the Property and the registrations, renewals and
extensions thereof, embodied in the Licensed Articles, including all
adaptations, translations, modifications and versions of the property. It is
also a condition of this license that all Licensed Articles and other materials
produced under this Agreement shall be produced as works made for hire for
Marvel.
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(j) Claims by Licensee. Licensee shall not commence any court or
administrative action against Marvel or against any other licensee of Marvel
under the Property without giving Marvel thirty (30) days prior written notice
and an opportunity by Marvel and/or such licensee to cure or correct the matter
giving rise to the proposed action during said thirty (30) day period. In the
event of any such action, Licensee shall give Marvel at least fifteen (15) days
prior written notice before seeking any interim injunctive relief or restraining
order.
8. QUALITY OF MERCHANDISE AND SERVICES; LICENSEE NAME ON LICENSED ARTICLES
(a) Prior to the Product Development/Submission Date provided in
Section 1, Licensee agrees to send representatives responsible for product
development and marketing to Marvel's New York Office to attend an initial
product development and marketing meeting at a date and time to be specified by
Marvel.
(b) Licensee agrees that the Licensed Articles shall be of a high
standard and of such style, appearance and quality as shall, in the judgment of
Marvel, be adequate and suited to their exploitation to the best advantage and
to the protection and enhancement of the Property and the goodwill pertaining
thereto; that the Licensed Articles shall be manufactured, packaged, sold,
distributed, advertised and serviced in accordance with all applicable laws;
that the policy of sale, distribution and/or exploitation by Licensee shall be
of equivalent high standard and style; and that the same shall in no manner
reflect adversely upon the Property or Marvel. Licensee further agrees that all
rights granted herein shall be exploited and exercised so as not to interfere
with, detract from, or alter the concepts used by Marvel or known to the public
and that Licensee shall use its best efforts to preserve the concepts therein.
Accordingly, Licensee further specifically covenants and agrees to keep Marvel
informed of its plans for use of the Property, and to consult Marvel as the
Licensed Articles are being prepared, so that there will be full opportunity for
Marvel to deter Licensee from any use that would alter the successful concepts
associated with the Property, including any new concepts Marvel develops for the
Property. Licensee will consult with Marvel at every stage in designing the
Licensed Articles regarding the utilization of the Characters and the Property
and shall work with Marvel to obtain Marvel's creative input concerning the
Characters and the Property and the overall look and direction of the Licensed
Articles. In connection therewith, Licensee shall be faithful in the portrayal
of the Characters to the basic conceptualization of the Characters and the
Property as well as Marvel's most current style guide for such Characters. To
this end, before the first display of any kind of the Licensed Articles or such
other materials, but in no event later than the Product Development /Submission
Date provided in Section 1, Licensee shall submit to Marvel's New York Office,
for written approval without charge, and in a form acceptable to Marvel, all
rough designs, concepts and/or prototypes of each item, class, part or category
of the Licensed Articles and/or with respect to any Character licensed
hereunder. After such rough material has been approved by Marvel, and before any
public display, Licensee shall further submit to Marvel's New York Office, for
written approval without charge, and in a form acceptable to Marvel, a
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pre-production sketch or model of each item, class, part or category of the
Licensed Articles and/or with respect to any Character licensed hereunder. Any
item submitted to Marvel shall be deemed disapproved unless the same shall be
approved in writing within twenty (20) days of receipt of the item. Licensee
shall have ten (10) business days from receipt of Marvel's disapproval (or
approval subject to modifications) of any submission, to make such modifications
as Marvel may request and to re-submit the so revised material to Marvel for its
written approval. If Licensee fails to submit the modified materials for
approval within said ten (10) business day period on three occasions,
notwithstanding anything to the contrary contained in this Agreement, Marvel
shall have the right to terminate this Agreement upon written notice with no
cure period being required. Except as otherwise provided in this Section 8(b),
Licensee's failure to comply with any of the provisions of this section shall be
deemed a substantial and material breach of this Agreement and shall entitle
Marvel to terminate this license as set forth in Section 15(e) hereof.
(c) Revocation of Approval. In the event that the quality, appearance
or style of any Licensed Article previously approved by Marvel ceases to be
acceptable to Marvel, Marvel shall have the right, in its sole discretion to
withdraw its approval of such Licensed Article and to require that Licensee
redesign such Licensed Article in a manner consistent with Marvel's new
policies. In the event of such withdrawal, Licensee shall as soon a practicable
cease the production of the previously approved Licensed Article and shall have
a four (4) month sell-off period for such Licensed Article.
(d) The Marvel Comic's logo (or such other logo as Marvel designates)
and Licensee's name, trade name (or a trademark of Licensee which Licensee has
advised Marvel in writing that it is using) shall appear on permanently affixed
labeling on each Licensed Article and, if the Licensed Article is sold to the
public in packaging or a container, printed on such packaging or a container so
that the public can identify the supplier of the Licensed Articles. On soft
goods, "permanently affixed" shall mean sewn on. On hard goods, "permanently
affixed" shall mean molded into the product. On packaging, "permanently affixed"
shall mean printed on the package. Licensee shall advise Marvel in writing of
all trade names or trademarks it is using on Licensed Articles being sold under
this license if such names or marks differ from your corporate name as indicated
herein. In addition, each Licensed Article shall bear an official Marvel hang
tag, which Licensee shall purchase from a supplier designated by Marvel.
9. INSPECTION AND APPROVAL
(a) Samples for Approval. The nature, quality, style and labeling of
the Licensed Articles and the packaging, labels, advertising and promotional
material therefor as well as any press releases or public statements involving
the Licensed Articles or this License Agreement, shall have the prior written
approval of Marvel. To this end, before the first sale, distribution, display or
release of any kind or in any media of the Licensed Articles or such other
materials, Licensee shall submit to Marvel's New York Office, for Marvel's
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written approval without charge, the number of samples specified in Section 1 of
each Licensed Article manufactured hereunder upon completion of the first
production, and each different piece of advertising, promotional, packaging and
label material therefor as well as any proposed press releases or public
statements involving this License Agreement (the "Associated Material").
Annually thereafter, Licensee shall submit to Marvel's New York Office, free of
cost, for Marvel's written approval, the number of samples specified in Section
1 of each of the finished Licensed Articles and each different piece of
Associated Material therefor. Any item submitted to Marvel shall be deemed
disapproved unless the same shall be approved in writing within twenty (20) days
of receipt of the samples. Licensee shall have ten (10) business days from
receipt of Marvel's disapproval (or approval subject to modifications) of any
submissions to make such modifications as Marvel may request) and to re-submit
the so revised material to Marvel for its written approval. If Licensee fails to
submit the modified materials for approval within said ten (10) business day
period on three occasions, Marvel shall have the right, notwithstanding anything
to the contrary contained in this Agreement, to terminate this Agreement upon
written notice with no cure period being required. After samples have been
approved pursuant to this section, Licensee shall not depart therefrom in any
respect without Marvel's prior written consent. No approval of any submitted
product or item by Marvel shall be construed to expand or enlarge the scope of
the license granted hereunder. Licensee shall use reasonable efforts to make
such changes as are reasonably requested by Marvel after an inadvertent approval
or a change of conditions. In the event that this license involves the
manufacture and/or sale of a food or drink product or a product intended for
human use in the manner of a soap, shampoo, or a similar product, then it is an
essential condition of this license, and Licensee covenants and agrees, that
there shall not be the slightest departure from the quality or the formula
approved by Marvel without the written consent of Marvel obtained in advance.
(b) Inspection. Marvel or its authorized agents or representatives
shall have access to Licensee's premises at all reasonable times, upon
reasonable notice, with the right to a full inspection of the production of the
Licensed Articles in order to satisfy itself that its standards are maintained,
and with the right to be supplied, on request, with a reasonable number of free
samples of all Licensed Articles in preparation and the raw materials and
ingredients used therein.
10. INDEMNIFICATION, LITIGATION AND INSURANCE
(a) In its use of the Property, or any element or portion thereof,
under this Agreement, Licensee shall exercise reasonable care, and shall
cooperate fully with Marvel, to avoid infringing any rights found to be owned by
others in the Territory. Upon learning of the existence or possible existence of
rights held by others which may be infringed by the use of any element or
portion of the Property under this Agreement, Licensee shall promptly notify
Marvel in writing.
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(b) Infringement. Licensee shall promptly notify Marvel, in writing, of
any imitations or infringements of the Property or the rights licensed hereunder
which may come to Licensee's attention. Marvel shall have the sole right to
determine whether or not any demand, suit or other action shall be taken on
account of or with reference to any such infringements or imitations, and
Licensee shall not institute any suit or take any action on account of any such
infringements or imitations without first obtaining the written consent of
Marvel to do so. Marvel, if it so desires, may commence or prosecute any suits
or make any such demands in its own name or in the name of Licensee or join
Licensee as a party thereto. Licensee shall cooperate with Marvel and in any
manner that Marvel may request in connection with any such demands, suits,
claims or other actions. If Marvel elects not to sue, Licensee may request
permission to bring suit and, with written permission, may bring suit at its own
expense, provided Licensee indemnifies Marvel against any loss or damage,
including any loss or damage to reputation or goodwill, and provided that trial
counsel is approved by Marvel, keeps Marvel fully informed, and further provided
that Marvel shall have the right to assume control of the litigation at any
time, but is thereupon responsible for its own further litigation expense.
Nothing herein shall be construed as imposing any obligation upon Marvel to take
action against any alleged infringer, nor to relieve Licensee from full
compliance with any of the terms of this Agreement in the event that Marvel does
not take such action.
(c) Indemnification of Licensee. Marvel shall defend, indemnify and
hold Licensee harmless of, from and against any charges, suits, damages, costs,
expenses (including attorneys' fees), judgments, penalties, claims, liabilities
or losses of any kind or nature whatsoever, which may be sustained or suffered
by or secured against Licensee based upon or arising out of any actual or
alleged trademark or copyright infringement arising solely out of the use by
Licensee of the Property as authorized in this Agreement, provided that: prompt
notice is given to Marvel of any such claims or suits and provided further that:
Marvel shall have the option to undertake and conduct the defense and/or
settlement of any such claims or suits and that Licensee cooperates with Marvel
in the defense of any such claims or suits and Licensee acts to mitigate any
damages, and that no settlement of any such claims or suits is made without the
prior written consent of Marvel. Marvel does not warrant any present or future
commercial value of the Property.
(d) Indemnification of Marvel. Licensee shall defend, indemnify and
hold Marvel, its parents, subsidiaries, associated and affiliated companies,
harmless of, from and against any charges, suits, damages, costs, expenses
(including attorneys' fees), judgments, penalties, claims, liabilities or losses
of any kind or nature whatsoever, which may be sustained or suffered by or
secured against Marvel in connection with the Licensed Articles, or based upon
or arising out of any actual or alleged unauthorized use of any patent, trade
secret, process, idea, method or device, or any copyright or trademark, other
than under this license, or the packaging, distribution, promotion, sale or
exploitation of the Licensed Articles, any actual or alleged defect in the
Licensed Articles or their packaging, whether latent or patent, including
failure of said Licensed Articles or their packaging, distribution, promotion,
sale or exploitation to meet any Federal, State or local laws or standards; or
any other actual or alleged unauthorized action of Licensee, including a breach
of any term of this Agreement.
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(e) Insurance. Licensee shall obtain at its own expense and maintain
during the Term of this Agreement and for seven (7) years thereafter, general
liability insurance including advertising, blanket contractual, product
liability and completed operations liability coverages. In the event the
Licensed Articles are books or other published materials or of an electronic
nature such as software, computer programs, etc., Licensee also shall obtain at
its own expense and maintain during the Term of this Agreement and for seven (7)
years thereafter (ten (10) years if the policy form is claims made) multi-media
liability insurance which provides coverage for claims arising out of the
published material and shall include but not be limited to the allegations of
defamation, copyright infringement, invasion of right of privacy, or other
personal injury and breach of implied contract. All insurance must be provided
by a recognized insurance company having a Best's Rating of no less than "A"
providing adequate protection at least in the amounts specified in Section 1 for
personal bodily injury and property damage for Marvel and also for Licensee.
Said insurance shall be primary and non-contributory with respect to any
insurance carried by Marvel. As proof of such insurance, a fully paid
certificate of insurance naming Marvel, its parent, subsidiary, associated and
affiliated companies is insured parties shall be submitted to Marvel's New York
Office by Licensee before any of the Licensed Articles are distributed or sold,
and at the latest within thirty (30) days after execution of this Agreement.
Said insurance coverage shall be effective as of the date first written above.
Any proposed change in the insurance policy(ies) affecting Marvel's coverage
shall be submitted for review as to the policy compliance with the terms and
conditions of this Agreement, to Marvel's New York Office. Marvel shall be
entitled, throughout the Term of this Agreement, to a copy of the prevailing
policy(ies) of insurance, which shall be furnished to Marvel's New York Office
by Licensee. The policy(ies) of insurance must be non-cancelable except after
thirty (30) days prior written notice to Marvel's New York Office. As used in
Section 10(b) and (d), "Marvel" shall also include the agents, employees,
assignees and any sponsor of Marvel, any advertising agency, and their
respective officers, directors, agents and employees. This provision shall
survive the termination or expiration of this Agreement.
11. ARTWORK
Marvel shall supply Licensee subject to availability, with reasonable
amounts of artwork from the Marvel Style Guide depicting the Property for use in
the Licensed Articles upon reasonable request by Licensee. The cost of providing
copies of such style guide artwork, and the cost of both producing and providing
copies of artwork, other than style guide artwork, which is specifically
requested by and specifically prepared for Licensee or the reproduction thereof
shall be paid by Licensee upon invoicing therefor. Licensee understands that in
the event any fees or royalties are due creators or artists as a result of
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certain artwork or storylines, Licensee shall be responsible for the payment of
such fees and/or royalties upon invoicing therefor. Payment of artwork and any
fees associated therewith shall not be credited against any guarantee or other
amount due Marvel. In addition, Licensee may produce within the Territory,
directly or through other persons approved by Marvel, any artwork Licensee needs
in connection with this license and, subject to obtaining Marvel's approval
pursuant to Section 9(a) hereof, may reproduce and use such artwork for the
purposes set forth in, and subject to the limitations imposed by, this
Agreement. No such artwork may be reproduced or used unless the notices required
under Section 7 are included thereon. All artwork involving the Property, or any
reproduction thereof, and all copyrights therein shall, notwithstanding its
creation or use by Licensee or other persons for Licensee, be and remain solely
the property of Marvel and Marvel shall be entitled to use the same and to
license the use of the same by others. Any reproduction or use of such artwork
shall be on a non-exclusive basis. Licensee shall obtain and promptly furnish to
Marvel's New York Office on the form annexed hereto as Exhibit C, an agreement
signed by each person who creates, prepares or produces for or on behalf of
Licensee (whether as an employee, an independent contractor or otherwise) any
artwork involving the Property or any reproduction thereof, stating that such
artwork is a work made for hire for Licensee under the U.S. Copyright Laws and
acknowledging that such person has no copyright or other rights of any kind in
or to such artwork. Licensee shall be deemed to have automatically assigned to
Marvel all copyrights in such artwork created by or for Licensee. Further,
Licensee shall execute any instruments requested by Marvel to accomplish or
confirm the foregoing assignment, and hereby irrevocably appoints Marvel as its
attorney-in-fact to execute such instruments if Licensee does not do so.
12. PROMOTION
Marvel shall have the right, but shall not be under any obligation, to
use the Property and/or the name of Licensee so as to give the Property,
Licensee, Marvel and/or programs connected with the Property full and favorable
prominence and publicity. If the Licensed Articles appear in film produced by or
under authority of Marvel, there shall be no obligation by Marvel to discontinue
use of such film or any part thereof at the expiration or termination of this
license and such continued use shall in no way be construed as an extension of
the Term hereof or of this license.
13. DISTRIBUTION AND ADVERTISING
(a) Licensee shall diligently and continuously use its best efforts
throughout the entire Territory licensed hereunder and during the entire Term of
this license to distribute and sell the Licensed Articles, to make and maintain
adequate arrangements for the distribution of the Licensed Articles, to promote
and expand its sales hereunder to achieve the highest gross Revenues practicably
obtainable and to compete with any similar businesses, products or services.
Licensee shall sell and distribute the Licensed Articles at a competitive price
and not on an approval, tie-in, consignment or 'sale or return' basis, and only
to jobbers, wholesalers and distributors for sale and distribution to retail
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stores and merchants, and to retail stores and merchants for sale and
distribution direct to the public. Licensee shall also have the right to
distribute and sell the Licensed Articles on home shopping television programs
provided Marvel's prior written approval of the dates for the shows, and the
Marvel product to be featured thereon, is obtained so that Marvel may avoid any
conflicts with any previously scheduled home shopping television shows featuring
Marvel product. Failure to submit for prior written approval the dates of the
show or the product shall be considered a breach of this Agreement for which
Marvel shall have the right, notwithstanding anything to the contrary contained
in this Agreement, upon written notice to Licensee, to terminate Licensee's
rights to distribute and sell the Licensed Articles on home shopping television
programs. Licensee acknowledges that it has no right to and shall not, without
prior written consent of Marvel, sell or distribute the Licensed Articles to
anyone whose sales or distribution are or will be made for publicity,
promotional or tie-in purposes, combination sales, premiums, giveaways, vending
machines, or similar methods of merchandising, or whose business methods are or
are reported to be questionable. Licensee shall not sell any of the Licensed
Articles at a price twenty-five percent (25%) or more below Licensee's
established price for such Licensed Article, without obtaining Marvel's prior
written consent.
(b) Licensee shall commit a minimum of five percent (5%) of Licensee's
net revenues derived from sales of the Licensed Articles for the purpose of
establishing a fund for the promotion of the Licensed Articles during each year
of the Term of this Agreement (the "Advertising and Promotion Commitment Fund").
The amount of the Advertising and Promotion Commitment Fund shall not be
deducted from royalties owed Marvel or applied to any trade discounts permitted
under Section 5(a). The Advertising and Promotion Commitment Fund shall be used
solely for fixtures, displays, retail promotions, sales materials and catalogs
promoting the Licensed Articles. All such use shall be subject to the approval
provisions set forth in Section 9 (a). Any other materials for which Licensee
desires to use the Fund must be first approved by Marvel in writing. Licensee
shall be responsible for maintaining the Advertising and Promotion Commitment
Fund; however, the Fund (or a portion thereof) shall be made available to Marvel
upon request for use by Marvel in the advertisement and promotion of the
Licensed Articles. Licensee shall report its expenditures from the Advertising
and Promotion Commitment Fund every twelve (12) months to Marvel's New York
Office accompanied by supporting documentation.
14. SALE TO MARVEL
(a) Licensee agrees to sell to Marvel the Licensed Articles at
Licensee's cost for such Licensed Articles, and shall deliver the Licensed
Articles to Marvel at Marvel's expense, and in any quantity Marvel orders,
provided that (i) the Licensed Articles so purchased shall not be resold by
Marvel and (ii) the Licensed Articles so purchased shall be on a royalty-free
basis.
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(b) In the event Marvel wishes to purchase the Licensed Articles for resale
purposes, Licensee shall sell to Marvel the Licensed Articles in any quantity
Marvel desires at no greater than Licensee's lowest wholesale selling price
offered to third parties for such quantities, and Licensee shall pay royalties
on all such sales to Marvel in accordance with the provisions hereof.
15. TERMINATION
(a) In the event of failure by Licensee to furnish the royalty payments
and/or Royalty Reports required hereunder in accordance with Section 5 hereof or
to timely pay the Minimum Royalty Guarantee payments in accordance with Section
1 of the Agreement, Marvel shall have the right to terminate this license upon
ten (10) days' notice in writing, and such notice of termination shall become
effective unless, within such ten (10) day period, Licensee shall completely
remedy the breach and furnish the required payments and/or Royalty Reports. In
the event Licensee fails to submit samples prior to production or sale of the
Licensed Articles in accordance with Section 9(a) hereof, or failure by Licensee
to obtain Marvel's written approval of the samples submitted by Licensee in
accordance with Section 9(a) hereof, this Agreement will automatically terminate
with no prior notice to Licensee being required.
(b) Change in Character of Licensee. It is understood that the grant of
the license herein by Marvel is premised upon the present character and
composition of Licensee's management and Licensee's general good standing and
reputation in the business community, and is therefore personal to Licensee. In
the event of the sale or transfer of a substantial portion of the assets of
Licensee's business or of a change in the controlling interest in Licensee's
business or of a merger or consolidation of Licensee's business with any other
entity, or in the event of substantial change in the management of Licensee or
of Licensee's property being expropriated, confiscated or nationalized by the
government, or in the event of the de facto control of Licensee or of any its
subdivisions or agencies being assumed by a government, or government agency or
representative, Marvel may, at its option, terminate this license on thirty (30)
days' written notice to Licensee.
(c) Trade Introduction. In the event of failure by Licensee to introduce the
Licensed Articles to retail accounts constituting eighty percent (80%) of
Licensee's anticipated Net Sales by the Trade Introduction Date provided in
Section 1, Marvel shall have the right to terminate this license upon thirty
(30) days notice in writing, and such notice of termination shall become
effective unless, within said thirty (30) day period, Licensee shall remedy the
violation and comply with all conditions, and reasonably satisfy Marvel that it
has done so.
(d) Diligent Distribution. If within three (3) months from the applicable
Consumer Introduction Marketing Date or if no such date is specified, within
six (6) months after the effective date of this Agreement, or thereafter if in
any three (3) consecutive months, Licensee fails to
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manufacture and sell substantial quantities of each item, class, part o category
of the Licensed Articles within the Territory, or fails to so manufacture and
sell Licensed Articles using each of the Characters included in the Property,
Marvel, in addition to all other options and remedies available to it hereunder,
may terminate this license on written notice with respect to any such item,
class, part or category of the Licensed Article: and/or with respect to any
Characters which have not been so used, sold and distributed. Such notice shall
be effective when mailed to Licensee with no prior notice to Licensee being
required.
(e) Other Breach. Except as otherwise specifically set forth in this Agreement,
if Licensee shall violate, breach or be in default of any of its covenants or
obligations under this Agreement or shall use bad faith in carrying out the
provisions of this Agreement, Marvel, in addition to all other rights, also
shall have the right to terminate this license upon thirty (30) days written
notice, and such notice of termination shall become effective within said thirty
(30) day period, unless Licensee shall completely remedy the violation and
satisfy Marvel that all reasonable steps have been taken to prevent
reoccurrence.
(f) Other Licenses and Properties. Licensee acknowledges and agrees that if
Licensee violates any of its obligations under this Agreement, Marvel shall have
the right to terminate any other License Agreement with Licensee (or any
affiliate of Licensee). In addition, Licensee acknowledges and agrees that if
Licensee violates its obligations under any other License -agreement between
Marvel and Licensee (or any affiliate of Licensee), or if Licensee (or any
affiliate of Licensee) uses the Property or any part thereof beyond the scope of
the license granted herein or uses any properties owned by Marvel which are not
licensed to Licensee, Marvel shall have the right to terminate this License
Agreement. In either event, Marvel's right to terminate shall be effective upon
ten .(10) days notice in writing and such notice shall become effective unless
Licensee shall completely remedy the violation within the ten (10) day period
and satisfy Marvel that such violation has been remedied.
16. OBLIGATIONS ON EXPIRATION OR TERMINATION
(a) Reversion of Right. Immediately upon the expiration or termination of
this license for any cause whatsoever, all the rights granted to Licensee
hereunder shall cease and revert to Marvel, who shall be free to license others
to use any or all of the rights granted herein effective on and after such date
of expiration or termination. To this end, Licensee will be deemed to have
automatically assigned to Marvel upon such expiration or termination, all
copyrights, trademark and service mark rights, equities, good will, titles and
other rights in or to the Property and all adaptations, compilations,
modifications, translations and versions thereof, and (except for Licensee's
house mark) all other trademarks and service marks used in connection therewith
which have been or may be obtained by Licensee or which may vest in Licensee and
which have not already been assigned to Marvel. Licensee shall upon the
expiration or termination of this license execute any instruments requested by
Marvell to accomplish or
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confirm the foregoing, and hereby irrevocably appoints Marvel as its
attorney-in-fact to execute such instruments if Licensee does not do so. Any
such assignment shall be without other consideration than the mutual covenants
and considerations of this Agreement. In addition, upon and after such
expiration or termination of this license for whatever reasons, Licensee will,
except as specifically provided in Section 16(e) hereof, forthwith refrain from
further use of the Property or Marvel's name, or any further reference to any of
them, direct or indirect, or of anything deemed by Marvel to be similar to the
Property.
(b) Return of Artwork. Upon termination or expiration of this Agreement for
any reason whatsoever, Licensee shall return to Marvel's Nev York Office all
artwork, including but not limited to all reproductions and all artwork
specially produced for Licensee by Marvel or others, whether or not paid for by
Licensee.
(c) No Release. The termination or expiration of this license shall not
release any party of any obligation to pay any monies that became due or owing
or arose out of any transaction prior to the date of termination or expiration,
and all royalties on sales or shipments theretofore made shall become
immediately due and payable with no part of the minimum royalty guarantee being
repayable, and any balances of the minimum royalty guarantee owed to Marvel
shall be immediately due and payable.
(d) Inventory. Fifteen (15) days before the expiration of this license and,
in the event of its termination, fifteen (15) days after receipt of notice of
termination or the happening of the event which terminates this license where no
notice is required, a statement executed by an officer of Licensee certifying
the number and description of the Licensed Articles in inventory or in process
shall be furnished by Licensee to Marvel's New York Office. Marvel shall have
the right to take a physical inventory to ascertain or verify such inventory and
statement, and Licensee's failure to furnish such statement or the refusal by
Licensee to submit to such physical inventory shall forfeit Licensee's right to
dispose of such Licensed Articles as provided in Section 16(e), hereof.
(e) Disposal. After expiration of this license, for the Post-Expiration
Disposal Period specified in Section 1, Licensee may, except as otherwise
provided in this Agreement', dispose of, on a nonexclusive basis, and in
compliance with all of the terms and conditions hereof, including Section 13,
those Licensed Articles which are on hand or in process at expiration or
termination, provided royalties with respect to such Calendar Period are paid
and Royalty Reports are furnished for such Calendar Period in accordance with
Section 5 hereof. Royalties on Net Sales during the Disposal Period may not be
applied against any unearned balance of the Minimum Royalty Guarantee.
Notwithstanding anything to the contrary herein, Licensee shall not sell or
dispose of any Licensed Articles after detrmination of this Agreement pursuant
to Section 15.
(f) Undisposed Licensed Articles. Upon expiration or termination of this
license, or upon the expiration of the period for disposal where
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permitted under the previous subsection, title to all remaining License
Articles, if any, and all tags, labels, packaging, advertising? promotional and
display materials therefor, and all molds, plates, engravings and/or mechanicals
used to make any of the Licensed Articles or any of the aforesaid materials,
shall be deemed to have automatically vested in Marvel Licensee shall
immediately deliver such remaining Licensed Articles materials, and items to
Marvel's New York Office at no expense to Marvel and Marvel shall have the right
to enter the business premises of Licensee and take possession of them or
Licensee shall destroy such License, Articles, materials and items if so
requested by Marvel, and shall furnish Marvel's New York Office with a
certificate of destruction executed by an officer of Licensee.
17. REMEDIES
(a) General. In addition to the right to terminate, Marvel may, upon any
default by Licensee, take whatever action it deems reasonably necessary to
protect its rights and interests hereunder, and termination of this license
shall be without prejudice to any rights or remedies which Marvel may otherwise
have against Licensee.
(b) Use after Termination, etc. Licensee acknowledges that its failure to
cease the use of the Property or to cease sale or distribution of the Licensed
Articles at the termination or expiration of this license, except as expressly
provided herein, will result in immediate and irreparable damage to Marvel and
to the rights of any subsequent licensee. Licensee acknowledges and admits that
there is no adequate remedy at law for such failure, and Licensee agrees that in
the event of such failure, Marvel shall be entitled to injunctive relief and
such other and further relief as any court with jurisdiction may deem just and
proper.
(c) Interest, Damages and Cost. In the event Licensee shall default in the
payment of monies required to be paid to Marvel hereunder, in addition to any
remedies which Marvel may have at law or in equity to recover any such monies as
may be due and owing, Marvel shall be entitled to receive from Licensee interest
on such monies as may be owing from the date of default at a rate equal to three
percent (3%) above the prime lending rate charged by Marvel's bank in New York
on the date of default. In the event that Licensee is in breach or default
hereof, then Licensee shall be responsible for the damages and expenses caused
Marvel thereby, including attorneys' fees, incurred by Marvel to enforce any of
its rights hereunder, such as, for example, the seeking of a temporary
restraining order or an injunction, or the obtaining of damages.
18. SUBCONTRACT MANUFACTURE
Licensee may utilize a third party subcontract manufacturer approved in
writing by Marvel in connection with the manufacture and production of the
Licensed Articles, provided that such subcontractor shall execute a letter in
the form of Exhibit D attached hereto and by this reference made a part hereof.
In such event, Licensee shall remain primarily obligated under all
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of the provisions of this Agreement. In no event shall any such subcontract
manufacturer agreement include the right to grant any further sublicenses.
19. GENERAL
(a) Integrity of Agreement. This Agreement contains and embodies the entire
agreement and understanding of the parties concerning the subject matter hereof.
No warranties, representations, understandings, inducements promises,
guarantees, agreements or conditions, express or implied, not expressly
contained herein, have been made or shall be enforceable by either party
concerning the subject matter hereof or any relationship between the parties.
Nothing contained herein shall be deemed an express or implied warranty on the
part of Marvel that efforts to gain copyright, trademark or service mark
registration will be successful, or that the Property has or will in the future
have any commercial value, and it is understood that no liability shall attach
to Marvel for any failure to secure such registration, nor shall there be any
modification hereof for such reason.
(b) Relationship Between the Parties. The relationship between the parties
hereto is that of licensor and licensee, and this Agreement is not to be
construed as creating a partnership, joint venture, master-servant, principal
- -agent, or other relationship for any purpose whatsoever. Except as may be
expressly provided herein, neither party may be held for the acts either of
omission or commission of the other party, and neither party is authorized to
or has the power to obligate or bind the other party by contract, agreement,
warranty, representation or otherwise in any manner whatsoever.
(c) Force Majeure. Licensee and Marvel shall be released from their
obligations hereunder and this license shall terminate with respect to such
territory, field or part thereof as to which governmental regulations or other
causes arising out of a state of national emergency renders performance
impossible and one party so informs the other in writing of such causes and its
desire to be released. In such event, all royalties on sales theretofore made
with respect to such territory, field or part and all guarantees, prorated until
the time of termination, shall, become immediately due and payable and no part
of any Advance or Minimum Royalty Guarantee shall be repayable.
(d) Mailing Addresses. All notices, reports and statements to be given and
all payments to be made hereunder, shall be given or made by first class,
Registered or Certified mail at the respective addresses of the parties as set
forth above, unless notification of a change of address is given in writing, and
the date of mailing, as post-marked, shall be deemed the date the notice, report
or statement is given. The mailing of a notice by Registered or Certified mail
shall constitute notice hereunder even in the event of non-receipt or refusal
to accept by addressee.
(e) Survival and Separability. Notwithstanding anything to the contrary
herein, all provisions hereof are hereby limited to the extent mandated by any
applicable law or decisions. If any one or more paragraphs,
-20-
<PAGE>
clauses or other portions hereof should ever be determined to be illegal invalid
or otherwise unenforceable by a court of competent jurisdiction or be
illegal, invalid or invalidated or unenforceable within any jurisdiction by
reason of any existing law or statute, then to that extent and within the
jurisdiction in which it is illegal, invalid or unenforceable it shall be
limited, construed or severed and deleted herefrom, and the remaining extent
and/or remaining portions hereof shall survive, remain in full force and effect
and continue to be binding and shall not be affected except insofar as may be
necessary to make sense hereof, and shall be interpreted to give effect to the
intention of the parties insofar as that is possible.
(f) Assignment or Sublicense. This Agreement and the license rights granted
hereunder are personal to Licensee and shall not in any manner whatsoever be
assigned, sublicensed, hypothecated, mortgaged, divided or otherwise encumbered
by Licensee to or with any other person or entity without Marvel's prior written
consent which it may withhold in its sole discretion but no such assignment by
Licensee shall release Licensee from any of its obligations or liabilities
hereunder. This Agreement and the provisions hereof shall be binding at all
times upon and inure to the benefit of the parties hereto, their successors and
permitted assigns. Any attempted assignment in violation of the provisions
hereof shall be void ab initio and the assignee shall obtain no rights by reason
thereof.
(g) Construction and Jurisdiction. This Agreement shall be construed and
interpreted in accordance with the laws of the State of New York applying to
contracts fully executed and performed in New York. Licensee agrees to submit to
jurisdiction in the courts (both Federal and State) of New York State for any
action brought by Marvel or Licensee hereunder, to bring no action in any other
Court, and Licensee further agrees to accept service of process by mail at its
above written address, and Licensee also designates the Secretary of State of
New York and the state of Licensee's incorporation to accept service of process
by mail on behalf of Licensee. The titles and headings of the sections,
subsections and other divisions of this Agreement are inserted merely for
convenience and identification and shall not be used or relied upon in
connection with the construction or interpretation of this Agreement.
(h) No Waiver. None of the provisions hereof shall be deemed to be waived or
modified, nor shall they be renewed, extended, altered, changed or modified in
any respect except by an express agreement in writing duly executed by the party
against whom enforcement of such waiver, modification, etc. is sought. The
failure of either party hereto to object to the failure on the part of the other
party to perform any of the terms, provisions or conditions hereof or to
exercise any option herein given or to require performance on the part of the
other party of any term, provision or condition hereof, or any delay in doing
so, or any custom or practice of the parties at variance therewith, shall not
constitute a waiver or modification hereof or of any subsequent breach or
default of the same or a different nature, nor affect the validity of any part
hereof, nor the right of either party thereafter to enforce the same, nor
constitute a novation or laches.
-21-
<PAGE>
ATTEST
IN WITNESS WHEREOF, and intending to be legally bound thereby the
parties hereto have caused this instrument to be duly executed as of the day and
year first above written.
MARVEL CHARACTERS, INC.
By: /s/ William H. Hardic, III
-------------------------------
Name: William H. Hardic, III
-----------------------------
Title: Vice President
----------------------------
Date: 11/22/99
-----------------------------
LICENSEE: Collectible Concepts Group
By: /s/ Paul S. Lipschutz
-------------------------------
Name: Paul S. Lipschutz
-----------------------------
Title: President
----------------------------
Date: 11/8/99
-----------------------------
Attachments:
Licensed Articles List (Exhibit A)
Royalty Report Form (Exhibit B)
Work Made For Hire Letter Form (Exhibit C)
Subcontract Manufacturer Letter Form (Exhibit D)
-22-
<PAGE>
Exhibit A D99060
LICENSED ARTICLES
Novelty Items: Graduation Rings, dog tags, pins, and belt buckles.
Collectible items: Resin replicas of the featured motorcycle, and black jet
(with a retail price of not less than $150 each). Resin or metal replicas of
Cyclops's visor, Magneto's helmet, Professor X's computer (Cerebro), and
Wolverine's adamantium claws and skeleton.
Collector's Club: A marketing continuity program offer to consumers for under
$29.99. The collector's club will be offered electronically and through direct
mail and will offer Licensee's own "X-Men" product.
-23-
<PAGE>
EXHIBIT B
MARVEL CHARACTERS, INC.
ROYALTY REPORT
<TABLE>
<CAPTION>
<S> <C>
Contract #: D99060
Licensee Name: _______________________ All Product Codes:
Contact Person: _______________________
Phone Number: _______________________ All Character Codes:
Fax Number: _______________________ Period Covered: From:_______________ To: _______________
ROYALTY INFORMATION
==================================================================================================================================
Licensee Marvel All Characters & Product Units Unit Price Gross Actual Net Royalty Royalty
SKU # Job Jkt# Respective Codes Code Sold By Item Sales Returns Sales % Earned
On SKU Dollars
- ----------------------------------------------------------------------------------------------------------------------------------
- ----------------------------------------------------------------------------------------------------------------------------------
- ----------------------------------------------------------------------------------------------------------------------------------
- ----------------------------------------------------------------------------------------------------------------------------------
- ----------------------------------------------------------------------------------------------------------------------------------
- ----------------------------------------------------------------------------------------------------------------------------------
- ----------------------------------------------------------------------------------------------------------------------------------
==================================================================================================================================
Total Royalties Earned _________________________
Less Unrecouped Advance _________________________
Balance Due Marvel _________________________
Prepared By: ___________________________
(please print)
Check Enclosed For: $__________________________
PLEASE REMIT TO: Bank of America Remittance Duplicate copy to: Accounts Receivable
File Number 54628,1000 West Temple Street Marvel Entertainment Group Inc.
Los Angeles, CA 90071 387 Park Avenue South
Attn: Operations New York, NY 10016
</TABLE>
-24-
<PAGE>
Exhibit C
AGREEMENT made this day of , 19 , between residing at (herein
"Supplier") and Collectible Concepts Group residing at Collectible Concepts
Group (herein "Licensee").
Licensee has been licensed by Marvel Characters, Inc. (herein "Marvel")
to produce and/or market certain merchandise based upon and utilizing literary
and/or artistic properties owned by Marvel. Supplier wishes to have Licensee
order or commission either written material or art work as a contribution to a
collective Work to be used by Licensee pursuant to the license from Marvel.
Marvel has informed Licensee that Marvel will permit the preparation of such
written material or art work only if it is commissioned on a work made-for-hire
basis.
THEREFORE, the parties agree as follows:
In consideration of Licensee's commissioning and ordering from Supplier
written material or art work and paying therefor, Supplier acknowledges, agrees
and confirms that any and all work, writing, art work material or services,
including all notes, sketches, drafts, etc. therefor (the "Work") which have
been or are in the future created, prepared or performed by or on behalf of
Supplier for Licensee involving, based upon, utilizing, derived from,
incorporating or referring to any properties, characters or materials of Marvel
have been and will be specially ordered or commissioned for use as a
contribution to a collective work; that the Work was produced under the
supervision and control and pursuant to the direction of Licensee; and that as
such, the Work was and is expressly agreed to be considered a work made for hire
pursuant to all copyright laws applicable to the Work.
Supplier expressly grants to Licensee forever all worldwide rights of
any kind and nature in and to the Work and agrees that as between Supplier and
Licensee, Licensee is the sole and exclusive copyright proprietor thereof
throughout the world. Supplier perpetually agrees (i) not to contest Licensee's
or Marvel's exclusive, complete and unrestricted ownership in and to the Work,
(ii) not to claim any ownership in the Work; (iii) not to use or exploit or
claim the right to use or exploit the Work in any manner; and (iv) not to object
to any exploitation or use of the Work or to any changes, modifications, or
revisions to the Work made by or on behalf of Licensee or Marvel, and Supplier
hereby waives any moral rights of any kind or nature in the Work.
This Agreement shall be binding upon and inure to the benefit of the
parties hereto and to the benefit of Marvel, and their respective heirs,
successors, administrators and assigns.
-25-
<PAGE>
In WITNESS WHEREOF, the parties hereto have executed this Agreement as
the date first above written.
Supplier: Licensee: Collectible Concepts
Group
By:_________________________________ By:______________________________________
Name:_______________________________ Name:____________________________________
Title:______________________________ Title:___________________________________
Date:_______________________________ Date:____________________________________
-26-
<PAGE>
Exhibit D
Dated __________ 19__
Marvel Characters, Inc.
c/o Marvel Entertainment Group, Inc.
387 Park Avenue South
New York, NY 10016
This letter will serve as notice to you that pursuant to Section 18 of
the License Agreement dated October 1, 1999 between you and Collectible Concepts
Group, we have been engaged as the subcontract manufacturer for Collectible
Concepts Group in connection with the manufacture of the Licensed Articles
defined in the aforesaid License Agreement. We hereby acknowledge that we have
received a copy and are cognizant of the terms an conditions set forth in said
License Agreement and hereby agree to be bound by those provisions of said
License Agreement which are applicable to our function as manufacturer of the
Licensed Articles, including but not limited to the right of Marvel, pursuant to
Section 5(e) of the License Agreement to examine our Books of Account Records
with respect to the manufacture of the Licensed Articles. It is understood that
this engagement as subcontract manufacturer is on a royalty-free basis, and that
we have no right to sublicense or subcontract thereunder.
We understand that our engagement as the subcontract manufacturer for
Collectible Concepts Group is subject to your approval. We request, therefore,
that you sign in the space below, thereby showing your acceptance of our
engagement as aforesaid.
Very truly yours,
___________________________________________
(Manufacturer)
By:________________________________________
Name:______________________________________
Title:_____________________________________
Date:______________________________________
Accepted:
Marvel Characters, Inc.
By:________________________________________
Name:______________________________________
Title:_____________________________________
-27-
<PAGE>
LEASE FOR REAL ESTATE L-1969C
PART ONE OF A TWO PART AGREEMENT (Rev. 1/78)
This form recommended and approved for, but not restricted to use by
members of the Pennsylvania Association of Realtors(R) when
used with an approved addendum attached hereto.
- ------------------------------Agent For The Lessor------------------------------
HARTSVILLE REALTY, LTD
1158 N. YORK ROAD
WARMINSTER, PA. 18974
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
<S> <C>
PRINCIPALS
(1-78)
This Agreement, made this 21st day of SEPTEMBER A.D. 1998
-------------------------------------------- ------------------------------ --------------
Between JOSEPH & ANDREA MANNINO
---------------------------------------------------------------------------------------------------------------------------
hereinafter called Lessor, and
- ----------------------------------------------------------------------------------------------------
- ----------------------------------------------------------------------------------------------------------------------------------
COLLECTABLE CONCEPTS GROUP, INC. hereinafter called Lessee,
- -------------------------------------------------------------------------------------------------------
PROPERTY
(11-74)
1. (a) WITNESSETH: Lessor agrees to let unto the Lessee premises being known as
-----------------------------------------------
1600 LOWER STATE ROAD
- ----------------------------------------------------------------------------------------------------------------------------------
in the
- ----------------------------------------------------------------------------------------------------------------------------
TOWNSHIP of DOYLESTOWN , County of BUCKS , State of Penna.
- -------------------------- -------------------------------------------- ------------------------------
with improvements consisting of APPROXIMATELY 2,000 SQ. FT. STAND ALONE BUILDING
---------------------------------------------------------------------------------------------------
- ----------------------------------------------------------------------------------------------------------------------------------
upon the following terms and conditions to wit:
(b) Total rental for entire term payable to Lessor $ 60,480
----------
(c) Payments in advance [X] Monthly [ ] in amount of: $ 1,600
--------- ----------
(d) Cash or check to be paid before possession by Lessee which is to be applied on account as follows:
Advance rent 10/1 1998 to 11/1 1998 Paid $ Due $ 1,600
---------- ---- -------- ---- -------- --------
On account of final payment of rent Paid $ Due $ 1,600
---------------------------- -------- --------
Security deposit (see par. 1 (f)) Paid $ Due $ 1,600
----------------------------- -------- --------
Credit report Paid $ Due $
-------------------------------------------------- -------- --------
Paid $ Due $
--------------------------------------------------------------- ======== ========
Totals - Paid to date.......................Paid $ -0-
--------
Balance due before possession..............................Due $ 4,800
--------
(e) Adjusted payment of rent until regular due date, if any $ -0-
----------
(f) Security deposit $ 1,600
----------
(g) Late charge if rent not paid within grace period $ 80
----------
(h) Due date for each payment 1ST DAY OF EACH MONTH, LATE AFTER 5 DAYS
-----------------------------------------------------------------------------------------------
(i) Term of this lease 3 YEARS WITH 3 YEARS OPTION TO RENEW
------------------------------------------------------------------------------------------------------
(j) Commencement date of lease 1ST day of OCTOBER A.D. 1998
---------------------------------------- ------------------------------------- ----
(k) Expiration date of lease 30TH day of SEPTEMBER A.D. 2001
---------------------------------------- ------------------------------------- ----
(l) Required written notice to terminate this lease 90 DAYS
-------------------------------------------------------------------------
(m) Renewal term if not terminated by either party MUST BE NEGOTIATED
-------------------------------------------------------------------------
(n) Lessee will occupy premises ONLY as OFFICE
-------------------------------------------------------------------------------------
(o) Maximum number of occupants under this lease 6
---------------------------------------------------------------------------
(p) Payments to be made promptly when due in lawful money of the United States of America to [ ] Lessor [X] Agent
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
<S> <C>
(q) Utilities & services to be supplied as follows:
Lessor will supply: [ ] cold water, [ ] hot water, [ ] gas, [ ] heat, [ ] electric, [ ] lawn care,
[ ] snow removal, [ ] janitor service, [ ] yearly oil burner cleaning, [ ] cesspool cleaning, [ ]
----------
[ ] Lawn & Shrubbery care. [ ]
---------------------------------------------------------------------------------
Lessee will supply: [X] cold water, [X] hot water, [X] gas, [X] heat, [X] electric, [X] lawn care,
[X] snow removal, [ ] yearly oil burner cleaning,
[X] cesspool cleaning, [X] Lawn & Shrubbery care. [ ]
---------------------------------------------------------
(r) Notwithstanding anything herein to the contrary, Lessee will pay cost of any or all repairs of any kind whatsoever,
occurring after commencement of this lease where the individual cost of each repair is less than $ SEE RIDER
----------------------
(s) No pets or animals of any kind whatsoever will be permitted on or within the herein described premises excepting
-------
NONE
------------------------------------------------------------------------------------------------------------------------
SPECIAL
CLAUSES
2. SEE ATTACHED RIDER.
SELLER AGREES TO CREDIT TENANT $400.00 PER MONTH FOR REMODELING FOR EACH OF
THE MONTHS OF OCTOBER, NOVEMBER, AND DECEMBER. FOR A TOTAL OF $1,200
THREE YEAR OPTION IF ELECTED WILL HAVE RENT INCREASES AT $80.00 PER MONTH
FOR EACH YEAR. A TOTAL OF $960 PER YEAR
BEGINNING OCTOBER 1, 1999, RENT WILL BE $1,680 PER MONTH.
BEGINNING OCTOBER 1, 2000, RENT WILL BE $1,760 PER MONTH.
ADDENDUM
3. The Lessor and Lessee agree for themselves, their respective heirs and successors and assigns to the herein described terms
and also to those set forth in the addendum attached hereto entitled "TERMS AND CONDITIONS," (PART TWO) all of which are to
be regarded as binding and as strict legal conditions.
INITIALS
LESSEE LESSEE LESSEE LESSOR LESSOR AGENT
---------------- ---------------- --------------- --------------- ------------- -----------
[LOGO] COPYRIGHT PENNSYLVANIA ASSOCIATION OF REALTORS(R) 1978
COPIES: WHITE-LESSOR; YELLOW-AGENT; PINK-LESSEE;
BLUE- 1/78
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
<S> <C>
NOTICE TO PARTIES: WHEN SIGNED, THIS AGREEMENT IS A BINDING CONTRACT. Parties to this transaction are advised to consult
an attorney before signing if they desire legal advice.
Approval
(7-86)
IN WITNESS WHEREOF, the parties hereto, including to be legally bound hereby, have hereunder set their hands and seals the day
and year first above written.
WITNESS AS LESSEE.................................................(SEAL)
TO LESSEE..........................................
WITNESS AS LESSEE.................................................(SEAL)
TO LESSEE..........................................
LESSEE.................................................(SEAL)
The Lessor hereby approves this contract on this.......................day of....................................19..........and in
consideration of the services rendered in procuring the herein named Lessee and/or collection of rents as agreed and specified in
part one of this lease, the Lessor agrees to pay the herein named agent a fee in the amount of..................................for
obtaining Lessee together with a fee of...................for the collection of rents during the term, renewal or extension of this
lease or additional lease with the herein named Lessee. Should the Lessee purchase the demised premises from the Lessor during the
term of this lease, or during a renewal, extension or any additional lease between said parties for the demised premises, or within
a reasonable period of time after the expiration of any such lease, the Lessor agrees to pay the agent, at the time of settlement,
a sales fee of/from the specified sale price.
WITNESS AS LESSOR.................................................(SEAL)
TO LESSOR..........................................
WITNESS AS LESSOR.................................................(SEAL)
TO LESSOR..........................................
AGENT BY.....................................................
LOGO
</TABLE>
<PAGE>
NON-RESIDENTIAL LEASE L-2C
PART TWO OF A TWO-PART AGREEMENT (REV. 12-85)
TERMS AND CONDITIONS (MOD. 4-92)
This form recommended and approved for, but not restricted to,
use by members of the Pennsylvania Association of REALTORS(R)
Copyright Pennsylvania Association of REALTORS(R) 1973
Special Clauses
Sewer Rent
(d) Lessee further agrees to pay as additional rent, if there is a metered
water connection to said premises, all sewer rental or charges for use of
sewers, sewer system, and sewage treatment works servicing the demised premises
in excess of the yearly minimum of such sewer charges, immediately when the same
become due.
Condition of Pavement
(e) Lessee shall be responsible for the condition of the curb, cellar doors,
awnings and other erections in the pavement during the term of this lease; shall
keep the pavement free from snow and ice, and shall be, and hereby agrees that
Lessee is solely liable for any accidents, due or alleged to be due to their
defective condition, or to any accumulations of snow or ice.
Security Deposit
5. The "security deposit" specified in Par. #1. (f) shall be held by Agent as
security for the performance of all the terms, covenants and conditions of this
lease and for the cost of any trash removal, housecleaning and the cost of
repairs and/or the correction of damage (which is, in excess of normal wear and
tear); otherwise, the "security deposit" or any balance thereof shall be
returned after the Lessee has vacated and left the premises in an acceptable
condition (following a personal inspection by Lessor and/or Agent) and
surrendered all keys to Agent. If the Lessor determines that any loss, damage or
injury chargeable to the Lessee hereunder, exceeds the security deposit, the
Lessor at his option, may retain the said sum as liquidated damages or may apply
the sum against any actual loss, damage or injury and the balance thereof will
be the responsibility of the Lessee. Lessor's determination of the amount, if
any, to be returned to the Lessee shall be final. It is further understood and
agreed that the said security deposit is not to be considered as the last
payment under the lease, however the rights of the Lessor shall not be hindered
to retain the security deposit, or a portion thereof as payment on account of
uncollected rents, if any.
The aforementioned "security deposit" shall be paid to the Agent who will
deposit same in a separate custodial type account. Agent shall keep records of
all funds so deposited as required in accordance with the Act of February 19,
1980, P.L. 15, No. 9, Section 604 (63 P.S. 455.604). Said account will be
clearly identified as required indicating the date and from whom he received
money, the date deposited, the date of withdrawals and other pertinent
information concerning this transaction. It is understood and agreed that should
the property herein mentioned be sold, exchanged, transferred or conveyed to a
new owner, that at the time of settlement, any money held as a security deposit
shall be transferred to the new owner or his agent, to be continued to be held
as a security deposit.
Affirmative
Covenants of
Lessor
6. (a) If the Lessee so desires, Lessor, if possible, may make available to
Lessee, without charge, a space in the building for the storage of good and
effects of Lessee. In consideration of the fact that no extra charge is made for
the furnishing of such space by the Lessor, it is understood that Lessor shall
not be liable for loss or damage to any stored goods through fire or theft or
any cause whatever, and Lessee expressly releases Lessor as bailee or otherwise
from all claims for any such loss or damage. It is further understood that the
use of storage space by the Lessee shall be limited to the time of the Lessee's
occupancy, and that goods left over thirty days after the expiration of Lessee's
occupancy may be sold for storage charges at public or private sale without
further notice to Lessee.
(b) The Lessor may furnish additional service not herein provided for but
any such service shall be gratuitous unless otherwise agreed and shall not be an
obligation of the Lessor or part of the consideration for the rent.
Place of
Payment
7. All rent shall be payable without prior notice or demand at the office of
Lessor or Agent as specified in paragraph #1. (p.).
8. Lessee covenants and agrees that he will without demand:
<PAGE>
Affirmative
Covenants of
Lessee
(a) Pay the rent and all other charges herein reserved as rent on the days
and times and at the place that the same are made payable, without fail, and if
Lessor shall at any time or times accept said rent or rent charges after the
same shall have become due and payable, such acceptance shall not excuse delay
upon subsequent occasions, or constitute or be construed as a waiver of any of
Lessor's rights. Lessee agrees that any charge or payment herein reserved,
included, or agreed to be treated or collected as rent and/or any charges,
expenses, or costs herein agreed to be paid by the Lessee may be proceeded for
and recovered by the Lessor by legal process in the same manner as rent due and
in arrears.
Payment
of Rent
Late Charges
(b) All rental payments are due and payable on the due date as specified in
paragraph #1.(h) of this agreement or within five days thereafter (grace period)
without penalty. However, after 5:00 P.M. on the fifth day after due date as
aforementioned, any rental payment not paid in full will be subject to a late
charge. Payments not made on or before 5:00 P.M. on the 30th day after due date,
together with late charge, may be referred to Magistrate or Justice of the Peace
for the collection and/or ejectment.
Cleaning,
Repairing, etc.
(c) Keep the demised premises clean and free from all ashes, dirt and other
refuse matter; replace all broken glass windows, doors, etc.; keep all waste and
drain pipes open; repair all damages to plumbing and to the demised premises; in
general, keep the same in as good order and repair as they are at the beginning
of the term of this lease, reasonable wear and tear and damage by accidental
fire or other casualty not occuring through negligence of Lessee or those
employed by or acting for Lessee alone excepted. The Lessee agrees to surrender
the demised premises in the same condition in which Lessee has herein agreed to
keep the same during the continuance of this lease.
Requirements of
Public
Authorities
Fire
Surrender of
Possession
(d) Comply with any requirements of any of the constituted public
authorities, and with the terms of any State or Federal statute or local
ordinance or regulation applicable to Lessee or his use of the demised premises,
and save Lessor harmless from penalties, fines, costs or damages resulting from
failure to do so.
(e) Use every reasonable precaution against fire.
(f) Peaceably deliver up and surrender possession of the demised premises to
the Lessor at the expiration or sooner termination of this lease, promptly
delivering to Lessor at his office, all keys for the demised premises, with all
trash and personal belongings removed and building(s) broom-swept clean.
Notice of Fire,
etc.
Pay for Gas and
Electricity
(g) Give to Lessor prompt written notice of any accident, fire or damage
occuring on or to the demised premises.
(h) Promptly pay for all gas and electricity, water, heat, lawn care and
services consumed in the herein demised premises during the continuance of this
lease if so specified in paragraph #1.(q); and should Lessee fail to make these
payments when due, Lessor shall have the right to settle therefor, such sums to
be considered additional rent and collectable from Lessee, as such, by distress
or other process and to have all the priorities given by law to claims for rent.
<PAGE>
Indemnification
(i) Indemnify and save Lessor harmless from any and all loss occasioned by
Lessee's breach of any of the covenants, terms and conditions of this lease, or
caused by his family, guests, visitors, agents and employees.
Negative
Covenants of
Lessee
Use of
Premises
Assignment and
Subletting
9. Lessee covenants and agrees that he will do none of the following things
without the consent in writing of Lessor:
(a) Occupy the demised premises in any other manner or for any other purpose
than as above set forth in paragraph #1.(n)
(b) Assign, mortgage or pledge this lease or under-let or sub-lease the
demised premises, or any part thereof, or permit any other person, firm or
corporation to occupy the demised premises, or any part thereof; nor shall any
assignee or sub-lease assign, mortgage or pledge this lease or such sub-lease,
without an additional written consent by the Lessor, and without such consent no
such assignment, mortgage or pledge shall be valid. If the Lessee becomes
embarrassed or insolvent, or makes an assignment for the benefit of creditors,
or if a petition in bankruptcy is filed or against the Lessee or a bill in
equity or other proceeding for the appointment of a receiver for the Lessee is
filed, or if the real or personal property of the Lessee shall be sold or levied
upon by any Sheriff, Marshal or Constable, the same shall be a violation of this
covenant.
Signs
(c) Place or allow to be placed any stand, booth, sign or show case upon the
doorsteps, vestibules or outside walls or pavements of said premises, or paint,
place, erect or cause to be painted, placed or erected any sign, projection or
device on or in any part of the premises. Lessee shall remove any sign,
projection or device painted, placed or erected, if permission has been granted
and restore the walls, etc., to their former conditions, at or prior to the
expiration of this lease. In case of the breach of this covenant (in addition to
all other remedies given to Lessor in case of breach of any conditions or
covenants of this lease) Lessor shall have the privilege of removing said
stand, booth, sign, show case projection or devise, and restoring said walls,
etc., to their former condition, and Lessee, at Lessor's option, shall be liable
to Lessor for any and all expenses so incurred by Lessor.
Alterations
Improvements
(d) Make any alterations, improvements, or additions to the demised
premises. All alterations, improvements, additions or fixtures, whether
installed before or after the execution of this lease, shall remain upon the
premises at the expiration or sooner determination of this lease and become the
property of Lessor, unless Lessor shall, prior to the determination of this
lease, have given written notice to Lessee to remove the same, in which event
Lessee will remove such alterations, improvements and additions and restore the
premises to the same good order and condition in which they now are. Should
Lessee fail to do so, Lessor may do so, collecting, at Lessor's option, the cost
and expense thereof from Lessee as additional rent.
Machinery
(e) Use or operate any machinery that, in Lessor's opinion, is harmful to
the building or disturbing to other tenants occupying other parts thereof.
Weights
Fire Insurance
(f) Place any weights in any portion of the demised premises beyond the safe
carrying capacity of the structure.
(g) Do or suffer to be done, any act, matter or thing objectionable to the
fire insurance companies, whereby the fire insurance or any other insurance now
in force or hereafter to be placed on the demised premises, or any part thereof,
or on the building of which the demised premises may be a part, shall become
void or suspended, or whereby the same shall be rated as a more hazardous risk
than at the date of execution of this lease, or employ any person or persons
objectionable to the fire insurance companies or carry or have been benzine or
explosive matter of any kind in and about the demised premises. In case of a
breach of this covenant (in addition to all other remedies given to Lessor in
case of the breach of any of the conditions of covenants of this lease).
<PAGE>
Removal
of Goods
(h) Remove, attempt to remove or manifest an intention to remove Lessee's
goods or property from or out of the demised premises otherwise than in the
ordinary and usual course of business, without having first paid and satisfied
Lessor for all rent which may become due during the entire term of this lease.
Vacate Premises
Agency on
Renewal
(i) Vacate or desert said premises during the term of this lease, or permit
the same to be empty and unoccupied.
10. The Lessee agrees that if, with the permission in writing of Lessor, Lessee
shall vacate or decide at any time during the term of this lease, or any renewal
thereof, to vacate the herein demised premises, prior to the expiration of this
lease, or any renewal hereof, Lessee will not cause or allow any agent to
represent Lessee in any sub-letting or reletting of the demised premises other
than an agent approved by the Lessor, and that should Lessee do so, or attempt
to do so, that Lessor may remove any signs that may be placed on or about the
demised premises by such other agent without any liability to Lessee or to said
agent, the Lessee assuming all responsibility for such action.
Lessee's Rights
Inspection of
Premises
Rules and
Regulations
11. Lessee covenants and agrees that Lessor shall have the right to do the
following things and matters in and about the demised premises:
(a) At 24 hr. notice unless an emergency by himself or his duly authorized
agents to go upon and inspect the demised premises and every part thereof,
and/or at his option to make repairs, alterations and additions to the demised
premises or the building of which the demised premises is a part.
(b) At any time or times and from time to time make such rules and
regulations as in his judgement may from time to time be necessary for the
safety, care and cleanliness of the premises, and for the preservation of good
order therein. Such rules and regulations shall, when notice thereof is given to
Lessee, from a part of his lease.
Sale, Rent,
Signs and
Prospects
(c) To display a "For Sale" sign at any time, and also, after notice from
either party of intention to determine this lease, or at any time within six
months prior to the expiration of this lease, a "For Rent" sign, or both "For
Rent" and "For Sale" signs; and all of said signs shall be placed upon such part
of the premises as Lessor may elect and may contain such matter as Lessor shall
require. Prospective purchasers or tenants authorized by Lessor may inspect the
premises Monday thru Saturday between the hours of 11:00 A.M. and 8:00 P.M. 24
hr. notice.
Discontinue
Service, etc.
12. (a) In the event that the demised premises is totally destroyed or so
damaged by fire or other casualty not occuring through fault or negligence of
the Lessee or those employed by or acting for him, that the same cannot be
repaired or restored within a reasonable time, this lease shall absolutely cease
and determine, and the rent shall abate for the balance of the term.
(b) If the damage caused as above be only partial and such that the premises
can be restored to their former condition within 30 days, the Lessor may, at his
option, restore the same with reasonable promptness, reserving the right to
enter upon the demised premises for that purpose. The Lessor also reserves the
right to enter upon the demised premises whenever necessary to repair damage
caused by fire or other casualty to the building of which the demised premises
is a part, even though the effect of such entry be to render the demised
premises or a part thereof untenantable. In either event the rent shall be
apportioned and suspended during the time the Lessor is in possession, taking
into account the proportion of the demised premises rendered untenantable and
the duration of the Lessor's possession. However, if more than 25% of Premises
is untenantable, tenant has option to terminate.
Damage for
Interrupted Use
(c) Lessor shall not be liable for any damage, compensation or claim by
reason of inconvenience or annoyance from the necessity of repairing any portion
of the building, the interruption in the use of the premises, or the termination
of this lease by reason of the destruction of the premises.
<PAGE>
Representation
of Condition
13. The Lessor has let the demised premises in their present condition and
without any representation on the part of the Lessor, his officers, employees,
servants and/or agents. It is understood and agreed that the Lessor is under no
duty to make alterations at the time of letting or at any time thereafter.
Miscellaneous
Agreements and
Conditions
14. (a) No contract entered into or that may be subsequently entered into by
Lessor with Lessee, relative to any alterations, additions, improvements or
repairs, nor the failure of Lessor to make such alterations, additions,
improvements or repairs as required by any such contract, nor the making by
Lessor or his agents or contracts of such alterations, additions, improvements
or repairs shall in any way affect the payment of the rent or said other charges
at the time specified in this lease.
Effect of Repairs
or Rentals
Waiver of
Custom
Failure of Lessee
to Repair
(b) It is hereby covenanted and agreed, any law, usage or custom to the
contrary notwithstanding, that Lessor shall have the right at all times to
enforce the covenants and provisions of this lease in strict accordance with the
terms hereof, notwithstanding any conduct or custom on the part of the Lessor in
refraining from so doing at any time or times; and further, that the failure of
Lessor at any time or times to enforce its rights under said covenants and
provisions strictly in accordance with the same not be construed as having
created a custom in any way or manner contrary to the specific terms, provisions
and covenants of this lease or as having in any way or manner modified the same.
(c) In the event of the failure of Lessee promptly to perform the covenants
of Par. #8.(c) hereof, Lessor may go upon the demised premises and perform such
covenants, the cost thereof, at the sole option of Lessor, to be charged to
Lessee as additional and delinquent rent.
Remedies of
Lessor
15. If the Lessee
(a) Does not pay in full when due any and all installments of rent and/or
any other charge or payment herein reserved, included, or agreed to be treated
or collected as rent and/or any other charge, expense, or cost herein agreed to
be paid by the Lessee; or
(b) Violates or fails to perform or otherwise breaks any covenant or
agreement herein contained; or
(c) Vacates the demised premises or removes or attempts to remove or
manifests an intention to remove any goods or property therefrom otherwise than
in the ordinary and usual course of business without having first paid and
satisfied the Lessor in full for all rent and other charges then due or that may
thereafter become due until the expiration of the than current term, above
mentioned; or
(d) Becomes embarrassed or insolvent, or makes an assignment for the benefit
of creditors, or if a petition in bankruptcy is filed by or against the Lessee
or a bill in equity or other proceeding for the appointment of a receiver for
the Lessee is filed, or if the proceedings for reorganization or for composition
with creditors under any State or Federal law be instituted by or against
Lessee, or if the real or personal property of the Lessee shall be sold or
levied upon by any due process of law, then and in any or either of said events,
there shall be deemed to be a breach of this lease, and thereupon ipso facto and
without entry or other action by Lessor;
(d1) The rent for the entire unexpired balance of the term of this lease, as
well as all other charges, payments, costs and expenses herein agreed to be paid
by the Lessee, or at the option of Lessor any part thereof, and also all costs
and officers' commissions including watchmen's wages and further including the
five percent chargeable by Act of Assembly to the Lessor, shall, in addition to
any and all instruments of rent already due and payable and in arrears and/or
any other charge or payment herein reserved, included or agreed to be treated or
collected as rent, and/or any other charge, expense or cost herein agreed to be
paid by the Lessee which may be due and payable and in arrears, be taken to be
due and payable and in arrears as if by the terms and provisions of this lease,
the whole balance of unpaid rent and other charges, payments, taxes, costs and
expenses were on that date payable in advance; and if this lease or any part
thereof is assigned, or if the premises or any part thereof is sub-let, Lessee
hereby irrevocably constitutes and appoints Lessor Lessee's agent to collect the
rents due by such assignee or sub-leasee and apply the same to the rent due
hereunder without in any way affecting Lessee's obligation to pay unpaid balance
of rent due hereunder; or in the event of any of the foregoing at any time at
the option of Lessor;
<PAGE>
(d2) This lease and the term hereby created shall determine and become
absolutely void without any right on the part of the Lessee to save the
forfeiture by payment of any sum due or by other performance of any condition;
term or covenant broken; whereupon, Lessor shall be entitled to recover damages
for such breach in an amount equal to the amount of rent reserved for the
balance of the term of this lease, less the fair rental value of the said
demised premises, for the residue of said term.
16. In the event of any default as aforesaid, the Lessor, or anyone acting on
Lessor's behalf, at Lessor's option:
Further
Remedies of
Lessor
(a) May lease said premises or any part of parts thereof to such person or
persons as may in Lessor's discretion seem best and the Lessee shall be liable
for any loss of rent for the balance of the then current term.
(b) Any re-entry or re-letting by Lessee under the terms hereof shall be
without prejudice to Lessor's claim for damages and shall under no circumstances
release Lessee from liability for such damages arising out of the breach of any
of the covenants, terms and conditions of this lease.
Zoning
17. It is understood and agreed that the Lessor hereof does not warrant or
undertake that the Lessee shall be able to obtain a permit under any Zoning
Ordinance or Regulation for such use as Lessee intends to make of the said
premises, and nothing in this lease contained shall obligate the Lessor to
assist Lessee in obtaining said permit; the Lessee further agrees that in the
event a permit cannot be obtained by Lessee under any Zoning Ordinance, or
Regulation, this lease shall not terminate without Lessor's consent, and the
Lessee shall use the premises only in a manner permitted under such Zoning
Ordinance or Regulation.
Confession of
Judgement
18. If rent and/or charges hereby reserved as rent shall remain unpaid on any
day when the same should be paid Lessee hereby empowers any Prothonotary or
attorney of any Court of Record to appear for Lessee in any and all actions
which may be brought for rent and/or the charges, payments, costs and expenses
reserved as rent, or agreed to be paid by the Lessee and/or to sign for Lessee
an agreement for entering in any competent Court an amicable action or actions
for the recovery of rent or other charges or expenses, and in said suits or in
said amicable action or actions to confess judgment against Lessee for all or
any part of the rent specified in this lease and then unpaid including, at
Lessor's option, the rent for the entire unexpired balance of the term of this
lease, and/or other charges, payments, costs and expenses reserved as rent or
agreed to be paid by the Lessee, and for interest and costs together with an
attorney's commission of 15%. Such authority shall not be exhausted by one
exercise thereof, but judgment may be confessed as aforesaid from time to time
as often as any of said rent and/or other charges reserved as rent shall fall
due or be in arrears, and such powers may be exercised as well after the
expiration of the original term and/or during any extension or renewal of this
lease.
Ejectment
19. When this lease shall be determined by condition broken, either during the
original term of this lease or any renewal or extension thereof, and also when
and as soon as the term hereby created or any extension thereof shall have
expired, it shall be lawful for any attorney as attorney for Lessee to file an
agreement for entering in any competent Court an amicable action and judgment in
ejection against Lessee and all persons claiming under Lessee for the recovery
of possession of the herein demised premises, for which this lease shall be his
sufficient warrant.
<PAGE>
whereupon, if Lessor so desires, a writ of habere facias possessionem may issue
forthwith, without any prior writ or proceedings whatsoever, and provided that
if for any reason after such action shall have been commenced the same shall be
determined and the possession of the premises hereby demised remain in or be
restored to Lessee. Lessor shall have the right upon any subsequent default or
defaults, or upon the termination of this lease as hereinbefore set forth, to
bring one or more amicable action or actions as hereinbefore set forth to
recover possession of the said premises.
Affidavit of Default
20. In any amicable action of ejectment and/or for rent in arrears, Lessor shall
first cause to be filed in such action an affidavit made by him or someone
acting for him setting forth the facts necessary to authorize the entry of
judgment, of which facts such affidavit shall be conclusive evidence, and if a
true copy of this lease (and of the truth of the copy such affidavit shall be
sufficient evidence) be filed in such action, it shall not be necessary to file
the original as a warrant of attorney, any rule of Court, custom or practice to
the contrary notwithstanding.
Remedies Cumulative
21. All of the remedies hereinbefore given to Lessor and all rights and remedies
given to it by law and equity shall be cumulative and concurrent. No
determination of this lease or the taking or recovering of the premises shall
deprive Lessor of any of its remedies or action against the Lessee for rent due
at the time or which, under the terms hereof, would in the future become due as
if there has been no determination, or for sums due at the time or which, under
the terms hereof, would in the future become due as if there had been no
determination, nor shall the bringing of any action for rent or breach of
covenant, or the resort to any other remedy herein provided for the recovery of
rent be construed as a waiver of the right to obtain possession of the premises.
Subordination
22. This Agreement of Lease and all of its terms, covenants, and provisions are
and each of them is subject and subordinate to any lease or other arrangement or
right to possession, under which the Lessor is in control of the demised
premises, to the rights of the owner or owners of the demised premises and of
the land or buildings of which the demised premises are a part to all rights of
the Lessor's landlord and to any and all mortgages and other encumbrances now or
hereafter placed upon the demised premises or upon the land and/or buildings
containing the same; and Lessee expressly agrees that if Lessor's tenancy,
control, or right to possession shall terminate either by expiration, forfeiture
or otherwise, then this lease shall thereupon immediately terminate and the
Lessee shall, thereupon, give immediate possession and Lessee hereby waives any
and all claims for damages or otherwise by reason of such termination as
aforesaid.
Condemnation
23. In the event that the premises demised or any part thereof is taken or
condemned for a public or quasi-public use, this lease shall, as to the part so
taken, terminate as of the date title shall vest in the condemnor, and rent
shall abate in proportion to the square feet of leased space taken or condemened
or shall cease if the entire premises be so taken. However if more than 25% of
the premises is taken, tenant shall have the option to terminate this lease. In
either event the Lessee waives all claims against the Lessor by reason of the
complete or partial taking of the demised premises, and it is agreed that the
Lessee shalll be entitled to 10 days notice whatsoever of the partial or
complete termination of this lease by reason of the aforesaid.
<PAGE>
Termination of Lease
24. It is hereby mutually agreed that either party hereto may determine this
lease at the end of the said term by giving to the other party prior written
notice thereof in accordance with paragraph #1.(1), but in default of such
notice, this lease shall continue upon the same terms and conditions in force
immediately prior to the expiration or the term hereof as are herein contained
for a further period as specified in paragraph #1.(m), and so on from renewal to
renewal unless or until termination by either party hereto, giving the other the
aforementioned written notice for renewal previous to expiration of the then
current term; PROVIDED, however, that if Lessor shall have given such written
notice prior to the expiration of any term hereby created, of its intention to
change the terms and conditions of this lease, and Lessee shall not within
thirty days from such notice notify Lessor of Lessee's intention to vacate the
demised premises at the end of the then current term, Lessee shall be considered
as Lessee under the terms and conditions mentioned in such notice for a further
term as above provided, or for such further term as may be stated in such
notice. In the event that Lessee shall give notice, as stipulated in this lease,
of intention to vacate the demised premises at the end of the present term, or
any renewal or extension thereof, and shall fail or refuse so to vacate the same
on the date designated by such notice, then it is expressly agreed that Lessor
shall have the option either (a) to disregard the notice so given as having no
effect, in which case all the terms and conditions of this lease shall continue
thereafter with full force precisely as if such notice had not been given, or
(b) Lessor may, at any time within thirty days after the present term or any
renewal or extension thereof, as aforesaid, give the said Lessee ten days
written notice of his intention to terminate the said lease; whereupon the
Lessee expressly agrees to vacate said premises at the expiration of the said
period of ten days specified in said notice. All powers granted to Lessor by
this lease may be exercised and all obligations imposed upon Lessee by this
lease shall be performed by Lessee as well during any extension of the original
term of this lease as during the original term itself.
Inability to give Possession
25. If Lessor is unable to give Lessee possession of the demised premises, as
herein provided, by reason of the holding over of a previous occupant, or by
reason of any cause beyond the control of the Lessor, the Lessor shall not be
liable in damages to the Lessee therefore, and during the period that the Lessor
is unable to give possession, all rights and remedies of both parties hereunder
shall be suspended.
Additional Rent
26. Lessee agrees to pay as additional rent any and all sums which may become
due by reason of the failure of Lessee to comply with any of the covenants of
this lease and any and all damages, costs and expenses which the Lessor may
suffer or incur by reason of any default of the Lessee or failure on his part to
comply with the covenants of this lease, and also any and all damages to the
demised premises caused by any act or neglect of the Lessee, his guests, agents,
employees or other occupants of the demised premises.
Notices
27. All notices required to be given by Lessor to Lessee shall be sufficiently
given by leaving the same upon the demised premises, but notices given by Lessee
to Lessor must be given by certified mail, and as against Lessor the only
admissable evidence that notice has been given by Lessee shall be a certified
return receipt signed by Lessor or his agent. The same for both.
Rights to Enforce Defination of Lessor and Lessee
28. The Lessor shall have the right, at all times, to enforce any or all the
convenants and provisions of this lease, notwithstanding the failure of the
Lessor at any previous time, or times, to enforce his rights under any of the
convenants and provisions of this lease.
<PAGE>
29. The word "Lessor" as used herein, shall include the Owner and the Landlord,
whether Person, Firm or Corporation, as well as the Heirs, Executors,
Administrators, Successors and Assigns each of whom shall have the same rights,
remedies, powers, privileges and obligations as though he, she, it or they had
originally signed this lease as Lessor, including the right to proceed in his,
her, its, or their own name to enter judgment by confession, or otherwise. The
word "Lessee" as used herein, shall include Tenant, whether Person, Firm or
Corporation, as well as the Heirs, Executors, Administrators, Successors and
Assigns, each of whom shall have the same rights, remedies, powers, privileges,
and shall have no other liabilities, rights, privileges or powers than he, she,
it or they would have been under or possessed had he, she, it or they originally
signed this lease as Lessee.
Agent
30. It is expressly understood and agreed between the parties hereto that the
herein named agent, his salesmen and employees or any officer or partner of
agent and any cooperating broker and his salesmen and employees and any officer
or partner of the cooperating broker are acting as agent only and will in no
case whatsoever be held liable either jointly or severally to either party for
the performance of any term of convenant of this agreement or for damages for
the nonperformance thereof.
Heirs and Assignees
31. All rights and liabilities herein given to, or imposed upon, or waivers of
the respective parties hereto shall extend to and bind the several and
respective heirs, executors, administrators, successors and assigns of said
parties; and if there shall be more than one Lessee, they shall all be bound
jointly and severally by the terms, covenants and agreements herein, and the
word "Lessee" shall be than deemed taken to mean each and every person or party
mentioned as a Lessee herein, be the same one or more; and if there shall be
more one Lessee, any notice required or permitted by the terms of this lease may
be given by or to any one thereof, and shall have the same force and effect as
if given by or to all thereof. No rights, however, shall inure to the benefit of
any assignee of Lessee unless the assignment of such assignee has been approved
by Lessor in writing as aforesaid.
Lease Contains Entire Agreement
32. The Lessor and Lessee hereby agree that this lease sets forth all the
promises, agreements, conditions and understandings between the Lessor, or his
Agent, and the Lessee relative to the demised premises, and that there are no
promises, agreements, conditions or understandings, either oral or written,
between them other than as are herein set forth, and any subsequent alteration,
amendment, change or addition to this lease shall not be binding upon the Lessor
or Lessee unless reduced to writing and signed by them.
Severability (11-74)
33. If any section, subsection, sentence, clause phrase or requirement of this
lease is contrary to law or laws subsequently enacted, or should be found
contrary to laws during the term or any renewal or extension thereof, the
validity of the remaining portions shall not be affected thereby. The parties
hereby agree that they would have agreed to each section, subsection, clause
sentence, phrase or requirement herein irrespective of the fact that one or more
section, subsection sentence, clause, phrase or requirement was contrary to law
or during the term or any renewal or extension thereof or are found to be
contrary to the law.
Descriptive Heading
34. The descriptive headings used herein are for convenience only and they are
not intended to indicate all of the matter in the sections which follow them.
Accordingly, they shall have no effect whatsoever in determining the rights or
obligations of the parties.
<PAGE>
NOTICE TO PARTIES: WHEN SIGNED, THIS AGREEMENT IS A BINDING CONTRACT. Parties to
this transaction are advised to consult an attorney before signing if they
desire legal advice.
Approval (7-86)
IN WITNESS WHEREOF, the parties hereto, including to be legally bound
hereby, have hereunder set their hands and seals the day and year first above
written.
WITNESS AS LESSEE /s/ xxxxxxxxx (SEAL)
TO LESSEE /s/ xxxxxxxxxxxxxx -------------------------
-------------------------- President
WITNESS AS LESSEE /s/ xxxxxxxxx (SEAL)
TO LESSEE -------------------------
-------------------------- Secretary Treasurer
LESSEE (SEAL)
-------------------------
The Lessor hereby approves this contract on this ____________ day of __________
19__ and in consideration of the services rendered in procuring the herein named
Lessee and/or collection of rents as agreed and specified in part one of this
lease, the Lessor agrees to pay the herein named agent a fee in the amount of
_________ for obtaining LEssee together with a fee of _____________ for the
collection of rents during the term, renewal or extension of this lease or
additional lease with the herein named Lessee. Should the Lessee purchase the
demised premises from the Lessor during the term of this lease, or during a
renewal, extension or any additional lease between said parties for the demised
premises, or within a reasonable period of time after the expiration of any such
lease, the Lessor agrees to pay the agent, at the time of settlement, a sale fee
of/from the specified sale price.
WITNESS AS LESSOR /s/ xxxxxxxxx (SEAL)
TO LESSOR /s/ xxxxxxxxxxxxxx -------------------------
--------------------------
WITNESS AS LESSOR /s/ xxxxxxxxx (SEAL)
TO LESSOR -------------------------
--------------------------
AGENT BY
------------------------
<PAGE>
RIDER
RIDER, attached to and forming part of a Lease Agreement dated as of September
21, 1998 between Joseph & Andrea Mannino as Lessor and
Lessee's for Premises situated at and known as 1600 Lower State Road,
Doylestown, PA. 18901.
INTERPRETATION: This Rider and the Lease Agreement of which it forms a part are
to be considered one document. Where the contents of this Rider and the Lease
Agreements are contradictory or inconsistent, the contents of this Rider shall
be deemed to supersede the Lease Agreement. To the extent the Lease Agreement is
not amended or affected by this Rider, it shall remain in full force and effect.
INSURANCE: Lessee shall maintain, at its sole cost and expense, during the
entire term hereof, comprehensive general liability insurance against injury,
death or damage to person or property on the demised Premises or from acts of
Lessee, its agents or employees, in amounts not less than $1,000,000.00 for
personal injury and $250,000 for property damage. Said policy shall name lessor
and any mortgagees of the Premises as additional insured parties. Lessor will
maintain insurance on the building at their expense.
REPAIRS: Tenant obligations under this clause shall be limited to $300.00 per
occurrence. Landlord shall be responsible for all repairs in excess of $300.00.
TENANT's OBLIGATIONS, By entry hereunder, Tenant shall be deemed to have
accepted the Premises as being in good, sanitary order, condition and repair.
Tenant shall, at Tenant's sole cost and expense, keep the Premises and every
part thereof in good condition and repair (except as hereinafter provided with
respect to Landlord's obligations) including without limitation, the
maintenance, and repair of any storefront, doors, window casements, glazing,
heating and air conditioning system if there is an air conditioning system.
Tenant shall be responsible for repairs and maintenance on said system,
plumbing, well, pipes, electrical wiring and conduits. Landlord reserves the
right to inspect and repair said system at Tenant's expense which, unless paid,
constituted default. Tenant shall, upon the expiration or sooner termination of
this Lease hereof, surrender the Premises to the Landlord in good condition,
broom clean, ordinary wear and tear, and damage from casualties covered by
Landlord's building insurance excepted. Any damage to adjacent premises caused
by Tenant's use of the Premises shall be repaired at the sole cost and expense
of Tenant.
<PAGE>
LANDLORD'S OBLIGATIONS: Notwithstanding the provisions of Article hereinabove,
Landlord shall repair and maintain the structural portions of the Building,
including the exterior walls unless such maintenance and repairs are caused in
part or in whole by the act, neglect, fault or omission of any duty by the
Tenant, its agents, servants, employees, invitees, in which case Tenant shall
pay to Landlord the actual cost of such maintenance and repairs. Landlord shall
not be liable for any failure to make such repairs or to perform any maintenance
unless such failure shall persist for 5 Business Days after written notice of
the need of such repairs or maintenance is given to Landlord by Tenant.
ALTERATIONS AND IMPROVEMENTS: Lessee may make such alterations and improvements
to the demised Premises as it sees fit at its sole cost and expense, provided
that (i) the structural integrity of the building is not adversely affected
thereby: (ii) Lessee shall obtain Lessor's prior approval of all plans and
specifications (except for cosmetic repairs and redecorating); (iii) Lessee
obtains all necessary permits and approval from all local and state agencies
having jurisdictions; (iv) each and every contractor and subcontractor
performing work on the job shall have executed and filed a valid Waiver of
Mechanics Liens in the office of the Prothonotary of Montgomery County; (v) each
contractor and subcontractor shall provide Lessor with evidence of adequate
Workers Compensation Insurance and general liability insurance not less than
$1,000,000.00 for personal injury and $100,000 for property damage, (vi) all
laws, statues, ordinances, rules, regulations and requirements of governmental
agencies and insurance companies complied with; and (vii) all such alterations
and improvements are done in first class and workmanlike manner and in
accordance with the plans and specifications apprised by Lessor. At termination
of the Lease, all alterations and improvements become the property of the
Lessor. At the termination of this Lease, all trade fixtures shall continue to
be Lessee's property and may be removed from the premises; otherwise, at the
option of Lessee, if the alterations and improvements are left at the premises
after Lessee vacates, these items shall become the property of the Lessor. All
trade fixtures shall remain Lessee's property and may be removed at the
termination of this Lease.
<PAGE>
ASSIGNMENT AND SUBLETTING: Lessee may not assign this lease or sublet all or a
portion of THE Premises without first obtaining Lessor's consent in writing.
TRADE FIXTURES: Provided that Lessee is not therein default hereunder, at the
termination of this Lease Lessee may remove its trade fixtures and equipment
from the Premises. Lessee shall repair any damage to the Premises caused by the
removal of said trade fixtures and equipment.
TAXES: Lessor will be responsible and pay for the Real Estate taxes.
UTILITIES: Lessee also will be responsible at their expense for the current
septic system use. Currently we have a 2500 gallon holding tank which is emptied
when it fills up.
HAZARDOUS MATERIALS: Lessee shall not store on the premises or utilize in its
operation any materials, compounds or liquids that are highly flammable or
hazardous to the health of humans in ordinary use. No oils, lubricating fluids,
cleaning compounds or other petrochemical-based substances shall be deposited or
disposed of in the septic system serving the premises or any sewer system to
which it may be connected hereafter. All such materials shall be removed from
the Premises once no longer used by Lessee in complicance with all statutes,
regulations and ordinances of the federal, state and local government.
HOLD HARMLESS: Tenant shall indemnify and hold harmless Landlord against and
from any and all claims arising from Tenant's use of the Premises or from the
conduct of its business or from any activity, work or other things done,
permitted or suffered by the Tenant in or about the Premises, and shall further
indemnify and hold harmless Landlord against and from any and all claims arising
from any breach or default in the performance of any obligation on Tenant's part
to be performed under the terms of this Lease, or arising from any act or
negligence of the Tenant, or any officer, agent, employee, guest, or invitee of
Tenant, and from all costs, attorney's fees, and liabilities incurred in or
about the defense of any such claim or any action or proceeding brought thereon
and in case any action or proceeding be brought against Landlord by reason of
such claim; provided however Tenant shall not indemnify and hold harmless
landlord from any and all claims arising from landlord's negligence. Tenant upon
notice from Landlord shall defend the same at Tenant's expense by counsel
reasonable satisfactory to Landlord. Tenant, as a material
<PAGE>
part of the consideration to Landlord, hereby assumes all risk of damage to
property or injury to persons in, upon, or about the Premises, from any cause
other than Landlord's negligence; and Tenant hereby waives all claims in respect
thereof against Landlord. Tenant shall give prompt notice to Landlord in case of
casualty or accidents in the Premises.
Landlord or its agents shall not be liable for any loss or damage to persons or
property resulting from fire, explosion, falling plaster, steam, gas,
electricity, water or rain which may leak from any part of the building or from
the pipes, appliances or plumbing works therein or from the roof, street
subsurface or from any place resulting from dampness or any other cause
whatsoever, except that of landlords negligence Landlord or its agents shall
not be liable for interference with the light, air, or for any defect in the
Premises.
AUTHORITY OF TENANT: If Tenant is a corporation, each individual executing this
Lease on behalf of said corporation represents and warrants that he is duly
authorized to execute and deliver this Lease on behalf of said corporation, in
accordance with the bylaws of said corporation, and that this Lease is binding
upon said corporation.
The terms of this Addendum have been agreed to by the parties to this Lease as
of the day and year first above written in the Lease Agreement.
RIGHT OF FIRST REFUSAL: 1. As a material consideration for entering this Lease
Agreement Tenant shall at all times during the initial lease term and subsequent
terms have the Right of First Refusal to purchase the "Property" constituting
the Leasehold Premises and surrounding acreage, known as 1600 Lower State Road,
Doylestown, Pennsylvania, together with all improvements (i.e. a 2,000 square
foot stand-alone building, parking area, lawn, etc.).
2. Under this provision, the Owner is obligated to
notify Tenant in writing, via certified mail, of any pending ownership change.
Notification will be deemed effective upon confirmed receipt of the certified
mail. A "pending ownership change" will constitute a bona fide offer in writing
for transfer or sale of the Property from a good faith purchaser/transferee
unaffiliated to the Owner, Tenant will not be obligated to exercise its Right
of First Refusal until receiving notification of a "pending ownership change".
Under no circumstances shall the "Property" be sold or transferred without first
permitting the Tenant to exorcise its Right of First Refusal. Tenant shall have
ninety (90) days from the date of notification
<PAGE>
to exercise its Right of First Refusal by matching the bona fide offer.
----------------------
JOSEPH MANNINO, LESSOR
----------------------
ANDREA MANNINO, LESSOR
----------------------
WITNESS
----------------------
LESSEE
----------------------
WITNESS
<PAGE>
THIS AGREEMENT is made between Verne J. Troyer ("TROYER"), TC Ventures, LLC
("TCV"), and Collectible Concepts Group, Inc. ("CCGR")
NOW, THEREFORE, in consideration of the mutual promises and covenants herein
contained, and in reliance thereof, the parties hereto agree to the following
terms and conditions:
1. TCV assigns to CCGR all rights, interests, liabilities, ownership and
control it has in the existing Internet Site License Agreement (the
"Agreement") with TROYER
2. TROYER agrees to extend the termination date of the Agreement to
December 31, 2001.
3. TROYER authorizes CCGR to use the name and likeness of TROYER,
including, but not limited to, "Vern J. Troyer", "Vern Troyer" and
"Mini-V", as the official spokesman for any and other CCGR, owned
and/or operated, Internet sites relating to "Austin Powers" and
authorizes cross-linking of CCGR's "Austin Powers" Internet sites.
4. TROYER agrees to make reasonable efforts to perform promotional duties
related to the aforementioned CCGR "Austin Powers" Internet sites.
These duties include, but are not limited to, Radio and/or Television
commercial appearances supporting the CCGR "Austin Powers" Internet
sites and any other personnal appearances and performances which
TROYER and CCGR deem relevant. CCGR will pay all reasonable travel,
lodging, transportation and per diem expenses related to promotional
duties and appearances.
5. CCGR affirms all the terms and conditions of the Agreement, and
acknowledges that the selection of merchandise provided, relating to
"Vern Troyer" and "Mini-V", is at the sole discretion of TROYER.
6. CCGR issued to TCV 400,000 common shares of CCGR to be lettered and
restricted pursuant to SEC Rule 144.
7. CCGR issues to TROYER 400,000 common shares of CCGR to be lettered and
restricted pursuant to SEC Rule 144.
8. CCGR pays to TROYER, on a monthly basis, two percent (2%) of gross
revenues generated by all CCGR Internet sites, other than the TROYER
site, relating to "Austin Powers".
Entered into this 16th day of December, 1999, at San Diego, California, by:
Executive Manager Jan Simanton
/s/ Verne J. Troyer /s/ Jan Simanton
- ------------------------- --------------------------
Verne J. Troyer
/s/ Matthew F. Tyson, Esq.
- --------------------------
Matthew F. Tyson, Esq.
Chairman and Member, TC Ventures, LLC ("TCV")
/s/ Paul S. Lipschutz
- --------------------------
Paul S. Lipschutz
President, Collectible Concepts Group, Inc. ("CCGR")
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTANS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE FINANCIAL
STATEMENTS CONTAINED IN COLLECTIBLE CONCEPTS GROUP, INC. FROM 10-SB FOR THE YEAR
ENDED FEBRUARY 29, 2000 AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH
FINACIAL STATEMENTS
</LEGEND>
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<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> FEB-29-2000
<PERIOD-END> FEB-29-2000
<EXCHANGE-RATE> 1
<CASH> 247,491
<SECURITIES> 0
<RECEIVABLES> 13,886
<ALLOWANCES> 1,500
<INVENTORY> 149,408
<CURRENT-ASSETS> 507,406
<PP&E> 34,558
<DEPRECIATION> 16,772
<TOTAL-ASSETS> 525,192
<CURRENT-LIABILITIES> 1,307,778
<BONDS> 437,587
0
0
<COMMON> 162,704
<OTHER-SE> (945,290)
<TOTAL-LIABILITY-AND-EQUITY> 525,192
<SALES> 296,261
<TOTAL-REVENUES> 296,261
<CGS> 199,224
<TOTAL-COSTS> 3,263,509
<OTHER-EXPENSES> 64,064
<LOSS-PROVISION> 6,077
<INTEREST-EXPENSE> 64,064
<INCOME-PRETAX> (3,031,312)
<INCOME-TAX> 0
<INCOME-CONTINUING> (3,031,312)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (3,031,312)
<EPS-BASIC> (0.03)
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