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1 MARTIN J. BRILL (State Bar No. 53220)
CRAIGM. RANKIN (State Bar No. 169844)
DAVID B. GOLUBCHIK {State Bar No. 185520) 01 NOV 27
3 LEVENE, NEALE, BENDER¥ RANKIN & BRILL L.L.P.
1801 Avenue of the Stars, Suite 1120
4 Los Angeles, California 90067
BY.
Telephone: (310} 229-1234 •^tz:^f^ -[rp
5 Facsimile: (310) 229-1244
6 Attorneys for Chapter 1l
o 7
Debtors and Debtors in Po!session

8
UITED STATES B A K U P T C Y COURT
9
10 CENTRAL-'DISTRICT OF CALIFOnIA

11 FERNANDO VALLEY DIVISION)


12 In r e CASE 01-11329-KL
13 STAN LEE MEDIA, INC'I C h a p t e r 11
a
Delaware corporation, and
14 STAN LEE MEDIA, INC., a {Jointly Administered with Case
)
15 Colorado corporation, No. SV-01-1l331-KL}

16 Debtors and Debtors


in Possession . NOTICE OF MOTION AND MOTION FOR
17 ORDER 1TO APPROVE SALE OF ASSETS
FREE U CLEAR OF LIENS;
18 n MORANDUM OF POINTS AND
Affects Both Debtors AUTHORITIES; DECLRATION OF
19 K N T H S . WILLIAMS IN SUPPORT
Affects Stan Lee THEREOF
20 Media, - Inc ., a
Delaware corpor ation, ) Date: Ja O uary 8,2002
21 Only Time: 10:0O a.m.
) Place: Courtroom "301"
2 Affects Stan Lee ) 21041 Burbank Blvd.
23 Media, Inc. , a ) WOOdland Hills, CA
Colorado corporation, }
24 Only ^

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III
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BMBIX n
03364
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i) 1
Table of contents
2
M M O A D U M OF-POINTS A D AUTH01UTIES
•• .6
I. STATEMENT OF FACTS ,6
4 BACGROUND

5 RLIONSHIP^Wr!H SiRN L E E . . . • • • • • • • • ••.•••••• 6


T DEBTORS" CKERTiVE 1 S E S S . •••••••• ••• ... ' .•
• 1. Produced Properties: "7
6 2 . Co-Brands Produced: .7
7 , 3. Co-Brands In Development! . . .,.7
4. Developed Dea ls: ..•.••. • 8
8 S. Other Projects (Undeveloped; Debtors acting as
agent tor a5sets only): ......... ..... 8
9 6. All trademarks, copyrights, original artwork' and
promotion al mate rial relating t o the fo re goi ng
10 Creative As sets . 1s. . ,.".., ., .. ,., .... -8
D,
11 THE 1 S E T P O R O U s AGREEMENT 12
I. All cash, bank deposits and/or cash equivalents of
12 the Debtors 12
2. A l of the D eb tors' off ice e quipm ent, computer5 i
13 and ser vers 12
3. Claims, lawsuits and causes of action of the
14
Debtor s.
15 4" Tax refunds and tax attributes • ..•. 13
S. Claims for relief under any of the avoiding powers
16 provided for under Chapter 5 of the Bankruptcy
Code. : .. .. . 13
6, All books and records of the Debtoris that do not
relate to the Assets . 13
18 The Debtors' corporate charter or- qualifications
to conduct business as a corporation, arrangements
19 with registered agents relating to foreign
.qualifications, taxpayer and other identification
20 numbers, seals, minute books, transfer books, and
other documents relating to the organization,
21 maintenance, and existence of the Debtors as a
corporation; or any of the rights of the Debtor's
22 under this Agreement • .. 13
23 8. The Debtorst interest in Conan Properties, Inc.
and any rights or interests, including
24 intellectual property rights, and interests in any
of the properties and assets of CPI 13
25 9. s tan Lee Presents; ..
10. -Stan's Soapbox; and
26 II. Stan Lee & Design • •...
14
TH P O J SA T IS IN T I BEST I N S O ST OF TH L E S T A T E S . A
27 G. . . , . . 15
P O J C T E D DISTRIBOTION B A S E ON $ 4 MlM-ION TOTAI. RETURN. . .
H. PROOECTED D I S T R I U I O N BASED OH $ 7 MILI:ON T O A R T . • • • •• 16
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03365
iXHlBlX
• '-''-^ - ^ " - 1 • . " •

1 DISCUSSIPN . . , .i,.,,.' .-'".,'' • ___.., . 17


II.
2 A. THB; C O U I SHODLD APPROV' THN D W O R S I PROPOSED A l SET S A TO
POROQVSER P O B S U J ' TO S E C T I O K 3 6 3 ( B 1 OF THE BftNKBDPTCTf C O D E . . . 1 7
3 1. sound' Business Purpose .. 19
2. , Accurate and Reasonable Notice 21
4 3. Fair aTdReasonable Price . , . .... . 22
5 4, Good F a i t h . . . . . . . . . . . . . , v . ' . . , ...."...,
B, S E c i o N 3 6 3 ( F ) O F ! B U P C _ CODE : E H M I ! S THE DEB!ORS' SAI£
6 OF THEXR ASSETS TO PDRCHASBR TO B E FKBS MID C L OF A U .
26
7 1. The P r o p o s e d A s s e t S a l e i s Permissible Pursuant to
11 U , S . C . S e c t i o n 3 6 3 { f ) ( 2 ) , . .,., 27
8 . 2, The P r o p o s e d A s s e t S a l e i s Permissible Pursuant t p
11 U.S . C , S e c t i o n 3 6 3 { f ) (3) . . , : . . . , . , . ,...,....28
9
II.! . CONCLUSION. ,. ,. . . . 29
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IX

^ Q ^ 03366
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1
ties
2 {
3 CAE
Coastal Indus.. Inc. v. U.S. Internal Revenue Service (In re Coastal Indus.. Inc.),
4 63 B.R. 361,368 (Bankr. N.D. Ohio 1986) - 23
5 In Ie Abbotts Dairies of Pennsylvania. Inc., .
1 8 F . 2 d 143. 149 (3d Cir. 19&6) - - 2 , 26, 27
6
1988) - -27
7
In re Apex Oil Co..
8 92 B.R. 847.869 ( . EDMo. 1988),
cfting In reBxennium:inc.. 115 f.2d 1401, 1404-05 (yi Cir. 198 3) - 27 :
-
9 In re Atlanta PackaRing Products, Inc,.
99 B.R. 124, 131 (.a n r . N.D. Ga. 198.)- -24
10
In re Continental Airlines. Inc.
11 1 8 F.2 d 1223(SIh Cr.- 1986)• -20
In ^GeorEe Walsh Chevrolet. Inc..
12 118 B.R. 99, 102 (Bankr. E.D. Mo. 1990)T -19

l3 In re Industrial Valley Refrig. and Air Condo Supplies. Inp..


77 B.R . 15, 21 (Bankr. E.D. Pa. 1987)- -19,27
14 Integrated Resources. Inc.,
135 B.R. 746, 750 (Bankr. S.D.N.Y. 1992), aff'd, 141 B.R 650 (S.D.N.Y. 1992)- -24
15 In re Kaipe.
84 B.R 926, 930 (Bankr. M.D.Pi. 1988) " - - - - - - - --- -22 23
16 - -

In
17 r S H . CoaS^SD.W.Va.1996) - - - : - - - - - - - - - . : __„__ . - - 1 9

18 In re Lionel Corp..
722 F.2d 1063, 1071 (ld CiT. 1983)- -lg.20
19 I re Oneida Lake Development. Inc,
114 B.R 352 (Bankr. N.D.N.Y, 1990) -30
20
In re Rock Tndus. Macfa. Corp! .
21 572 F.2d 1195, 119& ( Cir. 1 9 1 8 ) - - - - - - - - - - - - - -27
In re Snvder.
22 74 B.R. 872, 878 (ankr. ED. Pa 1987)- -24
23 I r Terrce Gardens Paric Partnership.
96 B.R. 707 (BanT. W.D.Te. 1989)- -31
24 Inre TheLandiiig,
156 B.R. 246,249 (Bankr. E.D Mo. 1993) - —19
25
In re-The Seychelles.
- • " - Partnership
m - and Genius Corp v. Banyan Corp..
26 32 B.R. 708i(.D. Tex 1983)- - - - - -24

27 ' ^ 1 8 9 B.R. 97; 102 ( a n T . ED. Va. 1995)- 19


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03367

EXHIBIT .JLmGEJiiL
-,
1
InreWiIde Horse Enterprises. Inc..
2 i36 B.R. 830, 84.-2 ( a r . CD. C t 1991) - -19,24; 26, 27

3 S u n C r . B.A.P." -20,21
4
WilemainfiS^'c. 1985}. - : 2 3
5
STATUTES
6
363(b)(1): -18
7 11 US.C.m^ 29
8
OTHER AuTHORmEs
3 Collier on Bankruptcy § 363.06[4}, at pp. 363-46v (15* ed. Rev. 2001)-

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IV

03368

B(HlBt _j_mRpll
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1
PLEASE T A NOTICE that a hearing will be held on January 8,
2
2002, at 10:00 a.m., before the Honorable Kathleen T. Lax, United
3
States Bankruptcy Judge for the Central District of California,
4
in -her Courtroom "301'1, located at 21041 Burbank Boulevard,
5
Woodland Hills, California, to consider the motion (the "Motion")

filed by Stan Lee Media," Inc., a Delaware corporationl and Stan


,7

8 Lee Media, Inc., a Colorado corpo ration" debtors and deb tors in
9 possession in the aboye-captioned Chapter ' 11 cases (the

10 ^''Debtors")t For Order To Approve Sale Of Assets Free and Clear of


-- 11 Liens.
Pursuant to 11 U.S.C. § IDS Ca} and 11 U.S.C. i 363 (b), (f)
13 and {m}, the Debtors seek to sell certain of the Debtors' assets,
U in the Asset Purchase Agreement {the "Agreement"}, a
15 correct copy of which is annexed to the accompanying
16 declaration of Kenneth S. Williams as Exhibit "A", to SLC, LLC
17
("Purchaser"''), free and clear of all liens, clalIls, encumbrances
18
and interests, and exclusive of any and all debts, obligations,
19
commitments, or responsibilities associated therewith, witl any
20
such liens, claims, encumbrances or interests to attach to the
21
proceeds from the sale with the same priority, extentt
e: and
22
validity which existed prior to the sale.
23
24 .n summary, the D e ,

25 developments (the "Creative Assetsl). The Creative ASSets wete

26 created de "
27 pop-culture icon Stan Lee, co-creator of such classic characters
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2

03369
EXHIBf JLf
1 Incredible Hulk™ and the X-Mep'. Pre-
as Spider-Man', the

petition,
pi stan Lee «s employed pursuant to an employment
agreement with the Debtors, which Stan Lee contends was b "

by the Debtors The Debtors dispute this

c6ntention,

Notwithstanding the foregoing, in order to exploit the

Creative 1ss.ets and generate funds for the estates, it is

crucial that Stan Lee be a part of such exploitation. The

10 Debtors believe that 'the Creative Assets have minimal or no


11 value without Stan Lee' s lnvol vement. However, any litigation

12 regarding the validity of Stan Lee' s employment agreement is


13 likely consuming, expensive and may result in "bad

blood" which will jeopardi:e tuture exploitation of the Creative


15 Assets, .
16 Pursuant to the Agreement, the parties agreed that the
17
Debtors will sell the Creative Assets to the Purchaser, an entity
18
creatively 60ntrolled by Stan Lee, The Purchaser will continue
19
to develop, exploit and moneti ze the Crea ti ve Assets. In
20
consideration for their sale of assets to the Purchaser, the
21
Debtors shall receive a percentage of the gross profit realized
22
by the Purchaser froi the exploitation of the deveioped Creative
23
24 Assets,-which is the best offer received by the Debtors .
25 The Agreement is the extended aims-length

26 negotiations by and among the Debtors, Purchaser and the Official


27 Committee of Unsecured Creditors_ The Debtors the
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3

a .PAGE.
(3370
..

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Agreement is in the best interest of the
e s ·
Agreement will result in creating value out of the Creative'
3
Assets, which value, the Debt o rs believe, can only be created
4
with the direct involvement of Stan Lee.
5
The Motion is based upon this Notice o: MotioI and Motion,
6
7 the Memorandum of Points and Authorities, and the Declaration of
8 Kenneth S. Williams annexed hereto, 11 U .S.C. §§ 105, 363 and
9 Federal Rules of Bankruptcy Procedure 2002 and 6004, the

10 statements, arguments and Iepresentations' of counsel to be made


11 at' the hearing on the Motion, and any other evidence properly
12 presented to the Court at or prior to the hearing on the Motion.
13 that any opposition to the
14 must,, not later than fourteen (14) days before the date
15 of the hearing, be filed with the Clerk of the Bankruptcy Court
16 and served on counsel for the Debtors whose name and address are
17
set forth at the top, left-hand co rner of the first page of this
18
Notice of Motion and Motion.
19
PLEAE T A FRTHER NOTICE that the Court may deem the
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failure of any party to object to the Motion to constitute
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consent to the relief sought by the Debtors.
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23 III
24 III
25 III
26 1/1
21 III
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4

IXHI J_PAGE_^ 03371


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1 WRFOR, the Debtors respectfully request that the Cburt -


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(l) grant ,th e Motion; (2). app rove . the sale upon the t er ms and
3
conditions set the Agreement annexed hereto; ahd (3)
4
grant such further and additional relief as the Court deems Just
5
and proper.
6
Dated: November ' 7 , 2001 STAN LEE MEDIA, INC.,
7 a Delaware corporation
8 STAN_r.EEjandA, INC. r
9
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11 _M^TIN j / B R I H T
c R I G M. RANKIN
12 DAVID B. GOLUBCHIK
LEVENE, NEALE, BENDER, RANKIN
13 & BRILL L.L.P.
Attorneys for Chapter 11
14 Debtors .and Debtors in
Possession
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5 •

1 ee. io(
03372
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:
1
2
1. STATEMENT OF FACTS

4
Stan Lee Media, Inc., a Delaware corporation ("Stan Lee

6 Delaware"), and stan Lee Media, Inc. ("Stan' Lee Colorado"), a

Colorado corporation, Chapter 11 debtors and debtors in

8 possession "(coilectively, the "Debtors" ) comraenced these

9 bankruptcy cases by filing V<luntar. Petitions under Chapter 11


10 of the Bankruptcy Code "on February 16, 2001 . (the "^Petition
11 Date"). continue to operate their business
12 manage their financial affairs as debtors in possession pursuant
13 to 11 U.S.C. §§ 1107 and 1108.
14 wholly-owned subsidiary of Stan Lee
15 Colorado. Stan Lee Colorado is a public corporation that, prior
16
to the Petition Date, traded on NASDAQ under the symbol "SLEE".
V The Debtor.
18
that, prior ,to the Petition Date, developed and distributed
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branded entertainment properties under the direction of pop-
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culture icon Stan Lee, co-creator classic characters as
21
Spider-Man1, the Incredible Hulk1 and the X-MeJ.
2
23 B. Relationship W i t Stan Lee.
24 Prior to the Petition Date, Stan Lee was employed by the
25 Debtors pursuant to an employment agreement (the "Stan Lee
26
Employment Agreement"). Prior to the Petition Date, Stan Lee
27
contended that the Debtors were' in breach under the Stan Lee
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6

03373
EXHIBIX
1 Employment Agreement and S ta n Lee d ecl are d: the stan Lee
2
Employment Agreement to be terminated as of January 29, 2001,
3
both of which contentions the Debtors' dispute .
4
Notwithstanding the foregoing, the Debtors belieye that any
5
litigation regarding the validity of Stan .Lee's employment
6
agreemelt is likely to be time consuming, expensive and I,Y

8 result in fbad blood" which will jeopardize future exploitation

of the Debtors' Assets, as described belo;.

10 Assets.
11 Although the Debtors do own certain minimal offfice

12 equipment/ by far, the Debtors' most valuable assets include

13 their branded entertainment properties (the ""Creative Assets")


14 which were created and developed under Stan Lee. The Crea t.ve
15
Assetsl, as described in the annexed Asset Purchase Agreement,
16
and in greater detail in exhibits thereto, include the following:
17
1. Produced Propertiesr
18 a) St;mlee. NET web site and. portal;
b) The Accuser;
19 c) The Drifter; and
2( d} Stan' s Evil Clone.

21 2. Co-Brands Produced:
a) The Backstreet Project.
22
23 3. Co-Brands In De.el6p»ent:
a)) Gene Ro ddenberry's Starshipi
24 b) Mary J. BIlge;
c) X-Treme Heroes;
25 d) Police Force 2220;
26 e) Chrysallis;
f) The Stqne Giant;
27 g} Battle School Tranquility;

28 I The Creative Assets which are the subject exclude the 7th
Portal Project, which is the subject of a dispute with salim/Stagg.

03374

!£^\,% HiSi^'a i
1
,

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• h) Story Bible; and
2 i} Stan, Junior.

4 . . Developed Deals:
a) ?O% interest in Lee Schultz Partnership.
_4
5. Other projects (Undeveloped; Debtors acting as agent
5 for assets only):
6 a} DCComicsi
p) Toon 800m:
c) Cyberworld;
d) Mobius;
8 e) Hollywood Christmas Parade;
f) Scuzzlei and
g) Scuzzle Design. -
to 6, All trademarks, copyrights, original artwork and
promotional material relating.to the foregoing Creative
11 Assets.
12
13
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Due to_ lack of finanCing, pre-petition the Debtors laid off
15
most of their employees and generally ceased ongoing operations.
16
The Debtors filed the instant cases in order to find a strategic
17
part
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recovery for the estates.
19
the outset of these cases, the Debtors created a sales
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memorandum, (the "Marketing - '
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2 listing of the Debtors' assets, primarily consisting of the

23 Creative Assets. The Marketing Package contained a detailed

24 explanation of ea?h of toe assets, togethe-


26 deals entered into by the Debtors relating to such assets.· The
26 comprehensive Marketing Package, the relevant . excerpts of which
27 are attached to the annexed Agreement, allowed prospective
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1 J6g 03375
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purchastrs and interested parties to analyz\ the Debtors' assets


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and make an' info.ed, decision whether to purchase or infuse
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capital with'respect to such assets.
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Opon finalizing the Marketing Package, the Debtors sent the
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Marketing Package to over 40 financial and ente-rtainment entities
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had an interest in the Debtors' business. The
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Deltorst efforts, which included a request for interim
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post-petition financing, .rtlsulted in approximately 12 meetings
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10 and conferences' with --interested parties, including Interfase
-.
11 Capital, L.P. (nlnterfasen). .

12 As set f?rth above, in order for the Debtors to be able to

13 market the Debtors' assets and negotiate with third parties as a

14 "going concern" entity, the Debtors required financing. The


15 Debtors were able to negotiate the terms of a post-petition
16 debtor-in-possession financing facility pursuant to which the,
17 Debtors would commence limited operations pending a sale or
18
of- the Debtors' I s i n e s s . On May 3,
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court entered that certain "Final Order Approving Emergency
20
Motion ,Pursuant To Local Bankruptcy Rule 9075-1(1) For Authority
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To Obtain Post.petition Finan"ing" (the "Order") r pursuant to
2
court approved the Debtor-in-Possession financing
23
agreement (the "financing Agreement") entered into by
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anq Interfase. Pursuant to the FinanciDg Agreement, Interfase
25
26 committed to provide at least $250, 000 in post-petition financing

27 for the Debtors' opera tionsr and potentiallY, ,$250,000 more in

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9

gXHSt 1 PAC
03376
^C..'

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the future. : In t u r n , I n t e r : a s e was g r a n t e d a s e c u r i t y i n t e r e st


2
in substantiallY all of the DebtOrsI p r e - p e t i t i o n " . and post-
3
petition assets. Additionally" based on Interfase's

representations that i t was i n t e r e s t e d in either a c q u i r i n g Or
5
merging with the DebtOrs,. Tnterfase was granted .a 60-day
6
e x c l u s i v e r i g h t t o n e g o t i a t e w i t h t h e DebtOrs.
7
Unfortunately, the discussions between the Debtors and
8
9 I n t e r f a s e d l d n o t prOceed as boped by t h e D e b t o r s . No agreement

10 was reached between the Deb t < r s and Interfase rregar(


e g a r d iirn g a

11 recapitalizatioI of the Debtors or a sale of the Debtors' assets

12 to Interfase. Moreover, Interfase refused to provide the


13 additional $Z50( 000 in financing to the Debtors, which
4 essentiqlly shut down the Debtors' operations again.
15 Upon being released of the exclusivity requirement to
16
negotiate with the Debtors attempted to market their
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prOjects entities, which included companies
18
in the United states and in Canada. However, as a result of
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Interfase's exclusivity period, other potential deals "fell
2,0
apartil and could nOt be revived by the Debtors. Additionally,
21
through discussions with such third parties, it was clear that
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23 (I) no party would recapitalize the Debtors through a plan of
24 reorganization due primarily to the fact that the Debtors' public
25 s h a r .
26 indlctments relating to the Debtors' former management and
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EHIB1T I^^d^ 03377


: '

shareholder lawsuits; and any sale transaction must involve

Stan Lee, per son;lly, and his creative abilities.

As. discusseO above, Stan Lee co n tended that l


lis employment

agreement with the Debtors was breached and .terminated .'re-

petitio! and, therefore, unassignable. While .the Debtors

disputed Mr. Lee's contentions, the fact is that any litigation

would take a long time, be expensive, and result in "bad blood, I

which would be detrimental to any possibility of having Sta n Lee

10 exploit the Debtors' assets. Additionally, it is likely that

11 Stan Lee's personal services employment agreement is not one

i2 which can be assumed and assigned over Mr. Lee's objection, as

13 provided for in 11 U.S.C. § 365(c}.

14 Based on the foregoing, the Debtors involved Stan Lee,


15 through his independent counsel, in their negotiations. Stan Lee
16 cooperated with the Debtors' efforts and assisted the Debtors in
17 their marketing efforts to the best of his ability.
18
Unfortunately, the Debtors were unable to reach any agreements
19
with third Iqrties which would be acceptaple to everyone and
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had a chance of benefiting the estates.
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After Debtors, would not be able to
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c o n s u m a t e a transaction with third parties and that the Debtors
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24 had no ability· to monetize their productions, Stan Lee contacted

25 the Debtors to advise them that Stan Lee would be interested in

26 trying to exploit and monetize the Debtors' assets. In tJat

27 regard, ,Stan Lee made an offer to the Debtors to acquire th.

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03318
BCHi _i„PAGiJy/
1 Creative Assets and exploit them, with the estates sharing in
2 future revenues .. Based on the Debtors' unsuccessful marketing
3
efforts and the importance of Stan Lee's personal involvement in
4
the productions, it was evident that the highest and best use for"
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the estates' assets would be through the exploitation of such
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assets by Stan Lee. Accordingly, the Debtors engaged in
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negotiations with Stan Lee,. who was represented by independent
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9 counsel, regarding the development apd exploitation or the

10 Creative Assets" The Creditors' Comittee was also involved in

11 such negotiations and assisted the Debtors in obtaining a result

12 which is much more favorable for the estate than originally


13 proposed by Stan Lee.
14
15 Prchase
16 . Based upon extensive negotiations among the Debtors, the
17 Committee and Stan Lee, which spanned approximately two (2)
18 months, the parties reached an agreement, the sali e nt terms of
19
which the Debtors understand are acceptable to the Committee.
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The agreement of the parties is memorialized in that certain
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Asset Purchase Agreement (the "Agreement"), a true anc correct
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copy of which is attached to tle annexed Declaration of Kenneth
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S. Williams as Exhibit "z:'. In summary, the Agreement provides
24
25 as follows:
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12.

03379
EXHffi!T_
.: /
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1 1. The Deb t or s shall transf e r the Creative A ssets,


2
excluding th . 7th Portal project, to SLC, LLC (the "Purchaser"),
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an entity controlled by Stan Lee.
4
20 Th^'Purchaser shall use its best efforts to exploit the

Creative Assets.
S
3. The sale shall specifically exclude the follow:ng;
7
ao All cash, bank deposits and/or cash equivalents of
8 : the Debtors.
9 bo All of the Debtors' office equipment, computers,
and serv.rs. .
10
c. Claims, lawsuits ard causes of action of the
11 Debtors. "
d. Tax refunds and tax attributes.
12
e. Claims for relief under any of the avoiding powers
13 provided for under Chapter 5 of the Bankruptcy
Code.
14
All books and records of the Debtors that do not
15 relate to the Assets.
g. The Debtors' corporate charter or qualifications
16 to conduct business as a corporation, arrangements
with' registered agents relating to foreign
17 qualifications, taxpayer ard other identification
nuiers, seals, minute books, transfer books, and
18 other documents relating to the organization,
19 maintenance, and existence of the Debtors as a
corporation; or any of the rights of the Debtors
20 under this Agreement.
h. The Debtors· interest in Conan Properties, Inc.
21 and any rights or interests, including
22 intellectual property rights, and interest: in any
of the properties and assets of CPT .
23 4.. In consideration for the sale <£ the Creative Assets,
24
the following revenue-sharing program shall pe implemented by the
25
parties;
26
Until such time as the allowed secured claim of
27 Interfase is satisfied in full by the Debtors or
their estates , (the "first Target"), the Purchaser
28 shall pay {to the Debtors, or their estates, for
13

.AFitt 1 03380
1 payment to Interfase, 60% of the gross income
2 received by the Purchaser frof the.explo:tation of
the Primary Assets, which are set forth in
3 Sections 1.1.1,- 1.1.2, and 1.1.4 of the AgJEement.

i b. ' Upon successfully achieving the First Target and


until such time as the Debtors or their estates
5 recover $250,000 from the Purchaser's expfoitation
of the Primary Assets (the "Second Target"), the
6 • Purchaser shall pay to the Debtors, or their
estates, 40% of the gross income received by the
7 Iurchase.i from the exploitation of the P rimary
Assets.
8
c. Upon successfully achieving the Second Target and
9 until such time as the Purchaser recovers its
10 advance -(as described in Paragraph 4 (a) above),
wherein Purchaser consented to increase the
11 Debtors' share of the exploitation of the Primary
Assets from 40% to 60% of gross income received by
12 Purchaser until such time as Ihter f ase' s securi ty
interest is satisfied in full (the "Third
13 Target"), the Purchaser shall pay to tle Debtors,
or their estates, 20% of the gross income received
14 by the Purchaser from the exploitation of the
Primary Assets.
15
d. Upon successfully achieving the Third Target and
16 until such time as (a) all allowed claims
(excluding any equjty interests in the. DebtorsJ
17 are :atisfied in full, net of other recoveries;
18 and (b) the Debtors'" estates receive the sum of
one (1) . million dollars from the exploitation of
19 the Assets over and above the amount necessary to
satisfy all"-allowed clalms, the Purchaser shall
20 pay to the Debtors, or their estates, 40% of the
gross income received by the Purchaser from the
21 exploitation of the Primary Assets.
^ e. In consideration for the purchase of the assets
described in Sections 1.1.3 and 1.1.5 of the
23 ! Agreement (the "Agency Assets"), the Purchaser
shall pay to the Debtors, or theit estates, 12% Qf
M the gross income received by the Purchaser from
25 the exploitation of the Agency Assets.

26 5. In addition to ' the foregoing, Stan Lee ,demanded, and

27 the estates , consented, to transfer the following intellectual


28
14

©CHIBIX 1
03381
, '

1 property assets to Stan Lee; personaily, without any obligation


2
of Stan Lee 'to compensate the Debtors or their estates for such
3
assets (the "Free Assets"):
4
a. stan Lee Presents;
5 b. stan's Soapbox; and
6 c. - stan Lee & Design.
-.
7
F. T e Sale 1s i, t e Best In-terest of the Estates.
8
As. discussed in detail above, the Debtors belie v e t hat
9
without the active invqlvement of Stan Lee, the Debtors will not
10
be able to exploit the value of the Creative Assets. In fact,
11

12 currently. without the involvement o f Stan Lee, the Oebtors


13 believe that the Creative Assets have virtually no value.
14 On the other hand, the Ag r eement allows Stan Lee to exploit
15 the Creative Assets, while allowing the Debtors' estates to share
16 in- the revenue st r eam from such exploitation. Attached hereto as
Exhibi t "'B" are projections of the revenue stream relating to the
18 exploitation of the Crea tiv e Assets (the "Pi:ojections"). The
19 Projections are based on a 3-5 year character life and utilize a
20
conservative' royalty rate of S%.
21
The success of characters similar to the Assets depends upon
22
the characters achieving a television or movie contract , which is
23
similar to an anchor tenant in a s t r i p mall. Once a movie or
24
television contract is achieved, the charactets can also be
25
monetized through merchandise, apparel, comic books and book
26
contracts.
27
28
15

eCHlBIt
1 PAGE,J-/X 03382
- X

Although Stan Lee's characters have generally had a high


2
degree of sUGcess, the fact . is that it is unknown which
3
characters will succeed and which will not. The general industry.
4
standard is to develop a mUltitude of characters and "bet" on a
5
few haracte^s succeeding. "
6
Based. on the foregoing industry standards and assumptions,
.:•7-

8 the- Debtors estimate that the Assets can gene!ate between


9 milLion over the next five years .
10
11 G. Projected Distribution Based on $4 Million Total Return.
12 Utiliiing the lower-end of the projections ($4 million); and
13 based on Interfase's claim of $250,000, the; revenues would be
14
shared as follows:
15
First $41.6,666.67 - Of the foregoing revenues, the Debtors'
16
share would be $250,000, to pay Interfase, and the
17
Purchaser's share would be $166,666.. 67.
18
Next $625,000 (total revenues to date of $1,b41,666.61) - Of
19
the next $625,000, the Debtors' share would be $250,000 and
20
21 the Pur9haser's share would be $375,000.

22 Next $4l6,666.67 (total revenues to date of $1,458,333.34) -

23 Of the next $416,666.67, the Debtors' share would be


24 $83,333 .34 and the Purchaser's share would be $333,333.33.
2.5 Ne x t $2,541,666 .. 66 (total revenues to date of $4 million ) -
26 Of the next. $2r54l_,666.66, the Debtors' snare would be
27
$1,016,666.66 and the Purchaser'S share would be $1,525,000.
28
16

*J ^^ ///T' 03383
mm
1 . Therefore, in the event that the exploitation Assets
2
results in gross income of $4 million, the Debtors' estates will
3
generate, after payment of Interfase's secured claim," the sum of
4
$1,683,333.00.
5
6
7 H. Projected pistribution Based on $7 Miliion Total Return.
In the event that the Purchaser "hits a jackpot" with the

9 exploitation of the Assets utilizing the higher-end of the

10 projections ($7 millioi)", and based on Interfase's claim of

11 $250,000, the revenues would be shared as follows:

12 First $416,666.67 - Of the toregoing revenues, the Debtors'


13 share would be $250,000, to pay Interfase, and the
14 Purchaser's share would be $166,666.67.
15 te of $1,041,666.67) - Of
Next $625,000 (total revenues to date
16
the ne:t $625,000, the Debtors' share would be $250,000 and
17
the Purchaser's share would be $375,OOO.
18
Next $416,666.67 (totai r eve n ue s to date of $1/458,333.34) -
19
Of the next $416,666.67, the Debtors' share would ' be
20
$83,333.34 and the Purchaser'S share would be $333,333.33 ..
21
Next $5,541,666.66 (total revehues to date of $7 million) -'
2
23 Of the next $5,541,666.66, the' Debtors' share would be

24 $2,216,666 and the Purchaser,s s hare would be $3,325,000.

25 Therefore, in the event,that the exploitation of t he Assets

26 results
. in gross income of $7 mllli9n, the Debtors' estates will'
27
28
17

1 M B 03384
'^-- .
..
•:"-"• A

1 generate, after payment of Interfase's secured claim, the sum of


2 $2,799,999.34. .
3
i II. DISCUSSION

5 A. T e Court Should Approve the Debtors' Proposeid Asset Sale to


6 P c h a s e r Pursuant to Section 363(b) of the Ean)cruptcy Code.

7 Section 363 (b) (1. of the Bankruptcy Code provides:


8 "The. trustee, after notice and a hearing, may
9
use, sell, or lease, other than in the
10
ordinary course of bu,iness, property of the
11
estate."
12
11 U.S.C. § 363 (b) (1). eral matter, "a judge determining
13
a Section 363(b) application [should) find from the evidence
i4
15 presented beIore him at the hearing a good business reason to
16 grant such an application." In re Lionel Corp., 1063,

1071 (2d Cit. 1983). The pa)ty moving under Section 363 (b)

18 carries the burden of demonstrating that a use, sale or lease out


19 of the ordinary course of business . will aid the debtor's
20 reorganization. Id
21 Certain: factors pertinent to this analysis have been
2 articulated; specifically, the Court should consider whether:
23 a sound business purpose justifies the
24 sale;
25
(2) accurate and reasonable notice of the
26
sale was provided;
27
28
18

03385
' t PAGE UJ
a -•

..V

1 () the price to be paid is, adequate, i.e.,

- fair. and reasonable; and


(4) the sale is in good faith, i.e., there

is ?! absence of any lucrative deals

with insiders.

7 In re Industrial Valley Refriq. and Air Cond. Supplies, Inc., 77

B.R. 15 , 21 {Bankr. E.D. Pa. 1987}; In re Wilde Horse


8
Enterprises, •Inc., 136 B.R. 830, 841-2 (Bankr. C.O. . Cal. 1991};

10 In re The Landing, 156'B·..R. 246, 249 (Bankr. E.O. Mo


Mo. 1993);
. 1993) ; In

11 re George Walsh Chevrolet, Inc., 118 B.R. 99, 102 . (Bankr. E.D.
12 Mo. 1990); In re WBQ Partnership, 189 B.R.. 97, 102 (Bankr.
13 E.D.Va. 1995}; ln re Lady H. Coal Co., Inc., 193 B . R. 233 (Bankr.
1 4 S.D.W.Va. 1996).
15 The Debtors' proposed sale to Purchaser meets the foregoing
16 criteria, is appropriate and should be approved by the Court,
17 1 Soud Business Puxpoae
18
There must be some articulated business justification, other
19
than appeasement of major creditors, for u5ing, selling or
20
leasing property out of the ordinary course of business before
21
the bankruptcy judge , may order such disposition under Section
2
23 363(b). In re Lionel Corp., supra, 722 F.2d at 1070. - The Ninth

24 Circuit BankruptcY Appellate Parel in Walter v. Sunwest Bank (In


25 'e Walter.), 83 _B.R. Cir. B.A.P. 1988) has a dopted a

26 flexible case-by-case test to determine whethex the business


27 purpose for a- proposed sale justifies disposition of property of
28
: 19 •

n ^. 1/5 03386
1
the estate under Section 363 {b} . In Walter, the Bankruptcy
2
Appellate panel, adopting the reasoning of the Fifth Circuit in
3
In re Continental Airlines;. Inc., 780 F.2d 1223 (5th Cir. 1986)
4
and the Second Circuit in In re Lionel Corp., supra, articulated
5
the standard to be applied under Section 363{b) as foilows:'
6
"Wlether the proffered busiJess justification
7 is suf ficient depends on the case . As the
se cond Circuit held in Lio nel, the b ankru ptcy
8 j rdge should consider all salient factors
9 peltaining to t he , proceeding and,
accordingly, act to further the diverse
10 interests of the Debtor, creditors and equity
hoiders,- alike. He might ; for'fexample, look
11 to such relevant facts as the, proportionate
value of the asset to the estate as a wholei
12 the amount of elapsed time since the filing,
the likelihood that a plan' of reorganization
13 • will be p roposed and confirmed in the near
'future, the effect of the proposed
14 disposition on future plans of
reorganization, the proceeds to be obtained
15 f:om the disposition vis-a-vis any appraisals
16 of the property, which of the alternatives of
use, sale or lease the proposal enViSlons
17 . and, most importantly perhaps, wh!ther the
as s et is it;creasing, or decreasing in valle.
18 This list is not intended to be exclusive,
but merely to provide guidance to the
19 '. bankruptcy judge."
20 In Re Walter, supra, 83 B.R. at 19-20j citing In re Continental
21 Air Lines, Inc., 780 F. 2d 1223, 1226 (5't Cir. 1986).
2 The facts pertaining to the Debtors' proppsed sale to
23
Ptrchasers amply substantiate the Debtors' business decision that
24
their contemplated asset sale to Purchaser in accordance with the
25
terms of the Agreement is in the best interests of the Debtors'
26
estates and 1heir creditors and merits the approval of this
21
28 C o u r t .
• '

03387

eCKIBft 1 mG^M
:„ <

•} •••J - • •-

From the date of the filing of the Debtors' bankruptcy

cases, the Debtors ma:keted their assets to third parties in

order to obtain a capital infusion into the Debtors'. operations

or effectuate a sale of the Debtors' assets» From the outset of

the Debtors' marketing efforts, it was abundantly clear that


6
without the active involvement of Stan Lee, the Debtors will not
., 7
8 be ab1.e to exploit the value of the.Creative Assets or generate a
9 return. Based on conversations with parties, it was also

10 clear that such entities·..did not care as much about the Creative
11 Assets as they cared aboqt bringin9 Stan Lee on board. However,
12 due. to the alleged breach of Stan Lee's employment agreement and
13 the fact that it is unlikely that a personal services contract
14 can be assumed and assig ne d over Stan Lee's objection, the
15 negotiation . process was very difficult for the Debtors.
16
Eventually, the Debtors were able to reach an agreement with Stan
17
Lee with respect to the Creative Assets, which agreement the
18
Debtors believe is acceptable to the Committee, pursuant to which
19
the estates - will share in a percentage of the gross income
20
derived, by the Purchaser from the exploitation of the Creative
21
Assets.
2
23 Based on the foregoing, the Debtors were able to monetize

24 the value of the,Creatlve Assets for the beneflt of the estates.


25 The foregoing demonstrates that the Debtors" proposed sale to.
26 Pu:chasex in accordance with the terms of the Agreement is
27 justified by sound business purposes, satisfying the first
28
21

^2. .^M 03383


r" .--

requirement for a sale tinder Section 363(b) of the Bankruptcy

Code.

2. Accurate and ReasonaBle Notice.


A notice is sufficient if it includes the terms. and

conditions of the sale and if it states the time for filing

objections, In re Karpe, 84 B.R. 926, 930 (Balkr. M.D.Pa. 1988).


7
The purpose of the notice is to prov i de an opportunity for
8
objections and hearing before the court if there are objections.
9
10 Id. ..

11 The Debtors have provided a notice of their proposed sale to

12 all creditors and parties in interest. Additionally, the Debtors


13 served a copy of together with all attached

exhibits, upon tnterfase, the secured cr ed itor herein,

Official Committee of Unsecured Creditors, the Office of the


16 United States Trustee, and all parties who served the Deltors
17 with a request for special notice, Additionally, if any party
18 copy of the Motion, the Debtors will forward a copy of
19
the Motion promptly upon receipt of such a request.
20
The Debtors submit _that their proposed notice is reasonable
21
and appropriate under the circumstances.
2
3,. Fair and Reasonable F r i c
23 In order to be approved under Section. 363 (b) of the.
24
-- Bankruptcy Code, the purchase price must be fair and reasonable.
25
Coastal Indus. , Inc. Internal Revenue Service (In re
26
Coastal Indus. , Inc.), 63 B.R. 361, 368 (Bankr ' N.D. Ohio 1986).
27
Several courts_ have held that "fair valueu is given for property_
28
22

iXHIElT I.^M 03389


sale when at least 15% of the appraised value of

such property is paid. See lu re Karpe, 'supra,. 84 B.R. at 933;

In re Abbotts Dairies of Peansylvania, Inc., 788 F.2d 143, 149

'(3d. Cir. 1986), Willemain . v. Kivitz, 764 F.2d 1019 (4th Cic.
5
1985}i In re Snyder,' 74 B.R. 872, 818 (Bankr. E.D. Pa. 1987); In

re The Seychelles, Partnership Banyan Corp.,

32 B.R. 708 {N.D. Tex. 1983}. However, the Debtors also reaUze

that their "main responsibilitYi· and the primary concern of the

10 bankruptcy court, is tle··.maximization of the the asset

11 sold." In re Integrated B.R. 746, 750

12 (Bankr. S.D.N.Y. 1992) " a f f d, 147 B.R. 650 (S.D.N. Y; 1992). "It
13 is a well-established principle of
14 objective of bankruptcy sales and the [debtor's] duty with
15 respect to s,ch sales is to obtain the highest price or greatest
16 overall benefit possible f6r the estate." In re Atlanta
17 Packaging Products, Inc., 99 (Bankr. N.D. Ga.
18
1988); see also In re Wilde Horse Enterprises, supra, 136 B.R. at
19
841 ["in aDY: sale of estate assets, the ultimate purpose is to
20
obtain the highest price for the property sold"] .
21
The Debtors believe that the terms of the Agreement
2
sharing in the future revenue stream of the exploitation of the
23
2 Creative AssEts) constitltes a fair arid reasonable pU'rchase price

25 for the assets under the cU.rrent circumstances for the following
26 reasons;
27
28
23

liT_Z .«.ji 03390


^1 3^.
1 1. The Debtors have been marketing the creative Assets

from the comencement of their cases. Althougl negotiations with

different parties took place, after months of marketing, only one

real of f er wcs presented to the Debtors. The offer was presented

by the Purchaser. . Even after the offer was presented by t?e

Purchase}, the DeQtors and the Committee spent months negotiating

the terms of the sale, which terms have now been approved and

finalized in the,attached Agreement.


9
10 2. Prom the outset of the Debtors' marketing efforts, it

11 was clear that the only way to maximize the value of the Creative
12 Assets was. to have a package. deaL with Stan Lee. Pursuant to the
13 Ag reement, Stan Lee will be the person that is primarily
14 responsible "or exploiting the assets. As a result, the Debtors
15 were able to overcome the primary obstacle to maximizing the
16 value of the Creative Assets.
17
3. Based on the revenue-sharing arrangement se t forth in
18
the Agreement, the of tne Debtors are aligned with
19
those of the Purchaser. In other words, i: the revenue stream is

maximized, everyone benefits:


21
4. Pinally I as discussed above, the explOitation of the
22
assets is likely to result in a net distribution to the Debtors
23
24 estates, after payment of Interfase's secured claim, of

25 approximately $1. 68-$2. 8 million .. .


26 Moreover,. the terms of the Agreement were arrived at

27 folJowing arms-length negotiatjons between the parties, including


28

03391

fe#\HiBiT PAGE
•:
i ) ;

1
the active involvement of"the Committee, and represents the best,
2
and only, offer received by the Debtors. For all of the reasons
3
described above, consummating the proposed asset sale to
4
Purchaser in .. accordance _ with the terml of .the_ Agreement is
5
clearly the -,b"est option available for the Debtors' estates and
6
their creditors.
1
.4. Good Faith • .. . •
S
9 When a bankruptcy court authorizes a sale of assets pursuant

10 to Section 363 (b) (1), ._it is required to make a finding. with

11 respect :to the "good faith" of the purchaser. In re Abbotts

12 Dairies, supra, 149. Such a procedure ensures that


13 Section 363{b} (1) will not be em]loyed to circumvent the creditor
14 protections of Chapter 11, and as such, it mirrors the
15 requirement of Section 1129, that, the Bankruptcy Court
16 independently scrutinizes the debtor's reorganization plan and
17 makes a ,finding that it has been proposed in good faith. Id. at
1'8 1 5 0 . ^ •• •.•

19
•"Good faith" encompasses fair further speaks to
20
the integrity of the transaction. ln re Wilde HorSe Enterprises,
-21
supra,, 136 B.R. at 842. With respect to the Debtor's conduct ,in
2
conjtnction with the Sale, the good faith requirement "focuses
23
principally on, the element of special treatment of the Debtor's
24
insiders in the sale transaction." See In re .Industrial Valley
25
26 Refrig. and -Air Condo Supplies, Inc., supra, 77 B.R. 15,
27 With respect to Purchaser's conduct, this Court shOUld consider
28
25

i
^iX^M 03392
- - . • >
^:^

whether there b any evidence of '^"fraud, collusion between the


2
purchaser and other pidders or the (debtor], or an attempt to
:
take grqssly unfair advantage of other bidders ." In re Abbotts
4
Oairies, supra^ 788 F.2d at 14-7, In re Rock Indus. Mach. Corp.,
5
572 F. 2d 1195, 1198 p Cir. 197 8) ; In re Wilde HorSe
6
Enterprises, Inc. , supra, at 842; In re Alpha

In<ustries, Inc., 84 B.R . .03, 706 (Bankr. D. M o n t . 1988). In


8
short, "(l]ack of good ' faith is generally determined by

10 fraudulent conduct during the sale proceedings." In re Apex Oil

11 Co., 92 B.R. 847, 869 (Bankr. E.D.Mo. 1988" In re

12 Exennium, Inc., ' 715 F.2d 1401, 1404-05 (9th Cir. 1983).

13 The te rms of the proposed sale of the Debtors' assets to


14 Purchaser were negotiated in good faith in arm's-length process.
15 Although the Purchaser is of the Debtors due to Stan
16 Lee's was represented by independent
17
cornsel at all stages of negotiations. Additionally, due to the
18
existing relationship between the Debtors and Stan Lee, the
19
Debtors sought and obtained the involvement of the Committee, as
20
the entity representing jnd protecting the interests of the
21
creditor base . . The proposed sale confers no special or
22
undisclosed benefit upon any insider of the Debtors, other than
23
Stan Lee's 'ncome from the continued exploitation of the Creative
24
25 Assets by Stan Lee through the Purchaser. , There is no

26 •distribution of any kind. whatsoever to any equity holder, officer

21 or director of the Debtors which is made part of the proposEd

28
26

03393
.TI .PAGE I^k'
'^

sale to Purchaser. No insider of the Debtors w L l receive any


2
special treatment in connection with the proposed sale. Finally, :
3
there is no fraud inqolving Purchaser or the Debtors
4
collusion between Purchaser and any other Purchasers or the'
5
Debtor.
6
Based on these facts, the Debtots submit that the Court
7
8 should find that the Purchaser is a good faith purchaser entitled
g to the protections afforded by $ection ·363(m) of the Bafkruptcy
10 Code.
11 B. Section 363(f} of the Bankrutcy Code Permits the Debtors"
12 Sale of 'heir Assets to n k r u t c y . . to Be Free Clear of
All Interests.
13 Section 363 (f} of the Bankruptcy Code provides, in relevant:
14 part, as follows!
"The trustee may sell property under
16
. subsection (b) . . . of this section free and
17
clear of any interest in such property of an
-. 18
entity other than the estate, only i f -
19
(1) applicable non-bankruptcy law permits
20
the sale .f such property free and clear of
21
such interest;
2
(2) such entity consents·;
23
24 (3) such interest is a lien and the price at

25 which such property is to be sold is greater

26 than the aggregate value of all liens on such

27 propertYi
28
27

03394
[HIBIT_IL=.PAGEJQ3
, -S

:
(4) such interest is in bona fide dispute;
2 or "
3
(5)' such entity could be compelled, in a
4
legal or equitable proceeding, to accept a
5
6
11 U.S.C. §363(f). section 363 (fl of the Bankruptcy Code was-
7
drafted in the disj unctive. Thus, a debtor need only meet the
8
pro'isions of one of the five subsections of Section 363(f) in
9
10 order for a sale of property free and clear of interests to be
11 permissIble.
12 3. The Proposed Asset Sale is l e : s s i l e
" U.S.C. Section 363{£) (2).
13
The only secured creditor in these cases is Interfase" which
14
provided post-petition financing ($250,000) to the Debtors and
15
which .eceived a blanket security interest upon all of the
16
Debtors' assets, including the assets subject to this M.tion.
17
Thie Agreement acknowledges the existence of the Interfase secured
18
and provides for the payment of secured claim before
19
20 any distribution is made to the estates. The Debtors believe

that Interfase will consent to the proposed sale on the condition

22 that its liens attach to the proceeds derived from such assets.

23 The Debtors consent to providing for !nterfase's liens to attach


24 to the estates' proceeds in respEct to the Agreement.
25 2. The Proposed Asset: Sale is Pexniisslle Pursuant
t.S.C. Section 363(f) (3) .
26
Section 363(f) (3) allows . sale to and clear
27
of liens it the.sale price '^'is greater than the Cggregate value
28
28 -

03395

iXHIBIX 3^?AG^J^
-v
:
1 of all liens on such property." Interfase is the only creditor
2
that holds a security interest in the creative Assets. As

Collier on Bankruptcy states, " [c]onstruction of the phrase ''the


4
aggregate 'alue of all liens has sharply di vided the court!. One
5
.l_ine of authority holds that the "aggregate value of all liens"
6
means the actual economic vaLue of the liens or _the value of the
7
lien as determined under Section 5(6 (a). 3 Collier on Bankruptcy
8
§ 363. (6 [4J, at pp. 363-46; {15th ed. Rev. 2001); See In re
9
10 Oneida Lake Developmentf- Inc., 114 B.R. 352 N.D.N.Y.

11 1990);' In re Terrace Gardens Park Partnership, 96 B.R. 701


12 (Bankr. W.O. Tex.
13 , As discussed above, currently, without the invo"vement of
14 Stan Lee, the Debtors believe that the creative Assets have
15 virtually no value. PUrsuant. to Section 506 Interfase's
16 security interest, in the Creative Assets is equal to the value of
17 such assets,' which is virtually nothing at the present. Onder
18
the proposed sa;e, the value of such Creative Assets wili surely
19
the current value, as set forth in the Proj ections
20
attached hereto as Exhibit "B". In fact, the pr<posed sale is
21
the only way to monetize the Creative A$sets. As a result, the
22
^ sale price does exceed the aggregate va the liens secured
23
24 by such property. Moreover, based on the proj ections, the sale

25 price exceeds the face amount of Interfase's lien. Interfase's

26 liens will continue to attach to the estates' proceeds resulting


27 from the Agreement. -

28
29

t J L P A G i ^ "0.3396
£X
--

r
1 IJJ,. CONCLUSION
2
For all,: of the
3
foregoing r e as ons, the Debtor9 respectfully
4
.request that :the Court tl} grant the Motion; (2) approve the sale
5
upon the terms and conditions set forth in the Agreement; and ([3)
6
grant such further and additiohal relief as the Court deems just

8 and pxoper. • . . .
ING.,
Delaware corporation
Dated: November 2001 STAN LEE MEDIA,
arid
STAN LEE MSSl A, INC.,
. .. .. a Colora«^o corFO-i^ct^i.?
10
11
12 FIN" .
^AIG M. RANKIN
13 DAVID B. GOLlCHIK
LEVENE, NEALE, BENDER, RANKIN
14 & BRILL L.L.P.
Attorneys for Chapter 11 Debtoxs
15 and Debtors in Possession
16
17
18
19
20
21
22
23
24
25
26
27
28
30

03397

EA rjl.5
-;.

••}

1 D E C L T I O N OF K T N H S. "WILLIAS
2 .

3 I , t e n n e t h $ . W i l l i a m s , do h e r e b y d e c l a r e a s f o l l o w s : ,

4 1. I am : , h e Chief E x e c u t i v e O f f i c e r of Stan Lee Media, Inc.,


5 a Delaware c o r p o r q t i o n ("Stan Lee D e l a w a r e " ) , and S t a n Lee Media,
6 I n c . " a :Colorado c o r p o r a t i o n ("Stan Lee CQlorado"} , C h a p t e r 11
7 d e b t o r s pnd d e b t o r s i n p o s s e s s i o n ( c o l l e c t i v e l y , t h e " D e b t o r s " ) .
8 2 . 1 have p e r s o n a i knowledge of t h e f a c t s s e t f o r t h h e r e i n ,
9 and, if called as a witness, I could and would testify
10
competently w i t h r e s p e c t thereto.
11
A. Background.
12
3 . The Debtors comenced t h e s e bankruptcy cases by filing
13
Voluntary P e t i t i o n s under C h a p t e r 11 of t h e B a n k r u p t c y Code on ,
14
15 February 16, 2001 ( t h e " P e t i t i o n D a t e " ) . The D e b t o r s c o n t i n u e to

16 o p e r a t e : t h e i r b u s i n e s s and manage t h e i r financial affairs as

17 d e b t o r s i n p o s s e s s i o n p u r s u a n t t o 11 U. s . c . §§ 1107 and 1 1 0 8 .
18 4. Stan.;Lee Delaware i s a wholly-owned s u b s i d i c : y of Stan
J9 Lee C o l o r a d o : s t a n Lee Colorado is a public corporation that,
20 p r i o r t o t h e P e t i t i o n Date, t r a d e d on
21 "SLEE" .
2 5. The Debtors operated as a digital entertainment studiQ
23
that,^ prior, to the Petition Date" developed and distributed
24
branded entertainment properties under the direction of pop-
25
culture icon stan Lee, co-creator of such classic characters as
26
Spider-Mar, the Incr,edible Hulk™ and the X-Men'.
27
28
31

03398
1
") ':

1 B. Relationship With StanLee. ^


2
•: (. Prior.too the Petition Date, stan Lee was employed by the
3
Debtors pursuant to" an employment agreement (the
4
Employment Agreement"). t"he Pe-ition Date; Stan Lee
5
contended that the Debtors were in breach under the Stan Lee
6
7 Employment Agreement, and Stan Lee declared the stan Lee

8 Employment Agreement to be terminated as of january 29, 2001,


9 both of which contentions the Debtors' dispute.
10 7. Notwithstanding'"-the foregoing, I believe that any

11 litigation regarding fhe validity of Stan Lee's employment

12 agreement is likely too be time consuming, expensive and may


13 .esult in "bad blood;' which will jeopardize future exploitation
14 -of the Debtors r assets.
15 c. The Detors' Creative Assets.
16 8. Although the Debtors do own certain minimal office
17
equipment, by far, the Debtors' most valuable Cssets include
18
their branded entertainment properties {the ""Creative Assets")
19
which were created and developed under Stan Lee. The Creative
20
Assets are described in that certain Asset Purchase Agreement, a
21
2 true and correct copy of which is attached hereto as Exhibit "A".

23
24 9. Due to lack of financing, pre-petition the Debtors'
25 m€magement laid off most of the Debtors' employees generally
26 ceased ongoing operations. The Debtors filed the ins .
27
28 2 The Creative Assets are the subject of this Motion ex(
Portal Project, which is the subject of a dispute with Salim/Stag'
32 ' • - • :

i) 1
~X

in order to find a strategic partner or a purchaser for their


2
order to maximize the recovery for
:
10. At the outset of these cases, the Debtors' management
4
and creative talent created a sales memorandum (the "Marketing
5
Package"), which included a detaited listing of the Debtors'
6
assets, primarily consisting of the Creative Assets. The
7
Marketing Package contained a detailed explanati<m of each of the
8
9 assets, together with a listing of deals entered into by the
10 De b to rs relating to SUGh as: ets. The comprehensive Marketing

11 Package, the relevant excerpts of which are attached to the

12 a n nexe d Agreement, allowed .prospective purchasers and interested


13 parties to analyze the Debtors' assets ard make an informed
14 decision whether to purchase or infuse capital with respect to
15 such assets.
16 11. Upon finalizing the Marketing Package, the Debtors sent
17 the Marketing Package to over 40 financial and entertainment
18
enti ties which may have had an .nterest in the Debtors'^ business.
19
The Debtors'' marketing efforts, which included a request for
20
interim post-petition financing, resulted in approximately 12
21
meetings and conferences; with interested parties, including
2
lnterfase Capital, L.P. {"Interfase"}.
23
12. As set fqrth above, in order for the Debtors to be able
24
25 to market the Debtors' assets and negotiate with third parties as
26 a "going concern" el1tity, the Debtors required . q.nancirg. The

Debtors were able to negotiate the terms of a post-ped. tion

28
33

EXHIB! 1 0300
^

1 debtor"in-possession financing facility pursuant to which the


2
Debtors, ' would commence "limted operations pendin9 a sale or

restructuring of the Debtors' business. " On May 3, 200l, this


4
Court entered an order pursuant to which the court approved the
-. 5
Debtor-in-Possessi6n financing agreement (the "Financing
6
•Agreement") entered into by the Debtors and I n te rfase . Pursuant
7
to the Financing Agreement, Itterfase comitted to provide at
8
least in post-petition financing for the Debtors'
9
10 operations1 and · potentiaIly, $250,000 more in the future . In

11 turn, Interfase was granted a security substantially

12 all of the Debtors' pre-petition and post-petition assets .

13 Additionally" based on Interfase's representations that it was


14 interested in either acquiring or merging with the Debtors,
15 Interfase was granted a 60-day exciusive right to negotiate with
16 the Debtors.
17 13: Unfortunately, the discussions between the Debtors and
18 Interfase did m t proceed as hoped by the Debtors. No agreement.
19
was re<ched'between the Debtors and Interfase regarding a
2(
recapitalization 6f the Debtors or a saie of the Debtors' aS,sets
21
to Interfase. Moreover, Interfase refused to provide the
22
additional $250,000 in financing to the Debtors , which
23
essentially shut dbwn the. Debtors' operations again.
24
14. Upor being released of the exclusivity requirement to
25
26 negotiate with Interfase, the Debtors attempted to market their
27 projects to other interested entities , which included companies
28
34

.301

tMV tfL 1 i35


t

.
1 in the United states and in Canada. However, as a result of
2 Interfase's iexclusivil:Y period, other potential deals "f e·11
3
apar,t" and could not be revived by the Debtors. Additionally,
4
through discussions with such third partiesr it was clear that
5
(1) no party would recapitaiize the Debtors through a plan of
6
reorganization due primarily to the fact that the D^ebtors' public
7
shares (SLEEl have been damaged by the bad press and federal

•9 indictments relating to the Pebtors' former

shareholder lawsuits; anf, ( 2) any sale transaction must involve


management and

10
stan Lee" personally, and his creative abilities.
11
15. As discussed above, Stan Lee contended that his.
12
13 emp19yment agreement with the Debtors was breached and terminated

14 pre-petition ' and, therefore, unassignable. While the Debtors

15 disputed Mr . ,Lee's contentionsr the fact is that any litigation


16 would take a 100, time, be expensive, and result in "bad blood,"
17 which woulc be possibility of having Stan Lee
is exploi t the Debtors I assets. Additionally, r am a dvised by
19
counsel thatj it is , likely that Stan Lee's personal services
20
employment agreement is not one which can be assumed and assigned
21
over Mr. Lee's objection.
22
16. Based on the foregoing, the Debtors involVed Stan Lee,
23
through his i,ndependent counsel, in their negotiations. Stan Lee
24
25 cooperated w.th the Debtors' efforts and assisted the Debtors in

26 their marketing efforts to the best of his ability.

21 Unfortunately, the Debtors were unable to reach any ,


28
35

,.Q.,". -ir.'rtfrf'rrif.'

D=.
E)CHIBfi: 13
•^

1 with third parties which would be acceptable to everyone an<


2
which had a ihance of benefiting the estates.
3
1'. Aftlr it was clear that the Debtors would not be able to
4
consummate a. trarsaction with third parties and that the Debtors
6
had no ability to monetize their productions, Stan Lee contacted
6
the Debtors to advise them that Stan Lee would be interested in

8 trying to exploit and monetize the Debtors' assets. In that

regard, Stan. Lee made an offer to the Debtors to acquire the


S
Creative Assets and exploit them; witl the estates sharing in
10
fu ture revenues. Based on the Debtors' unsuccessful marketing
11
efforts and the importance of stan Lee's personal involvement in
12
13 the pro<uctionE1 it was evident that the highest and best use for,
14 the estates! a s s et s would be through ' the exploitation of such
15 creative Assets by stan Lee. Accordingly, the Debtors engaged in
16 negotiations Stan Leel who was represented ny independent

17 counsel, regarding the development and exploitation of the


18 Creative Assets. The Creditors' Contmittee {the "Comruittee"} was
19 also involved in such negotiations and assisted the Debtors in
2P obtaining a result which is much more favorable for the estate
21 than originaily proposed by Stan Lee.
2
23
18. Based upon extensive negotiations among the DEbtors, the
24
25 Committee and Stan Lee, which spanned approximately two
26 months/" the parties entered into toe Agreement, the salient" terms
of which the): Debtors understand are acceptable to the Committee.
28
36

03403
EXHIBIT.D-B^EJMI
• ^

1 F. T e Sale is in t.e Best Interest of the Estates.


2
As discussed in detail above, I believe that without the·
3
active involvement Lee, - the Debtors will not be able t·o
4
exploit the value of the Creative Assets. In fact, currently,

without the involvement of Stan Lee, I believe that

ASsets have virtually no value.

20. On the other hand, the . Agreement allows Stan Lee to-

exploit the Creative Assets, while allowing the Del:tors' estates

10 to share in from such expla·itation. Attached

hereto as Exhibit "B' are proj ections of the revenue stream

relating to the exploitation . of the Creative Assets (the


13 "Projections") . The Prajectians are based on a 3-5 year
14 character life and utilize a conservative royalty rate of 5%.
15 Champion prepared the Projections, I have reviewed
16 them in detail and believe that the Projections fair and
17
realistic as they relate to the Creative Assets, and I therefore.
18
adopt the Projections herein as my own.
19
21. The success of characters similar to the Creative Assets
20
depends upon the characters a television or movie
21
contrcct, which is similar to an .anchor tenant in a st.ip mall.
22
Once a movie or television contract is achieved, the characters
23
24 can also be monetized through merchpndise, apparel, comic books.
25 a'nd book contracts, -

26 22. Although Stan Lee' s charicters have general1y had a high


27 degree of success, the. fact is thqt it is unknown which
28
37

1 .PAGE, 03404
..
t^.

1 characters will succeed and which will not. The general industry
2
standard is to develop a multitude of characters and "bet" on a
3
few characters succeeding.
4
23. Based on the foregoing industr y standards. and
5
assumptions, I estimate that the Assets. can generate between
6
$7 million over the next five years. As a result, I believe that
7
the terms of the Agreement (i. e. I sh<ring in the future revenue

st ream of the exploitation of the Creative Assets) constitutes a

io fair and reasonable purchase price for the assets under the
11 current circumstances
12
13 24. The terms of the proposed sale of the Debtors' assecs to
14 Purchaser were negotiated in good faith in arm's-length process.
15 The Purchaser was represented by independent counsel at all
16 stages of negotiations. Additionally, due tq the existing
17 relationship between the Debtors and stan Lee, the Debtors sought
18
and obtained the involvement of the C o r t t e e , as , the entity
19
representing and protecting the interests of the creditor base.
20
To the best of my knowledge, the proposed sale confers no special
21
or undis<losed insider of the Debtors, other

than Stan Lee's income from the continued. exploitation cf the


23
24 Creative Assets by Stan Lee through the Purchaser. There i s no

25 distribution of any kind whatsoever to any equity holder, officer


26 or director of the Debtors which is made part of the proposed
27 sale to Purchaser. No insider of the Debtors. will receive any
28
38 ,

-.
(HIBlt :i 03406
1 1 - 2 7 " 9 1 "12!li 10=3184716898 . .„_-
J/WO' oo

I special treatment in connection with th. proposed' sale. fin.l1y,


2
there is no ftau< involvins- Purchaser or the Deb:o)s und no
3
collusion b!tween Purchaser and any other Purchasers or the
Debt6rs.
5
I declare under penalty of perjury under the laws of the
6
United States that !the foregoin O is true and correct·

S Executed on this ^ Z ^ a y Pf Ncve..ber 2001, tt Los

9 California. ' l

10
11 KENErH S . WILLI.AS

14
16
11
18
19
20
21
22
23
24
26

27
28
39

FROM:'

1
evi
X

A S PURCHASE AGREEMENT
i

THIS A<REEMENT made this 19"' day of NoveIber 20 6 1, by and between Stan Lee
Media, Inc:. a Delaware co ajoration, and Stan t Media, Inc., a Colorado corporation, whose
address is PO Box 116, Van Nuya, Califora_914G8 (collectively, the "Debtors"), and s t c , LLC,
a. clifornia limited liability compaly to b f o r e d and controlled by Stan Lee, whose address is
clo Arthur Liebepnan, Liebermaa & Nowak, LLP. 350 Fifth AvenQc, #7412, New York, NY
10118 ("Purchaser").

WEREAS, on February 16, 2001 (the "Petition Date"), the Debtors fled'voluntary
petiti6ns under Chaptef 11 ofUtle II, of the United States Code ("Banluptcy Code"); '

WEREAS, since · t e filing of their bankruptcy cases, the Debtor-have .een operating
their business and managing their financial affairs as debtors in posseSion;

WHEREAS, prior to the Petition Date, the Debtors operated as a digital entertairn<t
studio that developed and distributed branded e n t e r inment properties under the direction of pop-
culture icon stan Lee, cOreator qf such c l a i c characters as Spider-Ma n™ , the Incredible
Hulk™ a the X-Men™.

WHEREAS: prior to the Petition Date, Stan Lee was employed by the Debtors pursuant to
a employment agreement (the "Stan Lee Employment Agreement");

WHEREAS. prior-to the Petition Date, Stan Lee contrtded that the Debtors were in
breach under the Stan Lee Employment Agreement and Stan Lee declared the Stan Lee
Emp{oyment Agreement to 1e tenninated a of January 29,20of. both of which Cnlntions the
Debtors dispute;

WHEREAS, the Debtors believe that without the active I\Qlvement of Stan Lee, the
Debtors will not be able to exploit the value of certain of the Debtors' assets;

WHEREAS. in order to maximize the value of the Debtors' asset' for the benefit (f all
creditors, the parties hereto desire that certain assets of the Debtors be sold f e and clear of all
liens. daims and encumbrances to Purchaser pursuant to t h e t e n s and conditions s t forth herein
" a subject to Banfcnjptcy C u approval; and .

WHEREAS; the parties hereto desire to set forth certain representations, warranties and
covenants made by each to the other, as an inducement to the GOrtsummation, of the sale,
assumption and assignment described herein. and certain additional a g r n ements related to the sae.
assumption and assigmnent;

NOW, TBEREFORE, for 'aluable c onsideration, including the mutual represertationst


w a n t i e s and covenants herein contained, the receipt of which is hereby acknowledg-d, the
p e s hereby agree as follows:

StanLe A et P
October29. 20 Pu „ . ., ,,r-.,-r-

t\o

03408
•• .. - .

.! PUCHASE AND SALE OF ASSETS

1.1 Purchased Assets. Subject to and upon the terms and conditions set forth herein
and sUbject to Bankruptcy C o U approval, the Debtors agree to and will sell, tmqfer, assign and
. deliver to Purchaser at the Closing (as hereinafler defined), . a d Purchaser agrees to and wll
purchase, acquire and take assignme!t and delivery of the following. a more particularly
- -
dicribed in Exhibit 1.1 hereto (conective1y, the "ASsetS't: . - ---- .-

l.U Produced Piopertiies:

LLLl S i e . N E T web site a n d p r ;-


p . 1 . 2 ' T h e Accuser; .
L.1.3 The Drif.er; and

1.1.1.4 Stan'. Evil Clone.

1.1.2 Co-Brands Produced:

1.1.2.1 The Backstreet Project.

CBrands In Development:

1. 1.3.1 Gene ; o d d e n b e r s Starship;

,1.1.3.2 MazrJ. Blige; .

13.3 X-Treme Heroe;

1.1.3.4 Police Force m O ;

. . 1:1.3.5 Chtysallis;

U.3.6 The Stone Giant;

l.i.3.7 B t e School Tranquility;

1.1.j.8 Stor Bible; and

1.1.3.9 Stan Junior.

. 1.1.4 Developed Deals:

1.1.4.1 50% interest in Lee Schultz Partnership (complete property


schedule attached hereto is E x b i t 1.1.4.1).

SteaUe Asset P r = Agr«™a« 2


OrtoLer 23.2001

•O- PAGEJM
P^HiaiT_JL^rA'^C.==i=^=^ ' 03409
h)
1.1.5 Other Projects (Undeveloped: Debtors acting as agent for assets onM:
Other
L
- 1.1.5.1 D Comics;

• - 1.1.5.2 Toon Boom;

1. 1.5.3 Cyberwodd;

1. 1 .5.4 Mobius;

• 1.1.5.5 Hol l w o c . C h r i s t Paradte;

• 1. 1.5.6 S c u l e ; and

U.S.7 Seuzzle Design.

1.1.6 All trademarks, copyrights, original a w o r k and promotional material


relating to the Assets.

1.2 Excluded A e t s . Anything to the contrary in Section L notwithstanding, the


Assfets shall exclude: .

1.2.1 All cash, bank deposits and/or cash equivalents of the Debtors.

1.2.2 All of the Debtors' office equipment, c o m p u t r , an,server^.

. L2.3 Claims, lawsuits and c u of action of the Debtors.

1.2.4 Tax refunds and tax attributes.

1.2.5 Claims for relief under any o f he avoiding powers provided for under
Chapter 5 of the B a n I p t c y Code.

1.2.6 AU books and records of the Debtors that do not relateto the Assets.

1.2.7 The Debtors' oorporate charter or qualifications to conduct b u s n s as a


corporationi arrangements With registered agents relating to foreign qualifcations, taxpayer and
other identific a tion number. se r ls. minute books. t s f e r books; and other d o c u e n t s relating to
the organization, maintenance, and existence of the D e b t I as a corporation; or any of fue rights
of t Debtors u d e r this Agreement

1.2.& The Debtors' interest in Conan Propertie. I1c. ("Cpr" and any rights or
interests. including intellectual property r i g t , a r d uterests in any of the properties and assets of
CPL .

1.2.9 Any property or interests b P[O perty not expressly included in Section 1.1.

A ^
St O o D sset Pindiasc ^ ^ 3
October 2 3 . 2 o l '

1^7.

EXHIBIT 1 P A G E 0310
ATICLE2

CONSIDERAT10N FOR PURCHASE O J ASSETS

2.1 In consideration for the p m h a s e of the Assets described in Sections 1.1.1, 1.1.2,
and L1.4 (50% interest in' Lee Schultz JPaitA erhip) other than the those Assets d C e b e d in
Sections 1,1.3 and 1.1 .5 above (the "Priniary A s ets"), the Purchter s h a pay to t e Debtors, a
percentage ofthe Gross Income, as defined in Section Z 3 below, received by the Purcbaser ftom
the exploitation of the :rimary A$sets,-.pursuant to Sections 2_Ll-2.1.3 helow. T O e percenttte of
Gross Income to which rIe Debtors u m entitled hereunder shalt not be re O uced of limited by or
Subject to deduction, ofiset or recoiqjrnent on account of any expenses or obligations paid or
incuired by Purchasf, including withou t limitation any compensation or lenefits paid to, or on
'behalf o f Stan Lee, subject to te.provisions of Sections 2.1.1-2.1.3 below.

2.1.1 Until such tinie as the allowed secured claim of Interfase is satisfied in full
by the Debtors on their estate for paymeiif t o Interfese (the «First Targe;t"), t e Purchaser shal l
pay to the Debtors, or their estates, 60% of the Gross Income received by the Purchaser from the
exploitation of the Primary ASsets: For example, if the Purchaser is entitled to 50% of the
revenue ("Purchaser's Share") from a production (e,g: Lee Schultz Partnership) the Debtors, or
their estates, will receive 600/ 0. of Purchaser's Share or - 0 % of the revenues generated from that
production.

2.1.2 Upon successfully achieving the First Target and until such time as the
Debtors or their estates recover $ 5 0 , 0 0 0 from the Purchaser's exploitation of tne Primary Assets
(the "Second Target"), the Purchaser shall pay to the DebtorS, or their estate. 40% of the Gross
Income ieceived by the Purchaser from the exploitation of the Primary Assets.

2.1.3 Upon succesflly achieving the Second Target and until such time as the
Purchaser recovers its advance described in Section 2;1.1 above, Wherein Purchaser consented to
.
increaSe the Debtors' share of the exploitation of the Primary Assets from 40% jo 60% of Gross
Income received by Purchaser until such time a Interfase's security interest is satisfied in f l l ( t h e
« h i r d Target"), the Purchaser shall pay to the Debtors, or t e i r estates, 20% of the Gross Income
received b y the Purchaser from the exPloitation of the Primary Assets.

2.10 Upon successfWly achieving the Third Target and until such time as (a) all
allowed c a m s (excluding any equity interests in the D e b t f rs) are satisfie t in fiU; and (b) t U e
Debtor'' estates receive the sum of one (1) million dollars from the exploitation of the Assets over
and above the amount n e c e s s r to satisfy all- allowed claims, the Purchaser shan p y to the
Debtors, or their - est m tes, 40% of the Gr a ss Income received by the Purchaser from the
exploitation of the Pritnary Assets.

2.2 In consideration for the purchase of the assets cescribed in Sections 1.1.3 and 1.1.5
above (the "Agency Assets"), the Purchaser shall pay to the Debtors, or their estates, 12% of the
G r s fncine received by the PUrchaser from the exploitation of the Agency Assets:

S O U c Asset P " h a e Asrcop«:nt 4


October 23.200I

^4 . ; .

IXHBITJLPAGEJM^ 03 411
• : .

2.3 F(f purposes of this Agreement "Gross Income" shaIi mean a d include all
i ncome, revenue. benefits and consideration o f any kind, and in any form derived, directly or
indirectly from the Assts includini without limitation all rights and interests in any cash,
, accounts receivable, stock, joint venture interests, p a t r s h i p interests, limited liability company
interests, securities, promissory notes, license agreements, distribution agreeinent and accounts
receivable relatingin any Wy to t l e eXploitation of the Assets including that which is derived
f r ! the personal services'" ofStan Lee inc1uding services as a creator, writer, producer, animator
or consultant *

2.4 To secure payment of the ConSideration provided hereunder, P u r h e r shal g t


and convey to the Debtors, a first priority security interest in aU of the Assets and the proceeds
thereof. Pprchaser sall execute 9Il documents necessary and appropriate to create and perfect
such security interests on or before closing o f t e sale pro;ided for b e i n ,

2S Purchaser shall not be entitl ed to any revenues derived from any agreements or
joint ventures in existence as of February t6, 2001 or agreements created during the Debtors'
Chapter 11 cases, including. without limitation, any revenue, profit participation or distribution
from a n I agreement relating to any of the characters. projects and intellectual property rights
described in Section 1.1 hereof,

2.6 Purchaser and Stan Lee, individually, shall not be required to share with the
Debtors any income or profit resulting from any a s s t now owned by Sta' Lee or herei t f t e r
created, develope4 or otherwise to oe acquired by Stan Lee other than the Asets, T e Parties
hereby acknowledge that ,the following ti^emarks are being conveye L to Stan Lee personally
without any obligation of any payment or duty of any kind fiom Stan Lee or Purchaser:

2.6.1 Stan t e Presents;

2.6.2 Stan's Soapbox; and

2.6.3 Stan Lee & Design.

2.7 Payment. The Consideration shall be paid quarterly by Purchaser in cash, crtifed
f d s or wire transfer, commencing on January 1, 2002, and each first business day of the
following calendar q u a r e , to the extent that the Assets generate Income. To the extent that the
Assets do not generate Income durng any quarter; the Purchaser shall not be obligated to make
any payments t t Debtors or their estates.

ARTICLE 3

PURCHASER '.

3.1 Limitations. Purchaser sh11 be formed and o p e r e d for t e exclusive and limited
p u r o of exploiting the A s s t a i g n e d to Purchaser liereuooer and protding the personal
services of Stan Lee. Purchaser's governing documents shall reflect sucg limited purpose and

. S I l ^ P l c h a e Ageement 5
October 2 , ZOOI

H?

r
BCHiBVC / PAGE 1 ^ 1
- - ' I ' ' '

shall prohibit P t rchaser ftom conducting any other busineSs. Purchaser's governing. documents
shatt also restrict and prohibit Purchaser from granting any liens or security interests or
e n c u * bering any of its assets, .inCluding tire Assets acquired hereunder, w e th the sole and
exclusive exception of the security interest provided for t d e r this agreenient. Purchaser's
goveJng docinnents shall also restrict P u r h e r t o m borrowing or incurring any indebtedness.
with the sole e n ception ofiildebtedness created in the o r d i n a coune of Purchaser's business.
^Purchaser shaii rio t acquire any assets other than the Assets.acquired hereunder ot acquir· in
connection with the exploitation of said Assets. Purchaser shall not t a f e r , convey, a O ign or
create a y inte e t m a y of the Assets acquired hereunder or any of t e revenue or other
consideralion or value g m i e r a t e d therefrom, without the expiessw ritten conseot of the . e btors
and the Creditors Cpnanittee.

3.2 . Representations, Warranties and Covenants ofPurchaser. Purchaser represents and L


warrants as follows; (a) Purchaser is a duly formed limited liabflity company organiz'd under the
-laws of California; (b) Purchaser has Sll requisite authority to execute and de1iver this Agreement
and t a perform its oblgations hereunder; and'(c) P u r h e r is a bank eptcy n o t e entity that (i)
· has an independent member whose yote is required prior to Pchaser declaring bankruptcy, and
(ii) such independent memb er is independent from PUrchaser and any euity owner or affiliate of
Purchaser. Purchaser and Mr. Lee hereby covenant that for so long as this Agreement is in effect
Purchaser shall not and Mr. Lee and his successors and assigns shall not amend the Ilmited
liabiHtr agreement or certifcate of foonation of Purchaser. .

ARTICLE 4

: BANKRUPTCY COURT APPROVAL; CLOSING

4.1 Filings with Bankruptcy Court Promptly after t he execution of t i Agreement


the Debtors shall file with the Bankruptcy Court a motion for approval of this. Agreement;
including ap proval of the sale of the Assets to Purchaser. fee and clear of aU liens, claims,
encumbrances and security interests .

4.2 Closing. Subiect t Bankrxiptcy Court approva. the parties $hall close (tiie
"Closing") t e transaction contemplated by t £ i s Agreement (the "Transaction") within ten (10)
days afer the entry of said Order as required in Section 4.1 (the "Closing Date"). The Closing
shall take place at·a location to be agreed u I n by the partiys, or by facsimile and overnight
courier for the conve[ience of the parties.

4.3 Closing Documents - Purch a ^ . At the dosing and thereafter jf ruested' by


Purchaser, the Debtors shall tender t9 Purchaser fully exeuted affidavits, bills of sale and otfier
documeritation a Purchaser or Purchasers attorneys may reasonably r e q u r for all Assets,
including but not Iimited to the following items:

43.1 Bill of Sale covering'the A s s t being conveyed.

SIa. l e J set P u r A g r e t 6
Oobe 2J. 2001

EXHIBll 03413
4.3.2 Such other docwnents a may be reasonably requested by Purchaser in
connection with the convexance of the Assets and the continued effective operation thereot

4.4 . Closing Documents - Debtors. At the c lo s ing and thereafter, Purchaser shall
. deliver t Debtors all documents. necessary to effectuate the terms and provisions of this
Agreement . ' .'

ARTICLES

LIEN-FRJEE SALE

5.1 Up S e n t a r e Clos t g and cnsSent with the Order of the Bankruptcy Court
au1orizing the sale," all right, title and interest in and to the Assets shall be immediately vested in
Purchaser free and'clear of any and all liens, claims, encumbrances and security interests of any
..t P pe wh s tsoever, pursuant to Bankruptcy Code Sections 363(b) and (Q

ARTICLE6

CONDITIONS TO OBLIGATION TO CLOSE

6.1 Conditions to Obligation To Close.

6.1.1 Conditions t Obligation of the Purchaser. The obligation of the Purchaser


to: consummate the transactioils to be perfonned by it in connection with the Closing is subject to
satisfction of the following conditions: .

6.1.1.1 Approval by Bankruptcy Cou rt Apprval of this Agreement by


t e Bankruptcy CQr having jurisdiction over the Debtors' estates, which Order shall include,
! alia, provisions that (i) the sale of the Assets to Purchaser are fee a d clear of all liens,
sepurity inte«ts, claims. a d other encumbrances, and (ii) Purchaser is a good fet purchaser.

6.1.i.2 Filings wit h nkruptcy Court Made. All filings with the
Bankruptcy C u required by S o n 3.t hereof shall have been made by the Debtors and all
approvals and Orders sought from such Bankruptcy Court t h erein shall have been g t e d .

6 ..1.1.3 Al. liens on the Assets shall have been either " removed or
Wived or (ii) made the subject of an Order from the Bankruptcy C u permitting the sale of the
Assets free andclearof any liens.

6.1.2 Condition o Obligation ofthe Debtors. The obl t gation of the Debtors to
consummate the transact6ns to be perfQ n e d by it in conneCion with tie Closing is subject to
satisfaction of the following conditions: .

6. 12.1 The Purchaser sbaR have performCd and complied with all of its
covenants hereunder in aI"'material respects through the Closing.

sunu.Asset^.as A.reet • . 7 " " • . . .


OaoJ)CT23,20Ql

03414
---. )

6_12.2 The Bankruptcy Court shall have issued an Order approving the
t c t i o n s as deScribed herein.

ARTICLE7

MS(ELLANEOUS PROVISIONS

7.1 AccouwR. The Purchaser shall provide the Debtors, their estates, and the
Creditors' Committee vrith a wtten accounting, in such reasonable detaji a the Debtors, their
.estate u or the Creditors' Committee shall request, prepared in accordance w i t genel1lly accepted
accountjiig principle; at the end of each c!enda quarter of all income and expenses attributable
to t e tssets. Purchaser shall provide the Debtors, their estates and the Cteditor'' Committe
w i t suc 1 accounting Qn October I, January 1, April l, and July 1 of each calendar year,
c(1rencing on O o tober 1, 2001. In the event that Rcounting teporting date occurs on a
Saturday, Sunday dr legal holiday, such acfounting will b due the f r t business day thereafter.
Debtors, their estates and the Creditors' Committee shall have the right to request an audit of such
accountings by giving 10 days w r t e n notice to Purchaser. P i h l e r and Debtors shall seleCt a
iutually, reasonably acceptable f r of accountao t .s to udertake such audit Purchaser shall
m e available to such accountants during normal busines bours any and all documentation and
information reasonably requested by such accountants in connection with such audit. In the event
that an audit determines that there is a discrepancy in any amounts paid, the party that has
received any excess shall promptly remit such amounts (plus interest at 8% per armum) to t h e
other party. The costs of one audit per year shall be shared equally between Purchaser and
Debtors; the costs of any additional audit requested by Debtors shall be borne by the DebtIs
uIlesS sucb audit discoverS a discrepancy in the Debtors' favor of at least 1 0 / of the expMises or
income reported during the audit penod, at which time the costs of the audit shall be bore by the
Purchaser.

7.7 Disclosure of Projects. In the event that the Purchaser enters into any contracts;
joint ventures, projects, etc. (hereinafter, "New Project"), with regard to any of the Assets, the
Debtors and the Creditors'. C m t t e e shall be provided with a copy of all agreements or contracts
relating to such New Project and any amendments or modificatioDs thereto.

-. 7.3 Future of Stan Lee, Individually. Debtors acknowledge that Stan Lee shall be free,
in the future, to pursue oiler similar or competing economic endeavors and form Corporations or
companies for those p U e s . Stan Le e , however, a i es, on behalf of himself and Euhaser,
that he shll exercise reasonable business j u g e n t in pursuing opportunities a they present
themselves wth respect to the Assets which are the subject of this Agreement and shall use
reasonable efforts in attempting to exploit the Assets in light of Stp Lee's other economic
endeavors. • -

J 7.4 Sevwihty and Operations of Law. If any provision of this Agreement is


prohibited by the lavsra of any jurisdiction as feose laws apply to thi: Agreement, that provision is
ineffective to the extent of such prohibition at d/or is modified to conforin w t such laws. without

St O Lcc Asct Fureinsc


OcH>bc23.2001

Imafjyy 03415
invalidating the refaining provisions hereto; and any s c h prohibition in any jurisdiction shaU not
invalidate such provision in any other juisdiction.

7.5 Choice of Law. This Agreement shall be governed by P e iniema1 1aws (and not
t e law of conflicts) of the State of California.

7.6 E t e Agreement: Modification. This Agreement embodies the entire agreement


and understanding of the parties hereto a 1d Sersedes any and all prior agreements, arrangements
and understandings relating to t h e matters provided for herein. No mOdification, alteration,
s iver, amendment, change or supplement hereto shall be binding or effective u t e the same is
set forth in writing signed by a duly authorized representative of each party to this Agreement

7.7 Survival and t d i n g Agreemert. The terms and conditions hereof shall survive
the Closing and shall inute to the benefit of and be binding upon the parties hereto and their
respective heirs, personal representatives, successors and assig, s. "

7.8 Counterparts. T i s Agreement may be executed in one or more c o u n t e r a s : each


of which shall
all be deemed an original, but all of which together shall constitute one and the same
instrumel

7.9 Assignment Neither party to this Agreement may, asagn any <f its rights or
delegate any of its responsibilities under this Agreement, witho1t the cS nsent of the other party;
provided, however, the Debtors may assign their rights under this Agreement p u r s ! t to an order
of the Bankniptcy Court

///

///

111 . '

Ii
/1

II '

II

II ,

if.

Oober2; 201.

\%

1 M 0316
t o

".

-Y)

7.10 Notices. AU notices, requests; demands, claims and other communications


hereder will be in writing. Any notice, request, demand, claim, or other coftrnication
hereunder shalI be deeme(duly given if (and then two business d?ys after) it is sent by personaL
delivery. by overnight carrier, or byfecsimiletransaction. as-onows;

If to Debtors: LEVE&, NEALE, B E E R , R K


«fe BRILL L.L.P. •
1801 Avenue of the Stars
Suite 1120
Los Angeles, CA 90067
Attn: Craig M. Rankin, Esq.
Fax: (310) 229-1244

If to purchaser: LIEBERlVlAN & NOWAK, LLP


. 350 Fifth Avenu. #7412
"New York, N Y 10118
Attn: Arthur M . Lieberman
Fax: (212) 947-0417

If to Committee: S T D A N , TREISTER & OLA I


PROFESSIONAL CORPORATION
3699 Wi lshire Boulevard· 9th Floor
Los Aigeles" CA 90010
Attn: Gary E. Klauslcr, Esq.
Fax: (213) 251-5288

7.11 Termination. I addition to the rights of the parties to terminate this Agreement as
set-forth elsewhere h e i n , this Agreement may be terminated at any time, by the mutual
agreement of the Debtors and Purchaser.

/ • .

ui _ .
I I _ • •

. / • , • ,

1 . • ] - . . .

I • : - -

% - :

S · L e Aset l c h c A g e . 10
· O e r 23, l o t i

So·
03417
1 1 : 2 t11--33 1 12.11
II>=31.8a7I6838 . t-w^r „ o

: thepanies have eecuted t t ii Agreement a ofth4


.fth4da:
day andI .

DEBTORS:
STAN LEEMEDTA, INC.
a D c f l w corporatjon, a C d
STAN LE r M I . INC,
a Colofrado egrpoiaiion
. .^
By: ^
Kenneth S. W i e s
T c r Chief Executive Officer

--. PURcHER:
SLC. LLC
a California Limited Liability Company

By: .
Namc:
Its:

SlJn L e e A M « »S»<*Mt .,-


0 , 3,2001 .

Sf

EXHIBItH 03413
Oc. 22 01 03:29p • , - - . lee media ca^^580-67'8 . p.2

a
IN WITNESS .WHEREf. or the <bY :M

DEBTOR.

' -• S T A e LaEE M r l J
a Dcliwaie cotporauon, and
STAN I E E M F I A INC..
aCol(r( c r t l i l
WlllinlT

PURCHAER:

SLC.LIC
a CaUfcniia Uinrtw^iabilUy Coinpnny
By: _ _^. ^ ^ .

_ ' 1 ^ . . ^ " ' '


Q d

* « « i . » J a 3 03419
j EmlTl.l

SCHEDmE OF ASSETS TO BE SOLD

1.1.1 Produced Properties

Stanlee.NET
Wholly o v e d , Production

Stanee_net is positioned as a portal that showcases interactive entertainment through a variety of


web based technologies. It finctions as a·online entertainment destination targeting a global
community of 6 to 20 year olds comprising the three genefions of fens in his 60-year cWeer . .

SLM additionally has secured a number of URLs such a : stanleemedW.com, scuzde.com.


backstreetproject.com, etc. . .

Elements of the website:


'. Webisodes - 3 - 6 min flash animations based o n wholly-owned or co-branded cbaracters
• Game; easy to d f c u l t
• Community EngineS (e.g. user homepages, etc), databases,
e AcUvides, comics composer, print engines,

• N S t z e pdates ou«.cword of Stan L e , comic b o k a d anmaton ^

So-
O e d Produced (contd)

TheAccnser
WhoUy Owned Produced

Description:
D e Mason, a criminal defense lawyer, could Qutmaneuver any prosecutor. helping some of the
cit a s mostheinous criminals walk with barely more than 1 slap on the W But when an attaak
by a disgruntled former client leaves his wife dead and Mason p a r a l y e he desperately wishes
for the chance to redem: h m s e t fulled from the brink of d e t by a mysterious stranger, he is
given ail amazing wheelchair, which t a f o r m s into a suit offiJturisticarmor — not only
alowing Mason to walk again, but dramatically muitiplying his streng;th and p r o v d g . him an
arsenal of exotic weapons. Mason takes to the streets, voWng to bring t n e criminals he once set
free to justice.

. Webisodes!
22 Webisodes produced and orgnglly distributed by Shockwave.com. Shockwave:cm
maintains limited back end in p r o p r until recoupmentof licensing fee.

R d y for2nd Cycle domestic syndication,

The rest of the world is available for primary exploitation (Subject to Fox Kids Latin America
Agreement)

Gnies:
Flash Bs
Based, Iteractive Games
T e Accuser's Revenge

Print Engines:
SLM has creatca series of flash based print engines t h a have the ability to print a number of
fun and different paper-based activities:
- Clendars
• Trading Cards

. ' -reeting Cards

A television script has been written.

5S

DCHlBf JM. 03421


*-"rv

The. Drffer *
Wholly Owned in Production ~~ ' ' •• ' ''.
. c p o : - " • • - • - • . .

Dethew Zane, code nameS "Drifter", is a man from nightmare f t 20'4 who has survived
' e Crash," a woridwide coraputer m e i d w t f at has k i l e 423 million people worldwide and
cause e another t O o billion t m go insane within twenty-f b v r hours. Using untested time travel
research, Zane arriveS in present day 2000. His lission is t v prevent key developing
technologies f m dohiinating mankind's descendants' lives and crushing the human s , t . A the
'Drifter" p u S e s his goal, he must evade security agent^ a r m the f t e , intent on his
d . ' . ,.

Webisodes:
12 Webisodes ordered fiom scifi,com
8 of 12 Webisodes completed in MicmeOia Flash

Deal Points:
Sci Pi pays Y of the production costs for all 12 webisodes up to $12,500 per webisode
Sci P i receives 14-week exclusive distribution period
Sci Fi a d SLM share revenues generated from syndication 50150

G m e B a e Interactive Q
Dri a er Racer ^
AOL =

T Treatment
Live action TV treatment available

b^

B C H l B T L l ^ m S i J J ^ 03422
?--\

Stan's Evil Clone


Wholly Owned ProduCd,

Description . . {
S t n clones himself but something goes horribiy wrong producing an evil, and highly
opinionated, version of himself. .

Interactive Comic Shorts: -


20 comic shorts produced in Macromedia Flash

Screen Friends; -
The Screenfriends Inter(Face)TM delivers a · entertaining and creative way for people t( interact
withflieircompllters using vocal dialogue" instead ofa mouse or keyboard. ScxeenFriends wQrk
wit t just about any PC compUer and there is no tcining or special equipment required. Users
c choosefroman ever-expanding set of characters that appear on the computer screen, ready
and able to operate the entire sySem. S c r r e can open computer programs, search the
web and help user r buy merchandise online. SLM created an Evil Clone ScreepFriend that talks
back in hilarious rantsfromthe real Stan Lee.

5^

1 PMm l 5 3 - °^«^
• • • - > )

1.1. Co-Brands ,:roduced


.ackstreet Project
Co-Branded Produced

Description:
" T C Backstreef
Backt Project," an animated s e p r ying the Backstreet Boys as eyber C r s e r e ,
each witii wlque powers too DTOtect
protect :the
e Earth
E .•

- • SLM entitled to recoup costs, thereafter 65/J5 revenue split between B W SLM
• Parties co-ow aU rigt
• Exploitation subject to joint control

Weblsodes:
8 Webisodes produced in Macromedia Flash
2 minute conceit introduction produced and used on their last tour

Backstreet Project.cpm:
T: c e Backsteetjectcom is a fiilly fonctional entertainment portal revolving aroun a he
superhero alter egos of the famous BackStrete Boys Music 9roup. T i website has all the
element of stanJe[net

• Webisode w - "
• Games;· easy to difficult 4-5 games
• Activities, c s mics composer, print engines,

Graphic Novel: .
.4000 copies of fist edition were sold at seven venues on the last BSB concert tour.
10,000 copies offirstedition sold on line.
Approximately 45;000 2n edition sold at retail.
First S3QO,OOO
Approved Script for 2R comichok

5(s>

l-nfHiP,IT I .PAGEJ 5 i l 03424


1.1.3 CO-Brnds In Development

Gene Roddenberry's Starship


Co-Branded i Oevelopment

Description:
SLM has partnered vrith . e estate of sci-fi Jegend and "Star Trek" creator Gene Roddenberiy to
develop a newly discovered origin( Roddenber project,"Starship"; into a global, muliimedia
enterfeinment franchi se under the collective brands ofRod: enbeny and Stan Lee.

Deal Points
• SLM and Majd Roddenber I John Semper entitled to 50150revenuesplit after
SLM recoups costs; · '
• Joint control of offlini exloitation;
• Reversion rghts exist i f c e r n perfon a c e targets are not met;
• Roddenber and Semper have claimed anticipatory breach of agreement in light
of SLM's suspension Of oPerations.

5,

imw^' ''I ' RAtGEltSC^...-


^ 03425 ·
,

SLM developed new animated franchise with R&i songstress Mary J. Blige to portray her as a
fantasy Sperhero. Series is heavily : u b . with M a r po$ayed as a high tech "hero of the
hood."

Deal Points
• SLM and Mary J. Blige entitled to 50/50 revenue split after SLM recoups costs;

• Minim^ of 60 minute of produconrequiid by J u e 9

2-minute concert introduction produced and used on her Jast tour.

Website
Gated
Lmited activities
SmaU Game

BCHIEI" 1 mcij^, 0326


i ^ :'.

X-TreIe leroes (OMS)


Co-Branded ii Development

A fve-year agreeInent ha§ b n forged with Kentuck n-based sports m gement f a r OMS Ltd; •
to c J e e sup e hero alter-egos for Mike L a R o c , Bea Bostr m Missy Giove, S ebastia n Tortel1i.
S l J t Summers and 4 c e laac7 rcing stars who are known in the world of two-wheeled
e e me sports, reaching an estiraated audience of over 450 million recorded annual impressions.
Under the agreemet. the companieS will jointly develop and own "animated bran&extensions"
of these popular athletes for all media exploitaton. with Stan Lee M e d i a r n i n g the s91e right
to distribute projects for Internet, home video, cable. sa:tellite and other meditims. including
traditioni licensing and merchandising . "

D e Points
• SLM and OMS entitled to ?0/50 revenue split after SLM recoups costs;
• SLM control of exploittion:'§ubjeqt to some consents ·fom OMS;
• SLM nQt obligated to produce under agreement prior to ob t i i n g sufficient

• OMS has claimed anticipatory breach in light ofSLM's suspension of production


• onerations.
oprions:

Police Fo.rce2220
Co-Branded in Development

Description: .
Set intiieyear2220, "POLICE FORCE 2220" is a futuristic vision of the world of crime
fighting that focuses on a U elite t i o ofpolice officers as they strujggle to save the world firom
global crises of the 2 3 t Century. tangley and Lee said they intend to expand the " P O L I c
FORCE 2220" franchise to live-action television and feature fil while building a global
audience on the Internet .

• SLM and Langley entitled to SO/50 revenue split after feCoUpS costs;.
• SLM controls online media exploitation, Langley controls ofiSine media
exploitation;
• Webisodes to be initially co-distributed on staree.net and crime.com..

An an reatment evision t^tment has been created based upon this property.
i:) -^
^j . . - .

Wyolly oWned in Development ^ " """ '•

In t e e far f t U , in a barbiic world of sor i ery and swords, a sonically gifted w o r n searches
For a cure for her tripe and" discovers there is a mystery to her origins ..•

The Stone Giant


Wholly owned in Devel 6 ment ~~' [ ~^' ^ '• ~

A e LAPD detective left to die in a toxic dump, gains the power to temporarily t i s f o f 1 into a
Colossal crime-fightng creatUre of stone, tattooed with miysterious rune.like sym b ols of
Unknown origi!.

Battle SchoolTranquiJity
Developed Property

Description
With a impending alien invasion, Earth's a t hope is a group of telekinetically gifted teenagers
training to use alien battle suits at a special academy o n the moon.

S t r Bible -' ;

Character development ;

Television
Are iinfinal
fnal discussions regarding
reg entering into a development agreement with FoxKids for the
deve[o f ent and production of a pilot based upon the property.

Stan Junior
Developed Property •

Description
Stan Jr. is an animated s e f e which tells stories on t c o levels: (I) the everyday life of
Cntemporaiy Stan Jr.. portrayed in traditional cartoon animation style, and (2) the world of Stan
Jr.'s imag-advettures, where even the most "commont events become uncommon. amazng
." adventures when flterd ! o u g h Stan Jr.'s psyche.

Television treatment available.

SLM is in a 50/50 partnership with TLC to produce a pilot and pitch series.

ifiVUiaiT ' PAC3E Y ^ > ! . , •


:y :?)

1.1.4 DEYELOPED DEAtS

Devdoped Property

D e l Description
SLM and Lany Schulfe are partners in a joint .venture relating to the production and d c ibution
of a number of properties (Se attached schedule). Many of t e p r p e s a Significantly
developed and ready t e be pitched to television and motion picture studios. For instanc,
Tribune Entertainment h expressed significant interest in a possible teleVsion series
suroooding t e "Diabella" propert. a we have receive i a great deal of interest with respect to
t e "!, Werewolf property.

:
l . I ^ OTHER PROJECTS

DC Comics
Developed Property

Deal Descriptiom
SLM has entered into an agreement with DC Comics, whereby Stan Lee has agreed to create
" a f t r a versions" of the major DC Cbmics cbaracteI (Superman, Bat h an. Wonder Woman.
The Flash. ctc.) to be published in a special edition series, currently entitled "What If Stan Lee
had Created the DC Universe." Under the tcnns of this deal, SLM receives a royalty of5.0% of
the cover price on p t sales of the f r t 200,000 copies of such iSsue; and 6.0% ofthe cover price
on net sale of s u c issue in excess of 200 ,090 copies.

Toon Boom'
Developed Contract

Deal Description:
SLM has entered into an agreement Wth the Canadian software company. Toon Boom, cre<tors
of US Animation, the standard in traditional animation digital ink and pint programs. Pursuant
to the terms of t h i agreement, SLM has non-exClusive right to distribute US Animation software
in the U.S. SLM has o\ligations to fbnn and execute amarketing pla C for the software, and to
develop a user interface for the product. SLM a S owns warrants to acquire up to 1,044,888
shares of Toon Boom Technologies, Inc., at Canadian $.70 per share, of which 348,296 are
currently vested.

Cyberworld
Developed Contract

SLM owns w a r r a t t purchase 250,OOO shares of Cyberworld InternatiQr. I c . at $1.00 per


shar' and 250,000 shares at $2.00 per share ..

©CHIWTLJ=»=J^^^
''••l^

Mobfus
Developed MOU

Deal Description:
D
SLM is in advanced negotaons wit m Glob w l Digital Development. Ltd. regarding t e
production of a 3-D q 1 aniniate n rao^de; written by Stan Lee and the world-faous Ftnch
artist, "Mobius.' Under the terms of t v is antiCipated agreement, SLM would receive a 15%
backend after the producer recovers its h d out-of-pocket costs a o i a t e d with producing and
distributing the f,m . 8LM would also control merchitdising for t e film a d woU.d receive a
20% fe e for such services.

-
H D l l o o d C h r i t a Parade
Developed Contract

Deal Description:
SLM has entered into ah a g e e n t w t the Hollywood C h a b r ofCqmmerce granting SLM
certain exclusive rights (including broadcast rights. merchandising rights, etc.)relatingto the
Hollywood ChristmaS Parade. The agreemenr grants these rights through to the 2005 parade.
8LM is requied to pay $250,000, and certain guaranteed revenue amounts must be generated in
each yearto maintain the rigt. SLM and t e H o l l y o Oamber of Commerce are currently
in a dispute regarding ptUported breaches by both p i e s in connection with the 2000 par de .

EXHIi 03431
', -",

-i

EXHIBIT 1.1.4.1

L e c b u l t z P r o p e r t y Schedule

Guardians
Haywire (aka fixers)
War Is Heck
Braindead
Fissure
Op: Aliein
Plsnet
Captain Super
Bots/The Retrievers
Adjuster
Con Man a d the Cop
Glardians
Micro-Man/Micro-TC
Missing Link
Pandora's Box

T r om ple Helix
Tomorw
Demolisher
Death Hunt
Talon
Raiders of Space.
The Visitor (Quarantine)
Carman
Cougar
Femizons
Hobson's Choices
The Un-Huma
Diabelta
Tarantula
I-Wercwolf
X-Isles
T e Terminal
Vindicator -
Decoy
The Lighthouse
Disaster Blasters
Stronghold
Mumoo Jumbo
Rocker
^c
> ^ ^?.^
' ^

Over My Dead Body


Monsters at Large
Rescuers
Falsetto
Chameleon
Company Town
Haunted F r t House
Avatar

EXHIBIt 1 03433
.

.V

-. ..-

. -
.
EXHIBITS -"

- ,.-;
. -- - -. ... ..
^"-CR.>-^
' ^ ^ • • • : ^ s •;

0^34

BOiiBIIULPAGE.
'•- r ••

CounselJ B Ame E can Express RSN. American Express Cousc fot Douglas Eminett Realty F u
i851 E o F m nSl35119) 1997-<'t935-1C
D n Sheuoothristian S. Molnar
11990 San Vicentc Blvd. 1240
L Angeles. CA. . 9 - 5 0 0 4

- D V s e l CorHti & K z b ton -0935-121t counsel forHU & Knowltonn935-122. C e l for EMwrah Schlfchting (1935-17.
David A. Scbwartz/EliEabeth L Rosenbfatt Neal H K l U e r / A m y Benen tt Banr R G r e E q
I r l & Mann Da 4 & G l Clackson; Gore & M a i l l a
1800 Avenue of theStais, #900 3424 Ca es C n St.. #350
Toirancc, C 8 ; 503
L Angeles, C 9 6 0 7

C o u s for H o r o d Chamber C m e Counsel fiyLynne C o h e Co a D for PFSC/SFCCAHTAL


Benntt 1 . Silverman E r q (1935-124) BaraOvA ofaras& Coate A l l . Halpeiin E q .
Gibson, Dunn & Gxatoher 9606 S a Monica Blvd.. H 52 W rin & ASsoc
333 S. Grand Ave Beverly H l l , CA 902 J 0
L Angek, CA 90701

Courisdl for Wild Brain. Inc.


How r d J. S t i n b i c R. Wilson c o ArtL u f Licberraan
[ r ! & Mnlla Lid)crntan & No mk
1800 Avenu e of the Stars, # 0 0 350 F f Av N ue #7412
Los Angeles. CA 90067 New YoIfc.^fi'10118

• ( 3 4 3 5

SKHlBff.
rl1 . I N. Uct, 2 6 2 1
V * •

Ootober 17. 2001 ,

hiF" F=AX
CD:.

David G chibchScEsq. FAX:.7/Q - ; ^ *^ -JLZ^i±. . DATE.-, / g / t c / o r •


Via Etngfl: dbg lIbrb:com

A one jEkniliar witii t e e t i c t ^ g ofinteUectual Propcjtics,


characters. and bei mm c w t d with the pJsponabf lity for such 1 St e n n p a u dia,
enciosed is my economic foreca" for t < zssctbt r ¢ by the purchase and saL
including in particua t o propertfes'delinete c in y o u r p a i a o i t h L L L I to 1.1.5.5.

Bec v e t e we a e d e a i g in t t araa of intel a o c a d w b of t t t ndcre dua "y

Stan d c p r o j e t for the past 50 years have a W y s h s a r e l a e l y high degro


success eX fKcMng from extraordinary success of characters such a C Spidarrnaii. X-i
ajid Hulk {first tier) to modr t t w successful characteis s t h as Captain A e a erica (s
tier), and unsuc t c f i i l chaiaaeis -which f o r the b t k of Uie over 1.000 stipeiheroes
r f v e l i s Univ q s , all of which wets C t e d underrhe aiispices of Stan L e .

The =
success of such C h l c d e d s supon uponits achieving a television or m o ' e
Cntract w c h may be a kened to t r e anchor tenant in a strip b k L To this televmon or
movie contracl is t e n attached merchandise- I p p a e l , comic : c s , an4 b i k c o n t r a ^ 3
majoT sub-clegories.

T e r e follows a e c tirnate of Stan Lee Me r a il characters developed fO T


exloitation ia tbe various cmgores o a (o L s f t v a d v e s a ond tier basis.

-s $
j_^50jOO-500,000
MJlndC
; M o v e .1 IO0.O00 •JOC.WW Boolo
JO.O0O
ComScs
25.000
Aoparet
25.000

p r i c a T e upon a conservar ve royHbe ay rste of 5%.

T s c<imate.givesa ra W ge of b e t w $2,OOO.OOO -$5.OOO>900per charcter -


o v e t ¢ major eCQnomic life; >i^^fh over 40 poteoial properties iix:luding - e Lee-Shutx

10-26-91 97:47 TO: pa2'

w -^MHB!T____Ll_
i
• ^

03436
Da4IBIU»==.^fi^
. ^ - --- ..- - - -
• . .

.-::-.)
,13

bKtw-ee S . 0 0 0 . 0 0 : S d t a , 2 \ i ! n rbyalties over t n e a 5 ye e d .

a laige number of facton


includin t noS ongy the e c r nomG outlolJi in Hx United Stetes, but t a e ty u e of c f r r
enjoying tiic public suppoit. It micy well he t t i 4 or 5 c b c t e r s sire saceessftd lalsiBg
t e ptentjal c n d e r ^ l y .

Finally. if the s y e s m s are worKe weU a the time of the movie, o t show
with t e ' e c t to merchandising, book eic de^als> a retom of $8,000,000 - $15,000,00 f
over 5 ye a a wouid l t b c unlieey. It is 1 v t t to n o t h t at t s is not t ssg gesi that
a y Oi e particular chax»5tc« selcete l a dvance would achieve stich a success, but xathw
that one of the forty characters wjou d i hteve such sucossJust as Marvel's busine^ pla t
virse based was l o n a C ery large i n v e n i l of c Saracters ia create the probabi lity that
several would ' e successful.

.4

iO-ae'-Sl 8T:A7 TOi FROH:$U 575 6813 P83

Ul
0337
• BCHiilT 1
— . • • - — —

-')

1
PJROOF OF SERVICE

STATE OF CALIFORNIA, COUNTY OF LOS ANGELES

I a a" e p l e i the County of Los Angeles, State ofCaKoma . I a over the age l 18
and am not a party toftew t n ac^on; my business addres i : 1801 Avenue of the Stars, Suite 112O,
Los Angles Catfom 90067.

On NQvember 27, 2001, I s d the freoing documet (s) descnbed as:


NOTICE OF MOTION AND M O T I O N F M R R OR O ER T O APPROVE S OF A S S E T S
F E AND c i O l LIENS; MEMORANDUM O F P O I N T S A J D AUTHORITIE.S. ;
DECLARATION O F R N N E T H S . W I L L I A M S I N SUPPORT THEREOF
o the interested parties i t acton by pJaing a true c m py tereof enclosed in a seal©l envelope with
postage thereon flly prepaid in the United States mail at Los Angees, Cafifo e a, addressed as
10 follows:
11 See attached seavice list
12
(By MaJl) I caused such envelope with postage thereon, flly prepaid to be placed in the
13 United States mail, Executed o November 27,2001, at Los Angeles, Caioma.
14
Q y Federal Express/Ovemight Mail} I caused such envelope to be deivered by Federal
15 Express (or Express Mal), next busness day delw"y to the o f f c of the addressee.
16 Executed on 2001, at Los Angeles, Cifornia.

17 _ (By F a c i e ) I cased said docwnent to be sent via facsimile. E x e t e o .


2001, at Los Angeles, California.
18
19 (By personal service) I caused such envelope to b deliVred by hand to the o f f c of the
addresse. Executed on . - 2001 at Los Angees, C o r n a
20
(State) I declare under penalty Q peIur. under the'laws of the State of California that the
21 above is tnie and conrect
22
jc ( F e d e r c ) I d a r e that I am a eployee in the offices of a member of the State a a of this
23 ! urt at whose direction the service w t s made.

24
25
Barabi Clark
26
27
28

eCHIBIt / mGEI'M 03438


.lI
S p < a l Notice - I re Stan Lee Media
i a • / -%

Office O r n e u.s. T r u s e Jenneth Wifliarn.(1935-i)


21051 Warner Center Q r e , Ste 15. Stan Lee Media, Inc
Woodland Hills 91367 P.O. Box 116
V a n N C 91408

COTnmitlee Counsel SEGURITIES & EXCHANGE COM . ense} forStae/Salim


GarKlansner, E s . (1935-106) Sandra Lavjgna (193S- ( ) CoeneJope Pannes F .sq(l935-1J6}
Stutman. T r e s t & Glatt 5670 Wishire Blvd,5 l l 5 RTto„& Tucker
369 L W i Blvd. #900 L Angeles C 9 0 3 6 611 Anton Blvd, }41 Floor
C t a Mesa. C 92626-1998
Los Angeles, CA 90010

J c A Krie u , Esq: (1935-31) Attorneys fo v P . LLC Counsel for EUioU Associates


M e e t berg. Ghjsker, Field, a a & YannGeroij, Esq. (1935'32) Robert MNovck E (l935-33)
G o n & AssCsates, PC Kasowt B e n o eta!
L r ofthe Strs #2100 317 Madison Ave., #1421 1633 Broadway
New York. NY 10017 New Yoric, N 10019
Los Angeles, l A 90067

Attorneys for Fidelity Leasing Counsel for u s Bank Counsdfr Warer Brothers
s u Kay B o n (1935-34) Wedell G KUsef Esq Wayne M. Stith Esq
H e . Rousso & He!d u s B c o r p l g a l Dept Wamcr Bros. (1935-35)
15910 Ventura Blvd., l : Floor PO Box 1 Q 40 u a Warner Blvd
B«rbenJ:. CA 91522
EncJno CA 91436-2829 Porland OR 9702200

I o m e b r Aapustine Ftinds. LP Counsel for Frntera Corp.


Ira D. Kliarasch. Z e . (1935-36) Wayne Ten i b Esq (1935-37) Nanette D Sanders (1935-38)
Pachulk SI<gl ,E i l , Young & Jones Mitchell Sflberberg & Knupp Snel & W l e
10100 Santa Monica BlVd. #HOO 11377 West Olympic Blvd. 1920 M St., Ste l200
I e CA 92614-7060
L s Angee, CA 90061 Los AngeleSi y 90064-1683

Attorneys for nflon. Inc.


Steven W. Wdnshe n t Esq (1935-117) Ja R es Relton Jo e a phEsq (1935-109)
C t o r & WeJBSbenk KlettjRooneyrtal Clark & K a eeEE
16830 V e t r Blvd., #35 J One Oxford Centre, 4 t Floor 2999 Overland Ave., (1204
Los Angeles. CA 900614243
E i n o , CA 91436-1796 Pitldairgh, PA 15219-6498

Coiitsdl for Fox Latin A m e r c Channel CounSl for GE Capital Coonsel forfaterfase Capita! L
D i d M Posner Esq (1935-1 I i ) ?arshall F Golderg Esq (1935-112) LaTsrence Peitz l an, Esq. (19351-13)
Squadron. Evlenol et a! Glass &. G 0 ldberg P wlzmffli, Classman & Weg LLP
21700 &xrordSt..Ste 430 1900 Ave. of Ue Stais, I650
Los Angee CA 9006.7
WooJand l d l , CA 91367-3665

SpK:ial Corporate Counsel Counsel for Adroinistaff RSN-n 935-118)


S ( e n Aips Slate Meagher etc (l935-l2) James Jose/Erin M l l i e
Attn: Ja A ie Edmonson. Esq. KetRoonty Lieber & Schorling
3130 Wjshire Blvd., #200 One Oxford C e t 40U Floor
300 S. G r n Ava. #34{O
Fittsbur. PA 15219-6498
L s ' Angeles, C e 90071-3 144 Santa M o n k , CA 90403

03439