Stan Lee Fraudulent Motion To Approve Sale Of Stan Lee Media Assets To Non-existent Llc

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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) 3 LEVENE, NEALE, BENDER¥ RANKIN & BRILL L.L.P. 1801 Avenue of the Stars, Suite 1120 Los Angeles, California 90067 4 Telephone: (310} 229-1234 5 Facsimile: (310) 229-1244

o

01 NOV 27

BY. •^tz:^f^

-[rp

6 Attorneys for Chapter 1l Debtors and Debtors in Po!session 7 8 9

UITED STATES B A K U P T C Y COURT

10

CENTRAL-'DISTRICT OF CALIFOnIA

11

FERNANDO VALLEY DIVISION)

12 In r e 13 STAN LEE MEDIA, INC'I a

Delaware corporation, and 14 STAN LEE MEDIA, INC., a Colorado corporation, 15 Debtors and Debtors in Possession

16 17 18

Affects Both Debtors

19

01-11329-KL

CASE C h a p t e r 11 )

{Jointly Administered with Case No. SV-01-1l331-KL} . NOTICE OF MOTION AND MOTION FOR ORDER 1TO APPROVE SALE OF ASSETS FREE U CLEAR OF LIENS; n MORANDUM OF POINTS AND AUTHORITIES;

DECLRATION

OF

K N T H S . WILLIAMS IN SUPPORT THEREOF

Affects Stan Lee Media, - Inc ., a Delaware corpor ation, ) Date: Only Time: ) Place: Affects Stan Lee ) Media, Inc. , a ) Colorado corporation, } Only ^

20 21 2 23 24

Ja O uary 8,2002 10:0O a.m. Courtroom "301" 21041 Burbank Blvd. WOOdland Hills, CA

25 26 27 28

//1 ill III III

BMBIX n

03364

%

• "

i)

1

2

Table of

M M O A D U M OF-POINTS A D AUTH01UTIES I.

.6 ,6

BACGROUND

RLIONSHIP^Wr!H

5 •

7 8 9 10 11

••

STATEMENT OF FACTS

4 6

contents

T

SiRN L E E . . . • • • • • • • • DEBTORS" CKERTiVE 1 S E S S .

••.•••••• ••••••••

6 •••

...

'

D, THE 1 S E T P O R O U s AGREEMENT

12

I.

All cash, bank deposits and/or cash equivalents of the Debtors 12 2. A l of the D eb tors' off ice e quipm ent, computer5 i 12 and ser vers 3. Claims, lawsuits and causes of action of the Debtor s. 4" Tax refunds and tax attributes • ..•. 13 S. Claims for relief under any of the avoiding powers 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 The Debtors' corporate charter or- qualifications to conduct business as a corporation, arrangements with registered agents relating to foreign .qualifications, taxpayer and other identification numbers, seals, minute books, transfer books, and other documents relating to the organization, maintenance, and existence of the Debtors as a corporation; or any of the rights of the Debtor's 13 under this Agreement • .. 8. The Debtorst interest in Conan Properties, Inc. and any rights or interests, including intellectual property rights, and interests in any of the properties and assets of CPI 13 9. s tan Lee Presents; .. 10. -Stan's Soapbox; and II. Stan Lee & Design • •...

12 13 14

15 16 18 19 20 21 22 23 24 25 26

14

27 28

.•

1. Produced Properties: "7 2 . Co-Brands Produced: .7 , 3. Co-Brands In Development! . . .,.7 4. Developed Dea ls: ..•.••. • 8 S. Other Projects (Undeveloped; Debtors acting as agent tor a5sets only): ......... ..... 8 All trademarks, copyrights, original artwork' and 6. promotion al mate rial relating t o the fo re goi ng Creative As sets . 1s. . ,.".., ., .. ,., .... -8

G. H.

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 . . . , . . 15 P O J C T E D DISTRIBOTION B A S E ON $ 4 MlM-ION TOTAI. RETURN. . . PROOECTED D I S T R I U I O N BASED OH $ 7 MILI:ON T O A R T . • • • ••

A 16

i

03365

iXHlBlX

•

1

2

II.

-

DISCUSSIPN . . , A.

.i,.,,.'

^

"

-

1 •

THB; C O U I SHODLD APPROV' THN D W O R S I

•

PROPOSED A

___.., l

.

17

SET S A TO

.. 19 21 .... . 22 .

.

,

...."...,

6

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' OF THEXR ASSETS TO PDRCHASBR TO B E FKBS MID C L OF A U .

7

1.

8

. 2,

9

B,

" •

I O K 3 6 3 ( B 1 OF THE BftNKBDPTCTf C O D E . . . 1 7

1. sound' Business Purpose 2. , Accurate and Reasonable Notice 3. Fair aTdReasonable Price . , . 4, Good F a i t h . . . . . . . . . . . . . , v . '

4

.

.-'".,''

POROQVSER P O B S U J ' TO S E C T

3 5

'-''-^

The P r o p o s e d A s s e t S a l e 11 U , S . C . S e c t i o n 3 6 3 { f ) The P r o p o s e d A s s e t S a l e 11 U.S . C , S e c t i o n 3 6 3 { f )

II.! . CONCLUSION.

i s Permissible ( 2 ) , . i s Permissible (3) . . , : . . . , . , .

,. ,.

SAI£

26 Pursuant to .,., Pursuant t p ,...,....28

27

. . . 29

10 11 12 13 14

15 16 -,

17 18 19 20 21 22 23 24 25 26 27 28 IX

^

Q ^

03366

.

-^

.j

•V

1

ties

2

{

3

CAE

4

Coastal Indus.. Inc. v. U.S. Internal Revenue Service (In re Coastal Indus.. Inc.), 63 B.R. 361,368 (Bankr. N.D. Ohio 1986) -

5

In Ie Abbotts Dairies of Pennsylvania. Inc., . 1 8 F . 2 d 143. 149 (3d Cir. 19&6)

23

- - 2 , 26, 27

6 1988) -

7 8 9 10 11 12 l3

In re Apex Oil Co.. 92 B.R. 847.869 ( . EDMo. 1988), cfting In reBxennium:inc.. 115 f.2d 1401, 1404-05 (yi Cir. 198 3) -

16 17

27

-

In re Atlanta PackaRing Products, Inc,. 99 B.R. 124, 131 (.a n r . N.D. Ga. 198.)-

-24

In re Continental Airlines. Inc. 1 8 F.2 d 1223(SIh Cr.- 1986)•

-20

118 B.R. 99, 102 (Bankr. E.D. Mo. 1990)T

-19

In re Industrial Valley Refrig. and Air Condo Supplies. Inp.. 77 B.R . 15, 21 (Bankr. E.D. Pa. 1987)-

-19,27

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)In re Kaipe. 84 B.R 926, 930 (Bankr. M.D.Pi. 1988) In

" - - - - - - -

-

r S H . CoaS^SD.W.Va.1996) - - - : - - - - - - - - - . :

-

-24

---

-22 23

__„__

. - - 1 9

18

In re Lionel Corp..

19

I re Oneida Lake Development. Inc, 114 B.R 352 (Bankr. N.D.N.Y, 1990)

-30

21

In re Rock Tndus. Macfa. Corp! . 572 F.2d 1195, 119& ( Cir. 1 9 1 8 ) - - - - - - - - - - - - -

-27

22

In re Snvder. 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

20

24 25

:

In ^GeorEe Walsh Chevrolet. Inc..

14 15

-27

722 F.2d 1063, 1071 (ld CiT. 1983)-

-lg.20

Inre TheLandiiig, 156 B.R. 246,249 (Bankr. E.D Mo. 1993) -

—19

26

- • " - Partnership m - and Genius Corp v. Banyan Corp.. In re-The Seychelles. 32 B.R. 708i(.D. Tex 1983)-

27

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

-

-

-

- -24 19

28 iii

03367

EXHIBIT

.JLmGEJiiL

-,

1

2 3 4 5

InreWiIde Horse Enterprises. Inc.. i36 B.R. 830, 84.-2 ( a r . CD. C t 1991) S u n

-19,24; 26, 27

C r . B.A.P."

-20,21

WilemainfiS^'c. 1985}.

- : 2 3 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)-

10 11 12 13 14 15 16 17 18 19 20 21 22

23 24 25 26 27 28 IV

03368

B(HlBt

_j_mRpll

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1

2

PLEASE T A NOTICE that a hearing will be held on January 8, 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") ,7

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

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 21 22

23 24

such liens, claims, encumbrances or interests to attach to the proceeds

from the

sale

with

the

same

priority,

and

extentt e:

validity which existed prior to the sale. .n summary, the

D

25 developments (the "Creative Assetsl). 26 created

e

,

The Creative ASSets wete

de

"

27 pop-culture icon Stan Lee, co-creator of such classic characters 28 2

EXHIBf

JLf

03369

1

as Spider-Man', the

Incredible

petition, pi

«s

stan

Lee

Hulk™ and

the X-Mep'.

Pre-

employed pursuant to an employment

agreement with the Debtors, which Stan Lee contends was by

the

Debtors

The

Debtors

b

dispute

this

to exploit

the

c6ntention, Notwithstanding Creative

the

foregoing,

1ss.ets and generate

in

funds

order

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. 20

In

consideration for their sale of assets to the Purchaser, the

21 Debtors shall receive a percentage of the gross profit realized 22

23

by the Purchaser froi the exploitation of the deveioped Creative

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

28 3

a

(3370

.PAGE.

"

..

1

Agreement is in the best interest of the

e s will result in creating value out of the Creative'

Agreement

·

3 Assets, which value, the Debt o rs believe, can only be created

4 5

with the direct involvement of Stan Lee. 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

14

any opposition

to

the

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 18

set forth at the top, left-hand co rner of the first page of this Notice of Motion and Motion.

19 PLEAE

T A

FRTHER NOTICE that the Court may deem the

20 21 2

failure of

any party to object to the Motion

to constitute

consent to the relief sought by the Debtors.

23 III 24 III 25 III 26 1/1 21 III 28 4

IXHI

J_PAGE_^

03371

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1

2

WRFOR,

the Debtors respectfully request that the Cburt -

(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 6 7 8

and proper. Dated: November ' 7 , 2001

STAN LEE MEDIA, INC., a Delaware corporation STAN_r.EEjandA, INC. r

9 10 11 12 13 14 15

_M^TIN j / B R I H T

c R I G M. RANKIN DAVID B. GOLUBCHIK LEVENE, NEALE, BENDER, RANKIN & BRILL L.L.P. Attorneys for Chapter 11 Debtors .and Debtors in Possession

16 17 18 19 20 21 22 23 24 25 26 27 28 5 •

1

ee. io(

03372

•

•

-•

:

I

1

2 1. STATEMENT OF FACTS

4

6

Stan Lee Media, Inc., a Delaware corporation

("Stan Lee

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

corporation,

8 possession

Chapter

"(coilectively,

11

the

debtors

and

"Debtors" )

debtors

comraenced

in

these

9 bankruptcy cases by filing V
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. 16

Stan Lee Colorado is a public corporation that, prior

to the Petition Date, traded on NASDAQ under the symbol "SLEE".

V

The

Debtor.

18 that,

prior ,to the Petition

Date, developed

and distributed

19 20 21 2

branded entertainment properties

under

culture icon Stan Lee, co-creator Spider-Man1, the Incredible

the direction

of pop-

classic characters as

Hulk1 and the X-MeJ.

23 B.

Relationship W i t Stan Lee.

24

Prior to the Petition Date, Stan Lee was employed by the

25 Debtors pursuant 26

to an employment

Employment Agreement").

27

agreement

(the "Stan Lee

Prior to the Petition Date, Stan Lee

contended that the Debtors were' in breach under the Stan Lee

28 6

03373

EXHIBIX

1 2

Employment

Agreement

and

S ta n

Lee

d ecl are d: the

stan

Employment Agreement to be terminated as of January

Lee

29, 2001,

3 both of which contentions the Debtors' dispute .

4 5 6

8

Notwithstanding the foregoing, the Debtors litigation agreemelt

regarding is

likely

the to

validity

be

time

of

belieye that any

Stan .Lee's

consuming,

employment

expensive

and

I,Y

result in fbad blood" which will jeopardize future exploitation of the Debtors' Assets, as described belo;.

10 11

Assets. Although

the

Debtors

far,

the

do

own

certain

minimal

offfice

assets

include

12

equipment/

13

their branded

14

which were created and developed under Stan Lee.

15 16

by

Debtors' most

entertainment

properties

valuable

(the ""Creative Assets") The Crea t.ve

Assetsl, as described in the annexed Asset Purchase Agreement, and in greater detail in exhibits thereto, include the following:

17 1.

18

a) b) c) d}

19 2( 21

2.

24 25 26 27 28

St;mlee. NET web site and. portal; The Accuser; The Drifter; and Stan' s Evil Clone.

Co-Brands Produced: a) The Backstreet Project.

22

23

Produced Propertiesr

3.

Co-Brands In De.el6p»ent: a)) Gene Ro ddenberry's Starshipi b) Mary J. BIlge; c) X-Treme Heroes; d) Police Force 2220; e) Chrysallis; f) The Stqne Giant; g} Battle School Tranquility;

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

,

I

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

2

4 . . Developed Deals: a) ?O% interest in Lee Schultz Partnership.

_4 5.

5 6

Other projects (Undeveloped; for assets only): a} p) c) d) e) f) g)

8

to

6,

11 12

Debtors

acting as agent

DCComicsi Toon 800m: Cyberworld; Mobius; Hollywood Christmas Parade; Scuzzlei and Scuzzle Design. -

and All trademarks, copyrights, original artwork promotional material relating.to the foregoing Creative Assets.

13 14

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 18 19

part recovery for the estates. the outset of these cases, the Debtors created a sales

20 21

memorandum, (the "Marketing -

2

listing

of

the

23 Creative Assets.

Debtors' The

'

assets,

Marketing

primarily Package

consisting

contained

a

of

the

detailed

24 explanation of ea?h of toe assets, togethe26 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 28 8

1

J6g

03375

."

purchastrs and interested parties to analyz\ the Debtors' assets

2

and

make

an' info.ed, decision

whether

to

purchase

or

infuse

3 capital with'respect to such assets.

4 Opon finalizing the Marketing Package, the Debtors sent the

5 Marketing Package to over 40 financial and ente-rtainment entities

6 had an interest in the Debtors' business.

7

-.

8

Deltorst

9

post-petition

The

efforts, which included a request for interim financing, .rtlsulted in approximately

10

and

conferences' with --interested

11

Capital, L.P. (nlnterfasen).

parties,

12 meetings

including

Interfase

.

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

15

Debtors

16

debtor-in-possession

17

Debtors

concern" were

would

18 19

entity,

able

to

the

Debtors

negotiate

financing

commence

the

required terms

facility

limited

entered

that

certain

operations

"Final

of

a

pursuant

of- the Debtors' I s i n e s s . court

financing.

The

post-petition to

pending

which a

sale

the, or

On May 3,

Order

Approving

Emergency

20 Motion ,Pursuant To Local Bankruptcy Rule 9075-1(1) For Authority

21 To Obtain

Post.petition

Finan"ing"

(the

"Order") r pursuant

to

2

23 24

court

approved

agreement (the "financing

the

Debtor-in-Possession

financing

Agreement") entered into by

25

anq Interfase.

Pursuant to the FinanciDg Agreement,

Interfase

26

committed to provide at least $250, 000 in post-petition financing

27

for the Debtors' opera tionsr

and potentiallY, ,$250,000 more in

28 9

gXHSt

1

PAC

03376

^C..'

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the future.

2

in

.}

: In t u r n ,

substantiallY

all

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 of

the

DebtOrsI

p r e - p e t i t i o n " . and

3 petition

assets.

i n t e r e st

Additionally"

based

post-

Interfase's

on

•

5 6 7

representations merging

with

that i t the

was i n t e r e s t e d

DebtOrs,.

either a c q u i r i n g

in was

Tnterfase

granted .a

Unfortunately,

the

discussions

between

Debtors

the

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 . 10 was

reached

between

13 additional

17

Deb t < r s

and

No agreement

Interfase

rregar( e g a r d iirn g

a

Moreover,

$Z50( 000

in

Interfase financing

refused to

to

the

provide

Debtors,

the which

essentiqlly shut down the Debtors' operations again.

15 16

the

and

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

12 to Interfase.

4

60-day

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.

8

11

Or

Upon

being

released

negotiate with

of

the

exclusivity

requirement

to

the Debtors attempted to market their

prOjects

entities, which included companies

18 in the United states and in Canada.

However, as a result of

19 Interfase's

exclusivity

period,

other

potential

deals

"fell

2,0 21 22

apartil and could nOt be revived by the Debtors.

Additionally,

through discussions with such third parties, it was clear that

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 26 indlctments

h relating

a to

the

Debtors'

r former

. management

and

27 28 10

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 petitio!

with and,

the

Debtors

therefore,

was

breached

and .terminated .'re-

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.

11

Stan

i2

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

13

provided for in 11 U.S.C. § 365(c}.

Lee's

14

Based

personal

on

the

Additionally,

services

employment

foregoing,

the

it is likely

agreement

Debtors

is not

involved

Stan

that one

Lee,

15

through his independent counsel, in their negotiations.

16

cooperated with the Debtors' efforts and assisted the Debtors in

17 18

their

marketing

Unfortunately,

efforts

to

the

best

of

his

Stan Lee

ability.

the Debtors were unable to reach any agreements

19 with

third

Iqrties

which

would

be

acceptaple to

everyone

and

20 had a chance of benefiting the estates.

21 22

After

Debtors, would not be able to

23

c o n s u m a t e a transaction with third parties and that the Debtors

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

27

regard, ,Stan Lee made

to exploit

and monetize an offer

the Debtors' assets. to the

Debtors

In

tJat

to acquire th.

28 11

BCHi

_i„PAGiJy/

03318

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"

5 the estates' assets would be through the exploitation of such

6 7 8

assets

by

Stan

Lee.

the

Debtors

engaged

in

negotiations with Stan Lee,. who was represented by independent

9 counsel, regarding 10 Creative Assets" 11

Accordingly,

the

development

apd

exploitation

or

the

The Creditors' Comittee was also involved in

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 16

Prchase . 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.

20 The agreement of the parties is memorialized in that certain

21 Asset Purchase Agreement

(the "Agreement"), a true anc correct

22

23 24

copy of which is attached to tle annexed Declaration of Kenneth S. Williams as Exhibit "z:'.

In summary, the Agreement provides

25 as follows: 26 27 28 12.

EXHffi!T_

03379

.: / "t

1

2 3

1.

The

Deb t or s

shall

transf e r

the

Creative

A ssets,

excluding th . 7th Portal project, to SLC, LLC (the "Purchaser"), an entity controlled by Stan Lee.

4 20

S 7

Th^'Purchaser shall use its best efforts to exploit the

Creative Assets. 3.

The sale shall specifically exclude the follow:ng;

8

ao

9

bo

:

10

c.

11 12

Tax refunds and tax attributes.

e.

Claims for relief under any of the avoiding powers provided for under Chapter 5 of the Bankruptcy Code. All books and records of the Debtors that do not relate to the Assets. The Debtors' corporate charter or qualifications to conduct business as a corporation, arrangements with' registered agents relating to foreign qualifications, taxpayer ard other identification nuiers, seals, minute books, transfer books, and other documents relating to the organization, maintenance, and existence of the Debtors as a corporation; or any of the rights of the Debtors under this Agreement.

14 15 g.

17 18 19 20 h.

21 22 23 24 25 26 27 28

4..

All of the Debtors' office equipment, computers, and serv.rs. . Claims, lawsuits ard causes of action of the Debtors. "

d.

13

16

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

The Debtors· interest in Conan Properties, Inc. and any rights or interests, including intellectual property rights, and interest: in any of the properties and assets of CPT .

In consideration for the sale <£ the Creative Assets,

the following revenue-sharing program shall pe implemented by the parties; Until such time as the allowed secured claim of Interfase is satisfied in full by the Debtors or their estates , (the "first Target"), the Purchaser shall pay {to the Debtors, or their estates, for 13

.AFitt

1

03380

1

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

2 3

b. ' Upon successfully achieving the First Target and until such time as the Debtors or their estates recover $250,000 from the Purchaser's expfoitation of the Primary Assets (the "Second Target"), the • Purchaser shall pay to the Debtors, or their estates, 40% of the gross income received by the Iurchase.i from the exploitation of the P rimary Assets.

i 5 6 7 8 9

c.

Upon successfully achieving the Second Target and until such time as the Purchaser recovers its advance -(as described in Paragraph 4 (a) above), wherein Purchaser consented to increase the Debtors' share of the exploitation of the Primary Assets from 40% to 60% of gross income received by Purchaser until such time as Ihter f ase' s securi ty interest is satisfied in full (the "Third Target"), the Purchaser shall pay to tle Debtors, or their estates, 20% of the gross income received by the Purchaser from the exploitation of the Primary Assets.

d.

Upon successfully achieving the Third Target and until such time as (a) all allowed claims (excluding any equjty interests in the. DebtorsJ are :atisfied in full, net of other recoveries; and (b) the Debtors'" estates receive the sum of one (1) . million dollars from the exploitation of the Assets over and above the amount necessary to satisfy all"-allowed clalms, the Purchaser shall pay to the Debtors, or their estates, 40% of the gross income received by the Purchaser from the 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 Agreement (the "Agency Assets"), the Purchaser shall pay to the Debtors, or theit estates, 12% Qf the gross income received by the Purchaser from the exploitation of the Agency Assets.

10 11 12 13 14 15 16 17 18 19 20 21 ^

23

!

M

25 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

2

property assets to Stan Lee; personaily, without any obligation

of Stan Lee 'to compensate the Debtors or their estates for such

3 assets (the "Free Assets"):

4 a.

5

b. stan's Soapbox; and c. - stan Lee & Design.

6 -.

stan Lee Presents;

7 8 9 10 11

F.

T e Sale 1s i, t e Best In-terest of the Estates. As. discussed

in detail above,

the

Debtors belie v e t hat

without the active invqlvement of Stan Lee, the Debtors will not be able to exploit the value of the Creative Assets.

In fact,

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 21 22

conservative' royalty rate of S%. The success of characters similar to the Assets depends upon 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 25

television monetized

contract

is achieved,

the charactets can also be

through merchandise, apparel, comic books and book

26 27

contracts.

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 6

few

haracte^s succeeding.

"

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

12

G.

Projected Distribution Based on $4 Million Total Return. Utiliiing the lower-end of the projections ($4 million); and

13 based on Interfase's claim of $250,000, the; revenues would be 14 15

shared as follows: 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 19 20

Next $625,000 (total revenues to date of $1,b41,666.61) - Of the next $625,000, the Debtors' share would be $250,000 and

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

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

27

the

next

$416,666.67,

the

Debtors'

share

would

the next. $2r54l_,666.66, the Debtors' snare would

be

be

$1,016,666.66 and the Purchaser'S share would be $1,525,000.

28 16

mm

*J

^^ ///T'

03383

1 2 3

. Therefore, in the event that the exploitation

Assets

results in gross income of $4 million, the Debtors' estates will 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

($7 millioi)",

utilizing

and

based

the on

higher-end

10

projections

Interfase's

11

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

of

the

claim

of

12

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

13

share

14

Purchaser's share would be $166,666.67.

15 16

would

be

$250,000,

to

pay

Interfase,

and

the

Next $625,000 (total revenues to date te of $1,041,666.67) - Of the ne:t $625,000, the Debtors' share would be $250,000 and

17 the Purchaser's share would be $375,OOO.

18 19 20 21

Next $416,666.67 (totai r eve n ue s to date of $1/458,333.34) Of

the

next

$416,666.67,

the

Debtors'

share

would ' be

$83,333.34 and the Purchaser'S share would be $333,333.33 .. (total revehues to date of $7 million) -'

2

Next $5,541,666.66

23

Of

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

the

next

$5,541,666.66,

the' Debtors'

share

would

be

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. 6

T e Court Should Approve the Debtors' Proposeid Asset Sale to 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,

10

sell,

or

lease,

other

than

in

the

ordinary course of bu,iness, property of the

11 estate."

12 13 i4

11 U.S.C. § 363 (b) (1). a Section

eral matter, "a judge determining

363(b) application

[should) find

from the evidence

15 presented beIore him at the hearing a good business reason to 16 grant such an application." 1071

(2d Cit. 1983).

In re Lionel Corp.,

1063,

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 2

Certain: factors

pertinent

to

this

analysis

have

articulated; specifically, the Court should consider whether:

23

a sound business purpose justifies the

24

sale;

25 26

been

(2)

accurate and reasonable notice of the sale was provided;

27 28 18

' t PAGE UJ

03385

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 8

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

B.R.

15 ,

21

{Bankr.

E.D.

Pa.

1987};

In

re

Wilde

Horse

Enterprises, •Inc., 136 B.R. 830, 841-2 (Bankr. C.O. . Cal. 1991}; Mo. 1993); . 1993) ; In 10 In re The Landing, 156'B·..R. 246, 249 (Bankr. E.O. Mo 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

18

Soud Business Puxpoae

There must be some articulated business justification, other

19 than

appeasement

of major

creditors,

for

u5ing,

selling

or

20 21 2

leasing property out of the ordinary course of business before the bankruptcy judge , may order such disposition under Section

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

2

the estate

under Section

363 {b} .

In Walter, the Bankruptcy

Appellate panel, adopting the reasoning of the Fifth Circuit in

3 In re Continental Airlines;. Inc., 780 F.2d 1223 (5th Cir. 1986)

4 5 6

and the Second Circuit in In re Lionel Corp., supra, articulated the standard to be applied under Section 363{b) as foilows:' "Wlether the proffered busiJess justification is suf ficient depends on the case . As the se cond Circuit held in Lio nel, the b ankru ptcy j rdge should consider all salient factors peltaining to t he , proceeding and, accordingly, act to further the diverse interests of the Debtor, creditors and equity hoiders,- alike. He might ; for'fexample, look to such relevant facts as the, proportionate value of the asset to the estate as a wholei the amount of elapsed time since the filing, the likelihood that a plan' of reorganization • will be p roposed and confirmed in the near 'future, the effect of the proposed disposition on future plans of reorganization, the proceeds to be obtained f:om the disposition vis-a-vis any appraisals of the property, which of the alternatives of use, sale or lease the proposal enViSlons . and, most importantly perhaps, wh!ther the as s et is it;creasing, or decreasing in valle. This list is not intended to be exclusive, but merely to provide guidance to the '. bankruptcy judge."

7 8 9 10 11

12 13 14 15 16 17 18 19

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

23

The

facts

pertaining

to

the

Debtors' proppsed

sale

to

Ptrchasers amply substantiate the Debtors' business decision that

24 their contemplated asset sale to Purchaser in accordance with the

25 26 21

terms of the Agreement is in the best interests of the Debtors' estates and 1heir

28 C o u r t .

•

creditors and merits the approval of this

'

eCKIBft

1 mG^M

03387

:„ <

•}

•••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»

6 ., 7

From the outset of

the Debtors' marketing efforts, it was abundantly clear that without the active involvement of Stan Lee, the Debtors will not

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 20 21 2 23

the estates - will share

in a percentage

of the gross income

derived, by the Purchaser from the exploitation of the Creative Assets. 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

27 justified

by

sound

with

business

the

terms

purposes,

of the Agreement is satisfying

the

first

28 21

^2. .^M

03383

r" .--

.

requirement for a sale tinder Section 363(b) of the Bankruptcy Code. 2. A

Accurate and ReasonaBle Notice. notice

is

sufficient

if

it

includes

the

terms. and

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

7 8 9

objections,

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

The purpose of the notice

for

objections and hearing before the court if there are objections.

10 Id. 11

is to prov i de an opportunity

.. 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

exhibits,

upon

tnterfase,

together the

secured

with

cr ed itor

all

attached

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 19 20

copy of the Motion, the Debtors will forward a copy of the Motion promptly upon receipt of such a request. The Debtors submit _that their proposed notice is reasonable

21 and appropriate under the circumstances.

2 23 --

24 25

3,. Fair and Reasonable F r i c In order to be approved under

Section. 363 (b) of the.

Bankruptcy Code, the purchase price must be fair and reasonable. 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 32 B.R. 708 {N.D. Tex. 1983}.

Banyan Corp., However, the Debtors also reaUze

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

10 bankruptcy court, is tle··.maximization of the 11

sold."

the asset

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 18

(Bankr. N.D. Ga.

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 2

The Debtors believe that the terms of the Agreement

23

sharing in the future revenue stream of the exploitation of the

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

.«.ji

liT_Z

03390

^1

1

1.

3^.

The Debtors have been marketing

from the comencement of their cases.

the creative Assets

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

9 10

finalized in the,attached Agreement. 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 22 23

4.

Pinally I as discussed above, the explOitation of the

assets is likely to result in a net distribution to the Debtors

24 estates,

after

payment

of

Interfase's

secured

claim,

of

arrived

at

25 approximately $1. 68-$2. 8 million .. . 26

Moreover,. the

terms

of

the

Agreement

were

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

Purchaser

in .. accordance _ with

the

proposed

asset

sale

to

4 5 6 1

of .the_ Agreement

is

clearly the -,b"est option available for the Debtors' estates and their creditors. .4.

S

Good Faith

•

..

. •

When a bankruptcy court authorizes a sale of assets pursuant

9 10 11 12 13 14

terml

to Section 363 (b) (1), ._it is required to make a finding. with respect :to the "good faith" of the purchaser. Dairies, supra,

149.

In re Abbotts

Such a procedure ensures that

Section 363{b} (1) will not be em]loyed to circumvent the creditor protections

of

15

requirement

of

16

independently scrutinizes the debtor's reorganization plan and

17 1'8 19 20 -21

Chapter Section

11,

and

1129,

as

such,

that, the

it

mirrors

Bankruptcy

makes a ,finding that it has been proposed in good faith. 1 5 0 .

^

••

the Court

Id. at

•.•

•"Good faith" encompasses fair the integrity of the transaction. supra,, 136 B.R. at 842.

further speaks to ln re Wilde HorSe Enterprises,

With respect to the Debtor's conduct ,in

2 23 24 25

conjtnction with the Sale, the good faith requirement "focuses principally on, the element of special treatment of the Debtor's insiders in the sale transaction."

See In re .Industrial Valley

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

2

any evidence of '^"fraud, collusion between the

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

6 Inc. ,

Enterprises,

8

supra,

at

Wilde

re

842;

In

re

HorSe Alpha

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

"(l]ack

of

good ' faith

is

generally

determined

10

fraudulent conduct during the sale proceedings."

11

Co.,

12

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

13

92 B.R. 847, 869

The te rms

(Bankr.

of the proposed

E.D.Mo.

In by

In re Apex Oil

1988"

In re

sale of the Debtors' assets to

14

Purchaser were negotiated in good faith in arm's-length process.

15

Although the Purchaser is

16 17

of the Debtors due to Stan

Lee's

was represented by independent

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 21

the

entity

creditor

representing

base . .

The

jnd protecting proposed

sale

the

interests

confers

no

of the

special

or

22

23

undisclosed benefit upon any insider of the Debtors, other than

24

Stan Lee's 'ncome from the continued exploitation of the Creative

25

Assets

26 21

by

Stan

Lee

through

the

Purchaser. ,

There

is

no

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

of the Debtors which is made part of the proposEd

28 26

.TI

I^k'

.PAGE

03393

'^

sale to Purchaser.

2

No insider of the Debtors w L l receive any

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 6

Debtor.

7

Based on these facts, the Debtots submit that the Court

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. 12 13

Section 363(f} of the Bankrutcy Code Permits the Debtors" Clear of Sale of 'heir Assets to n k r u t c y . . to Be Free All Interests. Section 363 (f} of the Bankruptcy Code provides, in relevant:

14 part, as follows! "The

16 17 -.

trustee

may

sell

property

under

. subsection (b) . . . of this section free and clear of any interest in such property of an

18 entity other than the estate, only i f -

19 20 21 2

(1)

applicable

non-bankruptcy

law

permits

the sale .f such property free and clear of such interest;

23

(2)

such entity consents·;

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)

2 3

such interest is in bona fide dispute;

or " (5)' such entity could

be compelled, in a

4 legal or equitable proceeding, to accept a

5 6 7 8 9

11 U.S.C. §363(f).

section 363 (fl of the Bankruptcy Code was-

drafted in the disj unctive.

Thus, a debtor need only meet the

pro'isions of one of the five subsections of Section 363(f) in

10 order for a sale of property free and clear of interests to be 11 permissIble.

12 "

13

3.

The Proposed Asset Sale is l e : s s i l e U.S.C. Section 363{£) (2).

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 17 18 19

Debtors' assets, including the assets subject to this M.tion. Thie Agreement acknowledges the existence of the Interfase secured and provides for the payment of

secured claim before

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 26

2.

The Proposed Asset: Sale is Pexniisslle Pursuant t.S.C. Section 363(f) (3) .

Section 363(f) (3) allows . sale to

and clear

27 28

of liens it the.sale price '^'is greater than the Cggregate value 28

-

03395

iXHIBIX 3^?AG^J^

-v :

1

of all liens on such property."

2

that holds a security

Interfase is the only creditor

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).

8

§

9

3 Collier on Bankruptcy

363. (6 [4J, at pp. 363-46; {15th ed. Rev. 2001); See In re

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 21 22

23

attached hereto as Exhibit "B".

In fact, the pr<posed sale is

the only way to monetize the Creative A$sets. ^ sale price does exceed the aggregate va

24 by such property.

As a result, the the liens secured

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

£X

t J L P A G i ^ "0.3396

--

r

1 2

IJJ,.

CONCLUSION

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 6

upon the terms and conditions set forth in the Agreement; and ([3) grant such further and additiohal relief as the Court deems just

8 and pxoper. • Dated: November

10

. 2001 . .. ..

. . ING., Delaware corporation STAN LEE MEDIA, arid STAN LEE MSSl A, INC., a Colora«^o corFO-i^ct^i.?

11 12

FIN"

.

^AIG M. RANKIN DAVID B. GOLlCHIK LEVENE, NEALE, BENDER, RANKIN & BRILL L.L.P. Attorneys for Chapter 11 Debtoxs and Debtors in Possession

13 14 15 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, 10 11 12 13

a

witness,

competently w i t h r e s p e c t

thereto.

A.

if

called

as

I

could

and

would

testify

Background. 3 . The Debtors

Voluntary P e t i t i o n s

comenced

t h e s e bankruptcy

under C h a p t e r

11 of

14 15 February 16, 2001 ( t h e " P e t i t i o n D a t e " ) .

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

cases

by

filing

t h e B a n k r u p t c y Code on , The D e b t o r s c o n t i n u e financial

affairs

to 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

J9 Lee C o l o r a d o :

a wholly-owned s u b s i d i c : y

s t a n Lee Colorado

is

of

a public corporation

Stan 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

23 24

5. The Debtors operated as a digital entertainment studiQ that,^ prior, to the Petition

Date" developed

branded entertainment properties

under

and

distributed

the direction

of pop-

25 culture icon stan Lee, co-creator of such classic characters as

26 27

Spider-Mar, the Incr,edible

Hulk™ and the X-Men'.

28 31

03398

1

") 1 B.

2

•:

':

Relationship With StanLee.

^

(. Prior.too the Petition Date, stan Lee was employed by the

3 Debtors

pursuant

to" an

employment

agreement

(the

4 5 6

Employment Agreement").

t"he Pe-ition Date; Stan Lee

contended that the Debtors were in breach under the Stan Lee

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

11 litigation

regarding

fhe

foregoing,

validity

of

I Stan

believe Lee's

that

any

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 17

office

equipment, by far, the Debtors' most valuable Cssets include

18 their branded entertainment properties

{the ""Creative Assets")

19 20

which were created and developed under Stan Lee.

The Creative

21

Assets

are described in that certain Asset Purchase Agreement, a

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 7 8

assets,

primarily

consisting

of

the

Creative

Assets.

The

Marketing Package contained a detailed explanati<m of each of the

9 assets, together with a listing of deals entered into by the 10 De b to rs relating to SUGh as: ets. 11

Package, the

relevant excerpts

The comprehensive Marketing

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 2

23 24

meetings

and

conferences; with

interested

parties,

including

lnterfase Capital, L.P. {"Interfase"}. 12. As set fqrth above, in order for the Debtors to be able

25 to market the Debtors' assets and negotiate with third parties as 26 a "going concern" el1tity, the Debtors required . q.nancirg. Debtors were able

to negotiate

the

The

terms of a post-ped. tion

28 33

EXHIB!

1

0300

^

1

2

debtor"in-possession Debtors, ' would

financing

facility pursuant to which the

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 7 8 9

•Agreement") entered into by the Debtors and I n te rfase . to the Financing Agreement, Itterfase comitted least

in

post-petition

financing

Pursuant

to provide at

for

the

Debtors'

10 operations1 and · potentiaIly, $250,000 more in the future . 11 turn, Interfase was granted a security 12 all of the Debtors' pre-petition

In

substantially

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 2(

was

re
the

Debtors

and

Interfase

regarding

a

recapitalization 6f the Debtors or a saie of the Debtors' aS,sets

21 to

Interfase.

Moreover,

Interfase

refused

to

provide

the

22 23 24 25

additional

$250,000

in

financing

to

the

Debtors ,

which

essentially shut dbwn the. Debtors' operations again. 14. Upor being released of the exclusivity requirement to

26 negotiate with Interfase, the Debtors attempted to market their 27 projects to other interested entities , which included companies 28 34

tMV

1

tfL

i35

.301

t .

1 in the United states and in Canada.

2 3

Interfase's iexclusivil:Y

period,

However, as a result of

other

potential

apar,t" and could not be revived by the Debtors.

deals

"f e·11

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 7

reorganization due primarily to the fact that the D^ebtors' public shares

•9 10 11 12 13 14 15 16 17 is 19 20 21 22 23 24 25 26 21 28

(SLEEl have been damaged by the bad press and federal

indictments

relating

to

the

Pebtors'

former

management

and

shareholder lawsuits; anf, ( 2) any sale transaction must involve stan Lee" personally, and his creative abilities. 15. As

discussed

above,

Stan

Lee

contended

that

his.

emp19yment agreement with the Debtors was breached and terminated pre-petition ' and, therefore, unassignable.

While the Debtors

disputed Mr . ,Lee's contentionsr the fact is that any litigation would take a 100, time, be expensive, and result in "bad blood," which woulc be

possibility of having Stan Lee

exploi t the Debtors I assets.

Additionally, r am a dvised by

counsel thatj it is , likely that Stan Lee's personal services employment agreement is not one which can be assumed and assigned over Mr. Lee's objection. 16. Based on the foregoing, the Debtors involVed Stan Lee, through his i,ndependent counsel, in their negotiations.

Stan Lee

cooperated w.th the Debtors' efforts and assisted the Debtors in their

marketing

efforts

to

the

best

of

his

ability.

Unfortunately, the Debtors were unable to reach any ,

35

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

D=.

E)CHIBfi:

13

•^

1

2

with third parties which would be acceptable to everyone an< 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

6

had no ability to monetize their productions, Stan Lee contacted 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

12

efforts and the importance of stan Lee's personal involvement in

13 the pro
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 24

18. Based upon extensive negotiations among the DEbtors, the

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

EXHIBIT.D-B^EJMI

03403

•

1 F. 2

^

T e Sale is in t.e Best Interest of the Estates. 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 toexploit the Creative Assets, while allowing the Del:tors' estates

10 to share in

from such expla·itation.

hereto as Exhibit relating

to

the

13 "Projections") .

Attached

"B' are proj ections of the revenue stream exploitation . of The

Prajectians

the are

Creative based

on

Assets

(the

a

year

3-5

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 17

fair and

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 21 22 23

depends upon

the characters

a television

or movie

contrcct, which is similar to an .anchor tenant in a st.ip mall. Once a movie or television contract is achieved, the characters

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

2 3

characters will succeed and which will not. The general industry

standard is to develop a multitude of characters and "bet" on a 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

$7 million over the next five years.

As a result, I believe that

the terms of the Agreement (i. e. I sh
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 21

To the best of my knowledge, the proposed sale confers no special or undis
23

insider of the Debtors, other

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

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'

j

I 2 3

special treatment in connection with th. proposed' sale. fin.l1y, there is no ftau< involvins- Purchaser or the Deb:o)s und no collusion b!tween Purchaser and any other Purchasers or the Debt6rs.

5 6

I declare under penalty of perjury under the laws of the United States that !the foregoin O is true and correct·

S

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

9 California. 10 KENErH S . WILLI.AS

11

n

14 16 11 18 19 20 21 22 23 24 26 2« 27 28 39

FROM:'

1

oo

evi

X

A S

PURCHASE AGREEMENT

i

THIS A
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 ,1.1.3.2

.

.

MazrJ. Blige;

.

13.3

X-Treme Heroe;

1.1.3.4

Police Force m O ;

. 1:1.3.5

1.1.4

Gene ; o d d e n b e r s Starship;

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.

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« OrtoLer 23.2001

2

•O- PAGEJM P^HiaiT_JL^rA'^C.==i=^=^

'

03409

h) 1.1.5

Other Projects (Undeveloped: Debtors acting as agent for assets onM: Other

-

1.1.5.1

D

L

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 . Assfets shall exclude: .

Anything to the contrary in Section L

notwithstanding, the

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 1.2.4

Claims, lawsuits and c u

of action of the Debtors.

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

A ^ St O o D sset Pindiasc

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

^ ^

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 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. .

L

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 Oobe 2J. 2001

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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 •

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---. ) 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. • -

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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

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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
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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 , «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:

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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. •

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DEBTORS: STAN LEEMEDTA, INC.

a D c f l w corporatjon, a C d STAN LE r M I . INC, a Colofrado egrpoiaiion .

By:

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Kenneth S. W i e s T c r Chief Executive Officer PURcHER:

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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:

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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

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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.

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The. Drffer * Wholly Owned in Production .

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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 Dri a er Racer ^ AOL =

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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

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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.

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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

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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.

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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; •

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2-minute concert introduction produced and used on her Jast tour. Website Gated Lmited activities SmaU Game

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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.

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Wyolly oWned in Development

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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

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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.

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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.

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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
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 ..

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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.

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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 .

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-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

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CounselJ B Ame E can Express

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Cousc fot Douglas Eminett Realty F u 1997-<'t935-1C D n Sheuoothristian S. Molnar 11990 San Vicentc Blvd. 1240 L Angeles. CA. . 9 - 5 0 0 4

RSN. American Express i851 E o F m

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D V s e l CorHti & K z b ton -0935-121t counsel forHU & Knowltonn935-122. David A. Scbwartz/EliEabeth L Rosenbfatt Neal H K l U e r / A m y Benen tt I r l & Mann Da 4 & G l 1800 Avenue of theStais, #900 L Angeles, C 9 6 0 7

C e l for EMwrah Schlfchting (1935-17. Banr R G r e E q Clackson; Gore & M a i l l a 3424 Ca es C n St.. #350 Toirancc, C 8 ; 503

C o u s for H o r o d Chamber C m e Benntt 1 . Silverman E r q (1935-124) Gibson, Dunn & Gxatoher 333 S. Grand Ave L Angek, CA 90701

Co a D for PFSC/SFCCAHTAL A l l . Halpeiin E q . H 52 W rin & ASsoc

Courisdl for Wild Brain. Inc. How r d J. S t i n b i c R. Wilson [ r ! & Mnlla 1800 Avenu e of the Stars, # 0 0 Los Angeles. CA 90067

Counsel fiyLynne C o h e BaraOvA ofaras& Coate 9606 S a Monica Blvd.. Beverly H l l , CA 902 J 0

c o ArtL u f Licberraan Lid)crntan & No mk 350 F f Av N ue #7412 New YoIfc.^fi'10118

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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

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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 = uponits achieving a television or m o ' e success of such C h l c d e d s supon 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.

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; M o v e .1 IO0.O00 •JOC.WW j_^50jOO-500,000

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25.000

Aoparet

25.000

p r i c a T e upon a conservar ve royHbe ay rste of 5%. T s c900per charcter o v e t ¢ major eCQnomic life; >i^^fh over 40 poteoial properties iix:luding - e Lee-Shutx

10-26-91

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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

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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.

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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

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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 follows:

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See attached seavice list

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(By MaJl) I caused such envelope with postage thereon, flly prepaid to be placed in the United States mail, Executed o November 27,2001, at Los Angeles, Caioma.

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Q y Federal Express/Ovemight Mail} I caused such envelope to be deivered by Federal Express (or Express Mal), next busness day delw"y to the o f f c of the addressee. Executed on 2001, at Los Angeles, Cifornia.

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(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. (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

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(State) I declare under penalty Q peIur. under the'laws of the State of California that the above is tnie and conrect

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( 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 ! urt at whose direction the service w t s made.

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Barabi Clark

26 27 28

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03438

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S p < a l Notice - I re Stan Lee Media i a

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Office O r n e u.s. T r u s e 21051 Warner Center Q r e , Ste 15. Woodland Hills 91367

Jenneth Wifliarn.(1935-i) Stan Lee Media, Inc P.O. Box 116 V a n N C 91408

COTnmitlee Counsel GarKlansner, E s . (1935-106) Stutman. T r e s t & Glatt 369 L W i Blvd. #900 Los Angeles, CA 90010

SEGURITIES & EXCHANGE COM Sandra Lavjgna (193S- ( ) 5670 Wishire Blvd,5 l l 5 L Angeles C 9 0 3 6

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ense} forStae/Salim CoeneJope Pannes F .sq(l935-1J6} RTto„& Tucker 611 Anton Blvd, }41 Floor C t a Mesa. C 92626-1998

L r ofthe Strs #2100 Los Angeles, l A 90067

Attorneys fo v P . LLC YannGeroij, Esq. (1935'32) G o n & AssCsates, PC 317 Madison Ave., #1421 New York. NY 10017

Counsel for EUioU Associates Robert MNovck E (l935-33) Kasowt B e n o eta! 1633 Broadway New Yoric, N 10019

Attorneys for Fidelity Leasing s u Kay B o n (1935-34) H e . Rousso & He!d 15910 Ventura Blvd., l : Floor EncJno CA 91436-2829

Counsel for u s Bank Wedell G KUsef Esq u s B c o r p l g a l Dept PO Box 1 Q Porland OR 9702200

Counsdfr Warer Brothers Wayne M. Stith Esq Wamcr Bros. (1935-35) 40 u a Warner Blvd B«rbenJ:. CA 91522

I o m e b r Aapustine Ftinds. LP Ira D. Kliarasch. Z e . (1935-36) Pachulk SI
Counsel for Frntera Corp. Wayne Ten i b Esq (1935-37) Mitchell Sflberberg & Knupp 11377 West Olympic Blvd. Los AngeleSi y 90064-1683

Nanette D Sanders (1935-38) Snel & W l e 1920 M St., Ste l200 I e CA 92614-7060

Attorneys for nflon. Inc. Steven W. Wdnshe n t Esq (1935-117) C t o r & WeJBSbenk 16830 V e t r Blvd., #35 J E i n o , CA 91436-1796

Ja R es Relton Jo e a phEsq (1935-109) KlettjRooneyrtal One Oxford Centre, 4 t Floor Pitldairgh, PA 15219-6498

Clark & K a eeEE 2999 Overland Ave., (1204 Los Angeles. CA 900614243

Coiitsdl for Fox Latin A m e r c Channel D i d M Posner Esq (1935-1 I i ) Squadron. Evlenol et a!

CounSl for GE Capital ?arshall F Golderg Esq (1935-112) Glass &. G 0 ldberg 21700 &xrordSt..Ste 430 WooJand l d l , CA 91367-3665

Coonsel forfaterfase Capita! L LaTsrence Peitz l an, Esq. (19351-13) P wlzmffli, Classman & Weg LLP 1900 Ave. of Ue Stais, I650 Los Angee CA 9006.7

SpK:ial Corporate Counsel S ( e n Aips Slate Meagher etc (l935-l2) Attn: Ja A ie Edmonson. Esq. 300 S. G r n Ava. #34{O L s ' Angeles, C e 90071-3 144

Counsel for Adroinistaff

RSN-n 935-118) James Jose/Erin M l l i e KetRoonty Lieber & Schorling One Oxford C e t 40U Floor Fittsbur. PA 15219-6498

J c A Krie u , Esq: (1935-31) M e e t berg. Ghjsker, Field, a a

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3130 Wjshire Blvd., #200 Santa M o n k , CA 90403

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