Document:

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                                                                   EXHIBIT 10.4

                      PREFERRED STOCK INVESTMENT AGREEMENT

        PREFERRED STOCK INVESTMENT AGREEMENT ("AGREEMENT") dated as of August 1,
2000 among Stan Lee Media, Inc., a Colorado corporation (the "COMPANY"), Elliott
Associates, L.P. ("ELLIOTT") and Westgate International, L.P. ("WESTGATE";
Elliott and Westgate shall be hereinafter referred to individually and
collectively as the "INVESTOR").

                              W I T N E S S E T H:

        WHEREAS, the Company desires to sell and issue to the Investor, and the
Investor wishes to purchase from the Company (1) an aggregate of 4,000 shares of
the Company's Series B 4% Cumulative Convertible Preferred Stock, liquidation
preference $1,000 per share (all of such shares being the "PREFERRED SHARES"),
having the rights, designations and preferences set forth in the Articles of
Amendment to the Articles of Incorporation of the Company (the "CERTIFICATE") in
the form of Exhibit 1.1A attached hereto, and (2) warrants (the "WARRANTS") to
purchase an aggregate of 75,000 shares ("COMMON SHARES") of common stock, no par
value, of the Company ("COMMON STOCK") pursuant to a warrant agreement in the
form of Exhibit 1.1B attached hereto, each on the terms and conditions set forth
herein; and

        WHEREAS, the Preferred Shares will be convertible into Common Shares
pursuant to the terms of the Certificate, and the Investor will have
registration rights with respect to such Common Shares issued upon conversion of
the Preferred Shares on exercise of the Warrants, pursuant to the terms of that
certain Registration Rights Agreement to be entered into between the Company and
the Investor substantially in the form of Exhibit 5.2(f) hereto ("REGISTRATION
RIGHTS AGREEMENT");

        NOW, THEREFORE, in consideration of the foregoing premises and the
covenants contained herein and other good and valuable consideration, the
receipt and sufficiency of which are hereby acknowledged, the parties hereto
agree as follows:

                                    ARTICLE I

                      PURCHASE AND SALE OF PREFERRED SHARES

        Section 1.1 Issuance of Preferred Shares and Warrants. Upon the
following terms and conditions, the Company shall issue and sell to the
Investor, and the Investor shall purchase from the Company, the number of
Preferred Shares and Warrants indicated next to the Investor's name on Schedule
I attached hereto.

        Section 1.2 Purchase Price. The purchase price for the Preferred Shares
and Warrants to be acquired by the Investor (the "PURCHASE PRICE") shall be the
Purchase Price set forth next to the Investor's name on Schedule I.

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        Section 1.3 The Closing.

           (a) Timing. Subject to the fulfillment or waiver of the conditions
set forth in Article V hereof, the purchase and sale of the Preferred Shares and
Warrants shall take place at a closing (the "CLOSING"), on or about the date
hereof or such other date as the Investor and the Company may agree upon (the
"CLOSING DATE").

           (b) Form of Payment. Each Investor shall pay their respective
Purchase Price for the Preferred Shares and Warrants by wire transfer to the
account or accounts designated by the Company upon delivery by the Company to
the Investors' counsel of the applicable Preferred Shares and Warrants and upon
satisfaction of the other conditions to the Closing. The delivery of payment to
such designated account(s) shall constitute a payment delivered to the Company
in satisfaction of such Investor's obligation to pay the Purchase Price
hereunder. The Company shall pay the cash fees due Trinity Capital Advisors,
Inc. ("Trinity") in connection with the transactions contemplated hereby out of
the gross proceeds of the Purchase Price hereunder, and the Company may direct
the Investor to pay such cash fee on account of the Company to Trinity from the
Purchaser Price hereunder. In addition, each party shall deliver all documents,
instruments and writings required to be delivered by such party pursuant to this
Agreement at or prior to the Closing.

                                   ARTICLE II

                         REPRESENTATIONS AND WARRANTIES

        Section 2.1 Representations and Warranties of the Company. The Company
hereby makes the following representations and warranties to the Investor as of
the date hereof and on the Closing Date:

           (a) Organization and Qualification; Material Adverse Effect. The
Company is a corporation duly incorporated and existing in good standing under
the laws of the State of Colorado and has the requisite corporate power to own
its properties and to carry on its business as now being conducted. The Company
does not have any subsidiaries other than the subsidiaries listed on Schedule
2.1(a) attached hereto ("SUBSIDIARIES"). Except where specifically indicated to
the contrary, all references in this Agreement to subsidiaries shall be deemed
to refer to all direct and indirect subsidiaries of the Company. The Company is
duly qualified as a foreign corporation to do business and is in good standing
in every jurisdiction in which the nature of the business conducted or property
owned by it makes such qualification necessary other than those in which the
failure so to qualify would not have a Material Adverse Effect. "MATERIAL
ADVERSE EFFECT" means any adverse effect on the business, operations,
properties, prospects or financial condition of the Company and its
subsidiaries, if any, and which is (either alone or together with all other
adverse effects) material to the Company and its Subsidiaries, if any, taken as
a whole, and any material adverse effect on the transactions contemplated under
this Agreement, the Certificate, the Warrants and the Registration Rights
Agreement, or any other agreement or document contemplated hereby or thereby.

           (b) Authorization; Enforcement. (i) The Company has all requisite
corporate power and authority to enter into and perform this Agreement, the
Certificate, the Warrants and

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the Registration Rights Agreement ("TRANSACTION DOCUMENTS") and to issue the
Preferred Shares and Warrants in accordance with the terms hereof, (ii) the
execution and delivery of this Agreement, the Warrants and the Registration
Rights Agreement by the Company and the consummation by it of the transactions
contemplated hereby and thereby, including the issuance of the Preferred Shares
and Warrants and the resolutions contained in the Certificate, have been duly
authorized by all necessary corporate action, and no further consent or
authorization of the Company or its Board of Directors (or any committee or
subcommittee thereof) or stockholders is required, (iii) this Agreement, the
Warrants and the Registration Rights Agreement have been duly executed and
delivered by the Company, (iv) this Agreement, the Warrants, the Certificate and
the Registration Rights Agreement constitute valid and binding obligations of
the Company enforceable against the Company in accordance with their terms,
except (A) as such enforceability may be limited by applicable bankruptcy,
insolvency, reorganization, moratorium, liquidation or similar laws relating to,
or affecting generally the enforcement of creditors' rights and remedies or by
other equitable principles of general application, and (B) to the extent the
indemnification provisions contained in this Agreement and the Registration
Rights Agreement may be limited by applicable federal or state securities laws
and (v) the Preferred Shares and Warrants have been duly authorized and, upon
issuance thereof and payment therefor in accordance with the terms of this
Agreement, the Preferred Shares and Warrants will be validly issued, fully paid
and non-assessable, free and clear of any and all liens, claims and
encumbrances.

           (c) Capitalization. As of the date hereof, the authorized capital
stock of the Company consists of (i) 100,000,000 shares of Common Stock, of
which as of the date hereof, 12,031,502 shares are issued and outstanding,
3,764,936 shares are issuable and reserved for issuance pursuant to the
Company's stock option and purchase plans and 2,856,864 shares are issuable and
reserved for issuance pursuant to securities exercisable or exchangeable for, or
convertible into, shares of Common Stock, (ii) _________ shares of Common Stock
are currently issuable and 500,000 shares of Common Stock are reserved for
issuance upon conversion of the Company's Series A Six Percent (6%) Convertible
Notes, and (iii) 10,000,000 shares of preferred stock, of which as of the date
hereof, none of such shares have any designations and none of such shares have
been issued, except for 1,500,000 shares designated as Series A Cumulative
Convertible Preferred Stock, of which 714,286 shares are issued and outstanding,
and 4,000 shares designated as Series B 4% Cumulative Convertible Preferred
Stock, all of which have been reserved for issuance hereunder as Preferred
Shares. All of such outstanding shares have been, and upon issuance authorized
but not outstanding shares will be, validly issued, fully paid and
nonassessable. As of the date hereof, except as disclosed in Schedule 2.1(c),
(i) no shares of the Company's capital stock are subject to preemptive rights or
any other similar rights or any liens or encumbrances suffered or permitted by
the Company, (ii) there are no outstanding debt securities which are not set
forth in the Form 10-Q filed by the Company with the SEC for the period ending
March 31, 2000 (except for such debt securities which do not exceed $5 million
in principal amount in the aggregate), (iii) there are no outstanding options,
warrants, scrip, rights to subscribe to, calls or commitments of any character
whatsoever relating to, or securities or rights convertible into, any shares of
capital stock of the Company or any of its Subsidiaries, or contracts,
commitments, understandings or arrangements by which the Company or any of its
Subsidiaries is or may become bound to issue additional shares of capital stock
of the Company or any of its Subsidiaries or options, warrants, scrip, rights to
subscribe to, calls or commitments of any character whatsoever relating to, or
securities

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or rights convertible into, any shares of capital stock of the Company or any of
its Subsidiaries, (iv) there are no agreements or arrangements under which the
Company or any of its Subsidiaries is obligated to register the sale of any of
their securities under the Securities Act of 1933, as amended ("SECURITIES ACT"
or "1933 ACT") (except the Registration Rights Agreement), (v) there are no
outstanding securities of the Company or any of its Subsidiaries which contain
any redemption or similar provisions, and there are no contracts, commitments,
understandings or arrangements by which the Company or any of its Subsidiaries
is or may become bound to redeem a security of the Company or any of its
Subsidiaries, (vi) there are no securities or instruments containing
anti-dilution or similar provisions that will be triggered by the issuance of
the Preferred Shares or Warrants as described in this Agreement or the issuance
of Common Shares upon conversion or exercise thereof, and (vii) the Company does
not have any stock appreciation rights or "phantom stock" plans or agreements or
any similar plan or agreement. The Company has furnished to the Investor true
and correct copies of the Company's Articles of Incorporation, as amended and as
in effect on the date hereof (the "CERTIFICATE OF INCORPORATION"), and the
Company's By-laws, as amended and as in effect on the date hereof (the
"BY-LAWS"), and the terms of all securities convertible or exchangeable into or
exercisable for Common Stock and the material rights of the holders thereof in
respect thereto.

           (d) Issuance of Shares. Upon issuance in accordance with this
Agreement, the Warrants and the Certificate, the Preferred Shares and Warrants
and the Common Shares issuable upon conversion or exchange thereof will be
validly issued, fully paid and nonassessable and free from all taxes, liens and
charges with respect to the issue thereof.

           (e) No Conflicts. Except as disclosed in Schedule 2.1(e), the
execution, delivery and performance of the Transaction Documents by the Company
and the consummation by the Company of the transactions contemplated hereby and
thereby, and the issuance of the Preferred Shares and Warrants hereunder and the
Common Shares upon conversion or exercise thereof, will not (i) result in a
violation of the Certificate of Incorporation, any certificate of designations,
preferences and rights of any outstanding series of preferred stock of the
Company or the By-laws; (ii) conflict with, or constitute a default (or an event
which with notice or lapse of time or both would become a default) under, or
give to others any rights of termination, amendment, acceleration or
cancellation of, any agreement, indenture or instrument to which the Company or
any of its Subsidiaries is a party, or (iii) result in a violation of any law,
rule, regulation, order, judgment or decree (including United States federal and
state securities laws and regulations and the rules and regulations of the NASD
and the Nasdaq Small-Cap Market ("PRINCIPAL MARKET") and any other principal
securities exchange or trading market on which the Common Stock is traded or
listed) applicable to the Company or any of its Subsidiaries or by which any
property or asset of the Company or any of its Subsidiaries is bound or
affected. Except as disclosed in Schedule 2.1(e), neither the Company nor its
Subsidiaries is in violation of any term of, or in default under, (x) its
certificate of incorporation, any certificate of designations, preferences and
rights of any outstanding series of preferred stock or by-laws or their
organizational charter or by-laws, respectively, (y) any material contract,
agreement, mortgage, indebtedness, indenture, instrument, or (z) any judgment,
decree or order or any statute, rule or regulation applicable to the Company or
its Subsidiaries, the non-compliance with which (in the case of clause (z) only)
would be material to the Company or its subsidiaries or interfere with the
performance of its obligations under the Transaction Documents. Except as
specifically contemplated by this Agreement and as required under the 1933 Act,
the Company is

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not required to obtain any consent, authorization or order of, or make any
filing or registration with, any court, governmental agency or any regulatory or
self-regulatory agency in order for it to execute, deliver or perform any of its
obligations under, or contemplated by, the Transaction Documents, or issue the
Preferred Shares, Warrants or Common Shares, in accordance with the terms hereof
or thereof. Except as disclosed in Schedule 2.1(e), all consents,
authorizations, orders, filings and registrations which the Company is required
to obtain pursuant to the preceding sentence have been obtained or effected on
or prior to the date hereof. The Company complies with and is not in violation
of the listing requirements of the Principal Market as in effect on the date
hereof and on the Closing Date and is not aware of any facts which would
reasonably lead to delisting or suspension of the Common Stock by the Principal
Market in the foreseeable future.

           (f) SEC Documents; Financial Statements. Since December 31, 1998, the
Company has filed all reports, schedules, forms, statements and other documents
required to be filed by it with the SEC pursuant to the reporting requirements
of the Securities Exchange Act of 1934 Act, as amended ("1934 ACT" or "EXCHANGE
ACT") (all of the foregoing filed prior to the date hereof and all exhibits
included therein and financial statements and schedules thereto and documents
incorporated by reference therein being hereinafter referred to as the "SEC
DOCUMENTS"). The Company has delivered to the Investor or its representatives
true and complete copies of any SEC Documents that were filed by the Company
with the SEC but not filed electronically via EDGAR. As of their respective
dates, the SEC Documents complied in all material respects with the requirements
of the 1934 Act and the rules and regulations of the SEC promulgated thereunder
applicable to the SEC Documents, and none of the SEC Documents, at the time they
were filed with the SEC, contained any untrue statement of a material fact or
omitted to state a material fact required to be stated therein or necessary in
order to make the statements therein, in light of the circumstances under which
they were made, not misleading. As of their respective dates, the financial
statements of the Company included in the SEC Documents complied as to form in
all material respects with applicable accounting requirements and the published
rules and regulations of the SEC with respect thereto. Such financial statements
have been prepared in accordance with generally accepted accounting principles,
consistently applied, during the periods involved (except (i) as may be
otherwise indicated in such financial statements or the notes thereto, or (ii)
in the case of unaudited interim statements, to the extent they may exclude
footnotes or may be condensed or summary statements) and fairly present in all
material respects the financial position of the Company as of the dates thereof
and the results of its operations and cash flows for the periods then ended
(subject, in the case of unaudited statements, to normal year-end audit
adjustments). No other written information provided by or on behalf of the
Company to the Investor which is not included in the SEC Documents, including,
without limitation, information referred to in Section 2.2(b) of this Agreement,
contains any untrue statement of a material fact or omits to state any material
fact necessary in order to make the statements therein, in the light of the
circumstance under which they are or were made, not misleading.

           (g) Absence of Certain Changes. Except as disclosed in Schedule
2.1(g) or the SEC Documents filed at least seven (7) days prior to the date
hereof, since December 31, 1999 there has been no adverse change or adverse
development in the business, properties, assets, operations, financial
condition, prospects, liabilities or results of operations of the Company or its
Subsidiaries which has had or, to the knowledge of the Company or its

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Subsidiaries, is reasonably likely to have a Material Adverse Effect. The
Company has not taken any steps, and does not currently expect to take any
steps, to seek protection pursuant to any bankruptcy law nor does the Company or
its Subsidiaries have any knowledge or reason to believe that its creditors
intend to initiate involuntary bankruptcy proceedings. Schedule 2.1(g) lists all
material events, transactions and agreements which have occurred or been entered
into affecting the Company since March 31, 2000.

           (h) Absence of Litigation. There is no action, suit, proceeding,
inquiry or investigation before or by any court, public board, government
agency, self-regulatory organization or body pending or, to the knowledge of the
Company or any of its Subsidiaries, threatened against or affecting the Company,
the Common Stock or any of the Company's Subsidiaries or any of the Company's or
the Company's Subsidiaries' officers or directors in their capacities as such,
(i) except as set forth in Schedule 2.1(h) and (ii) except which individually
and in the aggregate, respectively, would be reasonably likely to result in
liability to the Company in excess of $50,000.

           (i) Acknowledgment Regarding Investor's Purchase of Shares. The
Company acknowledges and agrees that the Investor is acting solely in the
capacity of arm's length purchaser with respect to the Transaction Documents and
the transactions contemplated hereby and thereby. The Company further
acknowledges that the Investor is not acting as a financial advisor or fiduciary
of the Company (or in any similar capacity) with respect to the Transaction
Documents and the transactions contemplated hereby and thereby, and any advice
given by the Investor or any of its respective representatives or agents in
connection with the Transaction Documents and the transactions contemplated
hereby and thereby is merely incidental to the Investor's purchase of the
Preferred Shares. The Company further represents to the Investor that the
Company's decision to enter into the Transaction Documents has been based solely
on the independent evaluation by the Company and its representatives.

           (j) No Undisclosed Events, Liabilities, Developments or
Circumstances. No event, liability, development or circumstance has occurred or
exists with respect to the Company or its Subsidiaries or their respective
business, properties, prospects, operations or financial condition, that would
be required to be disclosed by the Company on or prior to the date hereof under
applicable securities laws on a registration statement filed with the SEC
relating to an issuance and sale by the Company of its Common Stock and which
has not been publicly disclosed.

           (k) No Inside Information. Neither the Company nor any of its
Subsidiaries or any of their officers, directors, employees or agents have
provided the Investor with any material, nonpublic information which was not
publicly disclosed prior to the date hereof, and the Company shall not provide
any Investor with any non-public information.

           (l) No Integrated Offering. Neither the Company, nor any of its
affiliates, nor any person acting on its or their behalf has, directly or
indirectly, made any offers or sales of any security or solicited any offers to
buy any security, under circumstances that would cause this offering of
Preferred Shares and Warrants to the Investor to be integrated with prior
offerings by the Company for purposes of the 1933 Act or any applicable
shareholder approval provisions, including, without limitation, under the rules
and regulations of the Principal Market or other

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Approved Market (defined below) or the NASD, nor will the Company or any of its
Subsidiaries take any action or steps that would cause the offering of the
Preferred Shares and Warrants to be integrated with other offerings.

           (m) Employee Relations. Neither the Company nor any of its
Subsidiaries is involved in any labor dispute nor, to the knowledge of the
Company or any of its Subsidiaries, is any such dispute threatened, the effect
of which would be reasonably likely to result in a Material Adverse Effect.
Neither the Company nor any of its Subsidiaries is a party to a collective
bargaining agreement. The Company and its Subsidiaries believe that relations
between the Company and its Subsidiaries and their respective employees are
good. No executive officer (as defined in Rule 501(f) of the 1933 Act) whose
departure would be adverse to the Company has notified the Company that such
officer intends to leave the Company or otherwise terminate such officer's
employment with the Company.

           (n) Intellectual Property Rights. The Company and its Subsidiaries
own or possess adequate rights or licenses to use all trademarks, trade names,
service marks, service mark registrations, service names, patents, patent
rights, copyrights, inventions, licenses, approvals, governmental
authorizations, trade secrets and rights necessary to conduct their respective
businesses as now conducted. Except as set forth on Schedule 2.1(n), none of the
Company's trademarks, trade names, service marks, service mark registrations,
service names, patents, patent rights, copyrights, inventions, licenses,
approvals, government authorizations, trade secrets or other intellectual
property rights have expired or terminated, or are expected to expire or
terminate within two (2) years from the date of this Agreement. The Company and
its Subsidiaries do not have any knowledge of any infringement by the Company or
its Subsidiaries of trademark, trade name rights, patents, patent rights,
copyrights, inventions, licenses, service names, service marks, service mark
registrations, trade secret or other similar rights of others, or of any such
development of similar or identical trade secrets or technical information by
others and, except as set forth on Schedule 2.1(n), there is no claim, action or
proceeding being made or brought against, or to the Company's knowledge, being
threatened against, the Company or its Subsidiaries regarding trademarks, trade
name rights, patents, patent rights, inventions, copyrights, licenses, service
names, service marks, service mark registrations, trade secrets or other
infringement. The Company and its Subsidiaries have taken reasonable security
measures to protect the value of all of their intellectual properties.

           (o) Environmental Laws. The Company and its Subsidiaries (i) are in
compliance with any and all applicable foreign, federal, state and local laws
and regulations relating to the protection of human health and safety, the
environment or hazardous or toxic substances or wastes, pollutants or
contaminants ("ENVIRONMENTAL LAWS"), (ii) have received all permits, licenses or
other approvals required of them under applicable Environmental Laws to conduct
their respective businesses, and (iii) are in compliance with all terms and
conditions of any such permit, license or approval where such noncompliance or
failure to receive permits, licenses or approvals referred to in clauses (i),
(ii) or (iii) above could have, individually or in the aggregate, a Material
Adverse Effect.

           (p) Title. The Company and its Subsidiaries have good and marketable
title in fee simple to all real property and good and marketable title to all
personal property owned by them which is material to the business of the Company
and its Subsidiaries, in each case free and

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clear of all liens, encumbrances and defects except such as are described in
Schedule 2.1(p) or such as do not materially and adversely affect the value of
such property and do not interfere with the use made and proposed to be made of
such property by the Company or any of its Subsidiaries. Any real property and
facilities held under lease by the Company or any of its Subsidiaries are held
by them under valid, subsisting and enforceable leases with such exceptions as
are not material and do not interfere with the use made and proposed to be made
of such property and buildings by the Company and its Subsidiaries.

           (q) Insurance. The Company and each of its Subsidiaries are insured
by insurers of recognized financial responsibility against such losses and risks
and in such amounts as reasonably prudent and customary in the businesses in
which the Company and its Subsidiaries are engaged. Neither the Company nor any
such Subsidiary has been refused any insurance coverage sought or applied for
and neither the Company nor any such Subsidiary has any reason to believe that
it will not be able to renew its existing insurance coverage as and when such
coverage expires or to obtain similar coverage from similar insurers as may be
necessary to continue its business at a cost that would not materially and
adversely affect the condition, financial or otherwise, or the earnings,
business or operations of the Company and its Subsidiaries taken as a whole.

           (r) Regulatory Permits. The Company and its Subsidiaries possess all
material certificates, authorizations and permits issued by the appropriate
federal, state or foreign regulatory authorities, necessary to conduct their
respective businesses, and neither the Company nor any such Subsidiary has
received any notice of proceedings relating to the revocation or modification of
any such certificate, authorization or permit.

           (s) Internal Accounting Controls. The Company and each of its
Subsidiaries maintain a system of internal accounting controls sufficient to
provide reasonable assurance that (i) transactions are executed in accordance
with management's general or specific authorizations, (ii) transactions are
recorded as necessary to permit preparation of financial statements in
conformity with generally accepted accounting principles and to maintain asset
accountability, (iii) access to assets is permitted only in accordance with
management's general or specific authorization and (iv) the recorded
accountability for assets is compared with the existing assets at reasonable
intervals and appropriate action is taken with respect to any differences.

           (t) Foreign Corrupt Practices Act. Neither the Company, nor any
director, officer, agent, employee or other person acting on behalf of the
Company or any Subsidiary has, in the course of acting for, or on behalf of, the
Company, directly or indirectly (i) used any corporate funds for any unlawful
contribution, gift, entertainment or other unlawful expenses relating to
political activity; (ii) made any direct or indirect unlawful payment to any
foreign or domestic government official or employee from corporate funds; (iii)
violated or is in violation of any provision of the U.S. Foreign Corrupt
Practices Act of 1977, as amended, or any similar treaties of the United States;
or (iv) made any bribe, rebate, payoff, influence payment, kickback or other
unlawful payment to any foreign or domestic government or party official or
employee.

           (u) Tax Status. The Company and each of its Subsidiaries has made or
filed all United States federal and state income and all material other tax
returns, reports and declarations required by any jurisdiction to which it is
subject and has paid all material taxes and

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other governmental assessments and charges shown or determined to be due on such
returns, reports and declarations, except those being contested in good faith,
and has set aside on its books provisions reasonably adequate for the payment of
all taxes for periods subsequent to the periods to which such returns, reports
or declarations apply. To the Company's knowledge, there are no unpaid taxes
claimed to be due by the taxing authority of any jurisdiction, and the Company
is not aware of any basis for any such claim.

           (v) Certain Transactions. Except as set forth on Schedule 2.1(v) and
in the SEC Documents filed on EDGAR at least seven (7) days prior to the date
hereof and except for arm's length transactions pursuant to which the Company
makes payments in the ordinary course of business upon terms no less favorable
than the Company could obtain from third parties and other than the grant of
stock options disclosed on Schedule 2.1(c), none of the officers, directors or
employees of the Company is presently a party to any transaction with the
Company or any of its Subsidiaries (other than for services as employees,
officers and directors), including any contract, agreement or other arrangement
providing for the furnishing of services to or by, providing for rental of real
or personal property to or from, or otherwise requiring payments to or from any
officer, director or such employee or, to the knowledge of the Company, any
corporation, partnership, trust or other entity in which any officer, director
or any such employee has a substantial interest or is an officer, director,
trustee or partner.

           (w) Dilutive Effect. The Company understands and acknowledges that
the number of Common Shares issuable upon conversion of Preferred Shares and
exercise of the Warrants purchased pursuant to this Agreement will increase in
certain circumstances. The Company further acknowledges that, subject to such
limitations as are expressly set forth in the Transaction Documents, its
obligation (x) to issue Common Shares upon exercise of the Warrants, and (y) to
issue Common Shares upon conversion of Preferred Shares, purchased pursuant to
this Agreement, is absolute and unconditional regardless of the dilutive effect
that such issuance may have on the ownership interests of other shareholders of
the Company.

           (x) Application of Takeover Protections. The Company and its board of
directors have taken all necessary action, if any, in order to render
inapplicable any anti-takeover provisions contained in the Company's Certificate
of Incorporation or pursuant to Colorado law or otherwise which are or could
become applicable to the Investor as a result of the transactions contemplated
by this Agreement, including, without limitation, the Company's issuance of the
Common Shares and the Investor's ownership of the Common Shares upon conversion
or exercise of the Preferred Shares or Warrants.

           (y) Rights Plan. Neither the Company nor any of its Subsidiaries has
adopted a shareholder rights plan or similar arrangement relating to
accumulations of beneficial ownership of Common Stock or a change in control of
the Company. The Company confirms that no provision of such plan will, under any
present or future circumstances, delay, prevent or interfere with the
performance of any of the Company's obligations under the Transaction Documents
and such plan will not be "triggered" by such performance.

           (z) Market Capitalization. As of the date hereof, the aggregate
market value of the voting common equity of the Company held by non-affiliates
of the Company is greater

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than $40 million, and on the date of the filing of the Registration Statement,
such aggregate market value shall be greater than $40 million as of a date
within 60 days prior to such filing.

           (aa) Obligations Absolute. Each of the Company and the Investor
agrees that, subject only to the conditions, qualifications and exceptions (if
any) specifically set forth in the Transaction Documents, its obligations under
the Transaction Documents are unconditional and absolute. Except to the extent
(if any) specifically set forth in the Transaction Documents, each party's
obligations thereunder are not subject to any right of set off, counterclaim,
delay or reduction.

           (bb) Issuance of Common Shares. The Common Shares are duly authorized
and reserved for issuance and, upon conversion of Preferred Shares or exercise
of the Warrants, such Common Shares will be validly issued, fully paid and
non-assessable, free and clear of any and all liens, claims and encumbrances,
and entitled to be traded on the Principal Market or the New York Stock Exchange
or the American Stock Exchange, or the Nasdaq National Market (collectively with
the Principal Market, the "APPROVED MARKETS"), and the holders of such Common
Shares shall be entitled to all rights and preferences accorded to a holder of
Common Stock. As of the date of this Agreement, the outstanding shares of Common
Stock are currently listed on the Principal Market.

           (cc) Form S-3. The Company is eligible to file the Registration
Statement (as defined in the Registration Rights Agreement) for secondary
offerings on Form S-3 (as in effect on the date of this Agreement) under the
1933 Act and rules promulgated thereunder, and Form S-3 (as in effect on the
date of this Agreement) is permitted to be used for the transactions
contemplated hereby under the 1933 Act and rules promulgated thereunder.

           (dd) Brokers. The Company has taken no action which would give rise
to any claim by any person for brokerage commissions, finder's fees or similar
payments by the Company or any Investor relating to this Agreement or the
transactions contemplated hereby, except for those to certain entities or
individuals which are set forth on Schedule 2.1(dd) hereof, all of which fees
will be paid by the Company.

        Section 2.2 Representations and Warranties of the Investor. Each
Investor, severally (as to itself only) and not jointly, hereby makes the
following representations and warranties to the Company as of the date hereof
and on the Closing Date:

           (a) Accredited Investor Status; Sophisticated Investor. The Investor
is an "accredited investor" as that term is defined in Rule 501(a) of Regulation
D under the 1933 Act. The Investor has such knowledge and experience in
financial and business matters that it is capable of evaluating the merits and
risks of investment in the Preferred Shares and Warrants and the Common Shares
issuable thereunder.

           (b) Information. The Investor and its advisors, if any, have been
furnished with all materials relating to the business, finances and operations
of the Company which have been requested and materials relating to the offer and
sale of the Preferred Shares and the Warrants and the Common Shares issuable
thereunder which have been requested by the Investor. Neither such inquiries nor
any other due diligence investigations conducted by the

                                       10
<PAGE>   11

Investor or its advisors, if any, or its representatives shall modify, amend or
affect the Investor's right to rely on the Company's representations and
warranties contained in Section 2.1 above. The Investor understands that its
investment in the Preferred Shares and Warrants and the Common Shares issuable
thereunder involves a high degree of risk. The Investor has sought such
accounting, legal and tax advice as it has considered necessary to make an
informed investment decision with respect to its acquisition of the Preferred
Shares and Warrants and the Common Shares issuable thereunder.

           (c) No Governmental Review. The Investor understands that no United
States federal or state agency or any other government or governmental agency
has passed on or made any recommendation or endorsement of the Preferred Shares,
Warrants and Common Shares or the fairness or suitability of the investment in
the Preferred Shares, Warrants and Common Shares nor have such authorities
passed upon or endorsed the merits of the offering of the Preferred Shares,
Warrants and Common Shares.

           (d) Legends. The Company shall issue the Warrants and the
certificates for the Preferred Shares and Common Shares to the Investor without
any legend except as described in Article VI below. The Investor covenants that,
in connection with any transfer of Common Shares by the Investor pursuant to the
registration statement contemplated by the Registration Rights Agreement, it
will comply with the applicable prospectus delivery requirements of the 1933
Act, provided that copies of a current prospectus relating to such effective
registration statement are or have been supplied to the Investor.

           (e) Authorization; Enforcement. This Agreement and the Registration
Rights Agreement have been duly and validly authorized, executed and delivered
on behalf of the Investor and are valid and binding agreements of the Investor
enforceable against the Investor in accordance with their terms, except (A) as
such enforceability may be limited by applicable bankruptcy, insolvency,
reorganization, moratorium, liquidation or similar laws relating to, or
affecting generally the enforcement of creditors' rights and remedies or by
other equitable principles of general application, and (B) to the extent the
indemnification provisions contained in this Agreement and the Registration
Rights Agreement may be limited by applicable federal or state securities laws.
The Investor has the requisite corporate power and authority to enter into and
perform its obligations under this Agreement and the Registration Rights
Agreement.

           (f) Residency. The Investor is organized in the jurisdiction
indicated on Schedule 1.

           (g) No Conflicts. The execution, delivery and performance of this
Agreement and the Registration Rights Agreement by the Investor and the
consummation by the Investor of the transactions contemplated hereby and thereby
will not result in a violation of the limited partnership agreement, certificate
of incorporation, by-laws or other documents of organization of the Investor.

           (h) Investment Representation. The Investor is purchasing the
Preferred Shares and Warrants for its own account and not with a view to
distribution in violation of any securities laws. The Investor has been advised
and understands that neither the Preferred Shares, Warrants nor shares of Common
Stock issuable upon conversion or exercise thereof have been

                                       11
<PAGE>   12

registered under the 1933 Act or under the "blue sky" laws of any jurisdiction
and may be resold only if registered pursuant to the provisions of the 1933 Act
or if an exemption from registration is available, except under circumstances
where neither such registration nor such an exemption is required by law. The
Investor has been advised and understands that the Company in issuing the
Preferred Shares and Warrants is relying upon, among other things, the
representations and warranties of the Investor contained in this Section 2.2 in
concluding that such issuance is a "private offering" and is exempt from the
registration provisions of the 1933 Act.

           (i) Rule 144. The Investor understands that there is no public
trading market for the Preferred Shares and Warrants, that none is expected to
develop, and that the Preferred Shares and Warrants must be held indefinitely
unless and until such Preferred Shares, Warrants or Common Shares received upon
conversion or exercise thereof are registered under the 1933 Act or an exemption
from registration is available. The Investor has been advised or is aware of the
provisions of Rule 144 promulgated under the 1933 Act.

           (j) Brokers. The Investor has taken no action which would give rise
to any claim by any person for brokerage commissions, finder's fees or similar
payments by the Company or the Investor relating to this Agreement or the
transactions contemplated hereby, except with Trinity, whose fees will be paid
by the Company.

           (k) Reliance by the Company. The Investor understands that the
Preferred Shares and Warrants are being offered and sold in reliance on a
transactional exemption from the registration requirements of Federal and state
securities laws and that the Company is relying upon the truth and accuracy of
the representations, warranties, agreements, acknowledgments and understandings
of the Investor set forth herein in order to determine the applicability of such
exemptions and the suitability of the Investor to acquire the Preferred Shares
and Warrants.

                                   ARTICLE III

                                    COVENANTS

        Section 3.1 Registration and Listing; Effective Registration. Until such
time as no Preferred Shares or Warrants are outstanding, the Company will cause
the Common Stock to continue at all times to be registered under Sections 12(b)
or (g) of the Exchange Act, will comply in all material respects with its
reporting and filing obligations under Exchange Act, and will not take any
action or file any document (whether or not permitted by the Exchange Act or the
rules thereunder) to terminate or suspend such reporting and filing obligations.
Until such time as no Preferred Shares or Warrants are outstanding, the Company
shall continue the listing or trading of the Common Stock on the Principal
Market or one of the other Approved Markets and comply in all material respects
with the Company's reporting, filing and other obligations under the bylaws or
rules of the Approved Market on which the Common Stock is listed. The Company
shall cause the Common Shares to be listed on the Principal Market or one of the
other Approved Markets no later than the effectiveness of the registration of
the Common Shares under the Act, and shall continue such listing(s) on one of
the Approved Markets, for so long as any Preferred Shares or Warrants are
outstanding. For purposes of this paragraph (and elsewhere in this Agreement
where applicable), the term "Company" shall include any successor to the

                                       12
<PAGE>   13

Company and the term "Common Stock" shall include any common stock of such
successor into which the Preferred Shares or Warrants may be convertible or
exercisable. As used herein and in the Registration Rights Agreement and the
Certificate, the term "Effective Registration" shall mean that all registration
obligations of the Company pursuant to the Registration Rights Agreement and
this Agreement have been satisfied in all material respects, such registration
is not subject to any suspension or stop order (other than suspensions or stop
orders limited to a Suspension Grace Period (as defined in the Registration
Rights Agreement)), the prospectus for the Common Shares issuable upon
conversion of the Preferred Shares and exercise of the Warrants is current and
deliverable and such Common Shares are listed for trading on one of the Approved
Markets and such trading has not been suspended for any reason, and none of the
Company or any direct or indirect subsidiary of the Company is subject to any
bankruptcy, insolvency or similar proceeding.

        Section 3.2 Certificates on Conversion/Exercise. Upon any conversion by
the Investor (or then holder of Preferred Shares) of the Preferred Shares
pursuant to the Certificate or any exercise by the Investor (or then holder) of
Warrants, the Company shall issue and deliver to the Investor (or such holder)
within three (3) trading days of the conversion or exercise date a new
certificate or certificates for the number of Preferred Shares or Warrants which
the Investor (or holder) has not yet elected to convert or exercise but which
are evidenced in part by the certificate(s) or Warrants submitted to the Company
in connection with such conversion or exercise (with the denominations of such
new certificate(s) or Warrants designated by the Investor or holder).

        Section 3.3 Replacement Certificates. The certificate(s) representing
the Preferred Shares and the Warrants held by any Investor (or then holder) may
be exchanged by the Investor (or such holder) at any time and from time to time
for certificates or Warrants with different denominations representing an equal
aggregate number of Preferred Shares or Warrants, respectively, as requested by
the Investor (or such holder) upon surrendering the same. No service charge will
be made for such registration or transfer or exchange.

        Section 3.4 Securities Compliance. The Company shall notify the SEC and
the Principal Market, in accordance with their requirements, of the transactions
contemplated by this Agreement, the Certificate, the Warrants and the
Registration Rights Agreement, and shall take all other necessary action and
proceedings as may be required and permitted by applicable law, rule and
regulation, for the legal and valid issuance of the Preferred Shares and
Warrants hereunder and the Common Shares issuable upon conversion or exercise
thereof.

        Section 3.5 Notices. The Company agrees to provide all holders of
Preferred Shares and Warrants with copies of all notices and information,
including without limitation notices and proxy statements in connection with any
meetings, that are provided to the holders of shares of Common Stock,
contemporaneously with the delivery of such notices or information to such
Common Stock holders.

        Section 3.6 Use of Proceeds. The Company agrees that the net proceeds
received by the Company from the sale of the Preferred Shares and Warrants
hereunder shall be used only for working capital and other legally permitted
general corporate purposes (including without limitation bona-fide strategic
acquisitions of or mergers with unrelated third parties).

                                       13
<PAGE>   14

        Section 3.7 Reservation of Preferred Shares; Stock Issuable upon
Conversion or Exercise.

           (a) The Company shall reserve all authorized but unissued Series B 4%
Cumulative Convertible Preferred Stock for issuance to the Investor pursuant to
the terms of this Agreement and the Certificate.

           (b) The Company shall at all times reserve and keep available out of
its authorized but unissued shares of Common Stock, solely for the purpose of
effecting the conversion of the Preferred Shares and exercise of the Warrants,
such number of its shares of Common Stock as shall from time to time be
sufficient to effect the conversion of all Preferred Shares and the exercise of
all the Warrants, and if at any time the number of authorized but unissued
shares of Common Stock shall not be sufficient to effect the conversion of all
the then outstanding Preferred Shares and the exercise of the Warrants, the
Company shall use its best efforts to take such corporate action as necessary to
increase its authorized but unissued shares of Common Stock to such number of
shares as shall be sufficient for such purpose, including without limitation
engaging in best efforts to obtain the requisite shareholder approval. Without
in any way limiting the foregoing, the Company agrees to reserve and at all
times keep available solely for purposes of conversion of Preferred Shares and
exercise of Warrants, such number of authorized but unissued shares of Common
Stock that is at least equal to 200% of the number of Common Shares issuable
upon conversion of all Preferred Shares and exercise of all Warrants. If at any
time the number of authorized but unissued shares of Common Stock is not
sufficient to effect such conversion and exercise, up to the Maximum Common
Stock Issuance (as defined in Section 3.15 below), of all the then outstanding
Preferred Shares and Warrants, the Investor shall be entitled to, inter alia,
the redemption rights provided in the Registration Rights Agreement.

        Section 3.8 Best Efforts. The parties shall use their best efforts to
satisfy timely each of the conditions described in Article V of this Agreement.

        Section 3.9 Form D; Blue Sky Laws. The Company agrees to file a Form D
with respect to the Preferred Shares, Warrants and Common Shares, as required
under Regulation D and to provide a copy thereof to the Investor promptly after
such filing. The Company shall, on or before the Closing Date, take such action
as the Company shall have reasonably determined is necessary to qualify the
Preferred Shares, Warrants and Common Shares for sale to the Investor under
applicable securities or "blue sky" laws of the states of the United States (or
to obtain an exemption from such qualification), and shall provide evidence of
any such action so taken to the Investor on or prior to the Closing Date;
provided, however, that the Company shall not be required in connection
therewith to register or qualify as a foreign corporation in any jurisdiction
where it is not now so qualified or to take any action that would subject it to
service of process in suits or taxation, in each case, in any jurisdiction where
it is not now so subject.

        Section 3.10 Press Release. Immediately upon Closing, the Company shall
issue a press release, in accordance with Principal Market rules (or the rules
of such other Approved Market on which the Common Stock is traded) and the
Securities Act, with respect to the transactions contemplated hereby, in the
form of a press release attached as Exhibit 3.10 hereto. No press release shall
name the investors except as shall be required by law or permitted by Investors.
If the Company fails to issue a press release upon Closing, the Investors may
issue a

                                       14
<PAGE>   15

press release covering the Closing and complying with any legal requirement
applicable to the Investors.

        Section 3.11 Shareholder Rights Plan. None of the acquisitions of
Preferred Shares, Warrants or Common Shares nor the deemed beneficial ownership
of shares of Common Stock prior to, or the acquisition of such shares pursuant
to, the conversion of Preferred Shares or exercise of Warrants will in any event
under any circumstances trigger the poison pill provisions of any stockholders'
rights or similar agreements, or a substantially similar occurrence under any
successor or similar plan.

        Section 3.12 Future Issuances of Securities.

           (a) Right of First Refusal. The Company agrees that for a period of
one year immediately following the Closing Date and subject to the Company's
compliance with any similar rights previously granted to the purchasers of the
Company's Series A Six Percent (6%) Convertible Notes pursuant to that certain
Securities Purchase Agreement dated April 14, 2000 between the Company and
Augustine Fund, L.P. (the "AUGUSTINE AGREEMENT"), the Investors shall have a
right of first refusal with respect to any MFN Transaction (as defined below),
any Variable Rate Transaction (as defined below), and any sale or issuance of
any Common Stock or any rights, options or warrants to purchase any shares of
its Common Stock or any of the Company's preferred stock or any other securities
convertible, exercisable or exchangeable into shares of Common Stock at an
effective per share selling price per share of Common Stock ("Per Share Selling
Price") lower than the closing sale price on the date of issuance thereof (other
than shares or options issued pursuant to (i) the Company's duly adopted
employee or director stock option plans, (ii) the exercise of options, warrants
or rights outstanding on the date of this Agreement and listed in the Company's
most recent periodic report filed under the 1934 Act or Schedule 2.1(c) hereto,
(iii) arrangements with all the holders of Preferred Shares or (iv) a bona fide
strategic investment in the Company by an individual or entity ("STRATEGIC
INVESTOR") who is engaged in a business related or complementary to that of the
Company and which is not a public or private investment company or other
financial institution or an investment advisor or manager) (collectively,
"Financing Transactions"). The Company shall give advance written notice to the
Investors prior to any proposed Financing Transaction. The Investors shall have
ten (10) business days from receipt of such notice to deliver a written notice
to the Company that one or more of such Investors elects to exercise its right
of first refusal with respect to the entire issuance or a part thereof. If,
subsequent to the Company giving notice to the Investors hereunder, the terms
and conditions of the proposed Financing Transaction are changed in any material
way (for purposes hereof, any change in the effective purchase price of such
Financing Transaction shall be deemed a material change), the Company shall be
required to provide a new notice to the Investors hereunder and the Investors
shall have the right of refusal again to purchase all or a portion of the
securities in the offering on such changed terms and conditions as provided
hereunder. In such event, if such other Financing Transaction provides for
non-cash consideration, in whole or in part, from such other potential
investor(s), the Investors shall still have the right to participate in the
Financing Transaction as provided herein, provided that cash or cash equivalents
may be substituted by the Investors for such non-cash consideration. This right
of first refusal shall continue even if the Investors elect not to participate
in one or more Financing Transactions.

                                       15
<PAGE>   16

           (b) Definitions. The term "MFN Transaction" shall mean a transaction
in which the Company issues or sells any securities in a capital raising
transaction or series of related transactions (the "MFN Offering") which grants
to an investor (the "MFN Investor") the right to receive additional shares
(including without limitation as a result of a lower conversion, exchange or
exercise price but excluding customary antidilution protections) based upon
subsequent transactions of the Company on terms more favorable than those
granted to such MFN Investor in such MFN Offering. The term "Variable Rate
Transaction" shall mean a transaction in which the Company issues or sells (a)
any debt or equity securities that are convertible into, exchangeable or
exercisable for, or include the right to receive additional shares of, Common
Stock either (x) at a conversion, exercise or exchange rate or other price that
is based upon and/or varies with the trading prices of or quotations for the
Common Stock at any time after the initial issuance of such debt or equity
securities, or (y) with a fixed conversion, exercise or exchange price that is
subject to being reset at some future date after the initial issuance of such
debt or equity security or upon the occurrence of specified or contingent events
directly or indirectly related to the business of the Company or the market for
the Common Stock (but excluding standard stock split anti-dilution provisions),
or (b) any securities of the Company pursuant to an "equity line" structure
which provides for the sale, from time to time, of securities of the Company
which are registered for resale pursuant to the 1933 Act. For purposes hereof,
the term "Per Share Selling Price" shall include the amount actually paid by
third parties for each share of Common Stock; in the event a fee is paid by the
Company in connection with the transaction, any such fee shall be deducted from
the selling price pro rata to all shares sold in the transaction to arrive at
the Per Share Selling Price. A sale of shares of Common Stock shall include the
sale or issuance of rights, options, warrants or convertible securities
("derivative securities") under which the Company is or may become obligated to
issue shares of Common Stock (but shall exclude any derivative securities issued
by the Company in exchange for services rendered to the Company or purchases by
the Company of intellectual property rights), and in such circumstances the sale
of Common Stock shall be deemed to have occurred at the time of the issuance of
the derivative securities, with such derivative securities being deemed
converted or exercised in full without regard to any limitations or restrictions
contained therein.

        Section 3.13 Financial Information. The Company agrees to send the
following to the Investor for so long as any Preferred Shares or Warrants are
outstanding: (i) on the same day as the release thereof, facsimile or e-mail
copies of all press releases issued by the Company or any of its Subsidiaries;
and (ii) copies of any notices and other information made available or given to
the shareholders of the Company generally, contemporaneously with the making
available or giving thereof to the shareholders.

        Section 3.14 Transactions with Affiliates. The Company agrees that any
transaction or arrangement between it or any of its Subsidiaries and any
affiliate or employee of the Company shall be effected on an arms' length basis
in accordance with customary commercial practice and, except with respect to
grants of options and stock to service providers, including employees, shall be
approved by a majority of the Company's outside directors.

        Section 3.15 Overall Limit on Common Stock Issuable. Notwithstanding
anything contained herein or in the Certificate or Warrants to the contrary, the
number of Common Shares issuable by the Company and acquirable by the Investor
hereunder and pursuant to conversion of the Preferred Shares and exercise of the
Warrants shall not exceed 19.9% of the shares of

                                       16
<PAGE>   17

Common Stock outstanding as of the date hereof, subject to appropriate
adjustment for stock splits, stock dividends, combinations or other similar
recapitalization affecting the Common Stock (the "MAXIMUM COMMON STOCK
ISSUANCE"), unless the issuance of shares hereunder in excess of the Maximum
Common Stock Issuance shall first be approved by the Company's shareholders in
accordance with applicable law and the By-laws and Certificate of Incorporation
of the Company. Without limiting the generality of the foregoing, such
shareholders' approval must duly authorize the issuance by the Company of an
indeterminate number shares of Common Stock in excess of such Maximum Common
Stock Issuance. The parties understand and agree that the Company's failure to
seek or obtain such shareholder approval shall in no way adversely affect the
validity and due authorization of the issuance and sale of Preferred Shares or
Warrants hereunder, and that such approval pertains only to the applicability of
the Maximum Common Stock Issuance limitation provided in this Section. The
Company agrees that if at any point in time (the "Trigger Date") the number of
Common Shares issued pursuant to conversion of the Preferred Shares and exercise
of the Warrants, together with the number of Common Shares that would then be
issuable by the Company in the event of conversion of all the Preferred Shares
and exercise of all the Warrants then outstanding, would exceed the Maximum
Common Stock Issuance but for this Section 3.15, then the Company shall promptly
call a shareholders meeting to obtain shareholder approval for the issuance of
Common Shares hereunder in excess of the Maximum Common Stock Issuance. If such
shareholder approval is not obtained within 60 days of the Trigger Date, then
each holder of Preferred Shares and Warrants shall have the right to sell to the
Company such number of Preferred Shares and/or Warrants which cannot be
converted or exercised due to such Maximum Common Stock Issuance limitation at a
redemption price equal to (I) for the Preferred Shares, the greater of (x) 125%
of the Liquidation Preference (as defined in the Certificate) of all such
Preferred Shares being sold to the Company, or (y) the Liquidation Preference
for the Preferred Shares being sold to the Company divided by the then
applicable Conversion Price (as defined in the Certificate) multiplied by the
greater of the last closing price of the Common Stock on (i) the redemption date
or (ii) the Trigger Date, in each case payable in cash, and (II) for the
Warrants, the difference between the greater of clauses (i) or (ii) above and
the exercise price of the Warrants, multiplied by the number of Warrants being
sold to the Company, payable in cash.

        Section 3.16 Fulfillment of Obligations. The Company's obligation to
issue Common Shares upon conversion of Preferred Shares and exercise of the
Warrants shall be absolute and unconditional, is independent of any covenant of
any holder of Preferred Shares or Warrants, and shall not be subject to: (i) any
offset or defense; or (ii) any claims against the holders of Preferred Shares or
Warrants whether pursuant to this Agreement, the Certificate, the Registration
Rights Agreement, the Warrants or otherwise.

        Section 3.17 Expenses. Regardless of whether the Closing occurs, the
Company shall promptly reimburse the Investor for any and all actual
out-of-pocket fees, costs, disbursements and expenses of the Investor (including
without limitation reasonable travel and reasonable legal fees and
disbursements) in connection with the preparation and negotiation of the
Transactions Documents and the transactions contemplated hereby and thereby. On
the Closing Date, the Company shall either pay the amount estimated to be due
for such fees and expenses (which may with the consent of the Company include
fees and expenses estimated to be incurred for completion of the transaction
including post-closing matters) or direct the Investor to offset such amount
from the Purchase Price paid hereunder. In the event such amount is ultimately
less than

                                       17
<PAGE>   18

the actual fees and expenses, the Company shall promptly pay such deficiency
upon demand therefor. In the event such amount is ultimately greater than the
actual fees and expenses, such excess shall be returned promptly to the Company.

        Section 3.18 Augustine Agreement. The Company represents and warrants
that it has delivered to the Investor true, correct and complete copies of the
Augustine Agreement and all agreements and documents entered into in connection
therewith or related thereto, as amended up until and including the date hereof
(the "AUGUSTINE TRANSACTION DOCUMENTS"), and the Company agrees that it shall
not in any way amend, modify, extend or terminate any of the Augustine
Transaction Documents or any provision thereof, including without limitation
Sections 4(j) or 4(l) of the Augustine Agreement, nor enter into any new
agreement or arrangement with the Augustine Fund, L.P. which would have the
direct or indirect effect of altering any of the terms or provisions of the
Augustine Transaction Documents (including without limitation Sections 4(j) and
4(l) of the Augustine Agreement), without the prior written consent of the
Investor which may be withheld in its sole discretion.

                                   ARTICLE IV

                           TRANSFER AGENT INSTRUCTIONS

        The Company shall issue irrevocable instructions to its transfer agent,
and any subsequent transfer agent, to issue certificates, registered in the name
of the Investor or its respective nominee(s), for the Common Shares in such
amounts as specified from time to time by the Investor to the Company upon
delivery of a conversion notice pursuant to the Certificate or a notice of
election to purchase pursuant to the Warrants (the "IRREVOCABLE TRANSFER AGENT
INSTRUCTIONS"). The Company warrants that no instruction relating to the Common
Shares other than the Irrevocable Transfer Agent Instructions referred to in
this Article IV will be given by the Company to its transfer agent and that the
Common Shares shall be freely transferable on the books and records of the
Company as contemplated by Article VI below when the legend referred to therein
may be removed. Nothing in this Article IV shall affect in any way the
Investor's obligations and agreements to comply with all applicable prospectus
delivery requirements, if any, upon resale of the Common Shares. The Company
shall instruct its transfer agent to issue one or more certificates in such name
and in such denominations as specified by the Investor and without any
restrictive legends. The Company acknowledges that a breach by it of its
obligations hereunder will cause irreparable harm to the Investor by vitiating
the intent and purpose of the transaction contemplated hereby. Accordingly, the
Company acknowledges that the remedy at law for a breach of its obligations
under this Section will be inadequate and agrees, in the event of a breach or
threatened breach by the Company of the provisions of this Section, that the
Investor shall be entitled, in addition to all other available remedies, to an
injunction restraining any breach and requiring immediate issuance and transfer,
without the necessity of showing economic loss and without any bond or other
security being required.

                                       18
<PAGE>   19

                                    ARTICLE V

                             CONDITIONS TO CLOSINGS

        Section 5.1 Conditions Precedent to the Obligation of the Company to
Sell the Preferred Shares and Warrants. The obligation hereunder of the Company
to issue and/or sell the Preferred Shares and Warrants to the Investor at the
Closing is subject to the satisfaction, at or before the Closing, of each of the
applicable conditions set forth below. These conditions are for the Company's
sole benefit and may be waived by the Company at any time in its sole
discretion.

           (a) Accuracy of the Investor's Representations and Warranties. The
representations and warranties of the Investor will be true and correct in all
material respects as of the date hereof and as of the Closing Date, as though
made at that time.

           (b) Performance by the Investor. The Investor shall have performed
all agreements and satisfied all conditions required to be performed or
satisfied by the Investor at or prior to the Closing, including payment of the
purchase price set forth on Schedule I hereto.

           (c) No Injunction. No statute, rule, regulation, executive order,
decree, ruling or injunction shall have been enacted, entered, promulgated or
endorsed by any court or governmental authority of competent jurisdiction which
prohibits the consummation of any of the transactions contemplated by this
Agreement, the Registration Rights Agreement, the Warrants or the Certificate.

           Section 5.2 Conditions Precedent to the Obligation of the Investor to
Purchase the Preferred Shares and Warrants. The obligation hereunder of the
Investor to acquire and pay for the Preferred Shares and Warrants at the Closing
is subject to the satisfaction, at or before the Closing, of each of the
applicable conditions set forth below. These conditions are for the Investor's
benefit and may be waived by the Investor at any time in its sole discretion.

           (a) Accuracy of the Company's Representations and Warranties. The
representations and warranties of the Company shall be true and correct in all
material respects as of the date hereof and as of the Closing Date as though
made at that time (except for representations and warranties as of an earlier
date, which shall be true and correct in all material respects as of such date).

           (b) Performance by the Company. The Company shall have performed all
agreements and satisfied all conditions required to be performed or satisfied by
the Company at or prior to the Closing, including, without limitation, delivery
of the Warrants and certificates representing the Preferred Shares issued to
Investor.

           (c) Nasdaq Trading. From the date hereof to the Closing Date, trading
in the Company's Common Stock shall not have been suspended by the SEC and
trading in securities generally as reported by the Principal Market (or other
Approved Market) shall not have been suspended or limited, and the Common Stock
shall be listed on the Principal Market or another Approved Market.

                                       19
<PAGE>   20

           (d) No Injunction. No statute, rule, regulation, executive order,
decree, ruling or injunction shall have been enacted, entered, promulgated or
endorsed by any court or governmental authority of competent jurisdiction which
prohibits the consummation of any of the transactions contemplated by this
Agreement, the Warrants, the Registration Rights Agreement or the Certificate.
Neither the NASD nor the Principal Market shall have objected or indicated that
it may object to the consummation of any of the transactions contemplated by
this Agreement.

           (e) Opinion of Counsel. At the Closing, the Investor shall have
received an opinion of counsel to the Company in the form attached hereto as
Exhibit 5.2(e) and such other opinions, certificates and documents as the
Investor or their counsel shall reasonably require incident to the Closing.

           (f) Registration Rights Agreement. The Company and the Investor shall
have executed and delivered the Registration Rights Agreement in the form and
substance of Exhibit 5.2(f) attached hereto.

           (g) Officer's Certificate. The Company shall have delivered to the
Investor a certificate in form and substance satisfactory to the Investor and
the Investor's counsel, executed by an officer of the Company, certifying as to
satisfaction of closing conditions, incumbency of signing officers, and the
true, correct and complete nature of the Certificate of Incorporation, By-Laws,
good standing and authorizing resolutions of the Company.

           (h) Certificate. The Certificate shall have been accepted for filing
by the Secretary of State of the State of Colorado and a stamped copy thereof
shall have been provided to the Investor's counsel.

           (i) Miscellaneous. The Company shall have delivered to the Investor
such other documents relating to the transactions contemplated by this Agreement
or the Investor or its counsel may reasonable request.

        Section 5.3 Closing Deliveries.

           (a) On the Closing Date, the Company shall deliver to the Investor:

                        (i)   Certificates representing the Preferred Shares
                              issued to Investors;

                        (ii)  A stamped copy of the filed Certificate;

                        (iii) The certificate referred to in Section 5.2(g)
                              above;

                        (iv)  The Warrants issued to Investors.

                        (v)   The executed Registration Rights Agreement; and

                        (vi)  The opinion of counsel referred to in Section
                              5.2(e) above.

                                       20
<PAGE>   21

           (b) On the Closing Date, the Investor shall deliver to the Company:

                        (i)  The Purchase Price set forth on Schedule I hereto;
                             and

                        (ii) The executed Registration Rights Agreement;

                                   ARTICLE VI

                                LEGEND AND STOCK

           Upon payment therefor as provided in this Agreement, the Company will
issue one or more Warrants and certificates representing the Preferred Shares in
the name the Investor and in such denominations to be specified by the Investor
prior to (or from time to time subsequent to) Closing. Each of the Warrants and
certificates representing the Preferred Shares, and any Common Shares issued
upon conversion or exercise thereof prior to such Common Shares being registered
under the 1933 Act for resale or available for resale under Rule 144 under the
1933 Act, shall be stamped or otherwise imprinted with a legend substantially in
the following form:

           THESE SECURITIES HAVE NOT BEEN REGISTERED FOR OFFER OR SALE UNDER THE
SECURITIES ACT OF 1933 OR ANY STATE SECURITIES LAWS. THEY MAY NOT BE SOLD OR
OFFERED FOR SALE EXCEPT PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT UNDER
SAID ACT AND ANY APPLICABLE STATE SECURITIES LAW OR AN APPLICABLE EXEMPTION FROM
SUCH REGISTRATION REQUIREMENTS.

           The Company agrees to reissue certificates for Preferred Shares
and/or Warrants without the legend set forth above at such time as (i) the
holder thereof is permitted to dispose of such Preferred Shares and/or Warrants
pursuant to Rule 144 under the Act, or (ii) such Preferred Shares or Warrants
are sold to a purchaser or purchasers who (in the opinion of counsel to the
seller or such purchaser(s), in form and substance reasonably satisfactory to
the Company and its counsel) are able to dispose of such securities publicly
without registration under the Act.

           Prior to the Registration Statement (as defined in the Registration
Rights Agreement) being declared effective, any Common Shares issued pursuant to
conversion of Preferred Shares or exercise of Warrants shall bear a legend in
the same form as the legend indicated above; provided that such legend shall be
removed from such Common Shares and the Company shall issue new certificates
without such legend if (i) the holder thereof is permitted to dispose of such
Common Shares pursuant to Rule 144 under the 1933 Act, (ii) such Common Shares
are registered for resale under the 1933 Act and the Investors covenant to
comply with the prospectus delivery requirements under the Securities Act, or
(iii) such Common Shares are sold to a purchaser or purchasers who (in the
opinion of counsel to the seller or such purchaser(s), in form and substance
reasonably satisfactory to the Company and it counsel) are able to dispose of
such shares publicly without registration under the 1933 Act. Upon such
Registration Statement becoming effective, the Company agrees to promptly, but
no later than three (3) business days

                                       21
<PAGE>   22

thereafter, issue new certificates representing such Common Shares without such
legend, and any Common Shares issued after the Registration Statement has become
effective shall be free and clear of any legends, transfer restrictions and stop
orders, provided in each case that the Investors covenant to comply with the
prospectus delivery requirements under the Securities Act. Notwithstanding the
removal of such legend, the Investor agrees to sell the Common Shares
represented by the new certificates in accordance with the applicable prospectus
delivery requirements (if copies of a current prospectus are provided to the
Investor by the Company) or in accordance with an exemption from the
registration requirements of the 1933 Act.

           Nothing herein shall limit the right of any holder to pledge these
securities pursuant to a bona fide margin account or lending arrangement entered
into in compliance with law, including applicable securities laws.

                                   ARTICLE VII

                                   TERMINATION

        Section 7.1 Termination by Mutual Consent. This Agreement may be
terminated at any time prior to the Closing by the mutual written consent of the
Company and the Investor.

        Section 7.2 Other Termination. This Agreement may be terminated by
action of the Board of Directors of the Company or by the Investor at any time
if the Closing shall not have been consummated by the fifth business day
following the date of this Agreement; provided, however, that the party (or
parties) prepared to close shall retain its (or their) right to sue for any
breach by the other party (or parties).

                                  ARTICLE VIII

                                 INDEMNIFICATION

        Section 8.1 Company Indemnity. In consideration of the Investor's
execution and delivery of this Agreement and the Registration Rights Agreement
and acquiring the Preferred Shares and Warrants hereunder and in addition to all
of the Company's other obligations under the Transaction Documents, the Company
shall defend, protect, indemnify and hold harmless the Investor and all of its
partners, officers, directors, employees, members and direct or indirect
investors and any of the foregoing person's agents or other representatives
(including, without limitation, those retained in connection with the
transactions contemplated by this Agreement) (collectively, the "INDEMNITEES")
from and against any and all actions, causes of action, suits, claims, losses,
costs, penalties, fees, liabilities and damages, and expenses in connection
therewith (irrespective of whether any such Indemnitee is a party to the action
for which indemnification hereunder is sought), and including all reasonable
attorneys' fees and disbursements of one law firm (and local counsel where
necessary) (the "INDEMNIFIED LIABILITIES"), incurred by any Indemnitee as a
result of, or arising out of, or relating to (a) any misrepresentation or breach
of any representation or warranty made by the Company in the Transaction
Documents or any other certificate or document contemplated hereby or thereby,
(b)

                                       22
<PAGE>   23

any breach of any covenant, agreement or obligation of the Company contained in
the Transaction Documents or any other certificate or document contemplated
hereby or thereby, (c) any cause of action, suit or claim brought or made
against such Indemnitee by a third party and arising out of or resulting from
(i) the execution, delivery, performance or breach by the Company or enforcement
of the Transaction Documents or any other certificate, instrument or document
contemplated hereby or thereby, (ii) any transaction financed or to be financed
in whole or in part, directly or indirectly, with the proceeds of the issuance
of the Preferred Shares or (iii) solely due to the status of the Investor as
holder of the Preferred Shares or Warrants, and (d) the enforcement of this
Section. Notwithstanding the foregoing, Indemnified Liabilities shall not
include any liability of any Indemnitee arising solely out of such Indemnitee's
willful misconduct or fraudulent action(s). To the extent that the foregoing
undertaking by the Company may be unenforceable for any reason, the Company
shall make the maximum contribution to the payment and satisfaction of each of
the Indemnified Liabilities which is permissible under applicable law. Except as
otherwise set forth herein, the mechanics and procedures with respect to the
rights and obligations under this Article VIII shall be the same as those set
forth in Section 6 (other than Section 6(b)) of the Registration Rights
Agreement, including, without limitation, those procedures with respect to the
settlement of claims and Company's right to assume the defense of claims.

                                   ARTICLE IX

                          GOVERNING LAW, MISCELLANEOUS

        Section 9.1 Governing Law. THIS AGREEMENT SHALL BE GOVERNED BY AND
INTERPRETED IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK WITHOUT REGARD
TO THE PRINCIPLES OF CONFLICT OF LAWS. EACH PARTY HEREBY IRREVOCABLY SUBMITS TO
THE EXCLUSIVE JURISDICTION OF THE STATE AND FEDERAL COURTS SITTING IN THE CITY
OF NEW YORK, BOROUGH OF MANHATTAN, FOR THE ADJUDICATION OF ANY DISPUTE HEREUNDER
OR IN CONNECTION HEREWITH OR WITH ANY TRANSACTION CONTEMPLATED HEREBY OR
DISCUSSED HEREIN, AND HEREBY IRREVOCABLY WAIVES, AND AGREES NOT TO ASSERT IN ANY
SUIT, ACTION OR PROCEEDING, ANY CLAIM THAT IT IS NOT PERSONALLY SUBJECT TO THE
JURISDICTION OF ANY SUCH COURT, THAT SUCH SUIT, ACTION OR PROCEEDING IS BROUGHT
IN AN INCONVENIENT FORUM OR THAT THE VENUE OF SUCH SUIT, ACTION OR PROCEEDING IS
IMPROPER. EACH PARTY HEREBY IRREVOCABLY WAIVES PERSONAL SERVICE OF PROCESS AND
CONSENTS TO PROCESS BEING SERVED IN ANY SUCH SUIT, ACTION OR PROCEEDING BY
MAILING A COPY THEREOF TO SUCH PARTY AT THE ADDRESS FOR SUCH NOTICES TO IT UNDER
THIS AGREEMENT AND AGREES THAT SUCH SERVICE SHALL CONSTITUTE GOOD AND SUFFICIENT
SERVICE OF PROCESS AND NOTICE THEREOF. NOTHING CONTAINED HEREIN SHALL LIMIT IN
ANY WAY ANY RIGHT TO SERVE PROCESS IN ANY MANNER PERMITTED BY LAW. IF ANY
PROVISION OF THIS AGREEMENT SHALL BE INVALID OR UNENFORCEABLE IN ANY
JURISDICTION, SUCH INVALIDITY OR UNENFORCEABILITY SHALL NOT AFFECT THE VALIDITY
OR ENFORCEABILITY OF THE REMAINDER OF THIS AGREEMENT IN THAT JURISDICTION OR THE
VALIDITY

                                       23
<PAGE>   24

OR ENFORCEABILITY OF ANY PROVISION OF THIS AGREEMENT IN ANY OTHER JURISDICTION.
EACH PARTY HERETO IRREVOCABLY WAIVES ANY RIGHT TO TRIAL BY JURY.

        Section 9.2 Counterparts. This Agreement may be executed in two or more
counterparts, all of which shall be considered one and the same agreement and
shall become effective when counterparts have been signed by each party and
delivered to the other party; provided that a facsimile signature shall be
considered due execution and shall be binding upon the signatory thereto with
the same force and effect as if the signature were an original, not a facsimile
signature.

        Section 9.3 Headings. The headings of this Agreement are for convenience
of reference and shall not form part of, or affect the interpretation of, this
Agreement.

        Section 9.4 Severability. If any provision of this Agreement shall be
invalid or unenforceable in any jurisdiction, such invalidity or
unenforceability shall not affect the validity or enforceability of the
remainder of this Agreement in that jurisdiction or the validity or
enforceability of any provision of this Agreement in any other jurisdiction.

        Section 9.5 Entire Agreement; Amendments; Waivers.

           (a) This Agreement supersedes all other prior oral or written
agreements between the Investor, the Company, their affiliates and persons
acting on their behalf with respect to the matters discussed herein, and this
Agreement and the instruments referenced herein (including the other Transaction
Documents) contain the entire understanding of the parties with respect to the
matters covered herein and therein and, except as specifically set forth herein
or therein, neither the Company nor the Investor makes any representation,
warranty, covenant or undertaking with respect to such matters. No provision of
this Agreement may be amended other than by an instrument in writing signed by
the Company and the Investor, and no provision hereof may be waived other than
by an instrument in writing signed by the party against whom enforcement is
sought.

           (b) The Investor may at any time elect, by notice to the Company, to
waive (whether permanently or temporarily, and subject to such conditions, if
any, as the Investor may specify in such notice) any of its rights under any of
the Transaction Documents to acquire shares of Common Stock from the Company, in
which event such waiver shall be binding against the Investor in accordance with
its terms.

        Section 9.6 Notices. Any notices, consents, waivers or other
communications required or permitted to be given under the terms of this
Agreement must be in writing, must be delivered by (i) courier, mail or hand
delivery or (ii) facsimile, and will be deemed to have been delivered upon
receipt. The addresses and facsimile numbers for such communications shall be:

                                       24
<PAGE>   25

        If to the Company:

                Stan Lee Media, Inc.
                15821 Ventura Boulevard
                Suite 675
                Encino, CA 91436
                Telephone: (818) 461-1757
                Facsimile: (818) 728-9336
                Attention: General Counsel

        If to the Transfer Agent:

                Securities Transfer Corporation
                2591 Dallas Parkway
                Suite 102
                Frisco, TX 75034
                Telephone: (469) 633-0101

        If to the Investor:

                Elliott Associates, L.P.
                c/o Elliott Management Corporation
                712 Fifth Avenue, 36th Floor
                New York, New York  10019
                Telephone: 212-506-2999
                Facsimile: 212-974-2092 and (212) 489-8321
                Attention: Daniel Gropper

                and

                Westgate International, L.P.
                c/o Elliott Management Corporation
                712 Fifth Avenue, 36th Floor
                New York, New York  10019
                Telephone: 212-506-2999
                Facsimile: 212-974-2092 and (212) 489-8321
                Attention: Daniel Gropper

        With a copy to:

                Kleinberg, Kaplan, Wolff & Cohen, P.C.
                551 Fifth Avenue, 18th Floor
                New York, New York 10176
                Telephone: 212-986-6000
                Facsimile: 212-986-8866
                Attention: Stephen M. Schultz

        Each party shall provide five (5) days prior written notice to the other
party of any change in address, telephone number or facsimile number. Written
confirmation of receipt (A) given by the recipient of such notice, consent,
waiver or other communication, (B) mechanically or

                                       25
<PAGE>   26

electronically generated by the sender's facsimile machine containing the time,
date, recipient facsimile number and an image of the first page of such
transmission or (C) provided by a nationally recognized overnight delivery
service, shall be rebuttable evidence of personal service, receipt by facsimile
or receipt from a nationally recognized overnight delivery service in accordance
with clause (A), (B) or (C) above, respectively.

        Section 9.7 Successors and Assigns. Except as otherwise provided herein,
this Agreement shall be binding upon and inure to the benefit of the parties and
their respective successors and assigns, including any Permitted Assignee (as
defined below). The Company shall not assign this Agreement or any rights or
obligations hereunder without the prior written consent of the Investor,
including by merger or consolidation; provided that the Company may assign this
Agreement by operation of law in connection with any merger, the sole purpose of
which is to effect a change of the Company's state of incorporation and/or an
increase of the number of members of the Board of Directors of the Company. Each
Investor may assign some or all of its rights hereunder to any person or entity
to which such Investor transfers Preferred Shares or Warrants, without the
consent of the Company (a "PERMITTED ASSIGNEE"); provided, however, that any
such assignment shall not release the Investor from its obligations hereunder
unless such obligations are assumed by such assignee and the Company has
consented to such assignment and assumption (which may not be unreasonably
withheld). Notwithstanding anything to the contrary contained in the Transaction
Documents, the Investor shall be entitled to pledge the Preferred Shares,
Warrants or Common Shares in connection with a bona fide margin account.

        Section 9.8 No Third Party Beneficiaries. This Agreement is intended for
the benefit of the parties hereto and their respective permitted successors and
assigns, and is not for the benefit of, nor may any provision hereof be enforced
by, any other person.

        Section 9.9 Survival. The representations, warranties and agreements of
the Company and the Investor contained in the Agreement shall survive the
Closing.

        Section 9.10 Publicity. Subject to Section 3.10, the Company and the
Investor shall have the right to approve before issuance any press releases or
any other public statements with respect to the transactions contemplated
hereby.

        Section 9.11 Further Assurances. Each party shall do and perform, or
cause to be done and performed, all such further acts and things, and shall
execute and deliver all such other agreements, certificates, instruments and
documents, as the other party may reasonably request in order to carry out the
intent and accomplish the purposes of this Agreement and the consummation of the
transactions contemplated hereby.

        Section 9.12 No Strict Construction. The language used in this Agreement
will be deemed to be the language chosen by the parties to express their mutual
intent, and no rules of strict construction will be applied against any party.

        Section 9.13 Remedies. The Investor and each Permitted Assignee shall
have all rights and remedies set forth in this Agreement and the Registration
Rights Agreement and all rights and remedies which such holders have been
granted at any time under any other agreement or

                                       26
<PAGE>   27

contract and all of the rights which such holders have under any law. Any person
having any rights under any provision of this Agreement or the Registration
Rights Agreement shall be entitled to enforce such rights specifically (without
posting a bond or other security), to recover damages by reason of any breach of
any provision of this Agreement or the Registration Rights Agreement and to
exercise all other rights granted by law. The Investor and each Permitted
Assignee without prejudice may withdraw, revoke or suspend its pursuit of any
remedy at any time prior to its complete recovery as a result of such remedy.

        Section 9.14 Payment Set Aside. To the extent that the Company makes a
payment or payments to the Investor hereunder or under the Registration Rights
Agreement or the Investor enforces or exercises its rights hereunder or
thereunder, and such payment or payments or the proceeds of such enforcement or
exercise or any part thereof are subsequently invalidated, declared to be
fraudulent or preferential, set aside, recovered from, disgorged by or are
required to be refunded, repaid or otherwise restored to the Company, a trustee,
receiver or any other person under any law (including, without limitation, any
bankruptcy law, state or federal law, common law or equitable cause of action),
then to the extent of any such restoration the obligation or part thereof
originally intended to be satisfied shall be revived and continued in full force
and effect as if such payment had not been made or such enforcement or setoff
had not occurred.

        Section 9.15 Days. Unless the context refers to "business days" or
"trading days", all references herein to "days" shall mean calendar days.

        Section 9.16 Rescission and Withdrawal Right. Notwithstanding anything
to the contrary contained in (and without limiting any similar provisions of)
the Transaction Documents, wherever the Investor exercises a right, election,
demand or option under a Transaction Document and the Company does not fully
perform its related obligations within the periods therein provided, then the
Investor in its sole discretion may rescind or withdraw from time to time any
relevant notice, demand or election in whole or in part without prejudice to its
future actions and rights.

                                    * * * * *

                            [Signature Page Follows]

                                       27

<PAGE>   28

               IN WITNESS WHEREOF, the parties hereto have caused this Preferred
Stock Investment Agreement to be duly executed as of the date and year first
above written.

COMPANY:                                        INVESTOR:

STAN LEE MEDIA, INC.                            WESTGATE INTERNATIONAL, L.P.

                                                By: Elliott International
                                                    Capital Advisors, Inc.,
                                                    as Attorney-in-Fact

By:                                             By:
   ------------------------------                   ---------------------------
   Name:                                            Name:
   Title:                                           Title:

                                                 ELLIOTT ASSOCIATES, L.P.

                                                 By:
                                                    ---------------------------
                                                    Name:
                                                    Title:

                                       28
<PAGE>   29

LIST OF SCHEDULES

Schedule 2.1(a)        Organization and Qualification
Schedule 2.1(c)        Capitalization
Schedule 2.1(e)        No Conflicts
Schedule 2.1(g)        Absence of Certain Changes
Schedule 2.1(h)        Absence of Litigation
Schedule 2.1(n)        Intellectual Property Rights
Schedule 2.1(p)        Title
Schedule 2.1(v)        Certain Transactions
Schedule 2.1(dd)       Brokers

LIST OF EXHIBITS

EXHIBIT 1.1A           Certificate of Designation
EXHIBIT 1.1B           Warrant
EXHIBIT 3.10           Press Release
EXHIBIT 5.2(f)         Registration Rights Agreement
EXHIBIT 5.2(e)         Opinion of Counsel

<PAGE>   30

                                   SCHEDULE I

<TABLE>
<CAPTION>

                                          JURISDICTION OF                NUMBER OF          NUMBER OF          PURCHASE
        INVESTOR                           ORGANIZATION              PREFERRED SHARES        WARRANTS           PRICE
----------------------------          ----------------------         ----------------       ---------         ----------
<S>                                  <C>                                 <C>                 <C>             <C>
Elliott Associates, L.P.              Delaware, U.S.A.                     2,000              37,500          $2,000,000

Westgate International, L.P.          Cayman Islands, B.W.I.               2,000              37,500          $2,000,000
</TABLE><PAGE>   1

                                                                   EXHIBIT 10.5

                          REGISTRATION RIGHTS AGREEMENT

        This Registration Rights Agreement ("Agreement") is entered into as of
August 1, 2000, among Stan Lee Media, Inc., a Colorado corporation with offices
at 15821 Ventura Boulevard, Suite 675, Encino, California 91436 (the "Company"),
and Elliott Associates, L.P., a Delaware limited partnership ("Elliott"), and
Westgate International, L.P., a Cayman Islands limited partnership ("Westgate"),
each with an office at c/o Elliott Management Corporation, 712 Fifth Avenue,
36th Floor, New York, New York 10019 (Elliott and Westgate shall hereinafter be
referred to individually and collectively as the "Investor").

                              W I T N E S S E T H:

        WHEREAS, pursuant to that certain Preferred Stock Investment Agreement,
dated on or about the date hereof, by and between the Company and the Investor
(the "Purchase Agreement"), the Company has agreed to sell and issue to the
Investor, and the Investor has agreed to purchase from the Company (1) an
aggregate of 4,000 shares, Liquidation Preference $1,000 each, of the Company's
Series B 4% Cumulative Convertible Preferred Stock (the "Preferred Shares") and
(2) warrants to purchase an aggregate of 75,000 shares (the "Common Shares") of
common stock, no par value, of the Company ("Common Stock") pursuant to the
terms of such warrants ("Warrants"), in each case subject to terms and
conditions contained in the Purchase Agreement; and

        WHEREAS, the Purchase Agreement contemplates that the Preferred Shares
will be convertible into Common Shares pursuant to the terms and conditions set
forth in the Certificate of Designations for the Preferred Shares (the
"Certificate");

        NOW, THEREFORE, in consideration of the mutual promises,
representations, warranties, covenants and conditions set forth in the Purchase
Agreement and this Agreement, the Company and the Investor agree as follows:

           1. Certain Definitions. Capitalized terms used herein and not
otherwise defined shall have the meaning ascribed thereto in the Purchase
Agreement or the Certificate. As used in this Agreement, the following terms
shall have the following respective meanings:

        "Closing" and "Closing Date" shall have the meanings ascribed to such
terms in the Purchase Agreement.

        "Commission" or "SEC" shall mean the Securities and Exchange Commission
or any other federal agency at the time administering the Securities Act.

<PAGE>   2

        "Holder" and "Holders" shall include the Investor and any transferee or
transferees of the Preferred Shares, Warrants, Common Shares or Registrable
Securities which have not been sold to the public to whom the registration
rights conferred by this Agreement have been transferred in compliance with this
Agreement and the Purchase Agreement.

        The terms "register", "registered" and "registration" shall refer to a
registration effected by preparing and filing a registration statement in
compliance with the Securities Act and applicable rules and regulations
thereunder, and the declaration or ordering of the effectiveness of such
registration statement.

        "Registrable Securities" shall mean: (i) the Common Shares or other
securities issued or issuable to each Holder or its permitted transferee or
designee upon conversion of the Preferred Shares and/or upon exercise of the
Warrants; (ii) securities issued or issuable upon any stock split, stock
dividend, recapitalization or similar event with respect to such Common Shares;
and (iii) any other security issued as a dividend or other distribution with
respect to, in exchange for or in replacement of the securities referred to in
the preceding clauses.

        "Registration Expenses" shall mean all expenses to be incurred by the
Company in connection with each Holder's registration rights under this
Agreement, including, without limitation, all registration and filing fees,
printing expenses, fees and disbursements of counsel for the Company, blue sky
fees and expenses, reasonable fees and disbursements of counsel to Holders
(using a single counsel selected by a majority in interest of the Holders) for a
"due diligence" examination of the Company and review of the Registration
Statement and related documents, and the expense of any special audits incident
to or required by any such registration (but excluding the compensation of
regular employees of the Company, which shall be paid in any event by the
Company).

        "Registration Statement" shall have the meaning set forth in Section
2(a) herein.

        "Regulation D" shall mean Regulation D as promulgated pursuant to the
Securities Act, and as subsequently amended.

        "Securities Act" or "Act" shall mean the Securities Act of 1933, as
amended.

        "Selling Expenses" shall mean all underwriting discounts and selling
commissions applicable to the sale of Registrable Securities and all fees and
disbursements of counsel for Holders not included within "Registration
Expenses".

           2. Registration Requirements. The Company shall use its best efforts
to effect the registration of the Registrable Securities (including, without
limitation, the execution of an undertaking to file post-effective amendments,
appropriate qualification under applicable blue sky or other state securities
laws and appropriate compliance with applicable regulations issued under the
Securities Act) as would permit or facilitate the sale or distribution of all
the Registrable Securities in the manner (including manner of

                                       2
<PAGE>   3

sale) and in all states reasonably requested by the Holder. Such best efforts by
the Company shall include, without limitation, the following:

               (a) The Company shall, as expeditiously as possible after the
Closing Date:

                i) But in any event with 35 days after the Closing Date, prepare
        and file a registration statement with the Commission pursuant to Rule
        415 under the Securities Act on Form S-3 under the Securities Act (or in
        the event that the Company is ineligible to use such form, such other
        form as the Company is eligible to use under the Securities Act)
        covering resales by the Holders of the Registrable Securities
        ("Registration Statement"), which Registration Statement, to the extent
        allowable under the Securities Act and the rules promulgated thereunder
        (including Rule 416), shall state that such Registration Statement also
        covers such indeterminate number of additional shares of Common Stock as
        may become issuable upon conversion of the Preferred Shares and/or
        exercise of the Warrants. Such Registration Statement shall be, and the
        Registrable Securities shall be included in, the registration statement
        being filed on the date hereof pursuant to that certain registration
        rights agreement dated as of April 14, 2000 between the Company and
        Augustine Fund, L.P. covering the securities issuable upon conversion of
        the Company's Series A 6% Convertible Notes, among other securities (the
        "Augustine Registration Statement"). The number of shares of Common
        Stock included in such Registration Statement for the Holders shall be
        no less than the sum of two times the number of Common Shares that are
        then issuable upon conversion of the Preferred Shares and exercise of
        the Warrants, provided that for purposes hereof it shall be assumed that
        all the Preferred Shares and Warrants are then convertible and
        exercisable (assuming full conversion or exercise, respectively, at the
        applicable Conversion Price or Exercise Price (as defined in the
        Warrant) without regard to restrictions or limitations contained in the
        Certificate or Warrants). Nothing in the preceding sentence will limit
        the Company's obligations to reserve shares of Common Stock pursuant to
        Section 3.7 of the Purchase Agreement. Thereafter the Company shall
        cause such Registration Statement and other filings to be declared
        effective within 90 days following the Closing Date (or 120 days
        following the Closing Date if such Registration Statement is subject to
        full SEC review). Without limiting the foregoing, the Company will
        promptly respond to all SEC comments, inquiries and requests, and shall
        request acceleration of effectiveness at the earliest possible date. The
        Company shall provide the Holders reasonable opportunity to review any
        such Registration Statement or amendment or supplement thereto prior to
        filing (provided that, with respect to the Registration Statement being
        filed on the date hereof, the Company may provide less than 24 hours for
        such review).

                                       3
<PAGE>   4

                ii) Prepare and file with the SEC such amendments and
        supplements to such Registration Statement and the prospectus used in
        connection with such Registration Statement as may be necessary to
        comply with the provisions of the Act with respect to the disposition of
        all securities covered by such Registration Statement and notify the
        Holders of the filing and effectiveness of such Registration Statement
        and any amendments or supplements. In addition, in the event that the
        Augustine Registration Statement as filed fails to cover resales of the
        Registrable Securities, then the Company shall promptly file an
        amendment to such registration statement filing in order to cover
        resales of the Registrable Securities as provided herein.

                iii) Furnish to each Holder such numbers of copies of a current
        prospectus conforming with the requirements of the Act, copies of the
        Registration Statement, any amendment or supplement thereto and any
        documents incorporated by reference therein and such other documents as
        such Holder may reasonably require or request in order to facilitate the
        disposition of Registrable Securities owned by such Holder.

                iv) Register and qualify the securities covered by such
        Registration Statement under the securities or "Blue Sky" laws of all
        domestic jurisdictions; provided that the Company shall not be required
        in connection therewith or as a condition thereto to qualify to do
        business or to file a general consent to service of process in any such
        states or jurisdictions.

                v) Notify each Holder immediately of the happening of any event
        (but not the substance or details of any such events unless specifically
        requested by a Holder) as a result of which the prospectus (including
        any supplements thereto or thereof) included in such Registration
        Statement, as then in effect, includes an untrue statement of material
        fact or omits to state a material fact required to be stated therein or
        necessary to make the statements therein not misleading in light of the
        circumstances then existing, and use its best efforts to promptly update
        and/or correct such prospectus.

                vi) Notify each Holder immediately of the issuance by the
        Commission or any state securities commission or agency of any stop
        order suspending the effectiveness of the Registration Statement or the
        threat or initiation of any proceedings for that purpose. The Company
        shall use its best efforts to prevent the issuance of any stop order
        and, if any stop order is issued, to obtain the lifting thereof at the
        earliest possible time.

                vii) Subject to Section 2(a)(i), permit counsel to the Holders
        to review the Registration Statement and all amendments and supplements

                                       4
<PAGE>   5

        thereto within a reasonable period of time (but not less than 5 full
        Trading Days (as defined in the Certificate)) prior to each filing, and
        shall not file any document in a form to which such counsel reasonably
        objects and will not request accelerated effectiveness of the
        Registration Statement without prior notice to such counsel.

                viii) List the Registrable Securities covered by such
        Registration Statement with all securities exchange(s) and/or markets on
        which the Common Stock is then listed and prepare and file any required
        filings with the Principal Market or any exchange or market where the
        Common Shares are traded.

                ix) Take all steps necessary to enable Holders to avail
        themselves of the prospectus delivery mechanism set forth in Rule 153
        (or successor thereto) under the Act.

               (b) Set forth below in this Section 2(b) are (I) events that may
arise that the Investors consider will interfere with the full enjoyment of
their rights under this Agreement, the Purchase Agreement, the Warrants and the
Certificate (the "Interfering Events"), and (II) certain remedies applicable in
each of these events.

               Paragraphs (i) through (iv) of this Section 2(b) describe the
Interfering Events, provide a remedy to the Investors if an Interfering Event
occurs and provide that the Investors may require that the Company repurchase
outstanding Preferred Shares and/or Warrants at a specified price if certain
Interfering Events are not timely cured.

               Paragraph (v) provides, inter alia, that if default adjustments
required as the remedy in the case of certain of the Interfering Events are not
provided when due, the Company may be required by the Investors to redeem
outstanding Preferred Shares and/or Warrants at a specified price.

               Paragraph (vi) provides, inter alia, that the Investors have the
right to specific performance.

               The preceding paragraphs in this Section 2(b) are meant to serve
only as an introduction to this Section 2(b), are for convenience only, and are
not to be considered in applying, construing or interpreting this Section 2(b).

                i) Delay in Effectiveness of Registration Statement.

                        (A) In the event that (1) such Registration Statement
                has not been filed with the SEC by the 35th day following the
                Closing Date, (2) such Registration Statement has not been
                declared effective by the 90th day following the Closing Date
                (or 120th day

                                       5
<PAGE>   6

                following the Closing Date in the event such Registration
                Statement is subject to full SEC review), (3) the Company fails
                to include the Registrable Securities on the Augustine
                Registration Statement or (4) the Company at any time fails to
                issue unlegended Registrable Securities as required by Article
                VI of the Purchase Agreement, then in each case the Company
                shall pay each Holder a Monthly Delay Payment (as defined below)
                for each 30 day period (or portion thereof) that (a) such filing
                or effectiveness (as the case may be) of the Registration
                Statement is delayed, (b) the Registrable Securities are not
                included in the Augustine Registration Statement, or (c) failure
                to issue such unlegended Registrable Securities persists. In
                addition to the foregoing, if the Registration Statement has not
                been declared effective within six (6) months after the Closing
                Date, then each Holder shall have the right to sell, at any time
                after the sixth (6th) month following the Closing Date, any or
                all of its Preferred Shares and Warrants to the Company for
                consideration (the "Mandatory Repurchase Price") equal to (I)
                for the Preferred Shares, the greater of (x) 120% of the
                Liquidation Preference of all such Preferred Shares being sold
                to the Company, or (y) the Liquidation Preference for the
                Preferred Shares being sold to the Company divided by the then
                applicable Conversion Price multiplied by the greater of the
                last closing price of the Common Stock on (i) the date a Holder
                exercises its option pursuant to this Section 2(b) to require
                repurchase of Preferred Shares or (ii) the date on which the
                event triggering Holder's remedies under this Section 2(b) first
                occurred, in each case payable in cash, and (II) for the
                Warrants, 120% of the product of (a) the difference between the
                greater of clauses (i) or (ii) above and the exercise price of
                the Warrants, multiplied by (b) the number of Warrants being
                sold to the Company, payable in cash.

                        (B) As used in this Agreement, a "Monthly Delay Payment"
                shall be a cash payment equal to 1% of the Liquidation
                Preference of the Preferred Shares held by a Holder for the
                first 30 day period (or portion thereof) that the specified
                condition in this Section 2(b) has not been fulfilled or the
                specified deficiency has not been remedied and 2% of such
                Liquidation Preference thereafter for each subsequent 30 day
                period (or portion thereof) that the specified condition in this
                Section 2(b) has not been fulfilled or the specified deficiency
                has not been remedied. Payment of the Monthly Delay Payments and
                Mandatory Repurchase Price shall be due and payable from the
                Company to such Holder within 5 days of demand therefor. Without
                limiting the foregoing, if cash payment of the Mandatory
                Repurchase Price is not made within such 5 day period, the
                Holder may revoke and withdraw its election to cause the Company
                to make such

                                       6
<PAGE>   7

                mandatory purchase at any time prior to its receipt of such
                cash. At the option of the Holder, Monthly Delay Payments, in
                lieu of receiving any such cash payment, may be added to the
                Liquidation Preference of the Preferred Shares held by it.

                ii) No Listing; Premium Price Redemption for Delisting of Class
                    of Shares.

                        (A) In the event that the Company fails, refuses or for
                any other reason is unable to cause the Registrable Securities
                covered by the Registration Statement to be listed with the
                Principal Market or one of the other Approved Markets (as
                defined in the Purchase Agreement) by the earlier of the
                effectiveness of the Registration Statement or the 120th day
                following the Closing Date, and at all times thereafter during
                the registration period specified in Section 5, then the Company
                shall provide to each Holder a Monthly Delay Payment, for each
                30 day period or portion thereof during which such listing is
                not in effect. In addition to the foregoing, following the 10th
                day that such listing is not in effect, each Holder shall have
                the right to sell to the Company any or all of its Preferred
                Shares and/or Warrants at the Mandatory Repurchase Price. The
                provisions of Section 2(b)(i)(B) shall apply to this Section
                2(b)(ii)(A).

                        (B) In the event that Company's shares of Common Stock
                are not listed on the Principal Market or any of the Approved
                Markets on the earlier of the effectiveness of the Registration
                Statement or the 120th day following the Closing Date, and at
                all times thereafter during the registration period specified in
                Section 5, then the Company shall provide to each Holder a
                Monthly Delay Payment for each 30 day period or portion thereof
                during which such listing is not in effect. In addition to the
                foregoing, following any three (3) consecutive trading day
                period in which such listing is not in effect, each Holder shall
                have the right to sell to the Company any or all of its
                Preferred Shares and/or Warrants at the Mandatory Repurchase
                Price. The provisions of Section 2(b)(i)(B) shall apply to this
                Section 2(b)(ii)(B).

                iii) Blackout Periods. In the event any Holder's ability to sell
        Registrable Securities under the Registration Statement is suspended for
        more than (i) five (5) consecutive days or (ii) ten (10) days in the
        aggregate in any calendar year ("Suspension Grace Period"), including
        without limitation by reason of any suspension or stop order with
        respect to the Registration Statement or the fact that an event has
        occurred as a result of which the prospectus (including any supplements
        thereto) included in such Registration Statement then in effect includes
        an untrue

                                       7
<PAGE>   8

        statement of material fact or omits to state a material fact required to
        be stated therein or necessary to make the statements therein not
        misleading in light of the circumstances then existing (a "Blackout"),
        then the Company shall provide to each Holder a Monthly Delay Payment
        for each 30 day period or portion thereof from and after the expiration
        of the Suspension Grace Period, on the terms set forth in Section
        2(b)(i)(B) above. In addition, at any time following the expiration of
        the Suspension Grace Period if the Blackout continues for more than five
        (5) additional consecutive days, a Holder shall have the right to sell
        to the Company its Preferred Shares and/or Warrants in whole or in part
        for the Mandatory Repurchase Price on the terms set forth in Section
        2(b)(i)(B) above.

                iv) Redemption for Conversion/Exercise Deficiency. In the event
        that the Company does not have a sufficient number of Common Shares
        available to satisfy the Company's obligations to any Holder upon
        receipt of a Conversion Notice (as defined in the Certificate) or
        receipt of a Form of Election to Purchase (pursuant to the Warrants) or
        is otherwise unable or unwilling for any reason to issue such Common
        Shares (other than solely due to the failure of the Holder to comply
        with the conversion or exercise requirements of the Certificate or
        Warrants) (each, a "Conversion/Exercise Deficiency") in accordance with
        the terms of the Certificate or Warrants for any reason after receipt of
        a Conversion Notice or Notice of Exercise (as defined in the Warrants)
        from any Holder, then:

                        (A) The Company shall provide to each Holder a Monthly
                Delay Payment for each 30 day period or portion thereof
                following the Conversion/Exercise Deficiency, on the terms set
                forth in Section 2(b)(i)(B) above.

                        (B) At any time five days after the commencement of the
                running of the first 30-day period described above in clause (A)
                of this paragraph (iv), at the request of any Holder, the
                Company promptly shall purchase from such Holder, for the
                Mandatory Repurchase Price and on the terms set forth in Section
                2(b)(i)(B) above, the outstanding Preferred Shares and/or
                Warrants equal to such Holder's pro rata share of the
                Conversion/Exercise Deficiency, provided that the Holder may
                revoke such request at any time prior to receipt of the
                Mandatory Repurchase Price (such mandatory repurchase right to
                be in addition to and not in lieu of the Monthly Delay Payment
                right set forth in the preceding clause (A)).

                v) Mandatory Purchase Price for Defaults.

                        (A) The Company acknowledges that any failure, refusal
                or inability by the Company to perform the obligations

                                       8
<PAGE>   9

                described in the foregoing paragraphs (i) through (iv) will
                cause the Holders to suffer damages in an amount that will be
                difficult to ascertain, including without limitation damages
                resulting from the loss of liquidity in the Registrable
                Securities and the additional investment risk in holding the
                Preferred Shares, Warrants and Registrable Securities.
                Accordingly, the parties agree, after consulting with counsel,
                that it is appropriate to include in this Agreement the
                foregoing provisions for Monthly Delay Payments and mandatory
                redemptions in order to compensate the Holders for such damages.
                The parties acknowledge and agree that the Monthly Delay
                Payments and mandatory redemptions set forth above represent the
                parties' good faith effort to quantify such damages and, as
                such, agree that the form and amount of such payments and
                mandatory redemptions are reasonable and will not constitute a
                penalty.

                        (B) In the event that the Company fails to pay any
                Monthly Delay Payment within 5 business days of demand therefor,
                each Holder shall have the right to sell to the Company any or
                all of its Preferred Shares and/or Warrants at the Mandatory
                Repurchase Price on the terms set forth in Section 2(b)(i)(B)
                above.

                        (C) The Holder shall have the right to withdraw any
                request for redemption hereunder at any time prior to its
                receipt of the Mandatory Repurchase Price.

                vi) Cumulative Remedies. The Monthly Delay Payments and
        mandatory purchases provided for above are in addition to and not in
        lieu or limitation of any other rights the Holders may have at law, in
        equity or under the terms of the Certificate, the Purchase Agreement,
        the Warrants and this Agreement, including without limitation the right
        to monetary contract damages and specific performance. Each Holder shall
        be entitled to specific performance of any and all obligations of the
        Company in connection with the registration rights of the Holders
        hereunder.

                vii) Remedies for Registrable Securities. In any case in which a
        Holder of Preferred Shares or Warrants has the right to cause the
        purchase of its Preferred Shares or Warrants under this Section 2(b), it
        shall also have the right to cause the purchase of the Registrable
        Securities that it owns at a price equal to the Mandatory Repurchase
        Price of the Preferred Shares and/or Warrants which were converted into
        or exercised for Common Shares. In the case in which a Holder of
        Preferred Shares or Warrants would have the right to receive Monthly
        Delay Payments with respect to Preferred Shares or Warrants under this
        Section 2(b), it shall also have the right to receive payments with
        respect to Registrable

                                        9
<PAGE>   10

        Securities owned by it in an amount at the rate of the Monthly Delay
        Payments that would have applied to the Preferred Shares or Warrants
        converted into or exercised for Common Shares had such Preferred Shares
        and/or Warrants not been so converted or exercised.

               (c) If the Holder(s) intend to distribute the Registrable
Securities by means of an underwriting, the Holder(s) shall so advise the
Company. Any such underwriting may only be administered by nationally or
regionally recognized investment bankers reasonably satisfactory to the Company.

               (d) The Company shall enter into such customary agreements for
secondary offerings (including a customary underwriting agreement with the
underwriter or underwriters, if any) and take all such other reasonable actions
reasonably requested by the Holders in connection therewith in order to expedite
or facilitate the disposition of such Registrable Securities and in such
connection, whether or not an underwriting agreement is entered into and whether
or not the Registrable Securities are to be sold in an underwritten offering:

                i) make such representations and warranties to the Holders and
        the underwriter or underwriters, if any, in form, substance and scope as
        are customarily made by issuers to underwriters in secondary offerings;

                ii) cause to be delivered to the sellers of Registrable
        Securities and the underwriter or underwriters, if any, opinions of
        independent counsel to the Company, on and dated as of the effective day
        (or in the case of an underwritten offering, dated the date of delivery
        of any Registrable Securities sold pursuant thereto) of the Registration
        Statement, and within ninety (90) days following the end of each fiscal
        year thereafter, which counsel and opinions (in form, scope and
        substance) shall be reasonably satisfactory to the Holders and the
        underwriter(s), if any, and their counsel and covering, without
        limitation, such matters as the due authorization and issuance of the
        securities being registered and compliance with securities laws by the
        Company in connection with the authorization, issuance and registration
        thereof and other matters that are customarily given to underwriters in
        underwritten secondary offerings, addressed to the Holders and each
        underwriter, if any;

                iii) cause to be delivered, immediately prior to the
        effectiveness of the Registration Statement (and, in the case of an
        underwritten offering, at the time of delivery of any Registrable
        Securities sold pursuant thereto), and at the beginning of each fiscal
        year following a year during which the Company's independent certified
        public accountants shall have reviewed any of the Company's books or
        records, a "comfort" letter from the Company's independent certified
        public accountants addressed to the Holders and each underwriter, if
        any, stating that such accountants are independent public accountants
        within the meaning of the

                                       10
<PAGE>   11

        Securities Act and the applicable published rules and regulations
        thereunder, and otherwise in customary form and covering such financial
        and accounting matters as are customarily covered by letters of the
        independent certified public accountants delivered in connection with
        secondary offerings; such accountants shall have undertaken in each such
        letter to update the same during each such fiscal year in which such
        books or records are being reviewed so that each such letter shall
        remain current, correct and complete throughout such fiscal year; and
        each such letter and update thereof, if any, shall be reasonably
        satisfactory to the Holders;

                iv) if an underwriting agreement is entered into, the same shall
        include customary indemnification and contribution provisions to and
        from the underwriters and procedures for secondary underwritten
        offerings; and

                v) deliver such documents and certificates as may be reasonably
        requested by the Holders of the Registrable Securities being sold or the
        managing underwriter or underwriters, if any, to evidence compliance
        with clause (i) above and with any customary conditions contained in the
        underwriting agreement, if any.

               (e) The Company shall make available for inspection by the
Holders, representative(s) of all the Holders together, any underwriter
participating in any disposition pursuant to a Registration Statement, and any
attorney or accountant retained by any Holder or underwriter, all financial and
other records customary for purposes of the Holders' due diligence examination
of the Company and review of any Registration Statement, all SEC Documents (as
defined in the Purchase Agreement) filed subsequent to the Closing, pertinent
corporate documents and properties of the Company, and cause the Company's
officers, directors and employees to supply all information reasonably requested
by any such representative, underwriter, attorney or accountant in connection
with such Registration Statement, provided that such parties agree to keep such
information confidential.

               (f) Subject to Section 2(b) above, the Company may suspend the
use of any prospectus used in connection with the Registration Statement only in
the event, and for such period of time as, such a suspension is required by the
rules and regulations of the Commission. The Company will use its best efforts
to cause such suspension to terminate at the earliest possible date.

               (g) The Company shall file a Registration Statement with respect
to any newly authorized and/or reserved Registrable Securities consisting of
Common Shares described in clause (i) of the definition of Registrable
Securities within five (5) business days of any stockholders meeting authorizing
same and shall use its best efforts to cause such Registration Statement to
become effective within sixty (60) days of such stockholders meeting. If the
Holders become entitled, pursuant to an event described in clause (ii) and (iii)
of the definition of Registrable Securities, to receive any

                                       11
<PAGE>   12

securities in respect of Registrable Securities that were already included in a
Registration Statement, subsequent to the date such Registration Statement is
declared effective, and the Company is unable under the securities laws to add
such securities to the then effective Registration Statement, the Company shall
promptly file, in accordance with the procedures set forth herein, an additional
Registration Statement with respect to such newly Registrable Securities. The
Company shall use its best efforts to (i) cause any such additional Registration
Statement, when filed, to become effective under the Securities Act, and (ii)
keep such additional Registration Statement effective during the period
described in Section 5 below and cause such Registration Statement to become
effective within 30 days of that date that the need to file the Registration
Statement arose. All of the registration rights and remedies under this
Agreement shall apply to the registration of such newly reserved shares and such
new Registrable Securities, including without limitation the provisions
providing for default payments and mandatory redemptions contained herein.

        3. Expenses of Registration. All Registration Expenses in connection
with any registration, qualification or compliance with registration pursuant to
this Agreement shall be borne by the Company, and all Selling Expenses of a
Holder shall be borne by such Holder.

        4. Registration on Form S-3. The Company shall use its best efforts to
remain qualified for registration on Form S-3 or any comparable or successor
form or forms, or in the event that the Company is ineligible to use such form,
such form as the Company is eligible to use under the Securities Act.

        5. Registration Period. In the case of the registration effected by the
Company pursuant to this Agreement, the Company shall keep such registration
effective until the later of (a) the date on which all the Holders have
completed the sales or distribution described in the Registration Statement
relating thereto or, if earlier, until such Registrable Securities may be sold
by the Holders under Rule 144(k) (provided that the Company's transfer agent has
accepted an instruction from the Company to such effect), and (b) the fifth
(5th) anniversary of the Closing Date.

        6. Indemnification.

           (a) Company Indemnity. The Company will indemnify each Holder, each
of its officers, directors, agents and partners, and each person controlling
each of the foregoing, within the meaning of Section 15 of the Securities Act
and the rules and regulations thereunder with respect to which registration,
qualification or compliance has been effected pursuant to this Agreement, and
each underwriter, if any, and each person who controls, within the meaning of
Section 15 of the Securities Act and the rules and regulations thereunder, any
underwriter, against all claims, losses, damages and liabilities (or actions in
respect thereof) arising out of or based on any untrue statement (or alleged
untrue statement) of a material fact contained in any prospectus, offering
circular or other document (including any related registration statement,
notification or the like) incident to any such registration, qualification or
compliance, or

                                       12
<PAGE>   13

based on any omission (or alleged omission) to state therein a material fact
required to be stated therein or necessary to make the statements therein not
misleading in light of the circumstances under which they were made, or any
violation by the Company of the Securities Act or any state securities law or in
either case, any rule or regulation thereunder applicable to the Company and
relating to action or inaction required of the Company in connection with any
such registration, qualification or compliance, and will reimburse each Holder,
each of its officers, directors, agents and partners, and each person
controlling each of the foregoing, each such underwriter and each person who
controls any such underwriter, for any legal and any other expenses reasonably
incurred in connection with investigating and defending any such claim, loss,
damage, liability or action, provided that the Company will not be liable in any
such case to a Holder to the extent that any such claim, loss, damage, liability
or expense arises out of or is based on any untrue statement or omission based
upon written information furnished to the Company by such Holder or the
underwriter (if any) therefor and stated to be specifically for use therein. The
indemnity agreement contained in this Section 6(a) shall not apply to amounts
paid in settlement of any such loss, claim, damage, liability or action if such
settlement is effected without the consent of the Company (which consent will
not be unreasonably withheld).

           (b) Holder Indemnity. Each Holder will, severally and not jointly, if
Registrable Securities held by it are included in the securities as to which
such registration, qualification or compliance is being effected, indemnify the
Company, each of its directors, officers, agents and partners, and each
underwriter, if any, of the Company's securities covered by such a registration
statement, each person who controls the Company or such underwriter within the
meaning of Section 15 of the Securities Act and the rules and regulations
thereunder, each other Holder (if any), and each of their officers, directors,
agents and partners, and each person controlling such other Holder(s) against
all claims, losses, damages and liabilities (or actions in respect thereof)
arising out of or based on any untrue statement (or alleged untrue statement) of
a material fact contained in any such registration statement, prospectus,
offering circular or other document, or any omission (or alleged omission) to
state therein a material fact required to be stated therein or necessary to make
the statement therein not misleading in light of the circumstances under which
they were made, and will reimburse the Company and such other Holder(s) and
their directors, officers, agents and partners, underwriters or control persons
for any legal or any other expenses reasonably incurred in connection with
investigating and defending any such claim, loss, damage, liability or action,
in each case to the extent, but only to the extent, that such untrue statement
(or alleged untrue statement) or omission (or alleged omission) is made in such
registration statement, prospectus, offering circular or other document in
reliance upon and in conformity with written information furnished to the
Company by such Holder and stated to be specifically for use therein, and
provided that the maximum amount for which such Holder shall be liable under
this indemnity shall not exceed the net proceeds received by such Holder from
the sale of the Registrable Securities pursuant to the registration statement in
question. The indemnity agreement contained in this Section 6(b) shall not apply
to amounts paid in settlement of any such claims, losses, damages or liabilities
if

                                       13
<PAGE>   14

such settlement is effected without the consent of such Holder (which consent
shall not be unreasonably withheld).

                (c) Procedure. Each party entitled to indemnification under this
Section 6 (the "Indemnified Party") shall give notice to the party required to
provide indemnification (the "Indemnifying Party") promptly after such
Indemnified Party has actual knowledge of any claim as to which indemnity may be
sought, and shall permit the Indemnifying Party to assume the defense of any
such claim in any litigation resulting therefrom, provided that counsel for the
Indemnifying Party, who shall conduct the defense of such claim or any
litigation resulting therefrom, shall be approved by the Indemnified Party
(whose approval shall not be unreasonably withheld), and the Indemnified Party
may participate in such defense at its own expense, and provided further that
the failure of any Indemnified Party to give notice as provided herein shall not
relieve the Indemnifying Party of its obligations under this Section 6 except to
the extent that the Indemnifying Party is materially and adversely affected by
such failure to provide notice. No Indemnifying Party, in the defense of any
such claim or litigation, shall, except with the consent of each Indemnified
Party, consent to entry of any judgment or enter into any settlement which does
not include as an unconditional term thereof the giving by the claimant or
plaintiff to such Indemnified Party of a release from all liability in respect
to such claim or litigation. Each Indemnified Party shall furnish such
non-privileged information regarding itself or the claim in question as an
Indemnifying Party may reasonably request in writing and as shall be reasonably
required in connection with the defense of such claim and litigation resulting
therefrom.

        7. Contribution. If the indemnification provided for in Section 6 herein
is unavailable to the Indemnified Parties in respect of any losses, claims,
damages or liabilities referred to herein (other than by reason of the
exceptions provided therein), then each such Indemnifying Party, in lieu of
indemnifying such Indemnified Party, shall contribute to the amount paid or
payable by such Indemnified Party as a result of such losses, claims, damages or
liabilities as between the Company on the one hand and any Holder on the other,
in such proportion as is appropriate to reflect the relative fault of the
Company and of such Holder in connection with the statements or omissions which
resulted in such losses, claims, damages or liabilities, as well as any other
relevant equitable considerations. The relative fault of the Company on the one
hand and of any Holder on the other shall be determined by reference to, among
other things, whether the untrue or alleged untrue statement of a material fact
or omission or alleged omission to state a material fact relates to information
supplied by the Company or by such Holder.

        In no event shall the obligation of any Indemnifying Party to contribute
under this Section 7 exceed the amount that such Indemnifying Party would have
been obligated to pay by way of indemnification if the indemnification provided
for under Section 6(a) or 6(b) hereof had been available under the
circumstances.

        The Company and the Holders agree that it would not be just and
equitable if contribution pursuant to this Section 7 were determined by pro rata
allocation (even if the Holders or the underwriters were treated as one entity
for such purpose) or by

                                       14
<PAGE>   15

any other method of allocation which does not take account of the equitable
considerations referred to in the immediately preceding paragraphs. The amount
paid or payable by an Indemnified Party as a result of the losses, claims,
damages and liabilities referred to in the immediately preceding paragraphs
shall be deemed to include, subject to the limitations set forth above, any
legal or other expenses reasonably incurred by such Indemnified Party in
connection with investigating or defending any such action or claim.
Notwithstanding the provisions of this section, no Holder or underwriter shall
be required to contribute any amount in excess of the amount by which (i) in the
case of any Holder, the net proceeds received by such Holder from the sale of
Registrable Securities pursuant to the registration statement in question or
(ii) in the case of an underwriter, the total price at which the Registrable
Securities purchased by it and distributed to the public were offered to the
public exceeds, in any such case, the amount of any damages that such Holder or
underwriter has otherwise been required to pay by reason of such untrue or
alleged untrue statement or omission or alleged omission. No person guilty of
fraudulent misrepresentation (within the meaning of Section 11(f) of the
Securities Act) shall be entitled to contribution from any person who was not
guilty of such fraudulent misrepresentation.

        8. Survival. The indemnity and contribution agreements contained in
Sections 6 and 7 and the representations and warranties of the Company referred
to in Section 2(d)(i) shall remain operative and in full force and effect
regardless of (i) any termination of this Agreement or the Purchase Agreement or
any underwriting agreement, (ii) any investigation made by or on behalf of any
Indemnified Party or by or on behalf of the Company, and (iii) the consummation
of the sale or successive resales of the Registrable Securities.

        9. Information by Holders. Each Holder shall furnish to the Company such
information regarding such Holder and the distribution and/or sale proposed by
such Holder as the Company may reasonably request in writing and as shall be
reasonably required in connection with any registration, qualification or
compliance referred to in this Agreement. The intended method or methods of
disposition and/or sale (Plan of Distribution) of such securities as so provided
by such Investor shall be included without alteration in the Registration
Statement covering the Registrable Securities and shall not be changed without
written consent of such Holder.

        10. Replacement Certificates. The certificate(s) representing the Common
Shares held by any Investor (or then Holder) may be exchanged by such Investor
(or such Holder) at any time and from time to time for certificates with
different denominations representing an equal aggregate number of Common Shares,
as reasonably requested by such Investor (or such Holder) upon surrendering the
same. No service charge will be made for such registration or transfer or
exchange. Upon receipt by the Company of evidence reasonably satisfactory to it
of the loss, theft, destruction or mutilation of any certificate representing
the Preferred Shares or the Warrants, or the underlying Common Shares of any of
the foregoing, and, in the case of loss, theft or destruction, of indemnity
reasonably satisfactory to it, or upon surrender and cancellation of such
certificate if

                                       15
<PAGE>   16

mutilated, the Company will make and deliver a new certificate of like tenor at
no charge to the holder.

        11. Transfer or Assignment. Except as otherwise provided herein, this
Agreement shall be binding upon and inure to the benefit of the parties and
their successors and permitted assigns. The rights granted to the Investors by
the Company under this Agreement to cause the Company to register Registrable
Securities may be transferred or assigned (in whole or in part) to a transferee
or assignee of Preferred Shares, Warrants or Registrable Securities, and all
other rights granted to the Investors by the Company hereunder may be
transferred or assigned to any transferee or assignee of any Preferred Shares,
Warrants or Registrable Securities; provided in each case that the Company must
be given written notice by the such Investor at the time of or within a
reasonable time after said transfer or assignment, stating the name and address
of said transferee or assignee and identifying the securities with respect to
which such registration rights are being transferred or assigned; and provided
further that the transferee or assignee of such rights agrees in writing to be
bound by the registration provisions of this Agreement.

        12. Miscellaneous.

            (a) Remedies. The Company and the Investor acknowledge and agree
that irreparable damage would occur in the event that any of the provisions of
this Agreement were not performed in accordance with their specific terms or
were otherwise breached. It is accordingly agreed that the parties shall be
entitled to an injunction or injunctions to prevent or cure breaches of the
provisions of this Agreement and to enforce specifically the terms and
provisions hereof, this being in addition to any other remedy to which any of
them may be entitled by law or equity.

            (b) Jurisdiction. Each of the Company and the Investor (i) hereby
irrevocably submits to the exclusive jurisdiction of the United States District
Court, the New York State courts and other courts of the United States sitting
in New York County, New York for the purposes of any suit, action or proceeding
arising out of or relating to this Agreement and (ii) hereby waives, and agrees
not to assert in any such suit action or proceeding, any claim that it is not
personally subject to the jurisdiction of such court, that the suit, action or
proceeding is brought in an inconvenient forum or that the venue of the suit,
action or proceeding is improper. The Company and the Investor consent to
process being served in any such suit, action or proceeding by mailing a copy
thereof to such party at the address in effect for notices to it under this
Agreement and agrees that such service shall constitute good and sufficient
service of process and notice thereof. Nothing in this paragraph shall affect or
limit any right to serve process in any other manner permitted by law.

            (c) Notices. Any notice or other communication required or permitted
to be given hereunder shall be in writing by facsimile, mail or personal
delivery and shall be effective upon actual receipt of such notice. The
addresses for such communications shall be:

                                       16
<PAGE>   17

        to the Company:

               Stan Lee Media, Inc.
               15821 Ventura Boulevard
               Suite 675
               Encino, California   91436
               Telephone:  (818) 461-1757
               Facsimile:  (818) 728-9336
               Attention:  General Counsel

        to either Investor:

               c/o Elliott Management Corporation
               712 Fifth Avenue, 36th Floor
               New York, New York  10019
               Telephone:  (212) 506-2999
               Facsimile:  (212) 489-8321
               Attention:  Mr. Daniel Gropper

        with copies to:

               Kleinberg, Kaplan, Wolff & Cohen, P.C.
               551 Fifth Avenue
               New York, New York 10176
               Telephone:  (212) 986-6000
               Facsimile:  (212) 986-8866
               Attention:  Stephen M. Schultz, Esq.

Any party hereto may from time to time change its address for notices by giving
at least five days' written notice of such changed address to the other parties
hereto.

           (d) Indemnity. Each party shall indemnify each other party against
any loss, cost or damages (including reasonable attorney's fees) incurred as a
result of such parties' breach of any representation, warranty, covenant or
agreement in this Agreement, including any enforcement of this indemnity.

           (e) Waivers. No waiver by any party of any default with respect to
any provision, condition or requirement of this Agreement shall be deemed to be
a continuing waiver in the future or a waiver of any other provision, condition
or requirement hereof, nor shall any delay or omission of any party to exercise
any right hereunder in any manner impair the exercise of any such right accruing
to it thereafter. The representations and warranties and the agreements and
covenants of the Company and each Investor contained herein shall survive the
Closing.

                                       17
<PAGE>   18

           (f) Execution in Counterparts. This Agreement may be executed in two
or more counterparts, all of which shall be considered one and the same
agreement, it being understood that all parties need not sign the same
counterpart. A facsimile signature shall be considered due execution and binding
upon such signatory with that same force and effect as if the signature were an
original.

           (g) Publicity. The Company agrees that it will not disclose, and will
not include in any public announcement, the name of the Investor without its
consent, unless and until such disclosure is required by law or applicable
regulation, and then only to the extent of such requirement. The Company agrees
to deliver to the Investor a copy of any public announcement regarding the
matters covered by this Agreement or any agreement or document executed herewith
or any other public announcement including the name of the Investor, prior to
the publication of such announcements.

           (h) Entire Agreement; Amendment. This Agreement, together with the
Purchase Agreement, the Certificate, the Warrants and the agreements and
documents contemplated hereby and thereby, contains the entire understanding and
agreement of the parties, and may not be amended, modified or terminated except
by a written agreement signed by the Company plus the Holders of 50% of the
Preferred Shares issued under the Purchase Agreement to that date and by Elliott
and Westgate (provided that Elliott and Westgate hold collectively 25% of the
outstanding Preferred Shares or underlying shares); provided that for the
purposes of this Section 12(h) the Holders of Common Shares (including Elliott
and Westgate) still entitled to registration rights under this Agreement will be
deemed to still be Holders of that number of Preferred Shares which were
converted into such number of Common Shares issued upon conversion which are
still held by them.

           (i) Governing Law. This Agreement and the validity and performance of
the terms hereof shall be governed by and construed in accordance with the laws
of the State of New York applicable to contracts executed and to be performed
entirely within such state, except to the extent that the law of the State of
Delaware regulates the Company's issuance of securities.

           (j) Jury Trial. EACH PARTY HERETO WAIVES THE RIGHT TO A TRIAL BY
JURY.

           (k) Titles. The titles used in this Agreement are used for
convenience only and are not to be considered in construing or interpreting this
Agreement.

           (l) No Strict Construction. The language used in this Agreement will
be deemed to be the language chosen by the parties to express their mutual
intent, and no rule of strict construction will be applied against any party.

                            [Signature Page Follows]

                                       18
<PAGE>   19

        In Witness Whereof, the parties hereto have caused this Agreement to be
duly executed as of the date first above written.

                             STAN LEE MEDIA, INC.

                             By:
                                ---------------------------------------
                             Name:
                             Title:

                             WESTGATE INTERNATIONAL, L.P.

                             By: Elliott International Capital Advisors Inc.,
                                 as Attorney-in-Fact

                                     By:
                                        ------------------------------
                                        Name:
                                        Title:

                             ELLIOTT ASSOCIATES, L.P.

                             By:
                                ---------------------------------------
                             Name:
                             Title:

                                       19

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