CASE NO. CVUJ 11-1163 Amended Cross Complaint Final

1
DOHN R. HENION, State Bar No. 095118

2 ATTORNEY AT LAW
3 P.O. Box 886

Crescent City, CA 95531
4 Telephone: (707) 464-9761
5 Jonathan C. Uretsky, Esq.
Phillipson & Uretsky, LLP
6 111 Broadway, 8th Floor
New York, NY 10006
7 Telephone: ( 212) 571-1164
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Attorneys for Defendants, Media Dynamics, Barth, Sandmann & Ultavision
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10
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Superior Court Of The State Of California
12 County Of Del Norte
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POW ENTERTAINMENT, INC., a CASE NO. CVUJ 11-1163
14 California corporation,
15 Plaintiff, AMENDED CROSS-COMPLAINT FOR:
(1) FRAUD IN THE INDUCEMENT;
16 (2) INTENTIONAL
v. MISREPRESENTATION;
17 (3) CONCEALM ENT OF M ATERIAL
MEDIA DYNAMICS, INC. a Delaware FACTS;
18 Corporation; VALERIE BARTH, an (4) NEGLIGENT MISREPRESENTATIONS;
19 individual; RONALD SANDMANN, an (5) BREACH OF W RITTEN CONTRACT
individual; ULTAVISION, INC., a (6) BREACH OF GOOD FAITH AND FAIR
20 Colorado corporation, and DOES DEALING
(7) VIOLATION OF UCC SECTION 8-
21 1through 10, inclusive, 403(b)
(8) SECURITIES EXCHANGE ACT OF 1934
22 Defendants. SECTION 10-B5 AND RULE 10-B5

23 MEDIA DYNAMICS, INC. a Delaware (9) SECURITIES ACT OF 1933 SECTION
17(A)
Corporation; VALERIE BARTH, an
24 (10) CALIF. CORP. C. 24501
individual; ULTAVISION INC., a (11) CALIF. CORP. C. 24501
25 Colorado Corporation, (12) SECTION 11 OF THE
SECURITIES ACT OF 1933
26 Cross-Complainants, (13) BREACH OF FIDUCIARY DUTY
27 v. (14) FOR CONVERSION AGAINST
POW ENTERTAINMENT INC., a POW AND MARSHALL
28 California Corporation; STAN LEE, an (15) RECISSION DUE TO FRAUD
(16) RECISSSION DUE TO
29 individual; Arthur Lieberman, an PLAINTIFFS BREACH OF
individual; Gill Champion, an individual; CONTRACT
30 POW! ENTERTAINMENT LLC, a (17) RECISSION (Mutual Mistake)
31 Delaware limited liability company; (18) UNJUST ENRICHMENT
QED PRODUCTIONS LLC, a (19) RECISSION OF THE
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1 Delaware limited liability company; and PROMISSORY NOTE SECURED BY
ROES 1 through 100, inclusive. DEED OF TRUST
2 Cross-Defendants. (20) QUANTUM M ERUIT
(21) DECLARATORY RELIEF
3 (22) SLANDER OF TITLE
(23) PETITION FOR REMOVAL OF
4 POW BOARD OF DIRECTORS
5 (24) INDEM NIFICATION
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1 TABLE OF CONTENTS
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I. PRELIMINARY STATEMENT ................................................................. 1
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II. FACTS COMMON TO ALL CAUSES OF ACTION ................................ 3
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A. Parties ................................................................................................. 3
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6 1. Ken Williams Resigned Leaving No Duly
Authorized Representative To Receive Notice Of
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Speak On SLMI's Behalf ......................................................... 4
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2. Junko Kobayashi Was Not A Legally Authorized
9 Representative Of SLMI Who Could Act Or
10 Receive On SLMI'S Behalf ..................................................... 7
11 B. The Untold Story: How Stan Lee Used POW! To Take
12 Intellectual Property and Valuable Arturion Stock ............................. 9
13 (1) SLMI Commences a Chapter 11 Bankruptcy............................
14 (2) ....Lee, Lieberman, and Champion Divert Intellectual Property
15 From SLMIs Bankrutpcy Estate to QED/POW,
16 But The Transfer Is Ultimately Declared Void .........................
17 (3) Lee, Leiberman, Champion, POW! and others
Use The Promise That POW! Owned and
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Controlled SLMIs Intellectual Property In Order
19 to Induce Arturion and its shareholders to Merge
20 With Pow! and Transfer Arturion Shares for
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Shares in POW! .........................................................................
22 (4) Lees Assignment Of His Intellectual Property,
including the Lee Characters, To SLMI Is Still
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Enforceable Rendering Void Any Subsequent
24 Assignments And Rendering The Representations
25 Lee and POW! Made To Plaintiff False And
Misleading. ................................................................................
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27 C. Background Facts Relating to the Conspiracy Alleged
Herein ............................................................................................... 12
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D. The Agreements Between CROSS-COMPLAINANTS
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and CROSS-DEFENDANTS ...............................................................
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(1) The Reorganization Agreement December 9,
31 2003 ...........................................................................................
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1 (2) Amendments to the Reorganization Agreement ......................
2 (i) Amendment #1 May 5, 2004.....................................
3 (ii) Amendment #2 July 22, 2005 ...................................
4 (iii) The Consulting Agreement ...........................................
5 E. The Failure to Authorize Removal of the Legend
6 Condition .............................................................................................
7 F. Facts Relating to Equitable Estoppel ....................................................
8 G. Facts Related to the Fiduciary Responsibilities that
9 CROSS-DEFENDANTS owed to CROSS-
10 COMPLAINANTS ...............................................................................
11 H. Facts Related to the Absence of Lieberman from the
State ......................................................................................................
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I. Facts Related to Adverse Domination ..................................................
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J. The Corporate and LLC Entities are Shams .........................................
15 III. CROSS-CLAIMANTS CAUSES OF ACTION ........................................ 14
16 First Cause of Action
Fraud in violation of Section 10(b) of the Securities Exchange Act and Rule 10b-5,
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15 USC 78J AND 17 CFR 240.10B-5 as against Cross-Defendants LEE,
18 LIEBERMAN and CHAMPION as controlling persons under Exchange Act
Section 20(a) ......................................................................................................................
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Second Cause of Action
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Fraud in Violation of California Corporate Securities Law of 1968; Corporations
21 Code Section 25000, et seq. (including Sections 25401 and 25501) .................................
22 Third Cause of Action
23 Fraud In the Inducement ....................................................................................................
24 Fourth Cause of Action
25 Breach of Written Contract ................................................................................................
26 Fifth Cause of Action
27 Breach of Written Contract December 9, 2003 Agreement ............................................
28 Sixth Cause of Action
29 Breach of Written Contract April 30, 2006 Agreement ..................................................
30 Seventh Cause of Action
31 Violation Of Uniform Commercial Code 8-401 And 8-407 Against All Cross-
Defendants Stock Blocking .............................................................................................
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1 Eighth Cause of Action
2 Breach Of Fiduciary Duty Against All Defendants ...........................................................
3 Ninth Cause of Action
4 Conversion .........................................................................................................................
Tenth Cause of Action
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Rescission Due to Fraud ....................................................................................................
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Eleventh Cause of Action
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Rescission Due to Plaintiffs Breach of Contract ..............................................................
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Twelfth Cause of Action
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Rescission (Mutual Mistake) .............................................................................................
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Thirteenth Cause of Action
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Negligent Misrepresentation ..............................................................................................
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Fourteenth Cause of Action
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Breach of the Implied Covenant of Good Faith and Fair Dealing .....................................
14 Fifteenth Cause of Action
15 Restitution and Unjust Enrichment ....................................................................................
16 Sixteenth Cause of Action
17 Rescission of the Promissory Note Secured by Deed of Trust Arising from
18 Amendment 2 on the Basis of Violations of Statutory Duties ...........................................
19 Seventeenth Cause of Action

Amendment 2 on the Basis of Negligent Disclosure .........................................................
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Eighteenth Cause of Action
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The Promissory Note was a Partially Integrated Instrument .............................................
23 Nineteenth Cause of Action
24 For Cancelation of the $1,150,000 Promissory Note Secured by Deed of Trust ...............
25 Twentieth Cause of Action
27 Amendment 2 .....................................................................................................................
28 Twenty-First Cause of Action

Quantum Meruit .................................................................................................................
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Twenty-Second Cause of Action
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Declaratory Relief ..............................................................................................................
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1 Twenty-Third Cause of Action
2 Slander of Title...................................................................................................................
3 Twenty-Fourth Cause of Action
4 Petition for Removal of POW Board of Directors .............................................................

Twenty-Fifth Cause of Action
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Indemnity Against All Cross-Defendants ..........................................................................
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1 Cross-complainants, Media Dynamics Inc., Ultavision Inc., Valerie Barth and Ron
2 Sandmann, (herein referred to as Cross-complainants), complain and allege as follows:
3 I.
4 PRELIMINARY STATEMENT
5 Cross-complainants have been given no choice but to pursue their claims against Cross-
6 defendants named herein in light of Cross-defendants fraud and abusive business practices.
7 Instead of working together along with the other past supporters of Stan Lee, Cross-defendants
8 have made it very clear that in their world of comic-book publishing there is no room for
9 partnership, but, instead, it is a winner-take-all scenario where hard-ball tactics are the norm.
10 This is not what Cross-complainants signed on for. Instead, they thought they would assist Stan
11 Lee in creating a new company where artists would be given the ability to create wonderful new
12 characters for a new generation of readers and everyone involved would do well by doing good.
13 That, unfortunately, turned out to be the biggest fantasy of all. Now, Gill Champion, Arthur
14 Lieberman and the rest of the people acting in Stan Lees name at POW! and QED, are intent
15 only on squeezing out Stan Lees former friends and colleagues in order to further their own
16 interests and make themselves wealthy beyond their worth.
17 By this Cross-complaint, Cross-complainants simply seek to vindicate their rights and
18 correct the improper and abusive practices that have become the culture at the companies cross-
19 complainants previously worked so hard at creating and nurturing. In the hope that the truth will
20 come out and they will be heard, Cross-complainants allege as set forth below:
21 II.
22 FACTS COMMON TO ALL CAUSES OF ACTION
23 A. Parties
24 1. CROSS-COMPLAINANT, Media Dynamics, Inc. (MDI) is a Delaware
25 corporation with a principal place of business at Oak View, California.
26 2. CROSS-COMPLAINANT, Ultavision, Inc. (ULTAVISION) is a Colorado
27 corporation with its principal place of business in Denver, Colorado.
28 3. CROSS-COMPLAINANT, Valerie Barth (BARTH) is an individual and a
29 citizen and resident of the State of California and is the sole officer and shareholder of MDI. It is
30 alleged in the complaint on file herein that BARTH is the alter ego of MDI, SANDMANN and
31 ULTAVISION. Although plaintiffs contention in this regard is expressly denied, should the
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1 court determine for any reason that she is the alter ego of any other person or entity, BARTH
2 steps into the shoes of that entity and thereby acquires that person or entitys rights against
3 CROSS-DEFENDANTS asserted herein. For that purpose, and that purpose only, BARTH joins
4 herself as a cross-complainant in this cross-complaint.
5 4. Ron Sandmann (SANDMANN) is an individual and a citizen and resident of the
6 State of California and is the sole officer and shareholder of ULTAVISION. It is alleged in the
7 complaint on file herein that Sandmann is the alter ego of MDI, Barth and Ultavision. Although
8 plaintiffs contention in this regard is expressly denied, should the court determine for any reason
9 that he is the alter ego of any other person or entity, Sandmann steps into the shoes of that entity
10 and thereby acquires that person or entities rights against CROSS-DEFENDANTS asserted
11 herein. For that purpose, and that purpose only, Sandmann joins himself as a cross-complainant in
12 this cross-complaint.
13 5. Cross-Defendant, POW! ENTERTAINMENT, INC. (POW) (formerly known
14 as Arturion Entertainment, Inc. [ARUR]) is a Delaware corporation. POW has at all relevant
15 times conducted business and has had a principal office located within Ventura and Los Angeles
16 Counties, California.
17 6. Cross-Defendant, POW! ENTERTAINMENT, LLC (POW LLC) is a Delaware
18 limited liability company. POW LLC has at all relevant times conducted business and has had a
19 principal office located within Los Angeles County, California.
20 7. QED PRODUCTIONS, LLC (QED) is a Delaware limited liability company.
21 QED has at all relevant times conducted business and has had a principal office located within
22 Los Angeles County, California. It was alleged that it was principally formed to take title to the
23 bankruptcy assets of SLMI.
24 8. Cross-Defendant, STANLEY MARTIN LIEBER, A.K.A. STAN LEE (LEE) is
25 an individual and a citizen and resident of the State of California. LEE purports to be an
26 American comic book writer, editor, actor, producer, publisher, television personality, and the
27 former president and chairman of Marvel Worldwide Inc. In collaboration with several artists, he
28 claims to have co-created Spider-Man, the Hulk, the X-Men, the Fantastic Four, Iron Man, Thor,
29 Daredevil, Doctor Strange and others.
30 9. Cross-Defendant, Arthur Lieberman, (LIEBERMAN) is an individual and a
31 citizen and resident of the State of New York. All allegations relating to conspiracy in this cross-
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1 complaint relate to LIEBERMANs acts as a managing owner of POW LLC, a controlling
2 shareholder, officer and director of POW and, until leave is obtained from this court, do not relate
3 to his actions as an attorney for the various persons and entities including, but not limited to Stan
4 Lee, SLMI, POW LLC and POW.
5 10. Cross-Defendant, GILL CHAMPION (CHAMPION) is an individual and a
6 citizen and resident of the State of California.
7 11. CROSS-COMPLAINANTS are unaware at this time of the true names and
8 capacities, whether individual, associate, corporate or otherwise, of the cross-defendants sued
9 herein as ROES 1 through 100, inclusive, and therefore, CROSS-COMPLAINANTS sues said
10 defendants by such fictitious names pursuant to California Code of Civil Procedure section 474.
11 CROSS-COMPLAINANTS are informed and believe, and upon that basis allege: (i) that each of
12 CROSS-DEFENDANTS ROES 1 through 100, inclusive, has and/or is assisting, aiding and
13 abetting the named cross-defendants in carrying out the activities complained of herein, or
14 otherwise participated in, contributed to, or is legally responsible in some other manner for the
15 events and occurrences hereinafter alleged, (ii) that CROSS-COMPLAINANTS damages as
16 alleged herein were proximately caused thereby, and that each such fictitiously named CROSS-
17 DEFENDANT is liable to CROSS-COMPLAINANTS thereon. CROSS-COMPLAINANTS will,
18 with leave of court, amend this complaint to set forth the true names and capacities of defendant
19 ROES 1 through 100, inclusive, when the same have been ascertained.
20 12. CROSS-COMPLAINANTS are informed and believe, and upon that basis allege,
21 that at all relevant times mentioned herein, cross-defendants POW, POW LLC, LEE,
22 LIEBERMAN, CHAMPION and ROES 1 through 100, inclusive, and each of them (hereinafter
23 referred to individually and collectively as "Cross-Defendants"), were principals, officers,
24 directors, agents, employees, servants, representatives, alter egos, corporate affiliates, partners,
25 joint venturers or co-conspirators of each other defendant and in such capacities participated in
26 the acts or conduct alleged herein and incurred liability to CROSS-COMPLAINANTS therefore.
27 CROSS-COMPLAINANTS are further informed and believe, and upon that basis allege, that in
28 doing the things hereinafter alleged, Cross-Defendants were each acting within the course and
29 scope of their respective authority as such principals, officers, directors, agents, employees,
30 servants, representatives, alter egos, corporate affiliates, partners, joint venturers or co-
31 conspirators, and with the permission and consent of their co-cross-defendants.
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1 13. Any reference made herein to any corporate cross-defendant named herein, or to
2 Cross-Defendants herein which shall include a corporate cross-defendant in performing or failing
3 to perform any act, shall be construed to mean that the officers, directors, control persons,
4 supervisors, managers, employees, and agents of said corporate defendant performed, failed to
5 perform, authorized, ratified, or permitted such acts or failures to act while engaged in the
6 furtherance of the business or operations of said corporate defendant and while acting within the
7 course and scope of their corporate authority and employment.
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9 B. The Untold Story: How Stan Lee Used POW! To Take Intellectual Property and
10 Valuable Arturion Stock.
11 14. In order to provide a complete picture of the complex corporate activities in this
12 matter, one must understand the background and history surrounding Stan Lees intellectual
13 property. Accordingly, Cross-complainants allege upon information and belief:
14 15. In July 1998, the comic-book company known as Marvel then in bankruptcy
15 rejected Lees 1994 employment contract and, as a result, Lee regained his rights in characters
16 such as Spider-Man, The Incredible Hulk, The X-Men, Iron Man, The Fantastic Four, Thor,
17 Daredevil, and many others (the Lee Characters).
18 16. Also in 1998, after Lee regained ownership of his Lee Characters, on or about
19 October 13, 1998, LEE and his associate, Peter Paul, incorporated Stan Lee Entertainment, Inc., a
20 Delaware Corporation (SLE). In April 1999, SLE merged with a Delaware corporation named
21 Stan Lee Media, Inc. the resulting company being named Stan Lee Media Inc. (SLMI-DE).
22 SLMI-DE then entered into a transaction with a Colorado corporation named Stan Lee Media,
23 Inc. (SLMI), which resulted in SLMI-DE becoming a wholly owned subsidiary of SLMI
24 (SLMI, SLMI-DE and SLMIs predecessors in interest are hereinafter referred to as SLMI).
25 17. In October 1998, Lee assigned all of his intellectual property and rights to SLMI in
26 a written assignment (the October 1998 Agreement).
27 18. In exchange for Lees transfer of his intellectual property to SLMI, Lee became
28 SLMIs Chairman and received managerial control of SLMI.
29 19. Less than one month after executing the October 1998 Agreement, Lee executed a
30 similarly worded agreement with Marvel in November 1998.
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1 20. SLMI had initial success, achieving a market capitalization of more than $300
2 million, but then suffered from mismanagement and other internal problems, including the
3 malfeasance of certain of its officers, and an inability to perform.
4 21. SLMIs stock price tumbled and it looked that the Company would soon require
5 the protections of the bankruptcy court.
6
7 (1) SLMI Commences a Chapter 11 Bankruptcy.
8 22. On January 24, 2001, Lee authorized payment of $50,000 from SLMIs treasury to
9 engage bankruptcy counsel.
10 23. On January 30, 2001, Lees and SLMIs attorney, Arthur M. Lieberman, sent a
11 letter to SLMIs chief executive officer on behalf of Lee that alleged a breach of contract, but
12 which actually waived Lees rights, if any, to challenge the assignment of Lees intellectual
13 property to SLMI. The letter stated that Lee will continue to perform services to the company to
14 assure the equitable distribution of assets to creditors and stockholders .
15 24. On February 16, 2001, SLMI filed a short-form bankruptcy petition with the
16 United States Bankruptcy Court for the Central District of California. No one filed a list of
17 shareholders of SLMI, even though Rule 1007(a)(3) of the Federal Rules of Bankruptcy
18 Procedure required the debtor to file such a list within 15 days after commencing the case.
19
20 (2) Lee, Lieberman, and Champion Divert Intellectual Property From SLMIs
21 Bankruptcy Estate to QED/POW, But The Transfer Is Ultimately Declared Void.
22 25. In November 2001, Lee, Champion and Lieberman created POW LLC as a
23 Delaware limited liability company. According to POW, POW LLC was created to [create and
24 license] intellectual properties for the entertainment industry and to [leverage] the creative
25 output of Stan Lee.
26 26. On November 8, 2001, Lee, Champion and Lieberman created QED as a Delaware
27 limited liability company, a wholly-owned subsidiary of POW LLC. According to QED, QED
28 was created to exploit the assets from SLMIs bankruptcy. The initial member of QED was Stan
29 Lee.
30 27. In November 2001, Lee, Champion and Lieberman created POW LLC as a
31 Delaware limited liability company. According to POW, POW LLC was created to [create and
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1 license] intellectual properties for the entertainment industry and to [leverage] the creative
2 output of Stan Lee.
3 28. On May 27, 2004, Lee, Champion and Lieberman created POW! as a Delaware
4 corporation, changing its name from Arturion Entertainment, Inc. According to POW!, POW!
5 was created to [create and license] intellectual properties for the entertainment industry and to
6 [leverage] the creative output of Stan Lee.
7 29. Upon information and belief, the sole purpose of creating these entities was to use
8 them as vehicles to take and exploit SLMIs intellectual property notwithstanding the fact that
9 SLMI was in bankruptcy reorganization and needed those assets to provide recoveries to SLMIs
10 creditors and shareholders. In April 2002, Cross-Defendants Lieberman, Kobayashi and
11 Champion were working with Lee to divert SLMI assets to QED, which they controlled.
12 30. For example, on April 11, 2002, the Bankruptcy Court granted approval for SLMI
13 to sell its own intellectual property to a company called SLC, LLC. That company was to be
14 creatively controlled by Stan Lee. In seeking such approval, bankruptcy counsel for SLMI
15 (acting under the direction of Lee and Cross-Defendants Lieberman and/or Champion as well as
16 Kobayashi) asserted that the sale would resolve a purported dispute between Lee and SLMI
17 regarding the validity of Lees original 1998 contract with SLMI. SLMIs counsel urged the
18 Bankruptcy Court to approve the sale to SLC, LLC to avoid bad blood which will jeopardize
19 future exploitation of the Creative Assets.
20 31. The Creative Assets of SLMI were never transferred to SLC, LLC, however,
21 because no such company was ever formed. Rather, Kobayashi purported to transfer the assets
22 from SLMI to QED. The Superior Court, in a ruling on January 20, 2009, held that the purported
23 transfer to QED was not authorized by the Bankruptcy Court and was, therefore, void as a matter
24 of law because it violated the automatic stay. See Order Denying Plaintiffs Motion for Summary
25 Judgment as to Standing, QED Productions, LLC v. Nesfield, Case No. CV 07-0225 SVW (SSx)
26 (Jan. 20, 2009).
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28 (3) Lee, Leiberman, Champion, POW! and others Used The Promise That POW!
29 Owned and Controlled SLMIs Intellectual Property In Order to Induce Arturion
30 and its shareholders to Merge With POW! and Transfer Arturion Shares for Shares
31 in POW!
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1 32. After improperly taking SLMIs intellectual property via the now voided QED
2 transaction in April 2002, on December 9, 2003, Cross-complainant MDI and Valerie Barth,
3 president of MDI, and Cross-defendant POW! entered into the Reorganization Agreement based
4 upon the representations made in the Private Placement Memorandum (PPM) and the
5 Reorganization Agreement itself. The terms and representations made in the Reorganization
6 Agreement and the PPM are discussed separately below.
7 33. On May 5, 2004, the parties to the Reorganization Agreement entered into
8 Amendment #1 to that agreement. The terms and representations made in Amendment #1 to the
9 Reorganization Agreement are discussed separately below.
10 34. On July 22, 2005, the parties to the Reorganization Agreement entered into
11 Amendment #2 to that agreement. The terms and representations made in Amendment #2 to the
12 Reorganization Agreement are discussed separately below.
13 35. On April 30, 2005 and then on April 30, 2006, Cross-complainant MDI and
14 Valerie Barth, president of MDI, and Cross-defendant POW! entered into the Consulting
15 Agreements. Under the Consulting Agreements, MDI would provide POW! with public relations
16 services. The terms and representations made in the Consulting Agreement are discussed
17 separately below.
18
19 (4) Lees Assignment Of His Intellectual Property, including the Lee Characters, To
20 SLMI Is Still Enforceable Rendering Void Any Subsequent Assignments And
21 Rendering The Representations Lee and POW! Made To Cross-complainants False
22 And Misleading.
23 36. In paragraph 4(a) of the October 1998 Agreement, Stan Lee assigns, conveys and
24 grants to SLMI, forever, all rights, title and interest that Stan Lee has or controlled then and in the
25 future:
26 4. a) I assign, convey and grant to the Company forever, all right, title and interest
27 I may have or control, now or in the future, in the following: Any and all ideas,
28 names, titles, characters; symbols, logos, designs, likenesses, visual
29 representations, artwork, stories, plots, scripts, episodes, literary property, and the
30 conceptual universe related thereto, including my name and likeness (the
31 Property) which will or have been in whole or part disclosed in writing to,
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1 published, merchandised, advertised, and/or licensed by Company, its affiliates
2 and successors in interest and licensees (which by agreement inures to the
3 Companys benefit) or any of them and any copyrights, trademarks, statutory
4 rights, common law, goodwill, moral rights and any other rights whatsoever in the
5 Property in any and all media and/or fields, including all rights to renewal or
6 extensions of copyright and make applications or institute suits therefor (the
7 Rights)
8
9 37. Additionally, in paragraph 4 c) in the SLMI Contract, Lee guarantees to the
10 shareholders of SLMI that, subject to a material breach, neither Lee nor anyone directed by Lee
11 would assert any claim of ownership to these rights:
12 4 c) Subject to a material breach of this agreement, I will never file with the U.S.
13 Copyright or Patent and Trademark Office or any governmental or public agency,
14 and will never assert or assist others in asserting on my behalf or in claiming rights
15 through me, any claim to ownership of the Rights in the Property, or in making
16 any objection to Companys complete and unrestricted right to use and exploit said
17 Property or Rights in any form, manner or medium Company may desire.
18
19 38. To this day, there was never an adjudicated breach of this SLMI Contract.
20 39. In fact, nearly a year after executing the SLMI Contract, in October 1999, Lee
21 executed an Amendment to his SLMI Contract. This Amendment verifies the validity of Lees
22 first SLMI Contract.
23 40. Nonetheless, Lee and his partners, Gill Champion and Arthur Lieberman, later
24 claimed they and POW owned the rights to the Lees intellectual properties in direct
25 contravention of the SLMI contract that Lee signed before purporting to sign over the same rights
26 to POW
27 41. Specifically, the rights Lee assigned under the SLMI Contract were the same rights
28 POW and Lee represented to POW shareholders that Lee granted to POW, which representations
29 Lee used to induce shareholders of Arturion Entertainment Inc. to transfer to Stan and Joan Lee,
30 Arthur Lieberman (and the Lieberman Family) and Gill Champion more than forty million shares
31 of common stock then trading at approximately $2.00 per share.
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1 42. At the time POW and Lee made these representations; ownership of Lees
2 intellectual property was in dispute, but POW and those in control of POW, including Lee,
3 Lieberman, Champion and other Cross-Defendants did not disclose this contract or the fact that it
4 was being disputed by SLMI shareholders.
5 43. POWs management represented to Arturion that POW owned Lees intellectual
6 property rights and never disclosed any prior assignments or disputes concerning these rights. In
7 fact, POW provided Arturion and other potential investors a copy of an agreement between POW
8 and Lee purporting to grant POW Lees intellectual property.
9 44. See the below excerpts from Stan Lee Assignment and Employment contract with
10 POW:
11 4. ASSIGNMENT BY STAN LEE. In consideration for the foregoing Stan Lee
12 agrees as follows:
13 (a) To assign, convey and grant to POW! forever, all right, title and interest
14 Stan Lee may have or control, now or in the future, in the following: Any and all
15 ideas, names, titles, characters, symbols, logos, designs, likenesses, visual
16 representations, artwork, stories, plots, scripts, episodes, literary property, and the
17 conceptual universe related thereto, including my name and likeness (the
18 Property) which will or have been in whole or part disclosed in writing to,
19 published, merchandise, advertised, and/or licensed by POW!, its affiliates and
20 successor in interests and licensees (which by agreement inures to POW!s benefit)
21 or any of them and any copyright, trademarks, statutory rights, common law,
22 goodwill, moral rights and any other rights whatsoever in the Property in any and
23 all countries and in all media and/or fields, including all rights to renewal or
24 extensions of copyright (the Rights).
25 (b) To assign, convey and grant to POW! forever, all right title and interest that
26 Stan Lee may have in any income arising from the ownership of a Membership
27 interest in QED Productions LLC (QED) or arising from the sale of the
28 ownership of such Membership Interest. QED (or any other company so formed) is
29 formed to receive the intellectual property from Stan Lee Media. Stan Lee
30 represents and warrants that he will not cause or permit any ownership interest to
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1 be issued to any other party without the consent of Managers of POW! other than
2 Stan Lee.
3
4 45. In late 2003 Arturion Entertainment Inc. of which CROSS-COMPLAINANT
5 Media Dynamics was the controlling shareholder, Valerie Barth was the President, UltaVision
6 Inc. was a minority shareholder and Ron Sandmanns only involvement was as the sole officer
7 and director of UltaVision Inc., was approached by Stan Medley on behalf of POW!
8 Entertainment Inc. to solicit Arturion shareholders to consider a reverse merger and acquisition
9 by the iconic Stan Lees new company POW! Entertainment LLC. The purpose of the reverse
10 merger was to enable POW to become a publicly traded company without the lengthy registration
11 process.
12 46. The PPM and its attached Re-organization agreement and other related documents
13 were the cumulative documents that came out of negotiations he made between POW and
14 Arturion.
15 47. These documents memorialized those negotiated agreements between the
16 companies and are the foundational documents that are part and parcel to the subsequent Note and
17 Deed of Trust that is the subject of this litigation.
18 48. Before being approached in regard to the reverse merger, none of the CROSS-
19 COMPLAINANTS had ever heard of Stan Lee Media Inc. and only knew of Stan Lee from his
20 association with Marvel. Marvel was having tremendous success then with the release of Spider-
21 Man, X-Men and other Stan Lee created character franchises that we all grew up with as part of
22 the Marvel Universe. Stan Lee was credited as the Executive Producer of these films and was
23 listed as Marvels Chairman Emeritus. This information was the extent of what Arturion knew of
24 Lee, POW and Stan Lee Media Inc.
25 49. Arturion relied on the PPM document and other disclosures put out by Stan Lees
26 partners. When talking to Stan Lee himself, he introduced his partners and his company in such a
27 way that one would never think that he may not have owned the rights to his name and brand nor
28 any of the other assets that POW was representing to CROSS-COMPLAINANTS as their core
29 and foundational assets.
30 50. Specifically, at pages 29-30 of the PPM, under the heading, COMPANY
31 ASSETS the PPM asserts:
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1 POWs primary assets are the intellectual property created post-Marvel that are
2 owned by POW, including ownership in perpetuity to Stans name, likeness, brand
3 and signature slogans, Stan Lee Presents, Excelsior, and Stans Soap Box as
4 well as all new properties being developed by POW. In addition the Company has
5 acquired the right to license a substantial amount of the intellectual property
6 created under Mr. Lee at Stan Lee Media, Inc. subject to payment of a percentage
7 of remuneration to the bankrupt estate of Stan Lee Media. (See REVENUE
8 PRODUCING AGREEMENTS and PROJECTS IN DEVELOPMENT above, as
9 well as exhibit A for Brands and Property Descriptions.)
10
11 51. POW further went on to represent that shortly after its formation POW alleges that
12 it acquired a significant amount of the intellectual properties and creative assets from the estate of
13 Stan Lee Media, Inc. (SLM), which was then in bankruptcy and not in a position to market this
14 intellectual property. Under some undisclosed and alleged agreement with SLM, POW
15 purported that it was not required to pay any up front cash consideration, but agreed to give SLM
16 a participation in any revenues realized from the licensing of these SLM assets ranging from a
17 high of 40% to a low of 12%. POW stated that it does not know the value of these assets. POW
18 alleged that it had signed an agreement with Hollywood Licensing, a licensing company, to
19 license and merchandise two of the properties for a term of one year with a one-year extension
20 but gave no assurance that Hollywood Licensing will be able to enter any licensing arrangement
21 for these properties or that the Company will receive any revenues from this arrangement.
22 52. In short, the PPM, represents that POWs primary assets are the intellectual
23 property Lee created post-marvel that are owned by POW including ownership in perpetuity to
24 Stans name, likeness, brand and signature slogans, Stan Lee Presents, Excelsior, and Stans
25 Soap Box.
26 53. POW never disclosed that at the time POW disclosed the PPM to CROSS-
27 COMPLAINANTS Barth and Arturion -- the representation of ownership of the Stan Lee brand
28 was in fact being disputed by Stan Lee Media Inc. Instead, POW claimed they acquired all their
29 asset through an assignment agreement from the bankrupt estate of Stan Lee Media Inc., but, as
30 discussed below, this alleged assignment was later ruled void in federal court when POW tried
31 to exert the rights to the assets against SLM.
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1 54. Had Cross-complaintants and the Arturion shareholders known that the very core
2 assets of POW were being disputed, they never would have entered into the agreement until such
3 time as the dispute was definitively resolved.
4 55. POW failed to make material disclosures in the PPM Exhibits. On page 56 of the
5 PPM and page 10 of the Reorganization Agreement, POW states:
6 4.8 LITIGATION. POW is not and as of the Closing will not be involved in any
7 pending litigation not in the ordinary course of business or governmental
8 investigation or preceding not disclosed to ARUR in the Private Placement
9 Memorandum attached as Exhibit H hereto, and to the knowledge of the POW
10 Members no litigation or governmental investigation or proceeding beyond the
11 ordinary course of business is threatened against POW.
12
13 56. The above disclosure is false and misleading as POW principals knew of the
14 threatened litigation from SLM shareholders over the rights to the Stan Lee Name and Brand
15 which Stan Lee assigned to Stan Lee Media Inc. prior to the void assignment of the same rights to
16 POW. They concealed this fact to entice and defraud Arturion out of their company and to extort
17 more money from CROSS-COMPLAINANTS MDI and Barth in the form of a promissory note
18 and deed of trust the subject of this litigation.
19 57. Unbeknownst to Cross-complainants, on February 03, 2004, Lieberman, on behalf
20 of Stan Lee Media Inc., applied for and was granted by the United States Patent and Trademark
21 Office an extension to the trademark Stan Lee. The materials submitted to the office listed as
22 the owner of the trademark Stan Lee Media Inc. not POW Entertainment. The timing of this is
23 important because this grant was less than two months after Arthur Lieberman represented to
24 Cross-complaintants that POW Entertainment owned this mark.
25 58. Barth based on the representations made in the PPM and other disclosure
26 documents, concluded that in the best interest of the Arturion shareholders that a merger with the
27 iconic Stan Lee could propel the company to the top of the industry and shareholders would not
28 have to endure the sometimes lengthy process of establishing a relatively new company as a
29 player in the entertainment industry.
30 59. Arturion, after entering into the reverse merger and surrendering to Stan and Joan
31 Lee, Arthur Lieberman and family and Gill Champion some 40,000,000 Arturion shares and the
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1 control of CROSS-COMPLAINANTS company Arturion, a series of events began -- slowly at
2 first -- to materialize demonstrating ultimately that things werent as they were represented.
3 60. CROSS-COMPLAINANT did not discover this dispute until February 2009 when
4 a ruling by Federal Judge Stephen V. Wilson was posted on the internet. In that decision, Judge
5 Wilson voided the purported transfer to POW of the Lee intellectual property.
6 61. In 2009, pursuant to the ruling by Federal Judge Wilson, POW did not have the
7 rights to a large portion of these properties that POWs management falsely claimed POW owned
8 and the remaining property rights they purported POW owned are still currently in litigation. It
9 was these assets that gave value to the POW stock and were the deciding factor that compelled
10 Cross-complainants to enter into the agreements with POW.
11
12 C. Background Facts Relating to the Conspiracy Alleged Herein
13 62. Cross-complainants are informed and believe and upon that basis herein allege:
14 63. Beginning in approximately the year 1998, Lee and ROES 21 through 24,
15 inclusive, and each of them, entered a common plan or scheme thereby conspiring to accomplish
16 by concerted action the criminal or unlawful purpose referred to in this cross-complaint and/or a
17 lawful purpose by criminal or unlawful means referred to in this cross-complaint.
18 64. CROSS-COMPLAINANTS are uncertain of the exact dates that POW, POW
19 LLC, Lieberman, Champion and ROES 25 through 30, inclusive, joined the common plan and
20 scheme as co-conspirators with Lee and ROES 21-30. After joining the conspiracy LEE, POW,
21 POW LLC, LIEBERMAN, CHAMPION and ROES 21 through 30, each willfully, knowingly,
22 oppressively, and maliciously conspired and agreed among themselves to promote the common
23 act and scheme and took acts in furtherance of the common plan or scheme to engage in the
24 tortious conduct alleged in this cross-complaint.
26 that the common plan and scheme generally takes the following forms:
27 66. Capitalizing on the motion picture success of Marvel Worldwide Inc.s (commonly
28 known as Marvel Comics) productions of Spider-Man, X-Men, Daredevil and other characters
29 created or co-created by Lee, and through Lee and his co-conspirators wrongful utilization of
30 duplicate and multiple assignments purporting to create a right to use the Stan Lee name and
31 brand thereby wrongfully inducing others to invest in his business enterprises and/or to profit off
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1 of as income generating sources interested in working with LEE pursuant to the purported
2 assignments.
3 67. Misrepresentation and concealment, in private placement memorandums, orally
4 and through press releases and other such documents that the CROSS-DEFENDANTS have
5 rightful title to certain intellectual property with the intent to deceive investors and in breach of
6 their fiduciary duty to shareholders.
7 68. Misrepresentation and concealment to induce MDI to transfer its controlling
8 ownership of ARUR, which consisted of 35,897,416 shares of common stock for no consideration
9 and to further induce MDI to pay the sum of Five Hundred Thousand Dollars ($500,000) for the
10 right to simply retain 769,250 shares of MDIs own common stock. The note was secured by a
11 deed of trust pledging 28.9 acres of prime real estate that had a value far in excess of the note.
12 69. Misrepresentation and concealment to induce ULTAVISION to transfer 3,550,000
13 shares of common stock in exchange for retention of just 750,000 shares.
14 70. To wrongfully manipulate the number of free trading shares by blocking the
15 release of restrictive legends on POWs common stock for the purpose of inducing the Walt
16 Disney Company and others to invest in POW.
17 71. Misrepresentation and concealment to induce MDI to enter into a subscription
18 agreement to purchase shares of common stock in the amount of Six Hundred Fifty Thousand
19 Dollars ($650,000).
20 72. Misrepresentation and concealment of the lack of adequate capitalization of POW
21 and POW LLC in violation of CROSS-DEFENDANTS fiduciary duty to its shareholders and
22 investors.
23 73. To block ULTAVISION's shares from becoming free trading in an effort to
24 prevent ULTAVISION and other shareholders from being able to finance legal proceedings
25 against POW with the potential proceeds that could be generated by the sale of those shares if
26 they became free trading.
27 74. To conceal and defeat CROSS-COMPLAINANTS's statutory and common law
28 action for damages by assuring CROSS-COMPLAINANTS that if CROSS-COMPLAINANTS
29 and Cross-Defendants did not sue each other for three years that Cross-Defendants would be able
30 to prove that they had ownership to the Stan Lee name and brand; that LEE would ensure that
31
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1 POW would pay all sums owed CROSS-COMPLAINANTS; and that LEE would make sure that
2 he wrote a happy ending to the story.
3 75. To conceal and defeat CROSS-COMPLAINANTS's statutory and common law
4 action for damages by wrongfully failing to approve the release of Rule 144 restrictive legends on
5 ULTAVISIONs 4,148,881 shares of common stock depriving them of the capital required to
6 institute litigation against CROSS-DEFENDANTS. Soon after such wrongful failure to permit
7 the transfer of POW common stock by ULTAVISION the value of the stock reached 87 cents per
8 share with millions of shares trading. ULTAVISION was damaged in the approximate sum of
9 $3,609,526.40 by the aforesaid wrongful act of CROSS-DEFENDANTS.
10 76. To convert POWs common stock owed by CROSS-DEFENDANTS to CROSS-
11 COMPLAINANTS in the continuing concert of action by failing to issue stock that was due to
12 MDI for consulting services.
14 COMPLAINANTS in the continuing concert of action by failing to make a 2-for-1 stock split that
15 was due to MDI for consulting services.
17 COMPLAINANTS in the continuing concert of action by failing to issue stock pursuant to an
18 anti-dilution agreement that was due to MDI for consulting services.
19 79. To convert stock and wrongfully prevent its transfer by failing to comply with the
20 reimbursement of shares to MDI for the shares MDI had to used of its own to effectuate MDIs
21 consulting agreement and the adjunct with CROSS-DEFENDANTS.
22 80. To convert POW stock owed to MDI and ULTAVISION with the common plan
23 and scheme to induce MDI to default on its promissory note secured by deed of trust in order to
24 judicially foreclose on Barths valuable property in a depressed economic market and then obtain
25 a deficiency judgment due to the nature of the depressed market.
26 81. To convert POW stock owed to MDI and block UVs shares from becoming free
27 trading with the common plan and scheme to render CROSS-COMPLAINTS unable to finance
28 the high cost of litigation with CROSS-DEFENDANTS with the intent to force a default
29 judgment in favor of CROSS-DEFENDANTS.
30
31
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1 82. To convert POWs stock owed to MDI to unlawfully harass CROSS-
2 COMPLAINANTS by assisting a third party in litigation against Barth and Sandmann which was
3 caused by Cross-Defendants conversion of MDIs common stock and failure to pay as agreed.
4 83. To block ULTAVISIONs stock long enough so that when it was finally allowed
5 to be traded POWs stock would be rendered virtually worthless.
6 84. Such other and further plans, schemes and acts in furtherance thereto as elsewhere
7 alleged in this cross-complaint.
8 85. The conspiracy is still active; however, the last overt act in furtherance to the
9 conspiracy occurred on January 12, 2012. Sandmann had agreed with Lieberman, with the
10 consent of CROSS-COMPLAINANTS, to settle this litigation. POWs CFO, Bick Le, recorded
11 the terms of the settlement. Lieberman insisted that his attorneys draft the settlement agreement
12 so as to control both the product and the timing that the product was delivered for execution.
13 During the discussions LIEBERMAN indicated that the agreement would be short and sweet
14 and should be ready within a week. Close on the heels of the settlement, counsel for SLMI
15 announced to a federal judge that he would like to produce evidence from a former contractor or
16 employee of POW that related to one of the issues before the court in that matter. This
17 information could have detrimentally affected the decision against POW in that matter.
18 Thereafter the cross-defendants suspected Sandmann as the person that was identified in the
19 federal court proceeding. As a result, cross-defendants delayed the preparation of the settlement
20 agreement to determine the identity of the person who was providing truthful testimony that was
21 adverse to POWs financial interests. Subsequently, Sandmann did execute a declaration that was
22 duly submitted as evidence in the federal SLMI proceedings. Thereafter, POWs legal counsel
23 notified CROSS-COMPLAINANTS that POW had withdrawn from the settlement due to the
24 declaration. The legal counsel expressed that his clients were really bent out of shape because
25 SANDMANN had executed a declaration and that they dont know what he was doing when he
26 signed that. He stated that the declaration changes the situation rather dramatically. He
27 conjectured that SLMI must be paying for the litigation or something. It was communicated if
28 SANDMANN was to continue to settle it will have to be better than the previous offer. That
29 any future resolution of the matter would require substantially more favorable terms toward
30 POW. That any further settlement would have to be in the nature of a retraction. These acts
31 were intended to wrongfully intimidate a witness and also constituted the crime of extortion.
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1 86. As a direct and proximate result of CROSS-DEFENDANTS conspiracy(s) as
2 aforesaid, CROSS-COMPLAINANTS have suffered, and are continuing to suffer, general and
3 special damages in amounts that have not yet been fully ascertained but shall be proven at the
4 time of trial, but which exceed the jurisdictional sum required for unlimited civil proceedings
5 which is the minimum sum of twenty five thousand dollars.
6 87. In undertaking the wrongful conduct alleged in this action, cross-defendants, and
7 each of them, acted willfully, intentionally, maliciously, oppressively, and in conscious disregard
8 of the rights of cross-complainants and of cross-defendants respective obligations to cross-
9 complainants at all times to further cross-complainants respective economic and other interests at
10 the expense and to the damage and injury of cross-complainants.
11 88. Cross-complainants are informed and believe, and upon such information and
12 belief allege, that the acts of cross-defendants set forth herein were, are and continue to be with
13 the knowledge, consent, authorization, participation and ratification of each cross-defendant and
14 their responsible officers, directors and managing agents.
15 89. The aforementioned acts and conduct of cross-defendants, and each of them, have
16 been intentionally and wrongfully performed, and were fraudulent or otherwise tortious,
17 malicious, and oppressive in nature toward the cross-complainants, and each of them, in amounts
18 sufficient to punish each cross-defendant and set them each up as an example for others.
19
20 D. The Agreements Between CROSS-COMPLAINANTS and CROSS-DEFENDANTS
21 (1) The Reorganization Agreement December 9, 2003
22 90. Arturion Entertainment, Inc. (ARUR) was formed in 2001 under the laws of the
23 State of Delaware. It was a publically traded corporation on the Pink Sheets Exchange. In 2003
24 ARUR had issued and outstanding 51,235,000 shares of common stock. From 2002 through 2003
25 its stock traded consistently at $2.00 per share. MDI held 36,666,666 shares of common stock and
26 was its controlling shareholder. UV held 4,300,000 shares of its outstanding stock.
27 91. As of December 9, 2003, MDI owned Thirty Six Million Six Hundred and Sixty-
28 Six Thousand six Hundred and Sixty-Six (36,666,666) shares of ARUR. MDI was ARURs
29 controlling shareholder in that it held 70.9% of ARURs outstanding shares.
30
31
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1 92. As of December 9, 2003, Ultavision owned approximately Four Million Three
2 Hundred Thousand (4,300,000) shares of ARUR. Ultavision had 8.3% of ARURs outstanding
3 shares and was a minority shareholder.
4 93. In late 2003, SANDMANN, ULTAVISIONS sole officer and director was
5 approached by Stan Medley of Artfield Investments Inc., on behalf of POW LLC, to solicit
6 Arturion shareholders to consider a reverse merger and acquisition by LEEs new company
7 POW! Entertainment LLC. Mr. Medley and his team was the same group who also took LEEs
8 former business organizations (SLMI) public through the same process of a reverse merger. Mr.
9 Medley represented to CROSS-COMPLAINANTS that he and his group made millions of dollars
10 from the SLMI merger but that LEE had chosen the wrong partners in that business and they
11 crashed the company after the stock had soared, due to LEEs popularity, to over $27.00 per
12 share. This time, he stated, that Stan Lee is doing it right and was interested in ARUR.
13 94. The purpose of the reverse merger was to enable POW to become a publicly traded
14 company without the lengthy registration process.
15 95. A Private Placement Memorandum and its attached Re-organization Agreement
16 and other related documents were the cumulative documents that came out of negotiations
17 Medley made between POW LLC and ARUR. These documents memorialized those negotiated
18 agreements between the companies by Medley and are the foundational documents that are part
19 and parcel to the subsequent Note and Deed of Trust that is the subject of this litigation.
20 96. CROSS-COMPLAINANTS relied on these documents and other disclosures put
21 out by Stan Lees agents to be the true facts.
22 97. Relevant provisions of the Private Placement memorandum provided as follows:
23 a. Regulatory History of Stan Lee Media. Subsequent to the bankruptcy of
24 Stan Lee Media, Inc. (SLM) in February of 2001 and its closing of operations,
25 several people have been indicted for various criminal charges. Stephen Gordon,
26 SLMs former Executive Vice President, and his brother Jonathan Gordon, a
27 Merrill Lynch stockbroker, were found guilty in December 2002 of bank fraud and
28 making false statements to a financial institution, based on their allegedly writing
29 checks for millions of dollars from accounts with no money. Stephen Gordon was
30 sentenced to 6 years in prison. Peter F. Paul, a co-founder of SLM was also
31 charged it this matter, but was in Brazil at the time of the trial of Stephen and
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1 Jonathan Gordon. Additionally in August 2001, the United States Attorney filed a
2 criminal complaint against Peter F. Paul and Stephen Gordon in the Eastern
3 District of New York arising out of an alleged scheme to manipulate the price of
4 SLM stock. Currently, Mr. Paul has been extradited from Brazil and is being
5 held in New York awaiting trial. Although Mr. Lee has never been accused of any
6 wrongdoing, the historical problems at Stan Lee Media may adversely affect our
7 business and prospects. (See Other Agreements and MattersStan Lee Media
8 below.)
9 98. The above disclosure conceals the severity of the pending and unresolved issues
10 relating to the ownership of the Stan Lee Name and Brand and the various character franchises
11 that POW LLC represented in this and other documents that they owned and that are in various
12 stages of development therewith:
13 b. Company Assets
14 POWs primary assets are the intellectual property created post-Marvel that are
15 owned by POW, including ownership in perpetuity to Stans name, likeness, brand
16 and signature slogans, Stan Lee Presents, Excelsior, and Stans Soap Box as
17 well as all new properties being developed by POW. In addition the Company has
18 acquired the right to license a substantial amount of the intellectual property
19 created under Mr. Lee at Stan Lee Media, Inc. subject to payment of a percentage
20 of remuneration to the bankrupt estate of Stan Lee Media. (See Revenue
21 Producing Agreements and Projects in Development above, as well as exhibit A
22 for Brands and Property Descriptions.)
23 Shortly after its formation POW acquired a significant amount of the intellectual
24 properties and creative assets from the estate of Stan Lee Media, Inc. (SLM),
25 which was then in bankruptcy and not in a position to market this intellectual
26 property. Under its agreement with SLM, POW was not required to pay any up
27 front cash consideration, but agreed to give SLM a participation in any revenues
28 realized from the licensing of these SLM assets ranging from a high of 40% to a
29 low of 12%. The Company does not know the value of these assets, if any. POW
30 has signed an agreement with Hollywood Licensing, a licensing company, to
31 license and merchandise two of the properties for a term of one year with a one-
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1 year extension There can be no assurance that Hollywood Licensing will be able to
2 enter any licensing arrangement for these properties or that the Company will
3 receive any revenues from this arrangement.
4 99. POW concealed that the representation of ownership of the Stan Lee brand was in
5 fact at this time being disputed by SLMI. Had Arturion shareholders known that the very core
6 assets of POW were being disputed they never would have entered into the agreement until such
7 time as the dispute was definitively resolved.
8 100. The dispute was that Stan Lee had signed an almost identical employment
9 agreement with SLMI prior to signing his agreement with POW. POW concealed the existence of
10 this agreement and that it was currently in dispute. Should this disputed employment agreement
11 be found to be still in full force and effect then POW does not own any of its claimed intellectual
12 property assets.
13 101. POW claimed it had acquired all of its assets through a purchase of the assets from
14 the bankruptcy estate of SLMI. As previously alleged, the transfer authorized by the bankruptcy
15 court did not occur and the transfer to QED or POW LLC was ruled void by Federal Judge
16 Wilson.
17 102. In fact, LEE signed documents in the bankruptcy court acknowledging that the
18 prior Stan Lee Employment Agreement was in dispute.
19 103. LEE knew that his claim that he had terminated his employment agreement with
20 SLMI was also disputed by SLMI shareholders.
21 104. It was not discovered by CROSS-COMPLAINANTS until February 17, 2009
22 when a ruling by Federal Judge Wilson, was posted on the internet that POW had unlawfully
23 acquired what they purported to be the significant amount of the intellectual properties and
24 creative assets from the estate of SLMI:
25 c. Litigation
26 The Company understands that a suit has been filed in the Daytona Beach,
27 Florida Circuit Court by Janet Clover who alleges that she is the true creator of
28 Stripperella. This suit supposedly names Pamela Anderson and Stan Lee, although
29 neither the Company nor Stan Lee has been served or has received a copy of the
30 complaint. The defense of this matter is being undertaken by Viacom, the owner
31
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1 of SPIKE TV. Based on the limited information that it has, POW does not believe
2 that this suit has any merit.
3 To the knowledge of ARUR and POW, there are no other legal proceedings
4 pending or threatened against ARUR or POW.
5 105. POW LLC represented that there were no other legal proceedings pending or
6 threatened against POW, concealing that it was disclosed in the Asset Purchase Agreement that
7 Stan Lees contention that his Employment Contract with SLM was terminated was in fact
8 disputed:
9 d. Stan Lee Media, Inc.
10 Stan Lee Media, Inc. (SLM) was a company that became a publicly traded entity
11 on The Nasdaq Stock Market during 1999. SLM operated as an internet company,
12 specifically creating and developing brand new properties and franchises under the
13 Stan Lee signature style for that media. This original content was made into the
14 form of animated webisodes that were broadcast on the internet. The operations
15 included approximately 150 staff employees, which constituted a fully staffed
16 digital studio with tradition artists, digital artists, and production staff, as well as
17 all of the departments and management required for this type of company. SLM
18 had its own group of managers and was modeled in a similar method as other
19 internet companies of that time. SLM subsequently shut down operations and is
20 currently under the protection of Chapter 11 Reorganization Bankruptcy status.
21 There are no operations in SLM and it does not have any working relationship,
22 association or dealings with POW other than POW having acquired the right to
23 distribute most of SLMs intellectual property, subject to an agreement to pay
24 SLM royalty out of any revenues received from such intellectual property. SLMs
25 bankruptcy was due in part to the collapse of the internet-bubble. Additionally,
26 according to press accounts, several former employees have been convicted and/or
27 indicted with criminal acts in connection with SLM. Stephen Gordon the former
28 Executive Vice President of SLM and his brother, a Merrill Lynch stock broker,
29 were found guilty in December 2002 of bank fraud and making false statements to
30 a financial institution, based on their allegedly writing checks for millions of
31 dollars from accounts with no money. Stephen Gordon was sentenced to 6 years
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1 in prison. Peter Paul, a founder of SLM has been indicted for securities fraud, and
2 after being extradited from Brazil, is being held for trial in the Eastern District of
3 New York. Stan Lee has not been charged with any wrong-doing with respect to
4 SLM and to his knowledge is not the target of any governmental investigations.
5 106. The above disclosure conceals the involvement of Gill Champion, Arthur
6 Lieberman or Junko Kobayashi as purported debtor in possession and agents authorized to act on
7 SLMIs behalf with a fiduciary duty to act in SLMIs behalf rather than solely and exclusively for
8 the benefit of POW. All of the Cross-defendants were also shareholders of SLMI and Stan Lee
9 and his wife owned are still the largest control shareholders of SLMI.
10 107. In furtherance of the conspiracy, LIBERMAN sent to SANDMANN, a writing that
11 was intended to demonstrate that POW LLC was the rightful owner of the Stan Lee assets.
12 LIEBERMAN redacted the document concealing that the rest of the document showed that the
13 assets were to be sold to SLC LLC a company that did not even exist and even had it existed the
14 entity was restricted from transferring said assets to anyone else. Additonally, this agreement had
15 performance clauses the in the event SLC LLC did not perform that the assets reverted back to
16 SLMI. This was also withheld from Cross-complaintants
17 108. The PPM contained an exhibit of assets it represented it owned. These assets were
18 material to CROSS-COMPLAINANTS decision to enter the reverse merger because they were
19 already completed products rather than conceptual ideas. The fact that the ownership of these
20 assets was in dispute was concealed from CROSS-COMPLAINANTS and it was later ruled that
21 the finished asset like the Drifter and the Accuser did not belong to POW by means of the
22 purported transfer from the bankrupt estate of SLM.
23 109. As a result of the misrepresentations and concealments contained in the PPM and
24 other disclosures made by CROSS-DEFENDANTS, CROSS-COMPLAINANTS entered into the
25 reverse merger and surrendering their valuable interest in ARUR to the CROSS-DEFENDANTS.
26 110. On December 9, 2003 ARUR and POW LLC entered a Reorganization Agreement
27 (Reorganization Agreement).
28 111. The Reorganization Agreement provided for a transfer and assignment of stock
29 between POW and ARUR. The final result of the Reorganization Agreement was the formation
30 of one public corporation to be known as POW! Entertainment, Inc.
31
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1 112. MDI was a participating shareholder in the above-referenced Reorganization
2 Agreement.
3 113. Ultavision was a participating shareholder in the above-referenced Reorganization
4 Agreement.
5 114. The Reorganization Agreement, its attachments and its exhibits contained
6 numerous warranties, representations, assertions, disclosures and/or statements of material fact
7 made by the POW members which have since proven to be false and misleading.
8 115. In relevant part of the Reorganization Agreement POW LLC made the following
9 warranties, representations, assertions, disclosures and/or statements of material fact:
10 a. POW asserted that its assets included intellectual property created by Stan
11 Lee after his departure from Marvel Comics, including ownership in perpetuity to Stan
12 Lees name, likeness, brand and signature slogans, Stan Lee Presents, Excelsior, and
13 Stans Soap Box.
14 b. That POW LLC was not and would not be involved in any pending
15 litigation aside from that which was disclosed in the Private Placement Memorandum.
16 c. That there existed no unresolved dispute regarding POW LLCs rights to
17 its primary business assets.
18 d. That POW LLC and SLMI did not have a working relationship, association
19 or dealings.
20 e. That the information supplied to ARUR relating to POW and the POW
21 Members in POWs Private Placement Memorandum does not contain any untrue
22 statement of a material fact.
23 f. POW is not and as of the Closing will not be involved in any pending
24 litigation not in the ordinary course of business or governmental investigation or
25 proceeding not disclosed to ARUR in the Private Placement Memorandum, and to the
26 knowledge of the POW Members no litigation or governmental investigation or
27 proceeding beyond the ordinary course of business is threatened against POW.
28 116. CROSS-COMPLAINANTS relied upon the above representations and warranties.
29 117. Despite assertions to the contrary, MDI is now aware of the following facts:
30 a. POW LLC was not a distinct entity from SLMI. POW LLC was in fact
31 composed of the same personnel and represented itself as owning the same intellectual
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1 property that SLMI claimed to own and that all of the POW members were shareholders
2 in SLMI with San Lee and his wife being the largest control shareholders,
3 b. POW LLC did not in fact own all intellectual property created by Stan Lee
4 after his departure from Marvel Comics, including ownership in perpetuity to Stan Lees
5 name, likeness, brand and signature slogans, Stan Lee Presents, Excelsior, and
6 Stans Soap Box. This intellectual property was in fact the subject of a dispute between
7 Stan Lee Media and Marvel and has materialized into a long standing complex litigation..
8 c. Stan Lee Media was involved in substantial litigation that would have a
9 serious adverse affect on the ability of POW to conduct its business.
10 d. Stan Lee Medias board and officers had been indicted on numerous
11 criminal charges. CROSS-DEFENDANTS concealed the fact that the criminal conduct
12 which occurred at SLMI and the companys association with Peter Paul had a serious
13 adverse affect on the public reputation of LEE, SLMI, POW LLC and its officers
14 CHAMPION and LIEBERMAN.
15 e. POW LLCs statements in the PPM were untrue.
16 f. POW concealed the potential for litigation over LEEs services agreement
17 and the disputed nature of the ownership of POW LLCs assets.
18 118. The Reorganization Agreement also contained several covenants that ARUR
19 agreed to perform after the pre-closing.
20 119. One of these conditions was that ARUR agreed to obtain financing resulting in net
21 proceeds in an amount equal to a minimum of One Million Dollars ($1,000,000.00) to a
22 maximum of Five Million Dollars ($5,000,000.00). The funds were intended to be raised at 95
23 cents per share. As stated in the Reorganization Agreement, this provision was entered into
24 because the Participating ARUR shareholders believed they could obtain such financing if POW
25 was operated in a manner to establish confidence in its business profitability. However before the
26 target date, POWs management either directly or indirectly caused the market value of POWs
27 stock to fall well below the .95 offering amount making it impracticable to interest investors in
28 stock that they could purchase for less on the open market.
29 120. Under the terms of the original Reorganization Agreement dated December 9,
30 2003, the Agreement could not be closed until ARUR obtained the above-referenced minimum
31
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1 investment. Further, the Agreement set March 9, 2004, as a Target Date by which ARUR was
2 expected to have obtained the maximum investment.
3 121. The original Reorganization Agreement stated that the Target Date could be
4 extended if ARUR obtained at least Two Million Five Hundred Thousand Dollars
5 ($2,500,000.00) prior to the Target Date.
6 122. The original Reorganization Agreement stated that the Target Date may be
7 extended by ARUR for any period of time during which ARURs ability to obtain the
8 contemplated proceeds was interfered with, directly or indirectly, by actions of POW or POW
9 members. POW, LEE, LIBERMAN and CHAMPION were in sole control of the company and by
10 their actions and inactions they caused the market value of the stock to fall significantly below the
11 offering price.
12 123. The original Reorganization Agreement contained a provision that provided for
13 consequences if ARUR should fail to raise the maximum investment.
14 124. On February 3, 2004, LIEBERMAN was granted the trademark of Stan Lee
15 listing SLMI as the owner other than POW LLC as represented to CROSS-COMPLAINANTS.
16
17 (2) Amendments to the Reorganization Agreement
18 125. After entering into the Reorganization Agreement, the business arrangement
19 anticipated by the participating Arturion members did not proceed as planned.
20 126. Due to the material misrepresentations and fraud engaged in by the Cross-
21 Defendants, the Arturion participating members were unable to raise financing as expected.
22 127. As a result of the serious difficulties endured by the Arturion participating
23 shareholders due to the misrepresentations and fraud engaged in by the Cross-Defendants, MDI
24 attempted to salvage the deal by entering into a series of amendments and subsequent agreements
25 that modified the original Reorganization Agreement.
26 128. It is these amendments and subsequent agreements that have given rise to the
27 original Complaint filed by the Cross-Defendant against the Cross-Complainant.
28
29 (i) Amendment #1 May 5, 2004
30 129. In reliance on CROSS-DEFENDANTS representations and not aware of the facts
31 that were concealed by CROSS-DEFENDANTS, in the furtherance of their conspiracy, and each
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1 of them, on May 5, 2004, the parties amended the original Reorganization Agreement and entered
2 into a subsequent agreement as a result of this amendment (Amendment 1). CROSS-
3 COMPLAINANTS believed CROSS-DEFENDANTS misrepresentations and where unaware of
4 the facts it had concealed from them. In reliance thereon, MDI agreed to invest further in POW by
5 purchasing additional stock in exchange for a promissory note in the amount of Five Hundred
6 Thousand Dollars ($500,000.00), MDI would be able to retain a greater number of shares of
7 POW than they would have under the original Reorganization Agreement. The Target Date was
8 extended.
9 130. The promissory note was backed by a Deed of Trust, which gave CROSS-
10 DEFENDANTS a security interest in real property that was owned by Valerie Barth. The
11 promissory note expressly provided:
12 Should there be a material adverse change in the business of ARUR, resulting in a
13 decrease in either the trading volume below five thousand (5,000) shares per day
14 or the trading price below one dollar ($1.00) per share of the ARUR common
15 stock (either, an Adverse Trading Condition), then the Target Date shall be
16 further extended for the number of days that the trading volume remains under five
17 thousand (5,000) shares and/or trading price remains under one dollar ($1.00) per
18 share. Should such an Adverse Trading Condition remain in effect continually for
19 one (1) year, then the Additional Retained Shares shall be sold, the proceeds of
20 such sale shall be applied to the balance due on the Promissory Notes, and any
21 remaining balance due on the Promissory Notes shall be forgiven.
22 131. Under this amendment, the amount of the promissory note would amend the
23 financing that the Arturion participating shareholders were allegedly obligated to rise as set forth
24 in the original Reorganization Agreement.
25 132. The amendment also contemplated the rights of MDI should there be a material
26 adverse change in the business of POW. The amendment stipulated that should an adverse
27 trading condition come into existence which affected the trading volume and/or value of POWs
28 stock, MDI had the right to have the Promissory Note forgiven and sell of the shares for whatever
29 the saled of such shares would bring on the open market.
30 133. Specifically, Amendment 1 provides in Paragraph 6:
31
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1 Should there be a material adverse change in the business of ARUR, resulting in a
2 decrease in either the trading volume below five thousand (5,000) shares per day
3 or the trading price below one dollar ($1.00) per share of the ARUR common
4 stock (either, an Adverse Trading Condition), then the Target Date shall be
5 further extended for the number of days that the trading volume remains under five
6 thousand (5,000) shares and/or trading price remains under one dollar ($1.00) per
7 share. Should such an Adverse Trading Condition remain in effect continually for
8 one (1) year, then the shares of the ARUR common stock being held under the
9 Stock Pledge agreement of this date between ARUR and Media Dynamics Inc.
10 shall be sold, the proceeds of such sale shall be applied to the balance due on the
11 Promissory Notes, and any remaining balance due on the Promissory Notes shall
12 be forgiven.
13 134. Paragraph 10 of the amendment provided: 10. The Reorganization Agreement
14 will be amended promptly to reflect the terms of this Agreement. This provision was intended to
15 demonstrate that the promissory note was but one part that was integrated with the other terms
16 and conditions contained in the Reorganization Agreement.
17 135. The Adverse Trading Conditions remained in effect since the stock was not trading
18 over $1 per share with the required volume of sales.
19 136. Despite the good faith efforts of MDI to mitigate the requirement of the
20 Participating Arturion shareholders, the required financing could not be raised by the new target
21 date due to interference directly or indirectly by the POW management that led to POWs stock
22 crashing.
23 137. The inability to raise financing was caused by the material misrepresentations,
24 concealment and business practices engaged in by the Cross-Defendants.
25
26 (ii) Amendment #2 July 22, 2005
27 138. CROSS-DEFENDANTS represented to CROSS-COMPLAINANTS and in a press
28 release issued on August 30, 2004 that POW would become a reporting company. Reporting on
29 the financial condition of the company was needed to demonstrate to investors why they should
30 buy POWs stock. This representation was a further inducement to MDI to enter Amendment #2.
31 Contrary to this representation, POW did not become a reporting company for another six years.
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1 By not reporting a Stop sign is posted at the trading exchange and any one who looked up
2 POW was subjected to a stiff warning. The warning states:
3 Indicates companies that are not able or willing to provide disclosure to the public
4 markets - either to a regulator, an exchange or Pink OTC Markets. Companies in
5 this category do not make Current Information available via the OTC Disclosure
6 and News Service, or if they do, the available information is older than six months.
7 This category includes defunct companies that have ceased operations as well as
8 'dark' companies with questionable management and market disclosure practices.
9 Publicly traded companies that are not willing to provide information to investors
10 should be treated with suspicion and their securities should be considered highly
11 risky.
12 139. This warning adversely affected the Arturion participating shareholders ability to
13 attract knowledgeable investors and was perpetrated by POWs management.
14 140. In reliance on CROSS-DEFENDANTS representations and not aware of the facts
15 that were concealed by CROSS-DEFENDANTS, in the furtherance of their conspiracy, and each
16 of them, on July 22, 2005, the parties entered a second amendment to the original Reorganization
17 Agreement (Amendment 2), Agreement Amendment to May 5, 2004 Agreement, Promissory
18 Note, Deed of Trust, a Subscription Agreement and an Agreement Regarding Deed of Trust.
19 141. The Reorganization and the Amendment Number 1 required the surrender of
20 ARUR shareholders stock over to Stan and Joan Lee, Arthur Lieberman and family and Gill
21 Champion. MDI surrendered its controlling interest of 36,666,666 shares and retained 769,250
22 shares that she had purchased pursuant to the Amendment Number 1 to the Reorganization
23 Agreement. In essence MDI received nothing for its controlling interest in ARUR other than the
24 retention of a small amount of shares which it purchased for a promissory note that had safeguard
25 clauses in the event POWs stock crashed. UVs shares were reduced from 4,300,000 to
26 1,500,000 shares of which it had a verbal agreement to get 1,200,000 shares back to MDI.
27 Amendment 2 added additional terms to the previous Reorganization Agreement and Amendment
28 1 but it did not supersede paragraph 6 of amendment 1 - the Adverse Trading Condition clause
29 calling for cancelation of the note.
30 142. The Agreement Regarding Deed of Trust provided that a condition precedent to
31 the new note was that the previous $500,000 note and deed of trust would be surrendered to the
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1 Trustor and be deemed void and of no effect. It also provided a condition precedent that the
2 previous deed of trust be reconveyed to the Trustor and that the previous stock pledge on the
3 769,250 shares was released. Two of these conditions precedents were not met and POW to this
4 day still has the note and deed of trust of the first Amendment in effect and have not yet
5 complied with these condition precedents. Notwithstanding the above they have over encumbered
6 the pledge property and slandered the title.
7 143. This second amendment modified the consequences for failure to meet the
8 financing requirements as put forth in the original Reorganization Agreement although Arturion
9 participating members could have exercised their rights to postpone the due dates until POW
10 interferrance had subsided and the stock traded above POWs offering required price of $.95 per
11 share. Instead, MDI in good faith wanted to see POW move forward and agreed to mitigate the
12 outstanding issues based on POW representations so that POW could get on with its business.
13 144. This second amendment further reduced the number of shares that MDI and
14 UltaVision were allowed to retain down to only 750,000 shares.
15 145. The agreement was in exchange for a Six Hundred Fifty Thousand Dollar
16 ($650,000.00) promissory note that was secured by a Deed of Trust that gave POW a security
17 interest in real property owned by BARTH. POW was to issue 3,125,000 shares to MDI. The
18 effectiveness of the agreement was conditioned on the execution of the promissory note, deed of
19 trust, agreement regarding the Deed of Trust and the subscription Agreement and the cancelation
20 of the first note for $500,000 along with the reconveyance of the deed of trust securing that note.
21
22 (iii) The Consulting Agreement
23 146. As a result of the lawsuits, criminal issues, and financial difficulties that POW had
24 concealed from CROSS-COMPLAINANTS, Arturion participating shareholders had great
25 difficulty securing financing for POW. These difficulties stemmed in large part from the negative
26 public perception of POW that was a result of the lawsuits, criminal issues and financial
27 difficulties that plagued POWs managements former company which became widely known
28 across the internet This negative public perception made investors wary of purchasing stock in
29 POW coupled with POW managements failure to file proper disclosures about the company.
30
31
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1 147. CROSS-COMPLAINANTS had entered into their agreement with POW in good
2 faith and with a sincere intention to become long-term investors in POW and a desire to support
3 and enhance the public perception and value of POW as a publicly traded company.
4 148. In an attempt to salvage the business strategy reflected in their dealings with POW,
5 on April 30, 2005 and subsequently on April 30, 2006, MDI entered into two Consulting
6 Agreement with POW.
7 149. In relevant part the Consulting Agreements provided:
8 a. For MDI to provide public relations strategies and assist in gaining an
9 Internet presence for POW.
10 b. The term of the agreements were twelve months each.
11 c. Pursuant to the second agreement, MDI was to be paid, in advance,
12 250,000 shares of POW stock per month for the first six months which was the standard
13 fee POW paid for Public Relations work.
14 d. The parties were in good faith to fairly adjust the compensation due for the
15 second six months as it was anticipated that MDI duties would be broadened dealing
16 with additional public relations consultants that POW intended to hire.
17 150. To assist MDIs efforts in performing the services, POW was required to:
18 a. Furnish true and accurate information that MDI deemed appropriate.
19 b. Grant Consultant piggyback registration.
20 c. Not dilute MDIs stock by proportionately adjusting MDIs stock
21 whenever other stock was issued split or recapitalized.
22 151. On April 30, 2006, MDI and POW entered an Adjunct to the Consulting
23 Agreement (Adjunct) to provide for an escalated marketing campaign. The agreement provided
24 in relevant part:
25 a. MDI was to oversee the effort.
26 b. The term was sixty days from commencement.
27 c. POW was to pay MDI from three million to five million shares.
28 d. POW was to conduct a 2-for1 forward stock split in 30 days which would
29 give all shareholders who had one share two shares.
30 e. Assist in the registration of the shares.
31 f. Release a minimum of six press releases within 30 days.
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1 g. Post an updated Form 15c211 disclosure statement with financials within
2 one week.
3 152. The 2-for -1 stock split was required to pay for the Public Relations sub-
4 contractors using restricted shares and the allotted shares were insufficient to fully finance the
5 magnitude of the work POW required. POW failed to comply with this requirement yet demanded
6 that MDI perform fully.
7 153. Assistance in the registration of shares was vital as most sub-contractors who
8 would accept stock as payment for providing public relations work required free trading shares
9 not restricted shares and in order to effectuate the magnitude of this escalated campaign MDI
10 needed to hire sub-contracting firms. In lieu of doing a registration, POW directed MDI to find
11 shareholders who already had free trading shares and swap with them 2 of MDIs restricted shares
12 for one free trading share and they would reimburse MDI the difference. MDI did as directed but
13 POW only reimbursed MDI for a portion of the shares.
14 154. The issuance of the press releases of the company was essential this material
15 information was to be disseminated to the press to gain exposure for the company. POW failed to
16 provide the required press releases.
17 155. The 15c211 was perhaps the most important of the requirements as it was the
18 companys disclosure statement and POW was seriously lacking any current disclosures.
19 Although POWs CFO Junko Kobayashi reported that she had sent the required information to
20 POWs auditor firm, Rose, Snyder & Jacobs of Encino CA, to draft the disclosure no such
21 disclosure statement was ever filed even after repeated demands were made.
22
23 E. POW!s Stockblocking Through The Failure to Authorize Removal of the
24 Legend Condition
25 156. Cross-Complainant UltaVision Inc. (UV) acquired 4,148,881 shares of POW in a
26 series of transactions ranging as far back as December 9, 2003 when POW did the reverse merger
27 with Arturion Entertainment Inc. in which UV was a minority shareholder and retained shares of
28 that company which thereafter became shares of POW.
29 157. These shares were common stock issued pursuant to Rule 144 of the Securities and
30 Exchange Act.
31
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1 158. According to Rule 144 shares issued require that the shares be held for a period of
2 1 year before they are eligible to have the 144 Restrictive legend removed and become free
3 trading and available to be sold on the public market.
4 159. UV held these shares unencumbered far in excess of the minimum holding period.
5 160. As is customary the 144 share certificates were issued from the issuer (POW) with
6 a restrictive legend stamped on the face of each certificate and after the shares have been held for
7 one year from the original issuance the legend can be removed upon request sent to the issuer's
8 transfer agent and new certificates are issued with the restrictive legends removed.
9 161. Once this is done the certificates can be deposited in brokerage accounts for
10 trading on the public markets.
11 162. The one year holding period required for the release of the restrictive legends on
12 all of UV's certificates expired on or before August 21, 2007.
13 163. UV shares consisted of 5 certificates in the total amount of 4,148,881 shares of
14 common stock.
15 164. POW engaged Signature Stock Transfer Incorporated ("Signature") a Texas
16 corporation with its principal place of business in Plano, Texas as its designated transfer agent.
17 Signature is a registered transfer agent with the US Securities and Exchange Commission
18 ("Commission"), registration number 084-05674.
19 165. On or about April 14, 2008, UV sent Signature a demand letter along with the
20 original certificates and a check in the amount of $280.00 which paid for Signature's services.
21 The demand letter instructed Signature to remove the restrictive legend stamped on the front of
22 the shares pursuant to Rule 144 exemption and to reissue new certificates of equal number and
23 amounts back to UV with the restrictive legends removed.
24 166. A letter dated April 14, 2008 to Signature confirms.
25 167. Under Delaware law (the law applicable to this transaction) a request to remove a
26 restrictive legend, or other such ministerial acts that are required before a transfer can occur, is
27 deemed a request to register transfer under Delaware UCC 8-401.
28 168. Signature cleared the funds that were paid by UV and sent a request to the issuer
29 (POW) to approve the release.
30 169. Signature held the shares for 30 days until the 13th of May 2008. On the 13th of
31 May, Signature sent back the certificates to UV rejecting the demand and stated that the issuer
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1 had refused to authorize the release of the restrictive legend thereby blocking the stock from
2 being able to be traded on the public market.
3 170. Section 8-102 of the Uniform Commercial Code ("UCC")` defines a certificated
4 security as a security that is represented by a certificate.
5 171. UCC Section 8-103 states that a share issued by a corporation (such as POW) is a
6 security. UVs shares are represented by certificates 1388 in the amount of 70,000 shares,
7 certificate 1416 in the amount of 750,000 shares, certificate 1440 in the amount of 310,000
8 shares, certificate 1467 in the amount of 1,393,881 and certificate 1468 in the amount of
9 1,625,000 shares, with a combined total of 4,148,881 shares. POW is the issuer of the securities
10 in question.
11 172. Section 8-401 of the Uniform Commercial Code provides that if a certificated
12 security is presented for transfer, the issuer shall register the transfer provided the endorsement is
13 genuine, and other conditions are met that are not at issue here.
14 173. The issuer can also refuse the transfer of the shares if a demand has been made,
15 conforming to Section 8-403, that the issuer not register the transfer; however, the demand has to
16 be followed up by legal process or an indemnity bond as required in Section 8-403.
17 174. Section 8-403(b) provides that the issuer is liable to the person presenting the
18 certificate for unreasonable delay in registration or failure or refusal to register the transfer.
19 175. On April 15, 2010, the market price of POWs shares reached .87 per share. The
20 value of the shares for purposes of Section 8403(b) at that time was $3,609,532.50.
21 176. Section 8-403 provides that an "appropriate person" may demand that a
22 certificated security not be transferred. An "appropriate person" is defined in UCC Section 8-
23 107(a)(1) to be "the person specified by a security certificate or by an effective special
24 endorsement to be entitled to the security." There was no "special endorsement" on the Shares.
25 177. The only person specified on the security certificate is the owner - UV. Only UV
26 or someone claiming to be UV can give notice under Section 8-403.
27 178. The notification must identify the registered owner of the shares. If the issuer
28 receives such a demand, it must communicate with the registered owner (UV) and in that
29 communication it must state that it has received a demand that the security be not transferred; that
30 the issuer will withhold registration of the transfer for a period of time stated in the
31
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1 communication, but not to exceed 30 days, to provide the demanding third party with the
2 opportunity to obtain legal process or an indemnity bond.
3 179. No notice conforming to Section 8-403 was provided by POW. The only
4 communication provided was that the transfer was blocked because the issuer would not respond
5 to the transfer agents request and opine with an approval of the release.
6 180. POW has never claimed that another person has requested that the shares not be
7 transferred.
8 181. POW has not given notice of any other defect that would prohibit transfer under
9 Section 8-401.
10 182. Within the time period stated in the issuer's notice, the "appropriate person" is
11 required to either present an injunction or restraining order enjoining the transfer, or file an
12 indemnity bond with the issuer.
13 183. To the knowledge of UV, no such injunction, restraining order or indemnity bond
14 has been obtained.
15 184. However, since POW did not provide any notice conforming to Section 8-403, that
16 an " appropriate person" made a claim, POW did not provide proper legal process or an indemnity
17 bond. Under Section 8-403(b), POW is liable for the failure to transfer.
18 185. Under UCC Section 8-404, an issuer can also refuse to transfer a certificated
19 security if it has been served with legal process restraining the transfer. POW has not provided
20 UV with any information regarding legal process in connection with the transfer of the Shares.
21 186. UV is informed and believes that the individuals who dominate the control of
22 POW, Stan Lee, Gill Champion and Arthur Lieberman together with POW, conspired to block
23 UV's shares from becoming free trading in an effort to prevent UV and other shareholders from
24 being able to finance pending legal proceeding against POW with the potential proceeds that
25 could be generated by the sale of those shares if they became free trading.
26 187. Stan Lee had already proposed and agreed to a three year stay when UV first
27 threatened a law suit by offering certain concessions if UV and Cross-complainants would
28 refrain from filing a complaint against POW for numerous Breaches of Contracts, Fraud,
29 Recovery of their Company Arturion Entertainment Inc, Restitution of Unjust Enrichment,
30 Breach of Fiduciary Duty, and other such causes.
31
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1 188. UV is informed and believes, the conspiracy was perpetrated by POW and the
2 individuals, Stan Lee, Gill Champion and Arthur Lieberman and was done in an effort to prevent
3 UV and other cross-complainants from being able to finance an action against POW from the
4 proceeds derived from the sale of those shares, until such time as the applicable statutes had run
5 out.
6 189. The blocking of the shares and the offer of a three year grace period appears to
7 give credence to POW and the POW members individual conspiracy to 1) block UV shares from
8 becoming free trading so that UV could not afford to finance litigation against them or stall them
9 from being able to sell their shares until such time that the statutes have run their course 2)
10 deceive UV into believing that POW has given a stay on any disputes by and between the parties
11 until such time as UV and cross-complainants no longer can perfect their claims.
12 190. When the three year stay was over, Arthur Lieberman substantiated the conspiracy
13 by denying any such stay was ever discussed or agreed upon. He has since recanted and has
14 acknowledged the stay but keeps changing the terms.
15 191. There exists yet another argument that adds to the conspiracy perpetrated by the
16 POW members and POW and gives motive why they would conspire to prevent the sale of these
17 shares.
18 192. POW's Public Relations firm MDI had worked for POW full time for two years
19 without pay other than receiving restricted stock in the company of which POW did not pay MDI
20 for the last six months of work.
21 193. During the time MDI worked for POW, MDI became suspicious of certain
22 activities of the company but because of a very tight domination of the company by Lieberman
23 and Champion, MDI was unable to get the facts to substantiate those suspicions.
24 194. MDI even contracted with the company to have them release certain disclosure
25 documents and they blatantly breach the contract and continued to conceal from its shareholders
26 the underlying facts about the company. The POW members conspired to bankrupt the cross-
27 complainants in order to prevent them from filling suit against the company or even be able to
28 defend themselves.
29 195. POW succeeded in illegally blocking the shares from becoming free trading and
30 UV was able to sell the shares into the market when the stock ran up to .87 cents per share and
31 millions of shares traded .
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1 196. Cross-complainants are informed and believe that the illegal actions carried on by
2 POW, Lieberman, Lee and Champion in this dispute for the blocking of UV's shares are part of
3 an illegal stock fraud to manipulate POW's stock price and conceal the true number of free
4 trading shares that the company has issued and outstanding from investors.
5 197. UV has reason to believe, that during the time that the aforementioned POW
6 members individually and in concert with POW successfully prevented UV from having the
7 restrictive legend removed from its shares, that POW and the POW members were in negotiations
8 with Disney to sell them a ten percent interest in the securities of POW.
9 198. The POW members individually and through their employ with POW, prevented
10 UV from exercising its rights to have its shares become free trading in an effort to manipulate the
11 market share price.
12 199. Typically transactions of this nature wherein the parties are negotiating the per
13 share or percentage purchase price the price is based on the average per share trading price of a
14 specified trading period prior to the close of the transaction. Along with establishing a per share
15 price another contributing factor a purchasing company entering into such a transaction would be
16 concerned with is the number of free trading shares a company has issued and outstanding that
17 could affect the market if they were to be sold.
18 200. UV contends that the POW members and POW blocked its shares in an attempt to
19 manipulate the trading market price and to conceal from Disney and other potential investors the
20 true number of free trading shares of POW in order to get a potentially inflated purchase price for
21 the 10% of their company it was negotiating with Disney.
22 201. A pattern common in stock fraud programs is the control of the free trading float
23 so that unsuspecting investors believe that as the demand for shares increase that the supply will
24 be limited and the share price would be likely to appreciate.
25 202. Because the float is a considerable factor in penny stock companies like POW,
26 controlling the supply of shares available to the market could add significant appeal when a
27 company is raising money. UV is informed and believes that POW was developing a strategy to
28 do another public offering which they would raise investment money from investors who would
29 buy their offered shares.
30 203. The share price and number of shares that are free trading are both critical factors
31 to investors when determining the value of the shares being offered. It is believed that the POW
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1 members both individually and as representatives of POW blocked UV's shares in an attempt to
2 manipulate the price of their shares so they would not have to disclose that 4,148,881 shares that
3 they have on their records as restricted were in fact free trading shares.
4 204. UV was informed and has reason to believe that the other shareholders inclusive of
5 Arthur Lieberman's children and family and assigns have had no issues getting the restrictive
6 legends removed from their shares when they sent in their request to the transfer agent.
7 205. As POW is a Delaware corporation, Delaware law, in particular 8-401, controls.
8 206. Under Delaware law a stock transfer agent and the issuing corporation owe
9 shareholders the same duties. Both POW and Signature owed UV a duty to remove the restrictive
10 legend on the shares.
11 207. The Securities Act of 1933 generally makes it unlawful for any person to sell any
12 security that is not registered unless an exemption from registration is applicable. 15 U.S.C.
13 77e(a) and 77d.
14 208. Section 4(1) of the Act (15 U.S.C. 77d(1)) provides an exemption for sales made
15 by persons other than an issuer, underwriter or dealer.
16 209. Because of the Acts broad definition of the term underwriter, Rule 144 was
17 adopted to provide a safe harbor exemption in certain circumstances in which the seller might
18 otherwise be considered to be an underwriter.
19 210. Under that Rule, a sale is exempt if it meets all the requirements of Rule 144.
20 211. Pursuant to 8-401, an issuer has a duty to register a transfer of stock presented to
21 the issuer in registered form if:
22 a. it is requested to do so,
23 b. the security is properly endorsed by the appropriate person,
24 c. there is reasonable assurance that the endorsements are genuine and
25 effective,
26 d. the issuer has no duty as to adverse claims,
27 e. the applicable taxes have been paid, and
28 f. the transfer is in fact rightful or is to a bona fide purchaser.
29 212. A stock transfer agent and the issuing company each owe shareholders the same
30 duties.
31
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1 213. Transfer agents thereby are expressly held liable both to the issuer and to the
2 owner for the wrongful refusal to register a transfer within the scope of their respective functions
3 where the issuer would itself be liable.
4 214. A request to issue a new certificate is equivalent to a request to register a transfer
5 of the underlying stock.
6 215. UV presented its shares to Signature and POW.
7 216. UV was eligible to sell its shares.
8 217. Removal of the legend would not have violated any applicable laws or restrictions
9 on transfer.
10 218. Neither Signature nor POW are blank check companies.
11 219. Rule 144 was available to other, similarly situated shareholders, but not to UV.
12
13 F. Facts Relating to Equitable Estoppel
14 220. As demonstrated in the hereinafter-stated allegations, Cross-Defendants
15 misrepresented the disputed nature of its ownership of SLMIs bankruptcy estate properties.
16 221. CROSS-DEFENDANTS further concealed material facts relating to POWs
17 solvency, including, but not limited to, the failure to disclose its financial condition through a
18 Form 15c211.
19 222. CROSS-DEFENDANTS further issued false and misleading press releases and
20 other disclosure documents that were designed to induce false confidence in the viability and
21 value of the bankruptcy estate assets and the value of investing in POWs stock. CROSS-
22 COMPLAINTS read and relied on these disclosure documents in making their decision to give up
23 control of ARUR in a reverse merger with POW LLC and thereafter in continuing to invest in and
24 attempt to promote POWs financial success.
25 223. On July 12, 2007, CROSS-COMPLAINANTS met with Cross-Defendants who
26 just prior to that meeting had received a letter from POWs attorney, completely unexpected, and
27 in said correspondence threatened to foreclose on the valuable Stateline property that secured the
28 $1,150,000 promissory note. CROSS-COMPLAINANTS were totally surprised by this since
29 they were in close communication with CROSS-DEFENDANTS and due to adverse trading
30 conditions and other such terms of the note agreements, CROSS-COMPLAINANTS were under
31 the understanding that there were no payments due yet on the note. BARTH at that time was in
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1 discussions with LEE going over pictures she had taken of him with other celebrities and that she
2 after years of effort and her sponsorship of Lee, he was finally selected to receive a star on
3 Hollywoods Walk of Fame. At the meeting which occurred on that day there were discussions
4 with Champion over his many breaches of POWs obligations to CROSS-COMPLAINANTS and
5 that he had withheld the SLM litigation from CROSS-COMPLAINANTS along with the issue
6 that the note was subject adverse trading conditions provisions and no payments were even due.
7 This meeting was followed up with another meeting instigated by Stan Lee, on July 16, 2007 with
8 CROSS-COMPLAINANTS and Lee. CROSS-COMPLAINANTS met with LEE in his office.
9 LEE stated that he did not want CROSS-COMPLAINANTS to sue him. LEE stated that he had a
10 proposal that he thought they could all live with. He pulled out a piece of paper and read from it
11 stating, in essence, that POW will agree to forgive any accrued interest and payments and LEE
12 would make any payments due for the next three years. POW didnt want to get into any more
13 lawsuits so if we could agree to wait three years to get our house in order LEE will make sure that
14 Cross-Complainants get everything that is owed to them. At the end of the three years LEE
15 promised that he would write a happy ending to the story.
16 224. CROSS-DEFENDANTS intended that CROSS-COMPLAINANTS rely on LEEs
17 statements. As CROSS-DEFENDANTS were in a fiduciary relationship with CROSS-
18 COMPLAINANTS, CROSS-COMPLAINANTS did rely on Cross-Defendants statements to
19 CROSS-COMPLAINANTS detriment. However, due to the close nature of the relationship that
20 CROSS-COMPLAINANTS enjoyed with LEE, and the fact that LEE himself was making the
21 representations, the CROSS-COMPLAINANTS were justified in relying on LEEs assurances.
22
23 G. Facts Related to the Fiduciary Responsibilities that CROSS-DEFENDANTS
24 owed to CROSS-COMPLAINANTS
25 225. CROSS-COMPLAINANTS are informed, and upon that basis allege that LEE,
26 LIEBERMAN and CHAMPION and ROES 31-35, and each of them, have held, and do hold, a
27 fiduciary duty to CROSS-COMPLAINANTS as follows:
28 226. LEE, LIEBERMAN and CHAMPION, and ROES 31-35, and each of them, are
29 officers, directors, and controlling shareholders of POW. In this capacity they each have a
30 fiduciary responsibility to minority and non controlling shareholders to use their ability to control
31 the corporation in a fair, just and equitable manner.
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1 227. At all relevant times, MDI and UV were and are minority shareholders in POW.
2 228. As the controlling shareholders, LEE, LIEBERMAN and CHAMPION, and ROES
3 31-35, and each of them, had a duty not to use their power over the corporation to make a market
4 for their shares to the exclusion of the minority shares owned by CROSS-COMPLAINANTS and
5 owed to CROSS-COMPLAINANTS as alleged herein.
6 229. In acting as described in this cross-complaint, LEE, LIEBERMAN and
7 CHAMPION, and ROES 31-35, and each of them, did not exercise the standard of care required
8 of them.
9 230. As a proximate result of the acts of LEE, LIEBERMAN and CHAMPION, and
10 ROES 31-35, and each of them, CROSS-COMPLAINANTS have been damaged in a sum that
11 exceeds the minimum jurisdictional limits required for unlimited civil actions.
12
13 H. Facts Related to the Absence of Lieberman from the State
14 231. When CROSS-COMPLAINANTS entered into these agreement with Cross
15 Defendants and for a large portion of the time afterward, Cross-Defendant LIEBERMAN was
16 outside the State of California as he is a resident of the State of New York where he continued his
17 private practice as an intellectual properties litigant.
18
19 I. Facts Related to Adverse Domination
20 232. CROSS-COMPLAINANTS are informed, and upon that basis allege that LEE,
21 LIEBERMAN and CHAMPION and ROES 35-40, and each of them, have held, and do hold,
22 positions as officers and directors and managing personnel and controlling shareholders and
23 members of POW, POW LLC and QED. They have full complete and exclusive control over all
24 decisions that are made in the day-to-day management of POW, POW LLC and QED. As alleged
25 in this cross-complaint, LEE, LIEBERMAN and CHAMPION have conspired together to commit
26 the fraudulent, dishonest and unlawful acts alleged herein. Accordingly, CROSS-
27 COMPLAINANTS allege that the doctrine of Adverse Domination applies to any unlawful acts
28 perpetrated under their said direction and the Statute of Limitations does not accrue while the
29 affairs of POW, POW LLC and QED remain under their full control.
30
31 J. The Corporate and LLC Entities are Shams
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2 that:
3 234. The business activities and affairs of cross-defendants, POW LLC, LEE,
4 LIEBERMAN, CHAMPION and ROES 5 through 15, inclusive, and each of them, and cross-
5 defendants, are and were during all times relevant to this action so intermingled as to constitute
6 one single business enterprise conducted by, between and among them, and each of them, and
7 cross-defendants, POW LLC, LEE, LIEBERMAN, CHAMPION and ROES 5 through 15,
8 inclusive, individually or in combination, (i) by permitting to exist and failing to follow the
9 corporate procedures and required legal formalities prescribed by law for said corporation,
10 including POW's requirement to maintain minutes or adequate corporate/accounting records,
11 concealing its true financial condition by failing to issue a Form 15C211 as required and failing to
12 authorize its transfer agent to remove restrictive legends and/or transfer POWs publically traded
13 stock such that CROSS-DEFENDANTS engaged in stock-blocking commingled funds and
14 other assets, failed to segregate funds between them and diverted corporate funds or assets to
15 other uses without authorization; (ii) by treating the assets of POW as their own and diverting
16 assets from POW; (iii) by permitting to exist and failing to adequately capitalize POW thereby
17 using POW as a mere shell, instrumentality or conduit for their own purposes and in order to
18 procure investment capital from others, to procure labor, services or merchandise for said cross-
19 defendants own benefit; (iv) by permitting to exist and failing to maintain arm's length
20 relationships between and among themselves such that said POWs existence cannot be
21 reasonably separated therefrom; and (v) in violation Lees full time assignment to POW
22 (excluding Lees commitment to Marvel) of Lees name, brand, likeness and all his new
23 properties, as well as in violation of the PPM in which it was represented that POW has the full
24 time services of Stan Lee (subject to his continuing obligation to Marvel) for which he is paid by
25 POW a $250,000.00 annual salary and between Stan Lee and his wife Joan Lee they received
26 approximately 45,402,000 million shares of ARUR participating shareholders former company
27 now POW, to allow Lee to divert and commingle revenues for Lees consulting, signatures fees,
28 appearances, honorariums, interviews, literary works, acting revenues, and other engagements
29 and services and permitting these revenues to be diverted to Lee and his business organization, of
30 unknown form, known as SL Productions. There exists a unity of interest and ownership between
31 cross-defendants POW LLC, LEE, LIEBERMAN, CHAMPION and ROES 5 through 15,
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1 inclusive, and each of them, and cross-defendant POW such that any individuality and
2 separateness between such other cross-defendants and POW have ceased, and said corporation is
3 the alter ego of the said other cross-defendants, and each of them;
4 235. POW now is and was during all times relevant to this action a mere shell without
5 adequate, sufficient or reasonable assets or capital with which to carry on the business in which it
6 was engaged;
7 236. POW LLC, LEE, LIEBERMAN, CHAMPION and ROES 5 through 15,
8 inclusive, and each of them, were POWs controlling shareholders, POWs officers and directors
9 and actively participated in the management and control of the business thereby exercising total
10 and complete control and dominance over cross-defendant POW;
11 237. It would be unjust to maintain the fiction that cross-defendants POW LLC, LEE,
12 LIEBERMAN, CHAMPION and ROES 5 through 15, inclusive, and each of them, have a
13 separate existence from POW in that the cross-defendants, and each of them, concealed POWs
14 true financial condition by failing and refusing to issue its Form 15c211 disclosure statement; by
15 failing to perform a 2-for-1 stock split; by failing and refusing to comply with CROSS-
16 COMPLAINANTS registration rights and reimbursement for personal shares use to effectuate
17 marketing; by failing and refusing to issue shares as required by anti-dilution provisions
18 contained in agreements between them; by failing and refusing to release restrictive legends on its
19 publically traded stock; by affirmatively misrepresenting that POW had no debts when it was, in
20 fact, inadequately capitalized, by representing that Stan Lee will devote full time to POW other
21 than Marvels minimal requirement for which he receives $250,000 per year, by diverting
22 compensation due POW for Stan Lees activities and engagements performed on POWs time, by
23 diverting moneys due POW over to Stan Lee and his recipient company SL Productions that
24 rightfully belong to POW. concealing material information that would have affected investors
25 decision to buy stock or otherwise participate in the facilitation of POWs business advancement
26 by misrepresenting the true corporate structure of POW to its creditors and investors and the
27 creditors and investors of cross-defendants POW LLC, LEE, LIEBERMAN, CHAMPION and
28 ROES 5 through 15, inclusive, and through the other wrongful acts alleged elsewhere in this
29 cross-complaint, CROSS-COMPLAINANTS do not know the precise time during which such
30 misrepresentations and other wrongdoings occurred, and will seek leave of court to amend this
31 cross-complaint accordingly when the same is ascertained;
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1 238. Cross-defendants POW LLC, LEE, LIEBERMAN, CHAMPION and ROES 5
2 through 15, inclusive, (i) have misappropriated and used the assets and benefits of POW for their
3 own private use and purposes, including, among other things, wrongfully claimed health
4 insurance coverage to which they were not entitled, and (ii) have caused POWs assets and
5 benefits to be transferred to themselves without fair or adequate consideration therefore to
6 defraud insurance companies and creditors of POW and of cross-defendants POW LLC, LEE,
7 LIEBERMAN, CHAMPION and ROES 5 through 15, inclusive. CROSS-COMPLAINANTS do
8 not know the precise time during which such misrepresentations and other wrongdoings occurred,
9 and will seek leave of court to amend this cross-complaint accordingly when the same is
10 ascertained;
11 239. Cross-defendants POW LLC, LEE, LIEBERMAN, CHAMPION and ROES 5
12 through 15, inclusive, and each of them, have caused POW to become depleted of all assets,
13 financially insolvent and unable to pay its creditors, including any judgment which may be
14 awarded to CROSS-COMPLAINANTS in this action;
15 240. Adherence to the fiction of separate existence between cross-defendants POW
16 LLC, LEE, LIEBERMAN, CHAMPION and ROES 5 through 15, inclusive, and each of them,
17 and POW would sanction the fraud and injustices alleged in this cross-complaint by permitting
18 cross-defendants POW LLC, LEE, LIEBERMAN, CHAMPION and ROES 5 through 15,
19 inclusive, and each of them, to divert corporate assets for their own private use and to avoid the
20 responsibility for their business undertakings and by depriving cross-complainants from
21 recovering on judgment for the debts alleged in this action;
22 241. In acquiring POW through a reverse merger with ARUR, POW was conceived,
23 intended and used by cross-defendants POW LLC, LEE, LIEBERMAN, CHAMPION and
24 ROES 5 through 15, inclusive, and each of them, as a device to avoid individual liability for the
25 purpose of substituting financially irresponsible corporations and in the place and stead of
26 financially responsible individuals or other defendants. At no time was unencumbered capital
27 placed at the risk of POW; and
28 242. POW is thereby the alter ego of cross-defendants POW LLC, LEE,
29 LIEBERMAN, CHAMPION and ROES 5 through 15, inclusive, and each of them, and as such,
30 for the purposes of providing full redress to cross-complainants herein, the corporate veil should
31 be pierced and the liability of POW established in this counter action should be and become the
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1 liability of cross-defendants POW LLC, LEE, LIEBERMAN, CHAMPION and ROES 5
2 through 15, inclusive, and each of them.
4 that:
5 244. The business activities and affairs of cross-defendants, POW, LEE,
6 LIEBERMAN, CHAMPION and ROES 16 through 20, inclusive, and each of them, and cross-
7 defendants, are and were during all times relevant to this action so intermingled as to constitute
8 one single business enterprise conducted by, between and among them, and each of them, and
9 cross-defendants POW, LEE, LIEBERMAN, CHAMPION and ROES 16 through 20, inclusive,
10 individually or in combination, (i) by permitting to exist and failing to follow the corporate
11 procedures and required legal formalities prescribed by law for said corporation, including POW
12 LLC's requirement to observe legal formalities, such that cross-defendants commingled funds and
13 other assets, failed to segregate funds between them and diverted limited liability company funds
14 or assets to other uses without authorization; (ii) by treating the assets of POW LLC as their own
15 and diverting assets from POW LLC; (iii) by permitting to exist and failing to adequately
16 capitalize POW LLC thereby using POW LLC as a mere shell, instrumentality or conduit for their
17 own purposes and in order to procure investment capital from others, labor, services or
18 merchandise for said cross-defendants own benefit; and (iv) by permitting to exist and failing to
19 maintain arm's length relationships between and among themselves, such that POWs existence
20 cannot be reasonably separated therefrom;
21 245. There exists a unity of interest and ownership between cross-defendants POW,
22 LEE, LIEBERMAN, CHAMPION and ROES 16 through 20, inclusive, and each of them, and
23 cross-defendant POW LLC such that any individuality and separateness between such other
24 cross-defendants and POW LLC have ceased, and said limited liability company is the alter ego
25 of the said other cross-defendants, and each of them;
26 246. POW LLC now is and was during all times relevant to this action a mere shell
27 without adequate, sufficient or reasonable assets or capital with which to carry on the business in
28 which it was engaged;
29 247. Initially, POW LLC, was owned by Lee, Lieberman and Champion and ROES 16
30 through 18, inclusive, and each of them. Said cross-defendants were POW LLCs managing
31
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1 owners and actively participated in the management and control of the business thereby
2 exercising total and complete control and dominance over cross-defendant POW LLC;
3 248. Following the reverse merger of ARUR into POW, POW LLC became a wholly
4 owned subsidiary of POW and ROES 19 through 20, inclusive, whereupon POW and ROES 19
5 through 20, inclusive, and each of them, were and are POW LLCs managing owners and
6 together with Lee, Lieberman and Champion actively participated in the management and control
7 of the business thereby exercising total and complete control and dominance over cross-defendant
8 POW LLC;
9 249. It would be unjust to maintain the fiction that cross-defendants POW, LEE,
10 LIEBERMAN, CHAMPION and ROES 16 through 20, inclusive, and each of them, have a
11 separate existence from POW LLC in that the cross-defendants, and each of them, concealed
12 POW LLCs true financial condition by failing and refusing to disclose that its only assets, those
13 acquired from the bankruptcy estate of SLMI, were in dispute and that the transfer from SMLI to
14 POW LLC was void; by affirmatively misrepresenting that POW LLC had no debts when it was,
15 in fact, inadequately capitalized, concealing material information that would have affected
16 investors decisions to buy stock or otherwise participate in the facilitation of POW LLCs
17 business advancement; by diverting funds owing POW to Stan Lee and/or his recipient alter ego
18 SL Productions; by misrepresenting the true limited liability structure of POW LLC to its
19 creditors and investors and the creditors and investors of cross-defendants POW, Lee, Lieberman,
20 Champion and ROES 16 through 20, inclusive, and through the other wrongful acts alleged
21 elsewhere in this cross-complaint. CROSS-COMPLAINANTS do not know the precise time
22 during which such misrepresentations and other wrongdoings occurred and will seek leave of
23 court to amend this cross-complaint accordingly when the same is ascertained;
24 250. Cross-defendants POW, LEE, LIEBERMAN, CHAMPION and ROES 16
25 through 20, inclusive, and each of them, have misappropriated and used the assets and benefits of
26 POW LLC for their own private use and purposes, including, among other things, having caused
27 POW LLCs assets and benefits to be transferred to themselves without fair or adequate
28 consideration therefore to defraud creditors of POW LLC and of cross-defendants POW, LEE,
29 LIEBERMAN, CHAMPION and ROES 16 through 20, inclusive. Cross-complainants do not
30 know the precise time during which such misrepresentations occurred, and will seek leave of
31 court to amend this cross-complaint accordingly when the same is ascertained;
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1 251. Cross-defendants POW, LEE, LIEBERMAN, CHAMPION and ROES 16
2 through 20, inclusive, and each of them, have caused POW LLC to become depleted of all assets,
3 financially insolvent and unable to pay its creditors, including any judgment which may be
4 awarded to Cross-complainants in this action;
5 252. Adherence to the fiction of separate existence between cross-defendants POW,
6 LEE, LIEBERMAN, CHAMPION and ROES 16 through 20, inclusive, and each of them, and
7 POW LLC would sanction the fraud and injustices alleged in this cross-complaint by permitting
8 cross-defendants POW, LEE, LIEBERMAN, CHAMPION and ROES 16 through 20, inclusive,
9 and each of them, to divert the limited liability companys assets for their own private use and to
10 avoid the responsibility for their business undertakings by depriving Cross-complainants from
11 recovering on judgment for the debts alleged in this action;
12 253. POW LLC was conceived, intended and used by cross-defendants POW, LEE,
13 LIEBERMAN, CHAMPION and ROES 16 through 20, inclusive, and each of them, as a device
14 to avoid individual liability for the purpose of substituting financially irresponsible corporations
15 and in the place and stead of financially responsible individual or other defendants. At no time
16 was unencumbered capital placed at the risk of POW LLC; and
17 254. POW LLC and POW Entertainment Inc. are thereby the alter egos of cross-
18 defendants POW, LEE, LIEBERMAN, CHAMPION and ROES 16 through 20, inclusive, and
19 each of them, and as such, for the purposes of providing full redress to cross-complainants herein,
20 protection as a limited liability company and a corporation should be declared void and the
21 liability of POW LLC and POW Entertainment Inc. established in this counter action should be
22 and become the liability of cross-defendants POW, LEE, LIEBERMAN, CHAMPION and
23 ROES 16 through 20, inclusive, and each of them.
24
25 First Cause Of Action
26
Fraud in violation of Section 10(b) of the Securities Exchange Act and
27
Rule 10b-5, 15 USC 78J AND 17 CFR 240.10B-5 as against Cross-
28
Defendants LEE, LIEBERMAN and CHAMPION as controlling persons
29
30 under Exchange Act Section 20(a)
31
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1
2 255. Cross-Complainants refer to and by this reference incorporate paragraphs 1
3 through 254, above.
4 256. Cross-Defendants LEE, LIEBERMAN and CHAMPION, as alleged above,
5 directly and indirectly, with scienter, including with reckless disregard, in connection with the
6 purchase and sale of securities, by use of the means or instrumentalities of interstate commerce,
7 or of the mails, has employed devices, schemes or artifices to defraud; has made untrue
8 statements of a material fact or omitted to state material facts necessary in order to make the
9 statements made, in light of the circumstances under which they were made, not misleading; or
10 has engaged in acts, practices or courses of business which have been and are operating as a fraud
11 upon the purchasers or sellers of such securities.
12 257. Cross-Complainants reasonably relied upon these misrepresentations and
13 omissions in entering into the reverse merger and thereby exchanging valuable Arturion stock for
14 POW stock.
15 258. By reason of the foregoing conduct, Cross-Defendants LEE, LIEBERMAN and
16 CHAMPION have violated Section 10(b) of the Securities Exchange Act of 1934 and Rule 10b-5
17 thereunder.
18 259. Cross-Defendants LEE, LIEBERMAN and CHAMPION, as directors of POW, are
19 also liable for the violations of Section 10(b) and Rule 10b-5 as controlling persons under
20 Exchange Act Section 20(4).
21 260. As a direct and proximate result of Cross-Defendants LEE, LIEBERMAN and
22 CHAMPIONs omissions and misrepresentations, Counter-Claim-Plaintiff sustained and will
23 continue to sustain damages in an amount that is presently unknown, in that Cross-Complainants
24 have exchanged valuable Arturion stock for shares of POW, which shares were rendered
25 valueless because POW did not in fact own the intellectual property it claimed to own in the
26 PPM.
27 261. Under Section 10b and Rule 10b-5, Counter-Claim-Plaintiff is also entitled to
28 triple damages.
29
Second Cause Of Action
30
Fraud in Violation of California Corporate Securities Law of 1968;
31
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1 Corporations Code Section 25000, et seq.
2
(including Sections 25401 and 25501)
3
4
262. Cross-Complainants refer to and by this reference incorporate paragraphs 1
5
through 254, above.
6
263. Cross-Defendants LEE, LIEBERMAN and CHAMPION, in California, offered to
7
sell Cross-Complainants securities on POW in exchange for shares of Arturion in the reverse
8
merger.
9
264. Cross-Defendants LEE, LIEBERMAN and CHAMPION, as alleged above,
10
directly and indirectly, with scienter, including with reckless disregard, in connection with the
11
purchase and sale of securities, made material untrue statements; misrepresentations and
12
omissions in the PPM and other disclosures in regard to the purchase and sale and reverse merger
13
in which Arturion and the other Cross-Complainants sold or exchanged valuable Arturion stock
14
for shares of POW.
15
265. By reason of the foregoing conduct, Cross-Defendants LEE, LIEBERMAN and
16
CHAMPION have violated California Corporate Securities Law of 1968.
17
266. As a direct and proximate result of Cross-Defendants LEE, LIEBERMAN and
18
CHAMPIONs omissions and misrepresentations, Cross-Complainants have sustained and will
19
continue to sustain damages in an amount that is presently unknown because Cross-Complainants
20
have exchanged valuable Arturion stock for shares of POW, which shares were rendered
21
valueless because POW did not in fact own the intellectual property it claimed to own in the
22
PPM.
23
24 Third Cause Of Action
25 Fraud In The Inducement

26
27 267. Cross-Complainants repeat, reallege and incorporate herein by reference each and
28 every allegation contained in paragraphs 1 through 254, inclusive, of this complaint as though
29 fully set forth herein.
30
31
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1 268. Cross-Complainants entered into the Reorganization Agreement with POW due to
2 an intention to become long-term investors in POW and a desire to support and enhance the
3 public perception and value of POW as a publicly traded company.
4 269. The intentions, desires and business strategy of the Cross-Complainants was
5 informed and motivated by the warranties, representations, assertions, disclosures and/or
6 statements of material fact made by POW. These warranties, representations, assertions,
7 disclosures and/or statements of material fact were made to the Cross-Complainants numerous
8 times during the course of their dealings with POW and their beliefs were affirmed by statements
9 made by LEE, CHAMPION and LIEBERMAN while acting in their official capacity as the
10 agents and representatives of POW.
11 270. In addition to the warranties, representations, assertions, disclosures and/or
12 statements of material fact made by the Cross-Defendants to the Cross-Complainants, the
13 Reorganization Agreement outlined above contained a Private Placement Memorandum which
14 attested in writing to the truth of the warranties, representations, assertions, disclosures and/or
15 statements of material fact which had informed the Cross-Complainants desire to enter into an
16 agreement with POW.
17 271. When the Cross-Complainants began their dealings with POW they did not know
18 nor could they have known that POW was embroiled in serious legal and financial difficulties.
19 272. The warranties, representations, assertions, disclosures and/or statements of
20 material fact made by POW in the course of their dealings with Cross-Complainants were false.
21 273. Despite assertions to the contrary, Cross-Complainants are now aware of the
22 following facts:
23 a. POW was not a distinct entity from Stan Lee Media. POW was in fact composed
24 of the same personnel and represented itself as owning the same intellectual property that Stan
25 Lee Media claimed to own. Stan Lee and his wife own the largest control block of stock in SLMI
26 and Gill Champion, Arthur Lieberman and Junko Kobayashi all are shareholders to this day in
27 SLMI.
28 b. POW did not in fact own all the intellectual property created by Stan Lee after his
29 departure from Marvel Comics, including ownership in perpetuity to Stan Lees name, likeness,
30 brand and signature slogans, Stan Lee Presents, Excelsior, and Stans Soap Box. This
31
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1 intellectual property is in fact the subject of a long standing dispute between Stan Lee Media and
2 POW..
3 c. Stan Lee Media was involved in substantial litigation that would have a serious
4 adverse affect on the ability of POW to conduct its business.
5 d. Stan Lee Medias board and officers had been indicted on numerous criminal
6 charges. Known felon Peter Paul was a substantial part of Stan Lee Media and former best friend
7 of Stan Lee as well as being responsible for the hiring of Gill Champion and Arthur Lieberman.
8 The criminal conduct which occurred at Stan Lee Media and the companys association with
9 Peter Paul had a serious adverse affect on the public reputation of Stan Lee, Stan Lee Media, and
10 POW and its officers Gill Champion and Arthur Lieberman.
11 274. The Reorganization Agreement, its attachments and its exhibits contain many
12 other warranties, representations, assertions, disclosures and/or statements of material fact. Cross-
13 Complainants relied in good faith on these statements.
14 275. Cross-Defendants made false representations and concealed the facts with
15 knowledge of their falsity and that materially would have influenced Cross-Complainants
16 decision to enter the agreements.
17 276. Cross-Complainants allege that the misrepresentations, fraud, and omissions
18 enumerated above were part of a deliberate effort and in furtherance of a conspiracy by Cross-
19 Defendants to induce Cross-Complainants into an agreement under false pretenses.
20 277. Cross-Complainants entered into their agreement with POW in good faith and
21 relied on POW to truthfully, accurately and fully disclose the material facts attendant to the
22 agreement.
23 278. Cross-Complainants reliance on Cross-Defendants representations was justified
24 because of the extensive negotiations and statements made in writing under contract by POW and
25 its top officials. Further research had indicated that LEE had a distinguished career and by his
26 demeanor LEE appeared to be honest and truthful.
27 279. POW withheld and concealed from Cross-Complainants the sordid past of Gill
28 Champion and his involvement in and production of Pornographic Films under the guise of
29 Exotic films. Champion produced director Radley Metzger considered to be one of the founding
30 fathers of the pornography industry. Cross-Compaintants were under the impression that they
31
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1 were investing in and teaming up with the wholesome Stan Lee and his superheroes that
2 represented integrity, honor and duty.
3 280. As a direct and proximate result of their reliance on the false representations of the
4 Cross-Defendants, the Cross-Complainants have suffered adverse economic consequences. As a
5 result of the misconduct alleged herein, Cross-Defendants are liable.
6 281. Cross-Complainants seek permanent injunctive relief as well as rescission and
7 restitution for the benefits lost due to this transaction.
8 282. When a contract is breached, the non-breaching party is entitled to rescission of
9 the contract. Cross-Complainants hereby seeks to rescind the Reorganization Agreement, and its
10 Amendments and Adjuncts thereto, and each of its related documents, excepting the consulting
11 agreements.
12
13
14 Fourth Cause of Action
15 Breach of Written Contract May 5, 2004 Agreement
17 every allegation contained in paragraphs 1 through 254, inclusive, of this cross-complaint as
18 though fully set forth herein.
19 284. Cross-Complainants have performed all acts to which it is obligated under its
20 agreements with POW, except insofar as the fraud of POW has prevented the fulfillment of these
21 obligations.
22 285. Between 2004 to present, the price of shares in POW consistently traded at less
23 than $1.00 per share. Under the written contract dated May 5, 2004, this constitutes an adverse
24 trading condition, entitling MDI to certain options which would cause either the payments due to
25 be extended or provisions for the note to be forgiven.
26 286. Between 2008 and on or about April of 2011, Cross-Complainants made numerous
27 attempts to sell their shares which were illegally blocked by Counter-Claim-Defendants.
28 287. During this period, POW directed their agents to block the sale of the shares, citing
29 a violation of Rule 144 of the Securities Act of 1933, as amended.
30 288. In refusing to allow Cross-Complainants to sell their shares, POW used a frivolous
31 legal argument in bad faith in order to breach their contract.
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1 289. During the time that POW illegally blocked the Cross-Complainants sale of
2 shares, the stock price rose. This resulted in a loss of profits of approximately $3,609,526.40.
3 290. As a result of the misconduct and breach of contract, Cross-Defendants are liable.
4
5 Fifth Cause of Action
6 Breach of Written Contract December 9, 2003 Agreement.
10 292. On or about August 21, 2009, POW sold a 10% interest to the Walt Disney
11 Company.
12 293. In doing so, they diluted the value of the retained shares of Cross-Complainants in
13 direct violation of the written agreements in the consulting contracts that containing anti-dilution
14 clauses. Cross-Defendants breached these contracts and not only through the wrongful issuance
15 of share to Disney but to others diluting Cross-complaintants shares by approximately 31%.
16 294. As a result of this dilution, the Cross-Complainants have suffered severe financial
17 harm in the form of decreased value of their retained shares in POW.
18
19 Sixth Cause of Action
20 Breach of Written Contract April 30, 2006 Agreement
24 296. Cross-Complainants had entered into their agreement with POW in good faith and
25 with a sincere intention to become long-term investors in POW and a desire to support and
26 enhance the public perception and value of POW as a publicly traded company.
27 297. In an attempt to salvage the business strategy reflected in their dealings with POW,
28 on April 30, 2005 and subsequently on April 30, 2006, MDI and Valerie Barth, President of MDI,
29 entered into two Consulting Agreements with POW.
30 298. Under the terms of the April 30, 2006 Agreement, POW agreed to hire MDI for a
31 stated term of 12 months. POW agreed to compensate MDI for Services with its customary
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1 amount of 250,000 shares of restricted common stock per month for the first six months, and at
2 the end of the first six months to renegotiate Consultants compensation for the remaining six
3 months as it was anticipated that Consultants responsibilities would broaden and require
4 additional exchange.
5 299. On or about December 6, 2006, POW without prior notice attempted to terminate
6 the Consulting Agreement. This termination is in breach of the written contract which required
7 mutual consent to terminate which was never given.
8 300. MDI fulfilled its obligations under the Consulting Agreement above and beyond
9 the contractual obligations and POW and Stan Lee used consultants services extensively POW
10 failed to pay MDI for the services it was provided.
11 301. Despite POWs continual promises to perform, POW breached numerous
12 conditions and MDI was not able to fully effectuate the Escalated Marketing Campaign without
13 these essential requirements that POW in breach of the contract refused to provide. Yet, POW
14 continued to pressure MDI to perform its duties over the life of the contract. Without POWs
15 proper disclosures and assistance the Public Relations efforts became extremely expensive and it
16 was not as effective as if POW had complied.
17 302. POW required MDI to finance all public relations and marketing efforts with
18 restrictive shares yet they delayed in issuing the shares and MDI was forced to use its shares
19 purchased from the subscription agreement and promissory note and other shares MDI had
20 received from the prior consulting work to effectuate its marketing efforts. During this period
21 POWs COO, Gill Champion became increasingly uncooperative and kept trying to divert Public
22 Relations efforts over to raising money for the company. This was not what MDI was hired for
23 and nowhere in the contract does it state that MDI was responsible for raising money.
24 303. On December 6, 2006 Arthur Lieberman sent MDI an email thanking MDI for its
25 services and stating that the consulting contract term was over. Valerie Barth called the office at
26 POW and reminded them that the contract was for 12 months not just over 7 months and that any
27 modification or amendments require mutual consent which MDI was not willing to give. MDI
28 informed them that it intended to fulfill its obligations under the terms of the agreement.
29 304. MDI continued providing services to the company and POW accepted them and
30 solicited them
31
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1 305. The value of her services was worth the market price of a minimum of 1.5 million
2 shares at that time.
3 306. Additionally, the parties entered into another agreement for additional services
4 (Consulting Agreement Adjunct) on April 30, 2006.
5 307. The Consulting Agreement Adjunct provided that MDI would orchestrate a
6 marketing campaign to enhance the public perception of POW and to mitigate the negative
7 publicity that POW was receiving due to its numerous legal and financial difficulties.
8 308. Under this Adjunct Agreement, POW hired MDI under this Escalated Marketing
9 Campaign for a term of 60 days. POW agreed to compensate MDI for the additional services a
10 minimum of Three Million restricted shares of common stock and a maximum of Five Million
11 shares.
12 309. Among the actions taken by MDI in furtherance of their contractual obligations
13 was the creation of a promotional website (www.stanleeweb.com) and a successful campaign to
14 get Stan Lee a star on the Hollywood Walk of Fame.
15 310. MDI fulfilled its obligations under both the Consulting Agreement and Consulting
16 Agreement Adjunct.
17 311. POW has not paid MDI for this promotional work in violation of the written
18 agreement dated April 30, 2006.
19 312. This breach of contract has resulted in a minimum loss of profit equivalent to
20 1,500,000 shares of POW stock for six months of extensive services provided and that does not
21 take into account for shares owing pursuant to the Adjunct and dilution of MDI shares for which
22 Cross-Defendants are liable.
23 Seventh Cause Of Action
24
Violation Of Uniform Commercial Code 8-401 And
25
8-407 Against All Cross-Defendants Stock Blocking
26
27
313. Cross-Complainants repeat and reallege the allegations in paragraphs 1 through
28
254 all above as though they were fully set forth here.
29
314. As set forth more specifically above, Cross-Complainants presented certain stock
30
certificates to POW and its transfer agent and demanded that POW and its transfer agent register
31
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1 the transfer of those stock certificates and/or remove the restrictive legends from those stock
2 certificates.
3 315. Page 4, paragraph 3, of POWs PPM represented and warranted to Cross-
4 coomplainants that:
5 The Company has agreed that it will not unreasonably withhold, delay or condition its consent
to the release of such lock-up. Additionally, the Current ARUR Shareholders have entered
6
v a r i o u s a g r e e m e n t s w i t h t h e C o m p a n y l i m i t i n g t h e ir r i g h t t o s e l l t h e s h a r e s h e l d b y t h e m s o
7
that of the 6,500,000 shares that they will hold after the Reorganization (assuming that no
8 Adjustment is required): about 467,000 shares will be free to be sold as of December 9, 2003;
9 about an additional 2,769,000 shares will become free to be sold over the six months from
10 November 2003 through May 2004; about 2,150,000 additional shares will become free to be
sold during the three months from June through August 2004; and the remaining
11
approximately 1,115,000 will become free to be sold during the 5 months from September
12 2004 through January 2005.
13 316. As set forth more specifically above, in furtherance of the conspiracy and in
14 breach of their fiduciary duties, Cross-defendants, and each of them, unreasonably failed and
15 refused to register the transfer by removing the Rule 144 legend condition until such time as the
16 stock price had crashed.
17 317. On April 14, 2008, UV wrote to the transfer agent to request the removal of the
18 Rule 144 legend condition, to allow its stock to become free trading. The transfer agent, as agent
19 for Cross-defendants, and each of them, has unreasonably failed and refused to cause POW to
20 register the transfer.
21 318. On numerous occasions, UV wrote to POW directly to inform them of the
22 requested registration of the transfer/removal of the restrictive legend.
23 319. By reason of Counter-Claim-Defendants refusal to register the transfer of UVs
24 shares, UV was unable to sell its shares when the stock appreciated and has suffered damages.
25 320. UV requests judgment against Cross-Defendants (1) awarding UV damages in an
26 amount to be proven at trial, estimated to be 3.6 million dollars, which exceeds the minimum
27 jurisdictional limit for unlimited civil actions in this state.
28
Eighth Cause Of Action
29
30 Breach Of Fiduciary Duty Against All Defendants
31
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4 322. Cross-defendants further breached their fiduciary duties of loyalty and full
5 disclosure as alleged herein.
6 323. Cross-Complainants repeat and reallege the allegations in paragraphs 1 through
7 170 all the above as though they were fully set forth here.
8 324. Since UV and MDI were both the legal and/or beneficial owners of POW stock,
9 Cross-Defendants and ROES 51 through 55, inclusive, and each of them, owed UV and MDI a
10 fiduciary duty.
11 325. This fiduciary duty includes the duty to allow UV to remove Rule 144 legend
12 condition, to transfer and sell its shares, to not interfere with the transfer and sale of those shares,
13 and to act in good faith with respect to any transfers or sales.
14 326. Cross-Defendants each breached their fiduciary duties to UV by interfering with
15 and preventing UV from transferring its shares.
16 327. Cross-Defendants in doing so treated Cross-Complainants differently from other
17 POW shareholders and oppressed UV in particular.
18 328. As a result of the foregoing breaches of fiduciary duty by Counter-Claim-
19 Defendants, Cross-Complainants have suffered damages in an amount to be proven at trial,
20 estimated to be 3.6 million dollars, which exceeds the minimum jurisdictional limit for unlimited
21 civil actions in this state.
22 329. The aforementioned conduct of Cross-Defendants was despicable conduct that
23 subjected Cross-Complainants to cruel and unjust hardship in conscious disregard of Cross-
24 Complainants rights so as to justify an award of punitive damages.
25 Ninth Cause of Action
26
Conversion
27
28
330. Cross-Complainants repeat, reallege and incorporate herein by reference each and
29
every allegation contained in paragraphs 1 through 254, inclusive, of this complaint as though
30
fully set forth herein.
31
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1 331. Cross-Complainants are the rightful and lawful owners of the POW shares set
2 forth above.
3 332. Cross-Complainants have demanded the Cross-Defendants POW and Signature to
4 remove the Rule 144 legend condition in order to transfer their POW shares.
5 333. In furtherance of the conspiracy and in breach of their fiduciary duties to Cross-
6 Complainants, Cross-Defendants, and each of them, refused to allow the removal of the Rule 144
7 legend condition in order to transfer UVs POW shares.
8 334. Cross-Defendants had no legitimate justification for its refusal to allow the transfer
9 of Cross-Complainants POW shares.
10 335. By refusing to allow the transfer of Cross-Complainants shares of POW stock,
11 Cross-Defendants converted those shares.
12 336. As a result of the foregoing conversion by POW, Cross-Complainants has suffered
13 damages in an amount to be proven at trial, estimated to be 3.6 million dollars, which exceeds the
14 minimum jurisdictional limit for unlimited civil actions in this state.
15 337. The aforementioned conduct of POW and Signature was an intentional act with the
16 intention of depriving Cross-Complainants of property or legal rights or otherwise causing injury
17 to Cross-Complainants, and was despicable, malicious and oppressive conduct that subjected
18 Cross-Complainants to cruel and unjust hardship in conscious disregard of Cross-Complainants
19 rights, so as to warrant an award of exemplary and punitive damages against Counter-Claim-
20 defendants, and each of them, and set them each up as an example for others.
21 Tenth Cause of Action
22 Rescission Due to Plaintiffs Breach of Contract
23 338. Cross-complainants repeat, reallege and incorporate herein by reference each and
28 obligations.
29 340. Due to breaches of contract by POW, Cross-Complainants were unable to continue
30 fully perform their contractual obligations stated in its agreements with POW.
31
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1 341. When a contract breached by the other party, the aggrieved party is entitled to
2 rescission of the contract.
3 342. When a contract is breached, the non-breaching party is entitled to rescission of
4 the contract. Cross-Complainants hereby seeks to rescind the reorganization Agreement, and its
6 agreements.
7 343. Cross-Complainants have already suffered serious financial harm as a result of the
8 fraud and breach committed by POW. Cross-Complainants will continue to incur grave financial
9 harm if all agreements are not rescinded. As Cross-Defendants have requested in their initial
10 complain, Cross-Complainant agrees to a full rescission of the Reorganization agreement.
11 344. Any offer to restore consideration is inapplicable in that Plaintiff has already
12 received such consideration through its wrongdoing as alleged elsewhere in this Cross-complaint.
13 However, should the court not find this consideration adequate, MDI offers to restore any
14 remaining consideration due.
15 Eleventh Cause of Action
16 Rescission (Mutual Mistake)
22 obligations.
23 347. The parties were mutually mistaken regarding the facts relating to whether Cross-
24 defendants title to its assets were undisputed and the other facts referred to in this Cross-
25 complaint.
26 348. When a contract is induced through mutual mistake, the aggrieved party is entitled
27 to rescission of the contract.
28 349. Cross-Complainants hereby seek to rescind the Reorganization Agreement, and its
30 agreements.
31
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1 350. Cross-Complainants have already suffered serious financial harm as a result of the
2 fraud and breach committed by POW. Cross-Complainants will continue to incur grave financial
3 harm if all agreements are not rescinded.
8 Twelfth Cause of Action
9 Negligent Misrepresentation
11 every allegation contained in paragraphs 254, inclusive, of this complaint as though fully set forth
12 herein.
13 353. Cross-Defendant made or caused to be made the misrepresentations as alleged in
14 this cross-complaint.
15 354. The representation were untrue.
16 355. Regardless of Cross-defendants actual belief the Cross-defendants made the
17 representation without any reasonable ground for believing it to be true.
18 356. The representations were made with the intent to induce plaintiff to rely upon it.
19 357. Cross-complainants were unaware of the falsity of the representation; and have
20 acted in reliance upon the truth of the representation and was justified in relying upon the
21 representation.
22 358. As a result of the reliance upon the truth of the representation, the Cross-
23 complainants sustained damage herein alleged.
24 Thirteenth Cause of Action
25 Breach of the Implied Covenant of Good Faith and Fair Dealing
26
30
31
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1 360. The reorganization Agreement, its amendments and adjunct and their supporting
2 documents, including but not limited to the private placement memorandums, promissory notes
3 and the 2005 consulting agreements and the 2006 consulting agreements were written.
4 361. Cross-complainants performed all unexcused conditions required of the Cross-
5 complainants.
6 362. Pursuant to the December 9, 2003 Reorganization Agreement, POW acted to
7 defraud Cross-Complainants by making numerous false and misleading representations inclusive
8 of what assets the company owned as its core property and omitted numerous material facts, one
9 of which was the threatened and pending litigation from SLM that not only challenged the rights
10 to all POW's purported assets which essentially was the only value the company had. Just the
11 knowledge of a dispute of this magnitude would have caused Cross-Complainants to not
12 consummate any transactions with POW until such time as these disputes were definitively
13 settled. Cross-Complainants relied on the assurances and disclosures made by POW which
14 ended up being false and misleading and causing severe negative repercussions on Cross-
15 Complainants, frustrating the ability to perfect its rights and benefits set forth in the Re-
16 organization Agreement.
17 363. The same applies to numerous other agreements inclusive of the Amendment
18 Number 1 To The Reorganization Agreement, Amendment Number 2 To The Reorganization
19 agreement, wherein based on numerous representations by POW, Cross-Complainants entered
20 into stock purchase agreements with the expressed intentions to pay the Promissory notes off with
21 the proceeds derived from the sale of stock as it became free trading. Those efforts were
22 frustrated by the acts perpetrated by POW and its management who among other acts and
23 omissions, either directly or indirectly caused the share price of the company to plummet. Cross-
24 Complainants were unable to perfect its rights to sell its stock or to perfect its rights pursuant to
25 Adverse Trading Conditions as POW failed to comply and insisted on full payment of the note
26 even though the contracts state otherwise.
27 364. POW breached numerous conditions in the Consulting Agreements it executed
28 with MDI. In frustration MDI was unable to fully effectuate the full desired results of its efforts
29 and suffered damages directly related to POW's acts and omissions. MDI a minority owned
30 company did not get compensated for six months of work and POW members engaged in
31
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1 blocking Cross-Complainants shares from being able to be sold on the open market causing
2 financial hardships.
3 365. Cross-complainants suffered damages as a result of the breach of the implied
4 covenant.
5 Fourteenth Cause of Action
6 Restitution and Unjust Enrichment
7
9 every allegation contained in paragraphs1 through 254, inclusive, of this complaint as though
11 367. The fraudulent and wrongful acts of the Cross-Defendants have resulted in the
12 Cross-Defendants being unjustly enriched. Such unjust enrichment includes, but is not limited to,
13 the value of the reverse merge with ARUR, the benefits of the publicity provided by MDI, and the
14 value of the retained shares in ARUR.
15 368. Cross-Defendants should be required to pay the entire amount by which they have
16 been unjustly enriched.
17 Fifteenth Cause of Action
18 Rescission of the Promissory Note Secured by Deed of Trust
19 Arising from Amendment 2 on the Basis of Violations of
20 Statutory Duties
21
22
369. Cross-complainants repeat, reallege and incorporate herein by reference each and
23
24
25
370. The promissory note arising from the increased obligation called for in by the
26
terms of the Amendment 2 was induced by the breach of compliance of the statutory and
27
regulatory violations of section 10B5 and the Blue sky Laws as alleged in this Cross-Complaint.
28
371. Accordingly, Cross-complainants pray for rescission of the promissory note
29
secured by Deed of Trust.
30
372. Any offer to restore consideration is inapplicable in that Plaintiff has already
31
received such consideration through its wrongdoing as alleged elsewhere in this Cross-complaint.
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3 Sixteenth Cause of Action
5 Arising from Amendment 2 on the Basis of Negligent Disclosure
6
8 every allegation contained in paragraphs1 through 254, inclusive, of this complaint as though
10 374. The promissory note arising from the increased obligation called for in by the
11 terms of the Amendment 2 was induced by Cross-Defendants negligent failure to disclose
12 material information, which, if it had been disclosed, would have resulted in MDI refusal to enter
13 Amendment 2.
14 375. Accordingly, Cross-Complainants pray for rescission of the promissory note
15 secured by Deed of Trust.
20 Seventeenth Cause of Action
21 The Promissory Note was a Partially Integrated Instrument
22
26 378. The Cross-Defendant and MDI discussed amending the promissory note arising
27 from the Reorganization Agreement to simply state the increased obligation called for in by the
28 terms of the Amendment 2. It was agreed that the new note would be drafted but that it would
29 contain the same terms as the former note, which terms included the adverse conditions provision.
30 However, the note was silent as the continuation of the Adverse Condition provision.
31
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1 Accordingly, Cross-Complainant alleges that note is a partially integrated document that
2 incorporates the adverse condition as part of that agreement.
3 Eighteenth Cause of Action
4 For Cancelation of the $1,150,000
5 Promissory Note Secured by Deed of Trust.
6
10 380. The parties agreed that the new note would contain the same terms as the former
11 note, which terms included the adverse conditions provision. Should the trier of fact not find that
12 the note was partially integrated, thereby incorporating the adverse condition as part of the
13 agreement, Cross-complainants seek that the note and deed of trust be declared void for the fraud
14 in the inception.
17 However, should the court not find this consideration adequate, MDI offers to restore any remain
18 consideration due.
19 Nineteenth Cause of Action
21 Arising from Amendment 2
22
23
382. Cross-complainants repeat, reallege and incorporate herein by reference each and
24
25
26
383. The parties agreed that the new note would contain the same terms as the former
27
note, which terms included the adverse conditions provision. Should the court not find that the
28
note was partially integrated, thereby incorporating the adverse condition as part of the
29
agreement, Cross-complainants seek that the note and deed of trust be declared void for the fraud
30
in the inception.
31
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1 Twentieth Cause of Action
2 Quantum Meruit
3
7 385. In furtherance of the conspiracy of the conspiracy, Cross-defendants wrote
8 terminating MDIs final six months of the 2006 Consulting Agreement. However, at the special
9 instance of Cross-Defendants, and each of them, and on the respective promises to pay a
10 minimum of 250,00 shares per month, in advance, MDI continued to perform the services and
11 LEE accepted them and solicited them.
12 386. There is now due and owing the shares or the reasonable market value of those
13 shares if they had been received in advanced as promised, together with prejudgment interest
14 thereon at the maximum legal rate from July 2006 until paid along with shares to compensate for
15 the dilution thereof in the amount of approximately 31%. Cross-defendants and each of them, are
16 liable to MDI therefore.
17 387. Reasonable value of MDIs service performed for the second half of the 2006
18 services agreement.
19 Twenty-First Cause of Action
20 Declaratory Relief
21
25 389. There exists now a controversy between the Cross-Complainants and the Cross-
26 Defendants as to whether the agreements between the parties have been rescinded due to the
27 misconduct of the Cross-Defendants.
28 390. The Cross-Complainants desire a judicial determination that, due to the
29 misconduct of the Cross-Defendants, MDI is free from all future obligations to POW.
30
31
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1 Twenty- Second Cause of Action
2 Slander of Title
3
7 392. At all relative times to this Cross-complaint BARTH was the owner in fee of real
8 property located in Del Norte County, California, referred to in this complaint and more
9 particularly described in the Deed of Trust attached to Plaintiffs First Amended Complaint.
10 393. On July 6, 2004, pursuant to the Agreement dated May 5, 2004, a Deed of Trust
11 was executed by BARTH and recorded by POW in the official Records of the Del Norte County
12 Recorder as Document number 20011701. This deed of Trust created a lien in the sum of
13 $500,000 on the Stateline property.
14 394. On or about July 22, 2005 Cross-Defendants, in furtherance of the conspiracy and
15 willfully, maliciously, and without privilege or justification remaining to be published a false
16 statement concerning BARTHs title to the Stateline Property; to wit: by failing to cancel the
17 $500,000 Promissory note and failing to reconvey and deliver the reconveyances of the Deed of
18 Trust as required by the condition precedents found in paragraph 1 of the Agreement Regarding
19 Deed of Trust which states:
20 1.1 Upon signing and delivery to POW of the 2005 Note, the Old Note shall be
21 surrendered to Trustor and shall thereafter be deemed null and void and of no further
22 effect.
23 1.2 Upon the execution by Trustor of the 2005 Deed of Trust, and POW receiving
24 evidence that (a) the 2005 Deed of Trust has been recorded, and that the 2005 Deed of
25 Trust has provided POW a first lien on the Property (except for the Existing Lien as
26 described in 2.1 below) POW will execute a release for a full reconveyances releasing
27 the 2004 Deed of Trust.
28
29 395. Publication of the false statement impaired the vendibility of the property, to
30 plaintiffs damage in a sum that will exceed $25,000.
31
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1 396. The publication described in Paragraph 5 was motivated by Cross-defendants
2 oppression/fraud/malice in that Cross-defendants wanted to prevent BARTH from selling the
3 property or using it as collateral for a loan so that BARTH could support herself, pay her
4 obligations, and finance litigation against Cross-defendants and Cross-complainant is therefore
5 entitled to punitive damages in a sum according to proof.
6
7 Twenty-Third Cause of Action
8 Petition for Removal of POW Board of Directors
9
13 398. Cross-Defendants MDI and UltaVision are the former controlling shareholders of
14 POWs predecessor organization Arturion Entertainment, Inc. In addition, had POW not
15 conspired to withhold the issuance of stock to them; perform the 2-for 1 split, pay the
16 compensation owed, and reimburse them for shares advanced to others during the escalated
17 marketing campaign, they would possess at least ten percent of POWs outstanding shares.
18 399. Cross-Defendants, LEE, LIEBERMAN and CHAMPION were at all time
19 mentioned herein was/were, directors of the corporation.
20 400. Due to the dishonest and wrongful acts undertaken by them as alleged in this
21 Cross-complaint, Cross-Complainants pray the court remove them from office as directors of the
22 corporation Cross-complainants further pray the court to bar them from reelection to the office of
23 director for a period of ten years or such other periods the court prescribes.
24
25 Twenty-Fourth Cause of Action
26 Indemnity Against All Cross-Defendants
27
31
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1 402. There are indemnification provisions in the PPM, Reorganization Agreement and
2 the Subscription Agreement. Stan Lee, Gill Champion and Art Lieberman are the indemnifying
3 parties in at least one of these agreements.
4 403. There are a number of warranty provisions and indemnity provisions, particularly
5 in the Reorganization agreement. In it POW LLC and its members Lee, Champion & Lieberman
6 agree to indemnify Arturion shareholders (e.g. Media Dynamics and UltaVision) from damages,
7 attorneys fees, punitive damages, etc.
8
9 1. For an injunction requiring that Defendants transfer the POW shares pursuant to
10 Cross-Plaintiffs' instructions; and
11 2. For compensatory damages according to proof at trial, but for no less than $3.6
12 million;
13 3. For punitive, treble and exemplary damages;
14 4. For attorneys fees;
15 5. On all Causes of Action:
16 a. An award of prejudgment interest;
17 b. An award of costs; and
18 c. For such other and further legal and equitable relief as the Court may deem just
19 and proper.
20
Dated: March 13, 2012 Respectfully Submitted,
21
22
23
24 /s/
DOHN R. HENION
25
Attorney for Cross-Complainants
26
27
28
29
30
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CASE NO. CVUJ 11-1163 Amended Cross Complaint Final

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1

DOHN R. HENION, State Bar No. 095118

3 P.O. Box 886

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3 Ninth Cause of Action

19 Seventeenth Cause of Action

20 Rescission of the Promissory Note Secured by Deed of Trust Arising from

28 Twenty-First Cause of Action

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3 Twenty-Fourth Cause of Action

4 Petition for Removal of POW Board of Directors .............................................................

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HENION LAW OFFICE

HENION LAW OFFICE

HENION LAW OFFICE

HENION LAW OFFICE

25 Fraud In The Inducement

HENION LAW OFFICE