Exhibit 2.
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HEADS OF AGREEMENT
This HEADS OF AGREEMENT ("Agreement"), dated this 5th day of June,
2001, among TRUDY CORPORATION, a Delaware corporation ("Trudy"), CHART STUDIO
(PROPRIETARY) LIMITED ("Chart Studio"), a company formed under the laws of the
Republic of South Africa, and ASHLEY C. ANDERSEN ("Andersen").
WHEREAS, Trudy, Chart Studio and Andersen have agreed to cause the
formation of a business entity under the name of Studio Mouse LLC ("Studio
Mouse") (including as an equity holder thereof a Chart Studio Staff Trust to be
formed under South African law, or a proprietary company owned by such Trust)
and conduct a business in creating, publishing, distributing and selling a line
of high quality, mass market titles in a wide range of formats; and
WHEREAS, the parties hereto wish to enter into this Agreement for the
purpose of setting forth the manner in which they will proceed to establish
Studio Mouse and enter into agreements whereby its business will be conducted;
NOW, THEREFORE, in consideration of the premises and the mutual
covenants contained herein, the parties hereto, intending to be legally bound,
agree as follows:
1. The parties shall proceed to cause Studio Mouse to be formed as
soon as possible under the Connecticut Limited Liability Company
Act.
2. Chart Studio shall proceed to cause the formation of a Chart
Studio Staff Trust under South African law, or a proprietary
company owned by such Trust, one of which will be party to the
Operating Agreement and such other agreements as appropriate.
3. The equity of Studio Mouse shall be initially held by the
following and capitalized as follows:
Trudy 45% U.S.$50,000
Chart Studio 45% U.S.$50,000
Andersen 5% -0-
Chart Studio Staff Trust 5% -0-
4. Studio Mouse shall be managed by a Board of four persons, two of
whom shall be designated by Trudy and two of whom shall be
designated by Chart Studio. In the event of a tie vote among the
members of the Board, the casting vote (which shall determine the
outcome of such vote) shall be made by a representative of Chart
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Studio previously designated for this purpose. The prior consent
of both Trudy and Chart Studio, as equity holders, shall be
required for certain substantive actions by Studio Mouse,
including, but not limited to, approval of annual budgets and
capital expenditures. Chart Studio shall hold the casting vote in
the event of a tie vote on other decisions by the equity holders
not expressly requiring the consent of both Trudy and Chart
Studio.
5. Studio Mouse shall enter into employment agreements with each of
the four principal members of senior management of Studio Mouse
upon customary terms and provisions, for periods of employment and
at rates of compensation to be determined by the parties thereto:
William W. Burnham
Warrick Schroder
Ashley C. Andersen
Miles Jarvis
6. The parties hereto (including the Chart Studio Staff Trust, or
proprietary company referred to above) shall endeavor to
negotiate, execute and deliver as soon as practicable (including
the satisfaction of the conditions set forth below) an Operating
Agreement and such other agreements as the parties deem
appropriate to implement this Agreement, such Operating Agreement
and other agreements to contain such terms, provisions,
representations and warranties as the parties shall agree.
7. Studio Mouse shall pay and be responsible for all legal,
accounting and related fees incurred in connection with the
implementation of the matters envisioned in this Agreement.
8. The parties hereto agree that no party shall make any public
announcement regarding the matters contained in this Agreement
without first receiving the consent of the other parties;
provided, however, that Chart Studio and Andersen acknowledge and
agree that the U.S. federal and state securities law may require
disclosure by Trudy of developments which are material to Trudy,
in which event Chart Studio and Andersen agree to act reasonably
in view of the provisions of U.S. federal and state securities law
and their applicability to Trudy in approving the text of such a
press release.
9. Consummation of the transactions envisioned herein and the conduct
of business operations by Studio Mouse are subject to the
fulfillment of the following conditions:
o Approval by the appropriate South African governmental
authorities, including, but not limited to, the South African
Reserve Bank and the South African Department of Trade and
Industry, and compliance with the Exchange Control regulations
of South Africa and the laws pertaining to the ownership of
shares by South African citizens and/or companies of companies
registered outside of South Africa;
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o Approval by the Smithsonian Institution of a sub-rights
license by Soundprints, a division of Trudy, to Studio Mouse
under the existing License Agreement between Soundprints and
the Smithsonian Institution.
o Execution and delivery of sub-rights licensing agreements (i)
between Trudy and Studio Mouse, (ii) between Chart Productions
(Proprietary) Limited ("Chart Productions") (an affiliate of
Chart Studio) and Chart Studio, and (iii) between Chart Studio
and Studio Mouse, covering in each case proprietary content
owned by each such licensor. Each such licensor shall,
however, determine in its sole discretion the proprietary
content and the format or formats to be so licensed.
10. This Agreement is binding on the parties and shall not be assigned
or transferred by any party without the prior written consent of
the other parties hereto. The Operating Agreement and such other
agreements as are deemed appropriate shall be executed and
delivered by the parties on or before September 1, 2001; provided,
however, that such deadline shall be extended for any period of
force majeure (defined as an event beyond the control of the party
which has failed to perform, including, but not limited to,
approvals of required South African governmental authorities)
which prevents such execution and delivery of the Operating
Agreement or such other agreements. Failure of execution and
delivery thereof by September 1, 2001 (as such date may be
extended by force majeure) shall result in the termination of this
Agreement, except the provision of Section 6, above, shall survive
termination.
11. This Agreement and all transactions hereunder shall be governed by
the law of the State of Connecticut, without regard to the
principles of conflicts of laws; provided, however, that the law
of South Africa shall govern issues involving the corporate
proceedings of Chart Studio and the Chart Studio Staff Trust (or
proprietary company) and approvals of South African governmental
entities.
12. The parties hereto shall make a good faith effort to resolve among
themselves all controversies and disputes between and among them
relating to this Agreement and, failing such resolution within a
reasonable period of time, the controversy or dispute shall be
referred for arbitration to the International Chamber of
Arbitration in Paris, France, such arbitration to proceed and be
governed by the rules of the International Chamber. The decision
of the International Chamber shall be final and binding on all
parties thereto.
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IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
duly executed on this 5th day of June, 2001.
TRUDY CORPORATION
By /s/ William W. Burnham
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William W. Burnham, President
CHART STUDIO (PROPRIETARY) LIMITED
By /s/ Warrick Schroder
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Warrick Schroder, Managing Director
/s/ Ashley C. Andersen
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ASHLEY C. ANDERSEN
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