<PAGE>
UNITED STATES SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
[ X ] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the quarterly period ended June 30, 1997
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the transition period from __________ to __________
Commission file number 1-10779
MARVEL ENTERTAINMENT GROUP, INC.
(DEBTOR-IN-POSSESSION)
- -------------------------------------------------------------------------------
(Exact name of registrant as specified in its charter)
DELAWARE 94-3024816
- -------------------------------------------------------------------------------
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
387 PARK AVENUE SOUTH, NEW YORK, NY 10016
- -------------------------------------------------------------------------------
(Address of principal executive offices) (Zip Code)
212-696-0808
- -------------------------------------------------------------------------------
(Registrant's telephone number, including area code)
- -------------------------------------------------------------------------------
(Former name, former address and former fiscal year, if changed since last
report)
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports) and (2) has been subject to such
filing requirements for the past 90 days. Yes X No ______
As of July 31, 1997, there were 101,809,657 shares of the registrant's
common stock, par value $.01 per share, outstanding.
<PAGE>
MARVEL ENTERTAINMENT GROUP, INC.
(DEBTOR-IN-POSSESSION)
INDEX TO CONTENTS OF THE SECOND QUARTER 1997 FORM 10-Q
<TABLE>
<CAPTION>
Page
<S> <C>
Condensed Consolidated Balance Sheets as of June 30, 1997 (unaudited) and December 31, 1996-----------------------3
Condensed Consolidated Statements of Operations for the six months and three months
ended June 30, 1997 and 1996 (unaudited)--------------------------------------------------------------------------4
Condensed Consolidated Statements of Cash Flows for the six months ended June 30, 1997
and 1996 (unaudited)----------------------------------------------------------------------------------------------5
Notes to Condensed Consolidated Financial Statements--------------------------------------------------------------6
Management's Discussion and Analysis of Financial Condition and Results of Operations----------------------------20
Other Information------------------------------------------------------------------------------------------------28
Signatures-------------------------------------------------------------------------------------------------------29
</TABLE>
2
<PAGE>
MARVEL ENTERTAINMENT GROUP, INC.
(DEBTOR-IN-POSSESSION)
CONDENSED CONSOLIDATED BALANCE SHEETS
(DOLLARS IN MILLIONS)
(UNAUDITED)
<TABLE>
<CAPTION>
June 30, December 31,
1997 1996
----------- ----------
ASSETS
Current assets:
<S> <C> <C>
Cash................................................ $ 25.3 $ 25.1
Accounts receivable, net............................ 185.5 229.1
Inventories, net.................................... 79.7 78.1
Deferred income taxes............................... 6.2 6.2
Income tax receivable............................... 10.9 11.8
Prepaid expenses and other.......................... 52.4 49.2
----------- ----------
Total current assets............................. 360.0 399.5
Property, plant and equipment, net..................... 79.5 79.5
Goodwill and other intangibles, net.................... 304.8 317.6
Deferred charges and other............................. 44.0 47.4
----------- ----------
Total Assets.................................... $788.3 $844.0
=========== ==========
LIABILITIES AND STOCKHOLDERS' DEFICIT
Current liabilities:
Accounts payable.................................... $ 85.4 $ 98.5
Accrued expenses and other.......................... 132.5 174.7
Short term borrowings............................... 140.4 47.3
Current portion of long-term debt................... 121.6 10.6
Liabilities subject to settlement under reorganization 28.7 29.7
----------- ----------
Total current liabilities......................... 508.6 360.8
Long-term debt......................................... 14.8 145.0
Other long-term liabilities............................ 20.3 20.4
Liabilities subject to settlement under reorganization. 473.5 473.5
----------- ----------
Total Liabilities................................. 1,017.2 999.7
Minority interest in Toy Biz........................... 97.2 100.6
----------- ----------
Stockholders' deficit:
Common Stock........................................ 1.0 1.0
Additional paid-in capital.......................... 93.1 93.1
Accumulated deficit ................................ (420.0) (350.3)
Cumulative translation adjustment .................. (0.2) (0.1)
----------- ----------
Total Stockholders' Deficit....................... (326.1) (256.3)
----------- ----------
Total Liabilities and Stockholders' Deficit....... $788.3 $844.0
=========== ==========
</TABLE>
The accompanying Notes to Condensed Consolidated Financial Statements are an
integral part of these statements.
3
<PAGE>
MARVEL ENTERTAINMENT GROUP, INC.
(DEBTOR-IN-POSSESSION)
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(DOLLARS IN MILLIONS, EXCEPT PER SHARE DATA)
(UNAUDITED)
<TABLE>
<CAPTION>
For the For the
Three Months Ended Six Months Ended
June 30, June 30,
------------------- ------------------
1997 1996 1997 1996
--------- --------- -------- --------
<S> <C> <C> <C> <C>
Net revenues........................................... $ 129.6 $ 182.2 $ 286.3 $ 371.8
Cost of sales.......................................... 96.4 115.4 200.9 229.3
Selling, general & administrative expenses............. 51.5 55.6 100.0 107.9
Depreciation and amortization.......................... 7.7 4.9 12.5 9.3
Amortization of goodwill, intangibles and deferred charges 4.1 5.5 8.4 11.0
Interest expense, net (contractual interest for the three
and six months ended June 30, 1997 was $16.9 and $32.5
respectively).......................................... 13.2 13.8 28.8 27.5
Foreign exchange loss/(gain), net...................... (0.8) 0.9 (1.5) 1.5
Equity in net (loss) income of unconsolidated subsidiaries
and other, net......................................... (5.3) 0.4 (5.2) 0.5
--------- --------- -------- --------
Loss before reorganization items, benefit for income taxes,
and minority interest................................ (47.8) (13.5) (68.0) (14.2)
Reorganization items................................... 2.6 - 6.0 -
--------- --------- -------- --------
Loss before benefit for income taxes and
minority interest.................................... (50.4) (13.5) (74.0) (14.2)
Benefit for income taxes............................... (4.6) (5.4) (0.8) (3.7)
--------- --------- -------- --------
Loss before minority interest.......................... (45.8) (8.1) (73.2) (10.5)
Minority interest in (loss) earnings of Toy Biz........ (3.9) 2.9 (3.5) 4.9
--------- --------- -------- --------
Net loss............................................... $ (41.9) $ (11.0) $ (69.7) $ (15.4)
========= ========= ======== ========
Loss per share......................................... $ (.41) $ (.11) $ (.68) $ (.15)
========= ========= ======== ========
Common shares outstanding (in millions)................ 101.8 101.8 101.8 101.8
========= ========= ======== ========
</TABLE>
The accompanying Notes to Condensed Consolidated Financial Statements are an
integral part of these statements.
4
<PAGE>
MARVEL ENTERTAINMENT GROUP, INC.
(DEBTOR-IN-POSSESSION)
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(DOLLARS IN MILLIONS)
(UNAUDITED)
<TABLE>
<CAPTION>
For the
Six Months Ended
June 30,
------------------------
1997 1996
---------- ----------
<S> <C> <C>
Cash flows from operating activities:
Net loss................................................... $ (69.7) $ (15.4)
---------- ----------
Adjustments to reconcile net loss to net cash
used in operating activities:
Depreciation and amortization .......................... 20.9 20.3
Provision for deferred income taxes .................... - 1.6
Undistributed loss (earnings) of unconsolidated entities
(primarily restaurants).................................. 5.2 (0.5)
Minority interest in earnings of Toy Biz................ (3.5) 4.9
Changes in assets and liabilities:
Decrease in accounts receivable, net.................. 43.3 24.6
Increase in inventories............................... (1.3) (12.3)
Increase in other assets.............................. (8.4) (3.7)
Decrease in accounts payable ......................... (7.5) (14.6)
Decrease in accrued expenses and other................ (41.0) (45.3)
---------- ----------
Total adjustments.......................................... 7.7 (25.0)
---------- ----------
Net cash used in operating activities................. (62.0) (40.4)
---------- ----------
Cash flows from investing activities:
Capital expenditures (including product development and
package design costs).................................... (14.3) (21.3)
Other Acquisition, net of cash and cash equivalents acquired (3.9) -
Other investing activities............................... (7.1) (0.2)
---------- ----------
Net cash used in investing activities................. (25.3) (21.5)
---------- ----------
Cash flows from financing activities:
Net (repayments) borrowings under Credit Agreements...... (5.1) 29.9
Net borrowings under Toy Biz credit facility............. 12.0 -
Net borrowings under DIP Loan............................ 84.2 -
Net (repayments) borrowings under other debt............. (1.7) 0.7
Proceeds from exercise of stock options.................. - 0.5
Other financing activities............................... 0.1 (1.0)
---------- ----------
Net cash provided by financing activities............. 89.5 30.1
---------- ----------
Effect of exchange rate changes on cash ................... (2.0) 0.9
---------- ----------
Net increase (decrease) in cash ........................... 0.2 (30.9)
Cash, at beginning of period............................... 25.1 53.6
---------- ----------
Cash, at end of period..................................... $25.3 $ 22.7
========== ==========
Supplemental disclosures of cash flow information:
Interest paid during the period....................... $32.5 $ 29.9
Income taxes paid, net of refunds, during the period.. $ 0.8 $ 7.9
</TABLE>
The accompanying Notes to Condensed Consolidated Financial Statements are an
integral part of these statements.
5
<PAGE>
MARVEL ENTERTAINMENT GROUP, INC.
DEBTOR-IN-POSSESSION
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(DOLLARS IN MILLIONS, EXCEPT PER SHARE AMOUNTS)
(UNAUDITED)
1. BACKGROUND AND BASIS OF FINANCIAL STATEMENT PRESENTATION
The accompanying unaudited condensed consolidated financial
statements include the accounts of Marvel Entertainment Group, Inc. ("Marvel")
and its subsidiaries (collectively, the "Company"). In the opinion of
management, all adjustments and intercompany eliminations necessary for a fair
presentation of the results of operations, financial position and cash flows
have been made and were of a normal recurring nature. The Company's operations
consist of (i) the publication and sale of comic books and children's
magazines, (ii) the manufacture and distribution of sports and entertainment
trading cards and children's activity sticker collections, (iii) consumer
products, media and advertising-promotion licensing of the various characters
owned by the Company, (iv) the design, marketing and distribution of toys and
(v) the manufacture and distribution of adhesive paper and confectionery
products. These interim condensed consolidated financial statements should be
read in conjunction with the consolidated financial statements and related
notes thereto contained in the Company's Annual Report on Form 10-K for the
year ended December 31, 1996. Certain prior year amounts have been
reclassified to conform with the current year presentation.
The Company continues to consolidate the results of operations and
financial position of Toy Biz, Inc. ("Toy Biz") in its financial statements
for the period ended June 30, 1997. The Company's controlling interest in Toy
Biz, however, is the subject of a dispute described more fully in Management's
Discussion and Analysis of Financial Condition and Results of Operations. In
addition, the Company, Toy Biz and various other interested parties have
reached an agreement in principle, by which Toy Biz will become a wholly-owned
subsidiary of the Company as reorganized (see Note 5).
2. CHAPTER 11 REORGANIZATION
Marvel Holdings, Inc. ("Holdings"), is the owner of 50.03% of the
issued and outstanding shares of common stock of Marvel. Holdings is a
wholly-owned subsidiary of Marvel (Parent) Holdings, Inc. ("Marvel Parent")
which, in turn is a wholly-owned subsidiary of Marvel III Holdings, Inc.
("Marvel III", and collectively with Holdings and Marvel Parent, the "Holding
Companies"). In 1993, Holdings issued, pursuant to an indenture (the "Holdings
Indenture"), approximately $517.4 principal amount at maturity of Senior
Secured Discount Notes due in 1998 (the "Holdings Notes") secured by, among
other things, 48 million shares (as adjusted to reflect a subsequent stock
split) of Marvel common stock. In 1993, Marvel Parent issued, pursuant to an
indenture (the "Parent Indenture"), approximately $251.7 principal amount at
maturity of Senior Secured Discount Notes due 1998 (the "Parent Notes")
secured by, among other things, 100% of the shares of common stock of Holdings
(the "Holdings Stock") and 20 million shares (as adjusted to reflect a
subsequent stock split) of Marvel common stock. In 1994, Marvel III issued,
pursuant to an indenture (the "Marvel III Indenture"), $125.0 principal amount
of 9-1/8% Senior Secured Notes due 1998 (the "Marvel III Notes") secured by,
among other things, 100% of the shares of common stock of Marvel Parent (the
"Parent Stock") and 9,302,326 shares of Marvel common stock.
On December 27, 1996, Marvel along with eight of its operating and
inactive subsidiaries, Fleer Corp. ("Fleer"), SkyBox International, Inc.
("SkyBox"), Marvel Characters, Inc., Heroes World Distribution, Inc. ("Heroes
World"), The Asher Candy Company, Malibu Comics Entertainment, Inc.
("Malibu"), Frank H. Fleer Corp. and Marvel Direct Marketing Inc. (along with
Marvel, the "Debtor Companies") filed petitions for relief and a plan of
reorganization under Chapter 11, Title 11 of the United States Code (the
"Bankruptcy Code") in the United States Bankruptcy Court for the District of
Delaware (the "Bankruptcy Court"). Panini S.p.A. ("Panini"), Marvel Restaurant
Venture Corp. ("Marvel Restaurants") (a general partner in the joint venture
developing the Marvel Mania restaurants) and Toy Biz, all of which are active,
as well as certain other subsidiaries did not file petitions under the
Bankruptcy Code.
On December 27, 1996, Marvel filed a Plan of Reorganization (as
amended, the "Initial Plan") which contemplated that pursuant to the Stock
Purchase Agreement dated December 26, 1996, between Andrews Group Incorporated
("Andrews") and Marvel, Andrews, or an affiliate thereof, would acquire from
Marvel, a number of shares of common stock (or its equivalent) that would
represent 80.1% of the shares of reorganized Marvel after giving effect to
such acquisition, in consideration for $365 in cash or, at the option of
Andrews, shares of class A
6
<PAGE>
MARVEL ENTERTAINMENT GROUP, INC.
DEBTOR-IN-POSSESSION
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(DOLLARS IN MILLIONS, EXCEPT PER SHARE AMOUNTS)
(UNAUDITED)
common stock, par value $.01 per share of Toy Biz (the "Class A common stock")
or a combination of the foregoing (the "Andrews Investment"). The Initial Plan
contemplated that in connection with the Andrews Investment, the Company would
acquire the Class A common stock not owned by Marvel, Andrews or their
affiliates pursuant to a Merger Agreement between Andrews and Toy Biz and a
Stock Purchase Agreement with the two other principal stockholders of Toy Biz.
The Initial Plan also contemplated a new $160 credit facility for Toy Biz to
be used for working capital purposes of the Company, including Toy Biz, and to
fund the Company's strategic initiatives. As of June 30, 1997, the Company
owned 7,394,000 shares of class B common stock of Toy Biz (the "Class B common
stock"), representing 26.6% of the equity of Toy Biz, and 78.4% of the voting
power relating to Toy Biz. The Initial Plan has since been withdrawn as
described below.
As part of the first day orders, the Debtor Companies received
approval from the Bankruptcy Court to pay on time and in full undisputed
pre-petition obligations including salaries, wages and benefits to all of its
employees, trade creditors and independent contractors and to continue funding
its strategic initiatives. On January 24, 1997 the Bankruptcy Court approved a
$100 debtor-in-possession financing facility (the "DIP Loan"), which is
provided by a syndicate of lenders, including The Chase Manhattan Bank, as
agent bank. As of June 30, 1997, the current outstanding debt under this
facility was $94.2. The DIP Loan matured on June 30, 1997 and no repayment has
occurred. The DIP Loan is subject to covenants and events of default including
a change of control of Marvel (as defined therein). See Note 4.
On December 27, 1996, the Holding Companies filed voluntary petitions
for relief under the Bankruptcy Code with the Bankruptcy Court. The chapter 11
cases commenced by the Holding Companies have not been procedurally
consolidated and are not jointly administered with the Debtor Companies'
chapter 11 cases (the "Holding Cases").
On January 9, 1997, the United States Trustee appointed an Official
Bondholders Committee (the "Bondholders Committee") to represent the interests
of all holders (collectively the "Noteholders") of the Holdings Notes, the
Parent Notes and the Marvel III Notes (collectively, the "Notes"). The members
of the Bondholders Committee, is currently composed of: High River Limited
Partnership ("High River"), Westgate International, L.P. ("Westgate"), Schultz
Investments, WHERCO, Inc., M3, LLC and United Equities Commodities Company.
The commencement of the Chapter 11 cases by the Holding Companies was
an event of default under each of the Holdings Indenture, the Parent
Indenture, and the Marvel III Indenture (collectively, the "Indentures").
After its formation on January 13, 1997, the Bondholders Committee filed a
motion (the "Lift Stay Motion") with the Bankruptcy Court seeking an order
lifting the automatic stay in the Holding Cases and, thus, permitting the
trustee under the Indentures (the "Trustee") to vote and to foreclose upon
shares of stock pledged to secure repayment of the Notes, including (i) 100%
of the Holdings Stock, (ii) 100% of the Parent Stock and (iii) approximately
78.8% of the Marvel common stock (collectively, the "Pledged Stock"). On
January 13, 1997 The Bank of New York, then trustee under the Indentures,
joined in the Lift Stay Motion, and on January 30, 1997, LaSalle National Bank
(after its appointment as successor trustee) also joined the Lift Stay Motion.
On February 26, 1997, the Bankruptcy Court entered an order granting the Lift
Stay Motion and permitting the Bondholders Committee and the Trustee, on
behalf of the Noteholders, to vote and to foreclose upon the Pledged Stock
(the "Lift Stay Order"). On February 27, 1997, the Company and the Holding
Companies filed a notice of appeal with respect to such order.
On February 12, 1997, the United States Trustee appointed a committee
of equity security holders of the Debtor Companies under section 1102(a)(1) of
the Bankruptcy Code (the "Equity Committee"). The Equity Committee presently
consists of: Barclay's Global Investors, Marty Solomon, Robert A. Della
Camera, Peter E. Kelly, Jr., Gladys V. Veidemanis and Ronald Cantor.
On March 7, 1997, Andrews exercised its right to terminate the Stock
Purchase Agreement with the Company. On the same date, Andrews informed Toy
Biz and the two principal stockholders of Toy Biz (other than the Company)
that, as a result of the termination of the Andrews Investment, a condition to
closing under the
7
<PAGE>
MARVEL ENTERTAINMENT GROUP, INC.
DEBTOR-IN-POSSESSION
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(DOLLARS IN MILLIONS, EXCEPT PER SHARE AMOUNTS)
(UNAUDITED)
Merger Agreement with Toy Biz and the Stock Purchase Agreement would not be
satisfied, that Andrews Group did not intend to waive the satisfaction of such
condition and therefore the transaction contemplated by such agreements would
not be consummated. As a consequence of the termination of the Stock Purchase
Agreement, the Initial Plan was withdrawn.
On March 19, 1997, the Bondholders Committee notified the Company
that on March 25, 1997 it would cause the Trustee to vote the Pledged Stock to
replace the Board of Directors of Marvel. On March 24, 1997, at the request of
Marvel and its bank lenders (the "Bank Lenders"), the Bankruptcy Court issued
a restraining order (the "Stay Order") enjoining the Bondholders Committee and
the Trustee from voting the Pledged Stock or otherwise replacing the Board of
Directors of Marvel without first seeking and obtaining relief from the
automatic stay imposed under the Bankruptcy Code in the Chapter 11 cases of
the Debtor Companies (the "Marvel Cases"). The Stay Order, however, did not
prevent the holders of Parent Notes from exercising voting power over Holdings
Stock for the purpose of removing and replacing the Board of Directors of
Holdings.
On April 24, 1997, the Trustee, at the direction of the holder of a
majority of the Parent Notes, removed the members of the Board of Directors
of Holdings and appointed Carl C. Icahn, Vincent J. Intrieri and Robert J.
Mitchell to the Holdings Board. As a result, Marvel is no longer consolidated
for federal income tax purposes with Mafco Holdings, Inc. ("Mafco"). As a
result of such tax deconsolidation, the Company will retain an allocated
portion, if any, of net operating loss carryforwards ("NOLs") of the Mafco
affiliated group. Such allocation is not yet determinable. Such NOLs will be
limited under federal income tax laws since a change of control (as defined in
the internal revenue code) of the Company has occurred. Further limitation
could result if a plan of reorganization is consummated.
Between March 24, 1997 and June 20, 1997 Marvel and the Bank Lenders
requested action by the Bankruptcy Court and the United States District Court
for the District of Delaware (the "District Court") seeking, among other
things, to prevent the Noteholders and Holdings from exercising voting
authority with respect to the shares of Marvel common stock owned by Holdings
for the purpose of removing the existing Board of Marvel and replacing it with
the New Board (as defined below). At the same time, the Bondholders Committee
and Trustee also requested action by the Bankruptcy Court and the District
Court seeking to permit the Noteholders and/or Holdings to exercise voting
authority over such shares for such purpose. Such litigation culminated in the
issuance of an order by the District Court vacating the Bankruptcy Court's
Stay Order effective as of 5:00 p.m. (New York time) on June 20, 1997. The
effect of such order was to permit Holdings, as majority stockholder of
Marvel, to vote such stock to remove the existing Board of Marvel and replace
it with a New Board (the "New Board") which is comprised of the following
directors: Carl C. Icahn, Harold First, Charles K. MacDonald, Glen Adams, J.
Winston Fowlkes, III, Robert J. Mitchell, Jouko T. Tamminen, Vincent J.
Intrieri, and Michael J. Koblitz. Additionally, the New Board by written
consent amended and modified Marvel's By-laws to provide that Marvel's Board
of Directors shall be composed of nine persons or such other number of persons
as may thereafter be fixed by Marvel's Board of Directors. As a result of the
replacement of the existing board with the New Board, Toy Biz has taken the
position that a change in control occurred under the Stockholders Agreement
and that the Company's shares of Toy Biz Class B common stock automatically
converted to Class A common stock, reducing the Company's voting control of
Toy Biz from 78.4% to 26.6%. The Company disputes Toy Biz's position and
maintains that it continues to own Class B common stock of Toy Biz. The
Company is currently in litigation with Toy Biz with respect to this issue.
On July 10, 1997 it was announced that Marvel, High River, Westgate,
Toy Biz, Isaac Permutter, Avi Arad and The Chase Manhattan Bank had reached an
agreement in principle on certain key economic terms relating to the Marvel
Cases and the Holding Cases. Consummation of the agreement in principle
remains subject to: (1) negotiation and execution of definitive documentation
regarding the agreement; (2) approvals of the Boards of Directors of Marvel
and Toy Biz; (3) approval by holders of at least 67% in amount and 51% in
number of the secured lender claims (other than the secured lender claims
against Panini); and (4) approval of the Bankruptcy Court, none of which is
assured. The agreement stipulated that definitive agreements would be reached
by July 24, 1997. This date has been extended a number of times, with the
latest being August 20, 1997. There exist a number of material issues which
are still being negotiated among the parties. There can be no assurance that
a final definitive agreement can be reached.
The agreement in principle provides that, pursuant to a plan of
reorganization (the "Plan") to be proposed by the Company, the Holding
Companies, Toy Biz, High River and Westgate, Marvel and Toy Biz would be
combined (the "Toy Biz Merger") in a transaction in which the stockholders of
Toy Biz (other than the Company) would receive, in exchange for their Toy Biz
shares, 49% of the outstanding shares of common stock of the Company, as
reorganized ("Reorganized Marvel").
8
<PAGE>
MARVEL ENTERTAINMENT GROUP, INC.
DEBTOR-IN-POSSESSION
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(DOLLARS IN MILLIONS, EXCEPT PER SHARE AMOUNTS)
(UNAUDITED)
Additionally, pursuant to the Plan, the currently outstanding shares
of Marvel common stock would be canceled and Marvel's equity holders
(including the Noteholders) would be offered rights (the "Rights Offering") to
purchase on a pro rata basis: (1) new shares equal to 51% of outstanding
common stock of Reorganized Marvel for an aggregate price of $170.0 and (2)
$225.0 of new debt securities of Reorganized Marvel. High River and Westgate
would appoint a majority of the board of directors of Reorganized Marvel. The
proceeds of the rights offering would be used to retire all of the bank claims
acquired by High River and Westgate as described below.
The agreement in principle further contemplates that High River and
Westgate would purchase all of the prepetition and postpetiton claims and
liens of the secured lenders of the Company of approximately $700.8 at June
30, 1997, except for $120.0 of indebtedness of Panini and $80.0 to $95.0 of
indebtedness of the Company's Fleer/SkyBox businesses (which indebtedness
would no longer be indebtedness of the Company), in exchange for: (a) $395.0
in cash; and (b) five year warrants issued by the Company to acquire ten
percent (10%) of Reorganized Marvel, which warrants would have an exercise
price based upon a net equity value of $525.0 with no more than $225.0 in term
indebtedness for borrowed money (exclusive of indebtedness for working
capital). Under this arrangement, Fleer/SkyBox and Panini would be auctioned
for sale for the benefit of the Company's secured lenders. Pending such
auction, Fleer/SkyBox and Panini would be operated for the account of such
secured lenders and all expenses of such operation would be the responsibility
of the Company's secured lenders. The secured lenders would receive 100% of
the common stock of Panini and Fleer/SkyBox at the earlier of (i) such time
as they request it in writing, or (ii) the consummation of a plan of
reorganization for the Company and the Holding Companies. The Company would
receive a $200.0 million to $215.0 million credit against indebtedness held by
the Company's secured lenders (in exchange of net assets including goodwill and
other intangibles of approximately $268.7 at June 30, 1997 transferred to the
secured lenders) at such time as an order of the Bankruptcy Court in form and
substance reasonably acceptable to High River, Westgate, and the secured
lenders, approving the acquisition and settlements of the secured lender
claims (other than the specified claims against Panini and Fleer/SkyBox)
becomes a final order. In the absence of the transactions contemplated by
the agreement in principle, the Company has made no determination whether to
continue operating or to otherwise dispose of Panini and Fleer/Skybox.
The proposed global settlement contemplated that an auction for
Panini and Fleer/SkyBox is to be conducted. At such time, as any sale of the
assets of Fleer/SkyBox and Panini occurs, Fleer/SkyBox and Panini would be
deconsolidated. Based on the operating results of Fleer/SkyBox and Panini, the
status of the global settlement and the auction process, the Company continues
to evaluate whether an impairment of goodwill and other intangibles has taken
place. Further, under the terms of the proposed global settlement, the Company
will realize a significant forgiveness of debt.
The Company has entered into a number of animation and movie contracts
for various highly recognizable characters of its universe. The Company
believes that such contracts accrue significant benefit to Toy Biz. This
benefit is derived from Marvel's grant of a royalty free license to Toy Biz
for the use of all its characters in the sale of toys and other toy related
product offerings. Given the Company's financial condition, the Company can no
longer expend funds for animation and/or movies from which Toy Biz receives
more direct benefit than Marvel. The Company believes that the proposed
agreement in principle, if consummated, would allow the consolidated Company
to continue to enjoy the benefits of the exploitation of its characters,
without any financial disadvantage between Marvel and Toy Biz.
In the event that a global settlement is not achieved, the Company will be
forced to evaluate various alternatives to protect its long term interests.
Such alternatives may include: (i) attempting to revoke or reject through its
chapter 11 proceedings the royalty free license to Toy Biz; or (ii) exercising
all its rights under the license agreement. Additionally, if a global
settlement is not reached, Marvel may be forced to restructure certain movie
contracts which have a negative effect to Marvel, in that Marvel must pay a
portion of all toy revenues to the movie developers, even through Marvel
receives no cash benefit from toy revenues due to the fact that all these
revenues accrue to Toy Biz. Further, if there is no global settlement and
these movie contracts cannot be restructured, Marvel may suffer severe
financial consequences in the future. Marvel is continuing to focus its
efforts on the final negotiation and execution of a global settlement, as
well as continuing to develop animation and theatrical releases for its
long-term success.
A significant part of the Company's value is tied to its universe of
characters. The Company has been in bankruptcy since December 27, 1996 and
as such it has incurred significant cash/operating losses. The Company
believes that while in bankruptcy, it is significantly inhibited from the
exploitation of its character base. Therefore, if it continues in bankruptcy,
the Company is unsure as to the potential of a long-term negative effect of
such proceedings on the value of its character base. The Company's ability to
continue to operate in this state, having incurred $94.2 in additional
indebtedness since its petition date, raises serious doubt concerning the
value of its assets to creditors, lenders and shareholders, and its ability
to rejuvenate itself through the successful exploitation of its character
base. The Company is hopeful that a global settlement can be executed however,
there still exists a number of unresolved issues between all the parties,
which the Company is working to overcome. The Company believes that the
global settlement, if executed in the near term, will preserve the value of
its character base and thereby contribute to the long-term viability of the
Company. There can be no assurance that the Plan, or any other plan of
reorganization will be submitted or confirmed under the Bankruptcy Code. If
the Company is unable to obtain confirmation of a plan of reorganization, its
creditors, lenders or equity security holders may seek other alternatives for
the Company.
On June 30, 1997, the DIP Loan matured and no repayment has occurred.
The DIP lenders agreed to forbear from taking any action through August 14,
1997. Such forbearance is continuing on a daily basis while the Company
negotiates a replacement DIP loan. With a full reservation of all rights, the
prepetition secured lenders have agreed not to object to the Debtors'
continued use of the cash collateral through August 20, 1997 on the same terms
and conditions and with the same protections as set forth in the current
financing and cash collateral order approved by the Bankruptcy Court.
The accompanying condensed consolidated financial statements have
been prepared on a going concern basis, which assumes continuity of
operations, realization of assets and liquidation of liabilities in the
ordinary course of business. However, as a result of the Marvel Cases and
circumstances relating thereto, such realization of assets and liquidation of
liabilities is subject to significant uncertainty. These conditions raise
substantial doubt as to the Company's ability to continue as a going concern.
As of June 30, 1997, the Company's carrying value of goodwill for its trading
cards and stickers businesses was approximately $106.1 and $103.0,
respectively. The sale of the Company or parts thereof may necessitate a
material write down of assets, including goodwill associated with the
Company's businesses.
9
<PAGE>
MARVEL ENTERTAINMENT GROUP, INC.
DEBTOR-IN-POSSESSION
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(DOLLARS IN MILLIONS, EXCEPT PER SHARE AMOUNTS)
(UNAUDITED)
As part of the Chapter 11 process, the Debtor Companies have received
a significant number of proofs of claims. The Company is currently in the
process of reviewing these claims and believe that a majority of these claims
are without merit and/or are highly disputed. Although the Company believes
that reserves as of June 30, 1997 are adequate to cover the ultimate liability
under these claims, there can be no assurances that these claims will not be
settled for amounts in excess of these reserves.
Financial accounting and reporting during a Chapter 11 proceeding is
prescribed in Statement of Position No. 90-7, "Financial Reporting by Entities
in Reorganization Under Bankruptcy Code" ("SOP 90-7"). Accordingly, certain
pre-petition obligations, which may be subject to settlement, have been
classified as obligations subject to Chapter 11 reorganization proceedings and
include the following estimated amounts:
<TABLE>
<CAPTION>
June 30, December 31,
1997 1996
--------------- ---------------
<S> <C> <C>
Total accrued expenses---------------------------------------- $ 13.7 $ 14.7
Chase Revolving Line of Credit-------------------------------- 15.0 15.0
Total current liabilities------------------------------------- ------------- -------------
$ 28.7 $ 29.7
============= =============
Debt:
U.S. Term Loan Agreement------------------------------------- $ 350.0 $ 350.0
Amended and Restated Credit Agreement------------------------ 120.0 120.0
Chase Revolving Line of Credit------------------------------- 15.0 15.0
------------- -------------
Total debt------------------------------------------------- 485.0 485.0
Less current maturities (15.0) (15.0)
Other long-term liabilities---------------------------------- 3.5 3.5
------------- -------------
Total long-term liabilities---------------------------------- $ 473.5 $ 473.5
============= =============
</TABLE>
10
<PAGE>
MARVEL ENTERTAINMENT GROUP, INC.
DEBTOR-IN-POSSESSION
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(DOLLARS IN MILLIONS, EXCEPT PER SHARE AMOUNTS)
(UNAUDITED)
3. DETAIL OF CERTAIN BALANCE SHEET ACCOUNTS
<TABLE>
<CAPTION>
ACCOUNTS RECEIVABLE, NET:
June 30, December 31,
1997 1996
--------------- ----------------
<S> <C> <C>
Accounts receivable------------------------------------------- $ 228.2 $ 275.3
Less: Allowances--------------------------------------------- (42.7) (46.2)
------------- -------------
$ 185.5 $ 229.1
============= =============
INVENTORIES, NET:
Finished goods------------------------------------------------ $ 64.2 $ 69.4
Work in process----------------------------------------------- 13.0 16.3
Raw materials------------------------------------------------- 21.1 22.0
Less: Reserve for obsolescence-------------------------------- (18.6) (29.6)
------------ ------------
$ 79.7 $ 78.1
============ ============
GOODWILL AND OTHER INTANGIBLES, NET:
Goodwill and other intangibles-------------------------------- $ 368.4 $ 374.3
Less: Accumulated amortization-------------------------------- (63.6) (56.7)
------------ ------------
$ 304.8 $ 317.6
============ ============
ACCRUED EXPENSES AND OTHER:
Royalties and incentives-------------------------------------- $ 21.6 $ 23.0
Reserve for returns------------------------------------------- 44.8 51.2
Income taxes payable------------------------------------------ 7.6 10.9
Other--------------------------------------------------------- 72.2 104.3
Less amounts reclassified to liabilities subject to
settlement under reorganization (See Note 2)------------------ (13.7) (14.7)
------------ ------------
$ 132.5 $ 174.7
------------ ------------
</TABLE>
11
<PAGE>
MARVEL ENTERTAINMENT GROUP, INC.
DEBTOR-IN-POSSESSION
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(DOLLARS IN MILLIONS, EXCEPT PER SHARE AMOUNTS)
(UNAUDITED)
<TABLE>
<CAPTION>
4. AMOUNTS PAYABLE TO BANKS
Short term borrowings consists of the following:
June 30, December 31,
1997 1996
---------------- ----------------
<S> <C> <C>
Panini credit arrangements--------------------------------- $ 34.2 $ 37.3
DIP Loan--------------------------------------------------- 94.2 10.0
Toy Biz Credit Facility------------------------------------ 12.0 -
------------ ------------
$ 140.4 $ 47.3
============ ============
Debt consists of the following:
June 30, December 31,
1997 1996
---------------- ----------------
U.S. Term Loan Agreement----------------------------------- $ 350.0 $ 350.0
Amended and Restated Credit Agreement---------------------- 120.0 120.0
Chase Revolving Line of Credit ---------------------------- 15.0 15.0
Panini Term Loan Agreement--------------------------------- 121.6 139.3
Other long term debt--------------------------------------- 14.8 16.3
------------ ------------
Subtotal--------------------------------------------------- 621.4 640.6
Less amount reclassified*---------------------------------- (485.0) (485.0)
Less current maturities**---------------------------------- (121.6) (10.6)
------------ ------------
$ 14.8 $ 145.0
============ ============
</TABLE>
* Amounts as of June 30, 1997 have been reclassified to "Liabilities subject
to settlement under reorganization" in accordance with bankruptcy reporting
prescribed by Statement 90-7. See Note 2.
** Amount as of June 30, 1997 has been reclassified to "Current portion of
long-term debt" as a result of an event of default by Panini. See below.
On December 20, 1996, the banks and financial institutions that were
parties to the Company's existing loan agreements (collectively with the U.S.
Term Loan Agreement (as defined below), the Amended and Restated Credit
Agreement (as defined below), the Chase Revolving Line of Credit (as defined
below ) and the Panini Term Loan Agreement (as defined below), the "Credit
Agreements") entered into a Standstill Agreement and Amendment (the
"Standstill Agreement") which grants the Company the right to maintain any
outstanding loans under the Credit Agreements as either Eurodollar or
Eurocurrency Loans during the Standstill Period (as defined below). The
Standstill Agreement also provided that the commitments under the Credit
Agreements would not automatically terminate or be accelerated upon the
commencement of the reorganization cases but rather would be suspended and
reinstated upon confirmation of the Initial Plan. Unless a payment default was
continuing or certain other termination events were triggered, each lender
under the Credit Agreements agreed not to exercise any remedies against any
subsidiary of Marvel which is not one of the Debtor Companies during the
Standstill Period. Each lender under the Credit Agreements agreed not to
transfer such Claim to any entity that does not agree to be bound by the
Standstill Agreement or support the Initial Plan. Pursuant to the Standstill
Agreement, the lenders under the Credit Agreements permitted the loans
outstanding thereunder to be outstanding as Eurodollar Loans (or the
equivalent) during the Standstill Period provided that, in the event that the
interest period for any such Eurodollar
12
<PAGE>
MARVEL ENTERTAINMENT GROUP, INC.
DEBTOR-IN-POSSESSION
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(DOLLARS IN MILLIONS, EXCEPT PER SHARE AMOUNTS)
(UNAUDITED)
Loans is longer than one month, such interest period would have a scheduled
expiration on or prior to June 30, 1997. The Standstill Period commenced on
December 27, 1996 and ended on June 30, 1997.
On January 24, 1997, the Bankruptcy Court approved an order (the "DIP
Order") approving the DIP Loan, which was provided by a syndicate of lenders,
including The Chase Manhattan Bank, as agent bank. The DIP Loan matured on
June 30, 1997 and no repayment has occurred. The Debtor Companies also
received approval from the Bankruptcy Court to pay, on time and in full,
interest on the pre-petition debt of the Debtor Companies calculated at the
applicable non-default rate or rates provided for pursuant to the Credit
Agreements.
On June 5, 1997, the Bankruptcy court approved an order suspending
the adequate protection payments being made by the Company to the Pre-petition
Banks. As a result, the Company has ceased interest payments on the U.S. Term
Loan Agreement, the Amended and Restated Credit Agreement and the Chase
Revolving Line of Credit. The amount of suspended adequate protection payments
as of June 30, 1997 was $3.7 and is not included in the liabilities of the
Company.
On June 30, 1997, the DIP Loan matured and no repayment has occurred.
The DIP lenders agreed to forbear from taking any action through August 14,
1997. Such forbearance is continuing on a daily basis while the Company
negotiates a replacement DIP loan. With a full reservation of all rights, the
prepetition secured lenders have agreed not to object to the Debtors'
continued use of the cash collateral through August 20, 1997 on the same terms
and conditions and with the same protections as set forth in the current
financing and cash collateral order approved by the Bankruptcy Court.
In July 1997, Panini, a subsidiary of the Company that has not filed
for protection under Chapter 11 and, therefore, is not one of the Debtors,
suspended all payments of interest and principal for the Panini Term Loan
Agreement. This action constitutes an event of default under the Panini Term
Loan Agreement, as defined below, and, consequently, the Company has
reclassified the Panini Term Loan to current liabilities.
The liens securing the DIP Loan take first position (prime) over the
liens securing the Credit Agreements and are secured by a lien on the
Company's 26.6% equity interest in Toy Biz. Borrowings under the DIP Loan bear
interest at a rate per annum equal to the one month Eurodollar Rate (as
defined in the DIP Loan) rounded upwards to the next 1/16 of 1%, or Alternate
Base Rate (as defined in the DIP Loan) plus the Applicable Margin of 2-1/2%
with respect to Eurodollar Loans and 1-1/2% with respect with Alternate Base
Rate loans. Interest on Alternate Base Rate Loans is payable monthly in
arrears, and interest on Eurodollar Rate Loans is payable at the end of the
applicable interest period. Pursuant to the terms of the DIP Loan, the
outstanding balances of the current DIP facility after June 30, 1997 bear
interest at the penalty rate of Alternate Base Rate plus a margin of 3-1/2%,
which, at June 30, 1997 was approximately 12%.
The DIP Loan includes various restrictive covenants prohibiting the
Company from, among other things, incurring additional indebtedness (with
certain limited exceptions), making investments, including for the Company's
strategic initiatives (with certain limited exceptions), and making dividend,
redemption and certain other payments on its capital stock. The DIP Loan also
contains certain customary financial covenants and events of default for
financings of this type, including a change of control covenant and an event
of default if the royalty free license from Marvel to Toy Biz is rejected in
the Marvel Cases.
In conjunction with the Toy Biz IPO, Toy Biz entered into a three
year $30.0 revolving line of credit with a syndicate of banks for which The
Chase Manhattan Bank serves as administrative agent (the "Toy Biz Credit
Facility"). Substantially all of the assets of Toy Biz have been pledged to
secure borrowings under the Toy Biz Credit Facility. Borrowings under the Toy
Biz Credit Facility bear interest at either The Chase Manhattan Bank's
alternate base rate or at the Eurodollar rate plus, in each case, the
applicable margin. The applicable margin is 1% unless Toy Biz meets specific
financial operating levels, in which case the applicable margin decreases to
3/4 of 1%.
13
<PAGE>
MARVEL ENTERTAINMENT GROUP, INC.
DEBTOR-IN-POSSESSION
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(DOLLARS IN MILLIONS, EXCEPT PER SHARE AMOUNTS)
(UNAUDITED)
The credit facility requires Toy Biz to pay a commitment fee of 3/8
of 1% per annum on the average daily unused portion of the credit facility.
The Toy Biz Credit Facility contains various financial covenants, as
well as restrictions on obtaining new indebtedness, prepaying or amending
subordinated debt, acquisitions and similar investments, the sale or transfer
of assets, capital expenditures, limitations on restricted payments,
dividends, issuing guarantees and creating liens. The credit facility also
requires that (a) the Company control Toy Biz and (b) that the exclusive,
royalty free perpetual worldwide license agreement between Toy Biz and the
Company remain in effect. The Toy Biz Credit Facility is not guaranteed by the
Company.
Toy Biz is currently in default under the Toy Biz Credit facility as
a result of non-compliance with certain covenants. Toy Biz is seeking a waiver
of the provisions pertaining to the default and believes it could obtain a
replacement credit facility if a termination of the Toy Biz Credit Facility
were to occur, although there can be no assurance of Toy Biz's ability to do
so or the terms of such a replacement facility.
Under credit arrangements for short-term borrowings arranged with a
group of banks, Panini may borrow up to Italian Lire 45.3 billion as of June
30, 1997 (approximately $26.7 based on exchange rates at June 30, 1997) on
such terms as Panini and the banks may mutually agree upon. These arrangements
generally do not have termination dates but are reviewed periodically for
renewal. At June 30, 1997, the unused portion of the credit lines was Italian
Lire 3.5 billion (approximately $2.0 based on exchange rates at June 30,
1997). The weighted average interest rate on short-term borrowings as of June
30, 1997 was 6.3%. See "Management's Discussion and Analysis of Financial
Condition and Results of Operations" for information regarding a new credit
facility obtained by Panini.
In April 1995, the Company entered into a $350.0 term loan agreement
(as amended) with a syndicate of banks, the Co-Agents and The Chase Manhattan
Bank, as administrative agent (the "U.S. Term Loan Agreement"). Loans under
the U.S. Term Loan Agreement bear interest at a rate per annum equal to the
Eurodollar Rate (as defined in the U.S. Term Loan Agreement), or the Alternate
Base Rate (as defined in the U.S. Term Loan Agreement) plus, in each case, the
Applicable Margin (as defined in this paragraph). Eurodollar Rate Loans will,
at the option of the Company, have interest periods of one, two, three or six
months. Applicable Margin means (a) with respect to Eurodollar Rate loans, 3%
and (b) with respect to Alternate Base Rate loans, 2%. Interest on Alternate
Base Rate Loans is payable quarterly in arrears, and interest on Eurodollar
Rate Loans is payable at the end of the applicable interest period, except
that if the interest period is six months, interest is payable ninety days
after the commencement of the interest period and at the end of the interest
period. If adequate protection payments were not suspended, ABR borrowings
would have a rate of 10.5% as of June 30, 1997.
On August 30, 1994 the Company entered into a $120.0 revolving loan
agreement with a syndicate of banks, the Co-Agents and The Chase Manhattan
Bank, as administrative agent (the "Amended and Restated Credit Agreement").
Loans under the Amended and Restated Credit Agreement bear interest at a rate
per annum equal to the Eurodollar Rate (as defined in the Amended and Restated
Credit Agreement), or the Alternate Base Rate (as defined in the Amended and
Restated Credit Agreement) plus, in each case, the Applicable Margin (as
defined in this paragraph). Eurodollar Rate Loans will, at the option of the
Company, have interest periods of one, two, three or six months. Applicable
Margin means (a) with respect to Eurodollar Rate loans, 3% and (b) with
respect to Alternate Base Rate loans, 2%. Interest on Alternate Base Rate
Loans is payable quarterly in arrears, and interest on Eurodollar Rate Loans
is payable at the end of the applicable interest period, except that if the
interest period is six months, interest is payable ninety days after the
commencement of the interest period and at the end of the interest period. If
adequate protection payments were not suspended, ABR borrowings would have a
rate of 10.5% as of June 30, 1997.
During March 1996, the Company entered into a $25.0 revolving line of
credit (as amended) with Chase Manhattan (the "Chase Revolving Line of Credit)
which was subsequently reduced to $15.0. The Chase Revolving Line of Credit is
pari passu with the U.S. Term Loan Agreement, the Amended and Restated Credit
Agreement, and
14
<PAGE>
MARVEL ENTERTAINMENT GROUP, INC.
DEBTOR-IN-POSSESSION
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(DOLLARS IN MILLIONS, EXCEPT PER SHARE AMOUNTS)
(UNAUDITED)
the Panini Term Loan Agreement. The Chase Revolving Line of Credit bears
interest at a rate per annum equal to the Eurodollar Rate (as defined in the
Amended and Restated Credit Agreement), plus 3%, or the Alternate Base Rate
(as defined in the Amended and Restated Credit Agreement) plus 2%. Interest on
Alternate Base Rate Loans is payable quarterly in arrears, and interest on
Eurodollar Rate Loans is payable at the end of the applicable interest period,
except that if the interest period is six months, interest is payable ninety
days after the commencement of the interest period and at the end of the
interest period. If adequate protection payments were not suspended, ABR
borrowings would have a rate of 10.5% as of June 30, 1997.
On August 30, 1994, the Company, Marvel Italia Srl (now Panini
S.p.A.) and Instituto Bancario San Paolo Di Torino S.p.A. (the "Lender"),
entered into a term loan and guarantee agreement (the "Panini Term Loan
Agreement") providing for a term loan credit facility of Italian Lire 244.5
billion (approximately $154.0 based on exchange rates in effect on the date of
acquisition) (the "Term Loan Facility").
The Panini Term Loan Facility bears interest at a rate per annum
equal to the Eurocurrency Rate (as defined in the Panini Term Loan Agreement)
or, in certain limited circumstances, the Negotiated Rate (as defined in the
Panini Term Loan Agreement), in each case plus the Applicable Margin (as
defined in this paragraph). Eurocurrency Rate Loans have, at the option of
Panini, interest periods of one, two, three or six months. Applicable Margin
means (a) with respect to Eurocurrency Loans 3% and (b) with respect to
Negotiated Rate Loans, 2%. Interest on Negotiated Rate Loans is payable
quarterly in arrears and interest on Eurocurrency Rate Loans is payable at the
end of the applicable interest period, except that if the interest period is
six months, interest is payable ninety days after the commencement of the
interest period and at the end of the interest period. If Panini had not
ceased interest and principal payments, one month Eurocurrency borrowings
would have a rate of 9.8125% as of June 30, 1997.
The U.S. Term Loan Agreement (through incorporation by reference to
the Amended and Restated Credit Agreement), the Amended and Restated Credit
Agreement, Chase Revolving Line of Credit Agreement (through incorporation by
reference to the Panini Term Loan Agreement), and the Panini Term Loan
Agreement include various restrictive covenants prohibiting the Company from,
among other things, incurring additional indebtedness, with certain limited
exceptions, and making dividend, redemption and certain other payments on its
capital stock. The U.S. Term Loan Agreement, the Amended and Restated Credit
Agreement and the Panini Term Loan Agreement also contain certain customary
financial covenants and events of default for financing of this type,
including a change of control covenant. Mandatory prepayments are required to
be made out of net proceeds from sales of assets by the Company, with certain
exceptions, and from certain excess cash flow (as defined in the Amended and
Restated Credit Agreement).
The Credit Agreements and its respective lenders (the "secured
lenders") are secured with substantially all of the Company's domestic assets,
other than the Company's investment in common stock of Toy Biz, and all of the
capital stock of the Company's domestic subsidiaries and 65% of the capital
stock of the Company's first tier foreign subsidiaries.
The filing of petitions for relief under Chapter 11 of the Bankruptcy
Code in the United States Bankruptcy Court for the District of Delaware by the
Debtor Companies is an event of default under the Credit Agreements.
5. RESTRUCTURING OF OPERATIONS
In the fourth quarter of 1995, the Company recorded restructuring
charges of $25.0 related primarily to publishing and confections operations.
As part of the restructuring, the Company terminated approximately 275
employees, covering editorial, production, distribution and administrative
employee groups and, accordingly, provided for $10.7 of termination benefits,
of which $9.5 has been paid as of June 30, 1997. Additionally, approximately
$6.7 of the restructuring charges relates to facility closure, of which $5.7
has been paid as of June 30, 1997, and $7.6 of the restructuring charges
relates to other costs, of which $7.1 has been paid as of June 30, 1997. A
substantial portion of the
15
<PAGE>
MARVEL ENTERTAINMENT GROUP, INC.
DEBTOR-IN-POSSESSION
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(DOLLARS IN MILLIONS, EXCEPT PER SHARE AMOUNTS)
(UNAUDITED)
remaining amount of $2.7 as of June 30, 1997, which is included in accrued
expenses and other, is scheduled to be paid in accordance with the terms of
various agreements or are "liabilities subject to settlement under
reorganization".
In the fourth quarter of 1996, the Company recorded restructuring
charges of $15.8 related primarily to the publishing and trading card
operations; the closing of the comic book distribution subsidiary and the
closing or sale of a certain confections facility. As part of the
restructuring, the Company has terminated approximately 200 employees,
covering editorial, production, distribution and administrative employee
groups and, accordingly, provided for $6.6 of termination benefits of which
$2.6 has been paid as of June 30, 1997. The remaining approximate $9.2 of the
restructuring charges relates to facility closure or sale of which $0.6 has
been paid as of June 30, 1997 and $6.5 was used to write-down certain fixed
assets. A substantial portion of the remaining amount of $6.1 as of June 30,
1997, which is included in accrued expenses and other, is scheduled to be paid
in accordance with the terms of various agreements or are "liabilities subject
to settlement under reorganization".
16
<PAGE>
MARVEL ENTERTAINMENT GROUP, INC.
(DEBTOR-IN-POSSESSION)
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(DOLLARS IN MILLIONS, EXCEPT PER SHARE DATA)
(UNAUDITED)
6. FINANCIAL STATEMENTS OF ENTITIES OPERATING UNDER CHAPTER 11
The combined condensed balance sheet as of June 30,1997 of the Debtor Companies
is as follows (See Note 2):
<TABLE>
<CAPTION>
ASSETS
<S> <C>
Current assets:
Cash.................................. $ 15.6
Accounts receivable, net.............. 36.7
Inventories, net...................... 27.2
Income tax receivable................. 10.9
Prepaid expenses and other............ 5.2
----------
Total current assets............... 95.6
Property, plant and equipment, net....... 9.4
Goodwill and other intangibles, net...... 188.3
Deferred charges and other............... 22.3
Investments in and advances to subsidiaries 62.6
----------
Total Assets...................... $378.2
==========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable...................... $ 21.4
Accrued expenses and other............ 75.2
Short term borrowings................. 94.2
Liabilities subject to settlement under
reorganization........................ 28.7
----------
Total current liabilities........... 219.5
Other long-term liabilities.............. 11.3
Liabilities subject to settlement under
reorganization........................... 473.5
----------
Total Liabilities................... 704.3
----------
Stockholders' deficit:
Additional paid-in capital............ 94.1
Accumulated deficit .................. (420.0)
Cumulative translation adjustment .... (0.2)
----------
Total Stockholders' Deficit......... (326.1)
----------
Total Liabilities and Stockholders' Deficit $378.2
==========
</TABLE>
17
<PAGE>
MARVEL ENTERTAINMENT GROUP, INC.
(DEBTOR-IN-POSSESSION)
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(DOLLARS IN MILLIONS, EXCEPT PER SHARE DATA)
(UNAUDITED)
The combined condensed statement of operations for the six months ended June
30, 1997 of the Debtor Companies is as follows:
<TABLE>
<CAPTION>
<S> <C>
Net revenues............................................. $ 102.4
Cost of sales............................................ 75.1
Selling, general & administrative expenses............... 49.3
Depreciation and amortization............................ 3.5
Amortization of goodwill, intangibles and deferred
charges.................................................. 6.6
Interest expense, net (contractual interest for the
six months ended June 30, 1997 was $24.5).............. 20.8
Equity in net loss of unconsolidated subsidiaries and
other, net............................................... (5.2)
Equity in net loss of non-debtor companies............... (5.1)
----------
Loss before reorganization items and provision for income
taxes.................................................... (63.2)
Reorganization items..................................... 6.0
----------
Loss before provision for income taxes................... (69.2)
Provision for income taxes............................... 0.4
----------
Net loss................................................. ($69.6)
==========
</TABLE>
18
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
GENERAL
Marvel Entertainment Group, Inc. (together with its subsidiaries, as
applicable, "Marvel" or the "Company") is a leading creator, publisher and
distributor of youth entertainment products for domestic and international
markets based on fictional action adventure characters owned by the Company
(the "Marvel Characters"), licenses from professional athletes, sports teams
and leagues and popular entertainment characters and other properties owned by
third parties. The Company also licenses the Marvel Characters and properties
for consumer products, television and film projects, on-line and interactive
software, and advertising promotions. The Company's products include comic
book and other children's publications, sports and entertainment trading
cards, activity stickers, toys, adhesive paper and confectionery products.
RESULTS OF OPERATIONS
In recent years there has been an overall decline in the comic book
market, and more specifically, a significant reduction in speculative
purchases of comic books and reduced readership, which has adversely affected
the Company's publishing business. In response, the Company has undertaken
several strategic actions to mitigate the effect of such contraction. However,
to date these actions have not been successful in overcoming the overall
decline in the comic book market.
Similarly, there has been a significant contraction in the sports and
entertainment trading card markets. The contraction in sports trading cards is
related in part to lower speculative purchases and the residual impact of the
baseball, hockey and basketball labor situations in 1994 and 1995. The level
of demand for entertainment trading cards is dependent on, among other
factors, the commercial success and media exposure of the Marvel Characters
and third party licensed products, as well as the market conditions in the
comic book specialty stores. In 1994 and 1995, the sale of entertainment cards
based on the Marvel Characters and third party licensed characters
substantially offset the decline in sports trading cards. However, since 1995,
the lack of a commercially successful entertainment card property (e.g. a Lion
King TM) has resulted in an inability to offset the decline in sports trading
cards. The Company has significant minimum royalty guarantees and advertising
commitments with its licensors. As a result of the continued decline in
overall trading card sales, the Company has experienced very significant
losses in recent years. There can be no assurance that the Company will reach
the volumes required to make the current contracts profitable or to be able to
renegotiate more favorable terms for these contracts to enable the Company to
return to profitability.
The Company experienced significant operating losses during 1995 and
1996, and failed to satisfy certain financial covenants contained in the
Credit Agreements (see Note 4 of "Notes to Condensed Consolidated Financial
Statements") beginning in the Fall of 1996. The Company commenced discussions
in the Fall of 1996 with Andrews Group, formerly its indirect parent,
regarding an equity infusion in order to provide for the Company's cash
requirements and with The Chase Manhattan Bank, agent bank for the Credit
Agreements, regarding a restructuring of the Credit Agreements.
On December 27, 1996, Marvel along with certain of its operating and
inactive subsidiaries, Fleer; SkyBox; Marvel Characters, Inc.; Heroes World
Distribution, Inc.; The Asher Candy Company; Malibu; Frank H. Fleer Corp. and
Marvel Direct Marketing Inc. filed petitions for relief and a plan of
reorganization under chapter 11 of the United States Bankruptcy Code in the
United States Bankruptcy Court for the District of Delaware. Panini, Marvel
Restaurants (a general partner in the joint venture developing the Marvel
Mania restaurants) and Toy Biz, all of which are active, as well as certain
subsidiaries did not file petitions under the Bankruptcy Code.
The Debtor Companies received approval from the Bankruptcy Court to
pay on time and in full undisputed pre-petition obligations including
salaries, wages and benefits to all of its employees, trade creditors and
independent contractors and to continue funding its strategic initiatives. On
January 24, 1997 the Bankruptcy Court approved a $100.0 million DIP Loan,
which is provided by a syndicate of lenders, including The Chase Manhattan
Bank, as agent bank. The DIP Loan matured on June 30, 1997. The DIP Loan is
subject to covenants and events of default including a
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change of control of Marvel (as defined therein). See Note 4 of Notes to
Condensed Consolidated Financial Statements.
On June 20, 1997, the District Court vacated the Bankruptcy Court's
Stay Order which permitted Marvel Holdings to vote the stock, replace the
Board of Directors and take control of the Company. On July 10, 1997 Marvel
and its affiliated Chapter 11 debtors, High River Limited Partnership,
Westgate International L.P., Toy Biz, Inc., Isaac Permutter, Avi Arad and The
Chase Manhattan Bank announced that they reached an agreement in principle to
combine Marvel and Toy Biz into a new company and to turn the assets of
Fleer/SkyBox and Panini over to the debtor group for the purpose of selling
those assets. See Note 2 of Notes to Condensed Consolidated Financial
Statements.
There can be no assurance that the proposed agreement in principle or
any other plan of reorganization will be confirmed under the Bankruptcy Code.
If the Company is unable to obtain confirmation of a plan of reorganization,
its creditors or equity security holders may seek other alternatives for the
Company, including bids for the Company or parts thereof through an auction
process. The Company has, and will continue to incur professional fees and
other cash demands typically incurred in bankruptcy. However, on June 17, 1997
the Bankruptcy Court ordered a suspension on the payment of professional fees.
The Company has incurred, through June 30, 1997, approximately $11.5 million
in reorganization items.
The Company believes that since, and in part as a result of, the
commencement of the Company's chapter 11 proceedings, the Company has
continued to experience greater than expected weakness in certain businesses
due to, among other things, certain mass merchandisers maintaining lower than
expected levels of inventory of the Company's products and the Company
realizing lower licensing revenues. The Company believes that these lower
inventory levels and licensing revenues relate to customers' concerns as to
the impact of the bankruptcy of the Debtor Companies on the future of the
Company's brands. There can be no assurance that upon consummation of a plan
of reorganization that there will be improvement in any of such businesses.
THREE MONTHS ENDED JUNE 30, 1997 COMPARED WITH THREE MONTHS ENDED JUNE 30, 1996.
The Company's net revenues were $129.6 million and $182.2 million in
1997 and 1996, respectively, a decrease of $52.6 million or 28.9%. This
reflects a decrease of $35.5 million in net trading card and sticker revenues,
a decrease of $10.9 million in toy revenues, a decrease of $3.2 million in
licensing revenues, a decrease of $2.3 million in net publishing revenues and
a decrease of $0.7 million in other revenues.
The decrease in trading card net revenues was primarily due to the
continuing general decline in the demand for trading cards. The general
decline in the market and concerns arising out of the Company's chapter 11
proceedings has resulted in certain mass merchandisers maintaining lower
levels of inventory. In particular, entertainment card net revenues decreased
due to lower commercial success of third party licensed properties in the 1997
period as compared to the 1996 period, as well as lower sales of cards based
on the Marvel Characters. The decrease in net revenues of stickers was
primarily due to a general market softness for stickers in Western Europe and
in part the result of lower commercial success of licensed third party
entertainment products. Given the aforementioned, Panini undertook a strategic
change in 1997 to lower its distribution of its sticker products, thereby
improving its efficiency and lowering the risk of return.
The decrease in toy revenues was principally due to lower domestic
sales resulting from retailers concerns arising out of the Company's chapter
11 proceedings and the related Marvel brands and the timing of certain
promotional doll shipments until after the second quarter.
The decrease in licensing revenue primarily was due to the
renegotiation of the America Online ("AOL") agreement which required a partial
write-down of revenues previously recognized under the old agreement. This new
agreement has given Marvel the right to develop new revenue opportunities on
the Internet and on the AOL network previously prohibited under the old
agreement. The decrease in net publishing revenues primarily was due to the
impact on the Company of the continuing decline in the overall comic book
market. The decrease in other revenues primarily was due to decreased sales of
confectionery products by Fleer and adhesive paper by Panini.
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Gross profit was $33.2 million and $66.8 million in the 1997 and 1996
periods, respectively, a decrease of $33.6 million. As a percentage of net
revenues, gross profit was 25.6% in the 1997 period as compared to 36.7% in
the 1996 period. The decrease in gross profit as a percentage of net revenues
was due primarily to the effect of lower trading card net revenues without a
corresponding decrease in royalty expense given minimum payment obligations
for trading cards and an unfavorable product mix for trading cards and toys as
compared to the 1996 period.
Selling, General & Administrative ("SG&A") expenses were $51.5
million and $55.6 million in the 1997 and 1996 periods, respectively. The
decrease of $4.1 million was mainly attributable to the decrease in
advertising, promotion and selling expenses of the Company and a general
reduction in overhead expenses associated with the restructuring of the comic
book publishing and distribution, trading card and confectionery operations.
As a percentage of net revenues, SG&A was 39.7% in the 1997 period as compared
to 30.5% in the 1996 period. The increase in SG&A as a percentage of net
revenues was due primarily to certain fixed costs inherent in operating the
business that cannot be reduced in the short term.
Depreciation and amortization was $7.7 million and $4.9 million in
the 1997 and 1996 periods, respectively. The increase of $2.8 million was
primarily due to the amortization of animation costs by the comic book
division related to the Hulk television series and higher expense resulting
from an increased investment to support Toy Biz's expanded product line,
partially offset by a reduction in depreciation expense of certain fixed
assets of the Company's comic book direct market distribution subsidiary in
the 1997 period compared to the 1996 period as a result of the closure of such
facility. As part of such closure these fixed assets were written off in late
1996 as part of the restructuring program.
Amortization of goodwill, intangibles and deferred charges was $4.1
million and $5.5 million in the 1997 and 1996 periods, respectively. The
decrease of $1.4 million mainly reflects lower expense in the 1997 period due
to the write-down of goodwill and other intangibles in the fourth quarter of
1996 partially offset by a shorter amortization period. This write-down
related to asset impairment which was primarily due to the significant and
long-term changes in industry conditions in trading cards and publishing. See
Note 2 of Notes to Consolidated Financial Statements for a further discussion
on goodwill and other intangibles.
Interest expense, net was $13.2 million and $13.8 million in the 1997
and 1996 periods, respectively. The decrease in interest expense of $0.6
million primarily reflects a Bankruptcy Court ruling permitting the suspension
of adequate protection payments by the Company on the U.S. Term Loan, the
Amended and Restated Credit Agreement and the Chase Revolving Line of Credit
and therefore, in accordance with Statement of Position 90-7 ("SOP 90-7"),
suspension of an interest expense accruals for same. The unrecorded interest
on the above for the period was $3.7 million. In the second quarter of 1997,
the Company incurred DIP interest expense of $1.8 million.
Equity in net (loss) income of unconsolidated subsidiaries includes a
write-down of approximately $5.5 million in 1997, related to the Company's
investment in Marvel theme restaurants. The current plans for the Company are
to open one restaurant and find alternative financing and or licensing
arrangements for a number of restaurants in the future. As a result, the
Company revalued it investment in these assets.
Total bankruptcy reorganization items of $2.6 million for the 1997
period includes professional charges and other costs typical to those incurred
by entities in bankruptcy. On June 17, 1997 the Bankruptcy Court ordered a
suspension of the payment of professional fees associated with the bankruptcy.
The benefit for income taxes was $4.6 million and $5.4 million in the
1997 and 1996 periods, respectively. The 1997 tax benefit primarily represents
the impact of losses from Toy Biz's operations. Due to significant uncertainty
of the future business operations of the Company, the Company has stopped
recording a tax benefit for each of the domestic companies other than Toy Biz.
The 1996 tax benefit represented the impact of losses in all of Marvel's
operations offset by a tax provision on income from Toy Biz's operations.
Minority interest in (loss) earnings of Toy Biz was ($3.9) million
and $2.9 million in the 1997 and 1996 periods, respectively. The decrease in
minority interest was primarily due to a net loss in 1997 compared to net
income in 1996 at Toy Biz partially offset by Marvel's reduced ownership
percentage. See Note 2 of Notes to Condensed Consolidated Financial Statements
21
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SIX MONTHS ENDED JUNE 30, 1997 COMPARED WITH SIX MONTHS ENDED JUNE 30, 1996
The Company's net revenues were $286.3 million and $371.8 million in
1997 and 1996, respectively, a decrease of $85.5 million or 23.0%. This
reflects a decrease of $63.6 million in net trading card and sticker revenues,
a decrease of $14.9 million in toy revenues, a decrease of $5.7 million in
licensing revenues and a decrease of $3.5 million in net publishing revenues,
partially offset by a $2.2 million increase in other revenues.
The decrease in trading card net revenues was primarily due to the
continuing general decline in the demand for trading cards. The general
decline in the market and concerns arising out of the Company's chapter 11
proceedings has resulted in certain mass merchandisers maintaining lower
levels of inventory. In particular, entertainment card net revenues decreased
due to lower commercial success of third party licensed properties in the 1997
period as compared to the 1996 period, as well as lower sales of cards based
on the Marvel Characters. The decrease in net revenues of stickers was
primarily due to a general market softness for stickers in Western Europe and
in part the result of lower commercial success of licensed third party
entertainment products. Given the aforementioned, Panini undertook a strategic
change in 1997 to lower its distribution of its sticker products, thereby
improving its efficiency and lowering the risk of return.
The decrease in toy revenues was principally due to lower domestic
sales resulting from retailers concerns arising out of the Company's chapter
11 proceedings and the related Marvel brands and the timing of certain
promotional doll shipments until after the second quarter.
The decrease in licensing revenue primarily was due to the
renegotiation of the AOL agreement which required a partial write-down of
revenues previously recognized under the old agreement. This new agreement has
given Marvel the right to develop new revenue opportunities on the Internet
and on the AOL network previously prohibited under the old agreement.
Additionally, licensing revenues decreased in the 1997 period as compared to
the 1996 period in part as a result of the difficulty of the Company in
entering into licensing arrangements due to licensees concerns arising out of
the Company's chapter 11 proceedings, and in part to an insufficient amount of
new media exposure of the Company's characters. Pursuant to the agreement
between Fox Kid's Worldwide ("FKW") and the Company, the Company expects to
have a new animation series based on the SILVER SURFER on the Fox Children's
Network ("FCN") in the 1997-1998 broadcast season. Licensing revenues will
vary from period to period depending on the volume and extent of licensing
agreements entered into during any particular financial period, as well as the
level and commercial success of the media exposure of the Marvel Characters.
The decrease in net publishing revenues primarily was due to the impact on the
Company of the continuing decline in the overall comic book market. The
improvement in other revenues primarily was due to increased sales of
confectionery products by Fleer and adhesive paper by Panini.
Gross profit was $85.4 million and $142.5 million in the 1997 and
1996 periods, respectively, a decrease of $57.1 million. As a percentage of
net revenues, gross profit was 29.8% in the 1997 period as compared to 38.3%
in the 1996 period. The decrease in gross profit as a percentage of net
revenues was due primarily to the effect of lower trading card net revenues
without a corresponding decrease in royalty expense given minimum payment
obligations for trading cards, the effect of lower licensing revenues and an
unfavorable product mix for trading cards and toys as compared to the 1996
period.
SG&A expenses were $100.0 million and $107.9 million in the 1997 and
1996 periods, respectively. The decrease of $7.9 million was mainly
attributable to the decrease in advertising, promotion and selling expenses of
the Company and a general reduction in overhead expenses associated with the
restructuring of the comic book
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publishing and distribution, trading card and confectionery operations. As a
percentage of net revenues, SG&A was 34.9% in the 1997 period as compared to
29.0% in the 1996 period. The increase in SG&A as a percentage of net revenues
was due primarily to certain fixed costs inherent in operating the business
that cannot be reduced in the short term.
Depreciation and amortization was $12.5 million and $9.3 million in
the 1997 and 1996 periods, respectively. The increase of $3.2 million was
primarily due to the amortization of animation costs by the comic book
division related to the Hulk television series and higher expense resulting
from an increased investment to support Toy Biz's expanded product line,
partially offset by a reduction in depreciation expense of certain fixed
assets of the Company's comic book direct market distribution subsidiary in
the 1997 period compared to the 1996 period as a result of the closure of such
facility. As part of such closure these fixed assets were written off in late
1996 as part of the restructuring program.
Amortization of goodwill, intangibles and deferred charges was $8.4
million and $11.0 million in the 1997 and 1996 periods, respectively. The
decrease of $2.6 million mainly reflects lower expense in the 1997 period due
to the write-down of goodwill and other intangibles in the fourth quarter of
1996 partially offset by a shorter amortization period. This write-down
related to asset impairment which was primarily due to the significant and
long-term changes in industry conditions in trading cards and publishing. See
Note 2 of Notes to Consolidated Financial Statements for a further discussion
on goodwill and other intangibles.
Interest expense, net was $28.8 million and $27.5 million in the 1997
and 1996 periods, respectively. The increase in interest expense of $1.3
million primarily reflects the interest expense on borrowings under the DIP
Loan in 1997, increased borrowings under the Credit Agreements and Panini's
short term lines of credit compared to the 1996 period and higher average
borrowing rates. These increases were partially offset by a Bankruptcy Court
ruling permitting the suspension of adequate protection payments by the
Company on the U.S. Term Loan, the Amended and Restated Credit Agreement and
the Chase Revolving Line of Credit and therefore, in accordance with SOP 90-7,
suspension of an interest expense accruals for same. The unrecorded interest
on the above for the period was $3.7 million. In the first six months of 1997,
the Company incurred DIP interest expense of $2.8 million.
Equity in net (loss) income of unconsolidated subsidiaries includes a
write-down of approximately $5.5 million in 1997, related to the Company's
investment in Marvel theme restaurants. The current plans for the Company are
to open one restaurant and find alternative financing and or licensing
arrangements for a number of restaurants in the future. As a result, the
Company revalued it investment in these assets.
Total bankruptcy reorganization items of $6.0 million for the 1997
period includes professional charges and other costs typical to those incurred
by entities in bankruptcy. On June 17, 1997 the Bankruptcy Court ordered a
suspension of the payment of professional fees associated with the bankruptcy.
The benefit for income taxes was $0.8 million and $3.7 million in the
1997 and 1996 periods, respectively. The 1997 tax benefit primarily represents
the impact of losses from Toy Biz's operations. Due to significant uncertainty
of the future business operations of the Company, the Company has stopped
recording a tax benefit for each of the domestic companies other than Toy Biz.
The 1996 tax benefit represented the impact of losses in all of Marvel's
operations offset by a tax provision on income from Toy Biz's operations.
Minority interest in (loss) earnings of Toy Biz was ($3.5) million
and $4.9 million in the 1997 and 1996 periods, respectively. The decrease in
minority interest was primarily due to a net loss in 1997 compared to a net
income in 1996 at Toy Biz partially offset by Marvel's reduced ownership
percentage. See Note 2 of Notes to Condensed Consolidated Financial Statements.
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LIQUIDITY AND CAPITAL RESOURCES
On December 27, 1996 in connection with the filing of their petitions
in the Bankruptcy Court, the Debtor Companies received approval to pay on time
and in full undisputed pre-petition obligations including salaries, wages and
benefits to all of its employees, trade creditors and independent contractors
and to continue funding its strategic initiatives. On January 24, 1997 the
Bankruptcy Court approved the $100 million DIP Loan, which is provided by a
syndicate of lenders, including The Chase Manhattan Bank, as agent bank. The
DIP Loan matured on June 30, 1997. The DIP Loan is subject to covenants and
events of default including a change of control of Marvel (as defined
therein). See Note 4 of "Notes to Condensed Consolidated Financial
Statements."
On June 5, 1997, the Bankruptcy court approved an order suspending
adequate protection payments being made by the Company to the Pre-petition
Banks. As a result, the Company has ceased interest payments on the U.S. Term
Loan Agreement, the Amended and Restated Credit Agreement, and the |Chase
Revolving Line of Credit.
On June 30, 1997, the DIP Loan matured and no repayment has occurred.
The DIP lenders agreed to forbear from taking any action through August
14, 1997. Such forbearance is continuing on a daily basis while the Company
negotiates a replacement DIP loan. With a full reservation of all rights, the
prepetition secured lenders have agreed not to object to the Debtors'
continued use of the cash collateral through August 20, 1997 on the same terms
and conditions and with the same protections as set forth in the current
financing and cash collateral order approved by the Bankruptcy Court.
The Company is in negotiations with The Chase Manhattan Bank (the
current DIP Loan Agent) and a syndicate of banks to obtain a replacement DIP
loan. Additionally, the Company has received a proposal from High River and
Westgate to provide for a replacement DIP loan on terms that are no less
favorable than the current DIP Loan and which will expire no earlier than
December 31, 1997. However, the proposed replacement DIP loan from High River
and Westgate has not been consented to by the Company's secured lenders and
there can be no assurance that the Bankruptcy Court will approve a replacement
loan facility without such consent. Marvel intends to use $94.2 million of the
replacement DIP loan to retire the existing DIP Loan. Although there can be no
assurance, the Company expects that funds available under a replacement DIP
loan together with internally generated funds would be sufficient through
December 31, 1997 to enable the Debtor Companies to meet their consolidated
cash requirements, including servicing the replacement DIP loan. Any
replacement DIP loan is expected to be subject to a number of events of
default and conditions of borrowing. There can be no assurance, however, that
a replacement DIP loan can be obtained. If no such replacement DIP loan is
obtained, the Company may be forced to seek emergency relief under the
Bankruptcy Code and begin to sell and/or liquidate assets, close certain
business operations, seek other financing alternatives or a combination of all
of the above.
In July 1997, Panini, a subsidiary of the Company that has not filed
for protection under Chapter 11 and, therefore, is not one of the debtor
companies, suspended all payments of interest and principal under the Panini
Term Loan Facility. This action constitutes an event of default under the
Panini Term Loan Agreement and, consequently, the Company has reclassified the
Panini Term Loan to current liabilities. On August 11, 1997, Panini entered
into an agreement with The Chase Manhattan Bank for a loan of Italian Lire
27 billion to provide short term liquidity. On August 5, 1997, the Company
received approval from the Bankruptcy Court to guarantee this loan. This
guarantee is junior to tall liens of the secured creditors and the DIP lenders.
In connection with the proposed global settlement, this guarantee by Marvel
will be assigned to the secured lenders. This loan is subject to a number of
events of default and conditions of borrowing. Although there can be no
assurance, the Company believes that Panini should be able to meet its cash
requirements for the near term using the Italian Lire 27 billion short term
liquidity loan and internally generated funds. In the event such liquidity
sources are not sufficient, Panini may be required to seek one or more
alternatives to provide for its cash requirements, including seeking
additional lines of credit or borrowings or sales of assets. There can be no
assurance that Panini will be able to obtain such lines of credit or
consummate any such asset sales on satisfactory terms.
Toy Biz is currently in default under the Toy Biz Credit facility as
a result of non-compliance with certain covenants. Toy Biz is seeking a waiver
of the provisions pertaining to the default and believes it could obtain a
replacement credit facility if a termination of the Toy Biz Credit Facility
were to occur, although there can be no
24
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assurance of Toy Biz's ability to do so or the terms of such a replacement
facility. Toy Biz anticipates that its internally generated funds, together
with borrowings under its credit agreement, provided that it obtains a waiver
of its current default under its credit facility or obtains a replacement
facility, will be sufficient to enable Toy Biz to meet its peak working
capital needs and capital expenditure requirements. See Notes 2 and 4 of
"Notes to Condensed Consolidated Financial Statements".
As of July 31, 1997, the Company's outstanding bank indebtedness was
approximately $742.3 million, of which $94.2 million relates to borrowings
under the DIP Loan, $599.4 million relates to borrowings under the Credit
Agreements, approximately Italian Lire 25 billion (approximately $13.9 million
based on exchange rates at July, 31, 1997) relates to borrowings for Panini's
Adespan adhesives facility, approximately Italian Lire 40.8 billion
(approximately $22.8 million based on exchange rates at July 31, 1997) relates
to borrowings under Panini's short term lines of credit and $12.0 million
which relates to Toy Biz's line of credit.
As Chapter 11 debtors, the Debtor Companies may (subject, in certain
circumstances, to Bankruptcy Court approval) sell or otherwise dispose of
assets, and liquidate or settle liabilities for amounts other than those
reflected in the condensed consolidated financial statements. The amounts
reported in the condensed consolidated financial statements do not give effect
to any adjustments to the carrying value of assets or amount of liabilities
that might result as a consequence of any such actions or consummation of the
agreement in principle reached on July 10, 1997. If the Company is unable to
obtain confirmation of a plan of reorganization, its creditors or equity
security holders may seek other alternatives for the Company, including bids
for the Company or parts thereof through an auction process. In that event, it
is possible that the carrying value of certain assets would not be realized
and additional liabilities and claims would be asserted which are not
presently reflected in the condensed consolidated financial statements and
which are not presently determinable. The effect of any such assertion or
non-realization could be material.
Net cash used in operating activities was $62.0 million and $40.4
million for the six months ended June 30, 1997 and 1996, respectively. The use
of funds in the 1997 period was principally due to the loss from operations
and a decrease in working capital. Cash shown on the Condensed Consolidated
Balance Sheet at June 30, 1997 of $25.3 million includes $4.6 million of Toy
Biz cash.
Cash used in investing activities was $25.3 million and $21.5 million
for the six months ended June 30, 1997 and 1996, respectively. The primary use
of these funds in the 1997 period was for capital expenditures for tooling and
molds and capitalized product development costs related to Toy Biz and capital
expenditures of Panini.
Cash provided by financing activities was $89.5 million and $30.1
million for the six months ended June 30, 1977 and 1996, respectively. The
cash provided by financing activities for 1997 was primarily due to borrowings
under the DIP Loan, and for 1996 cash provided by financing activities was
primarily due to net borrowings under the Company's revolving credit
facilities.
On April 24, 1997, as a result of action taken by holders of the debt
securities issued by the Company's three parent holding companies to exercise
voting action over the common stock of Marvel and such holding companies
pledged to secure such debt securities, Marvel is no longer consolidated for
federal income tax purposes with Mafco. As a result of such tax
deconsolidation, the Company will retain an allocated portion, if any, of net
operating loss carryforwards ("NOLs") of the Mafco affiliated group. Such
allocation is not yet determinable. Such NOLs will be limited under federal
income tax laws since a change of control of the Company has occurred. Further
limitation could result if a plan of reorganization is consummated.
The Company expects to incur approximately $1.2 million in net
production costs for the INCREDIBLE HULK animated series being produced for
the 1997-1998 broadcast year. In addition, with respect to the Company's
agreement with FKW, the Company will be required to reimburse FKW a portion of
its production costs. One-half of such amounts are expected to be reimbursed
to the Company by Toy Biz pursuant to the understanding with respect to Marvel
Studios.
The Company is continuing development of Marvel theme restaurants.
The first restaurant to open, which will be in Los Angeles, is under
construction and is projected to open in the second half of 1997. The Company
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has made most of the required investment for the Los Angeles restaurant, with
the exception of costs related to opening food and merchandising inventories.
In view of current financial conditions, the Company is considering other
financing alternatives, including but limited to licensing its characters for
use in restaurants.
Toy Biz has authorized the repurchase of up to three million shares
of Class A common stock. Toy Biz has not commenced the repurchase program and
has no intention to do so.
RECENTLY ISSUED ACCOUNTING STANDARDS
In February 1997, the Financial Accounting Standards Board issued
Statement of Financial Accounting Standards No. 128 ("SFAS No. 128"),
"Earnings Per Share", which established new standards for computing and
presenting earnings per share. SFAS No. 128 will be effective for interim and
annual financial statements after December 15, 1997. The Company believes that
the adoption of SFAS No. 128 will not have a material impact on the Company's
reported earnings per share.
FORWARD-LOOKING STATEMENTS
Statements in this quarterly report on Form 10-Q for the quarter
ended June 30, 1997 such as "intend", "estimated", "believe", "expect",
"anticipate" and similar expressions which are not historical are
forward-looking statements that involve risks and uncertainties. Such
statements include, without limitation, the Company's expectation as to future
financial performance. In addition to factors that may be described in the
Company's Securities and Exchange Commission filings, including this filing,
the following factors, among others, could cause the Company's financial
performance to differ materially from that expressed in any forward-looking
statements made by, or on behalf of, the Company: (i) the ability of the
Debtor Companies to successfully reorganize in bankruptcy and the timing and
outcome of such bankruptcy proceedings; (ii) the ability of the Debtor
Companies to obtain an additional or new DIP loan or other financing, (iii)
continued weakness in the comic book market which cannot be overcome by the
Company's new editorial and production initiatives in comic publishing; (iv)
continued general weakness in the trading card market; (v) the failure of fan
interest in baseball to return to traditional levels that exist prior to the
1994 baseball strike thereby negatively affecting the Company's baseball card
business; (vi) the effectiveness of the Company's changes to its trading card
and publishing distribution; (vii) a decrease in the level of media exposure
or popularity of the Company's characters resulting in declining revenues
based on such characters; (viii) the lack of continued commercial success of
properties owned by major licensors which have granted the Company licenses
for its sports and entertainment trading card and sticker businesses; (ix)
unanticipated costs or delays in completing projects associated with the
Company's new ventures including media, interactive software and on-line
services and theme restaurants; (x) consumer acceptance of new product
introductions, including those for toys; and (xi) imposition of tariffs or
import quotas on toys manufactured in China as a result of a deterioration in
trade relations between the U.S. and China.
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PART II.
OTHER INFORMATION.
ITEM 1. LEGAL PROCEEDINGS.
The Company is a party to various legal proceedings described in
previous filings. During the quarter ended June 30, 1997 there were no
material developments in any of such proceedings not previously disclosed.
Although it is impossible to predict the outcome of any outstanding legal
proceeding, the Company believes that all legal proceedings and claims,
individually and in the aggregate, are not likely to have a material effect on
its financial condition or results of operations.
On June 23, 1997, Toy Biz, Inc. ("Toy Biz"), ZIB Inc., Isaac Perlmutter
T.A., Issac Perlmutter and Avi Arad (collectively, "Plaintiffs") filed a
complaint against Marvel Characters, Inc. ("MCI"), Marvel Entertainment
Group, Inc. ("Marvel") and Marvel Holdings Inc. ("Holdings") (collectively,
"Defendants") in the United States Bankruptcy Court for the District of
Delaware seeking declaratory and injunctive relief. The lawsuit challenges
the validity of Marvel's actions in causing its wholly owned subsidiary,
MCI, to remove and replace eight of the eleven directors of Toy Biz as of
June 20, 1997, by executing a written consent on behalf of its 7,394,000
shares of Toy Biz Class B Common Stock (the "Class B Stock"). The Class B
Stock represents approximately 26.6% of the issued and outstanding shares of
Toy Biz common stock, and represents approximately 78% of the total voting
power of Toy Biz's common stock because it carries 10 votes per share.
In their complaint, Plaintiffs allege that a "change of control" occurred
within the meaning of the Stockholders Agreement between Toy Biz and its
principal shareholders (which includes the Plaintiffs and Marvel), dated
as of March 2, 1995 (the "Stockholders Agreement") when Holdings removed
Marvel's entire board of directors, including Ronald O. Perelman.
Plaintiffs further allege that the purported change of control resulted in
the immediate automatic conversion of MCI's Class B Common Stock to
Class A Common Stock, which carries only one vote per share. The Company
believes that MCI had the right pursuant to the express terms of the
Stockholders Agreement to remove and replace the members of Toy Biz's
board of directors, and that the change of control provision in the
Stockholders Agreement is unenforceable as a result of the Company's
chapter 11 filing. Consequently, the Defendants have filed a motion to
dismiss Plaintiffs' complaint.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.
For information with respect to certain changes of the Company's
Board of Directors, see Exhibit 99.1 and the Company's Report on Form 8-K as
filed with the Securities and Exchange Commission (the "SEC") on June 24,
1997.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K.
(A) Exhibits
* 3.3 Amended and Restated By-Laws of the Registrant dated
as of August 13,1997
* 10.48 Term Loan and Guarantee Agreement dated as of August
5, 1997 between Panini S.p.A., Marvel Entertainment
Group, Inc. and The Chase Manhattan Bank, as agent.
* 99.1 Notice of Action by Written Consent dated June 27,
1997.
- -------------------------------------------------------------------------------
* Filed herewith.
(B) Reports on Form 8-K
Form 8-K as filed with the SEC on June 24, 1997 reporting
with respect to Item 1, Changes in Control of Registrant.
Form 8-K as filed with the SEC on July 14, 1997 reporting
with respect to Item 5, Other Events.
27
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SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned, thereunto duly authorized.
MARVEL ENTERTAINMENT GROUP, INC.
(Registrant)
By: /s/ August J. Liguori
-------------------------------------
Dated: August 19, 1997 August J. Liguori
Vice President, Finance
Chief Accounting Officer
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AMENDED AND RESTATED BY-LAWS
of
MARVEL ENTERTAINMENT GROUP, INC.
as of August 13, 1997
(Supersedes -September 11, 1996)
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Section Page
<S> <C>
ARTICLE I OFFICES ................................................................................ 1
SECTION 1.1 Offices........................................................................... 1
ARTICLE II MEETINGS OF STOCKHOLDERS..................................................................... 1
SECTION 2.2 Annual Meetings.................................................................... 1
SECTION 2.2 Special Meetings................................................................... 1
SECTION 2.3 Notice of Meeting.................................................................. 1
SECTION 2.4 Adjournments....................................................................... 2
SECTION 2.5 Quorum and Manner of Acting........................................................ 2
SECTION 2.6 Organization of Meetings........................................................... 2
SECTION 2.7 Order of Business.................................................................. 3
SECTION 2.8 Voting............................................................................. 3
SECTION 2.9 Consent in Lieu of Meeting......................................................... 4
SECTION 2.10 List of Stockholders.............................................................. 4
SECTION 2.11 Inspectors........................................................................ 5
ARTICLE III BOARD OF DIRECTORS.......................................................................... 5
SECTION 3.1 General Powers..................................................................... 5
SECTION 3.2 Number and Term of Office.......................................................... 5
SECTION 3.3 Election........................................................................... 5
SECTION 3.4 Meetings........................................................................... 5
SECTION 3.5 Compensation....................................................................... 7
SECTION 3.6 Resignation, Removal and Vacancies................................................. 7
ARTICLE IV COMMITTEES................................................................................... 8
SECTION 4.1 Number, Appointment, Term of Office................................................. 8
SECTION 4.2 Functions and Powers............................................................... 8
SECTION 4.3 Rules.............................................................................. 9
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ARTICLE V OFFICERS...................................................................................... 9
SECTION 5.1 Election and Appointment and Term of Office........................................ 9
SECTION 5.2 Resignation, Removal and Vacancies................................................. 9
SECTION 5.3 Duties and Functions............................................................... 10
ARTICLE VI WAIVER OF NOTICES; PLACE OF MEETINGS......................................................... 12
SECTION 6.1 Waiver of Notices.................................................................. 12
SECTION 6.2 Place of Meetings.................................................................. 12
ARTICLE VII EXECUTION AND DELIVERY OF DOCUMENTS; DEPOSITS; PROXIES; BOOKS AND RECORDS................... 12
SECTION 7.1 Execution and Delivery of Documents; Delegation.................................... 12
SECTION 7.2 Deposits........................................................................... 12
SECTION 7.3 Proxies in Respect of Stock or Other Securities of Other Corporations.............. 13
SECTION 7.4 Books and Records.................................................................. 13
ARTICLE VIII CERTIFICATES; STOCK RECORD; TRANSFER AND REGISTRATION; NEW CERTIFICATES; RECORD
DATE, ETC....................................................................................... 13
SECTION 8.1 Certificates for Stock............................................................. 13
SECTION 8.2 Stock Record....................................................................... 14
SECTION 8.3 Transfer and Registration of Stock................................................. 14
SECTION 8.4 New Certificates................................................................... 14
SECTION 8.5 Regulations........................................................................ 14
SECTION 8.6 Fixing Date for Determination of Stockholders of Record............................ 15
ARTICLE IX SEAL......................................................................................... 15
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SECTION 9.1 Seal............................................................................... 15
ARTICLE X FISCAL YEAR................................................................................... 15
SECTION 10.1 Fiscal Year....................................................................... 15
ARTICLE XI AMENDMENTS................................................................................... 15
SECTION 11.1 Amendments........................................................................ 15
ARTICLE XII SUBJECT TO LAW.............................................................................. 16
SECTION 12.1 Subject to Law.................................................................... 16
ARTICLE XIII INDEMNIFICATION ........................................................................... 16
</TABLE>
<TABLE>
<CAPTION>
Section Page
<S> <C>
SECTION 13.1 Power to Indemnify in Actions, Suits or Proceedings Other Than Those by or
in the Right of the Corporation........................................................ 16
SECTION 13.2 Power to Indemnify in Actions, Suits or Proceedings by or in the Right of
the Corporation........................................................................ 16
SECTION 13.3 Authorization of Indemnification.................................................. 17
SECTION 13.4 Good Faith Defined................................................................ 17
SECTION 13.5 Indemnification by a Court........................................................ 18
SECTION 13.6 Expenses Payable in Advance....................................................... 18
SECTION 13.7 Nonexclusivity of Indemnification and Advancement of Expenses..................... 19
SECTION 13.8 Insurance .........................................................................19
SECTION 13.9 Certain Definitions ...............................................................19
SECTION 13.10 Survival of Indemnification and Advancement of Expenses.......................... 20
SECTION 13.11 Limitation on Indemnification.................................................... 20
SECTION 13.12 Indemnification of Employees and Agents.......................................... 20
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ARTICLE XIV INTERESTED DIRECTORS........................................................................ 20
SECTION 14.1 Interested Directors; Quorum...................................................... 20
</TABLE>
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ARTICLE I
Offices
SECTION 1.1 Offices. Marvel Entertainment Group, Inc. (the "Corporation") may
have offices either within or without the State of Delaware. The registered
office of the Corporation and the name of the registered agent of the
Corporation are as is set forth in the Certificate of Incorporation of the
Corporation, or as may subsequently be or have been changed by resolution of
the Board of Directors (the "Board").
ARTICLE II
Meetings of Stockholders
SECTION 2.2 Annual Meetings. An annual meeting of the stockholders of
the Corporation for the election of directors and for the transaction of such
other business as may properly come before the meeting shall be held on such
date as the Board may from time to time determine, and at such place and hour
as shall be designated by the Board in the notice thereof.
SECTION 2.2 Special Meetings. A special meeting of the stockholders
for any purpose or purposes may be called at any time by the Board, or by any
committee of the Board which has been duly designated by the Board and whose
powers and authority, as expressly provided in a resolution of the
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Board, include the power to call such meetings, and such meeting shall he held
on such date and at such place and hour as shall be designated in the notice
thereof.
SECTION 2.3 Notice of Meeting. Notice of each meeting of the
stockholders shall be given not less than 10 nor more than 60 days before the
date of the meeting to each stockholder of record entitled to notice of, or to
vote at, such meeting by delivering a typewritten or printed notice thereof to
such stockholder personally or by depositing such notice in the United States
mail, postage prepaid, directed to such stockholder at his address as it
appears on the stock record of the Corporation. Every such notice shall state
the place, date and hour of the meeting and, in the case of a special meeting,
the purpose or purposes for which the meeting is called.
SECTION 2.4 Adjournments. Any meeting of stockholders, annual or
special, may adjourn from time to time to reconvene at the same or some other
place, and notice need not be given of any such adjourned meeting if the time
and place thereof are announced at the meeting at which the adjournment is
taken. At the adjourned meeting the corporation may transact any business
which might have been transacted at the original meeting. If the adjournment
is for more than thirty days, or if after the adjournment a new record date is
fixed for the adjourned meeting, a notice of the adjourned meeting shall be
given to each stockholder of record entitled to vote at the meeting.
SECTION 2.5 Quorum and Manner of Acting. The presence in person or by
proxy of stockholders holding of record a majority of the shares of stock of
the Corporation entitled to be voted shall constitute a quorum for the
transaction of business at any meeting of the stockholders. In the absence of
a quorum at any such meeting or any adjournment or adjournments thereof, a
majority in voting interest of those present in person or by proxy and
entitled to vote thereof, or, in the absence therefrom of all the
stockholders, any officer entitled to preside at, or to act as secretary of,
such meeting, may adjourn such meeting from time to time in the manner
provided in Section 2.4 until
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stockholders holding the amount of stock requisite for a quorum shall be
present in person or by proxy. The absence from any meeting in person or by
proxy of stockholders holding the number of shares of stock of the Corporation
required for action upon any given matter, shall not prevent action at such
meeting upon any other matter which may properly come before the meeting if
there shall be present thereof, in person or by proxy, stockholders holding
the number of shares of stock of the Corporation required in respect of such
other matter.
SECTION 2.6 Organization of Meetings. At each meeting of the
stockholders, one of the following shall act as chairman of the meeting and
preside thereat, in the following order of precedence:
(a) the Chairman of the Board, or, if he is not present or if no
person holds such office, any officer of the Corporation designated by the
Board; or
(b) any officer of the Corporation designated by a majority in
voting interest of the stockholders present in person or by proxy and entitled
to vote thereat.
The person whom the chairman of the meeting shall appoint, shall act as
secretary of the meeting and keep the minutes thereof.
SECTION 2.7 Order of Business. The order of business at each meeting
of the stockholders shall be determined by the chairman of the meeting, but
such order of business may be changed by a majority in voting interest of
those present in person or by proxy at such meeting and entitled to vote
thereat.
SECTION 2.8 Voting. Each stockholder shall, at each meeting of the
stockholders, be entitled to one vote in person or by proxy for each share of
stock of the Corporation which has voting power on the matter in question held
by him and registered in his name on the stock record of the Corporation:
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(a) on the date fixed pursuant to the provisions of Section 8.6 of
Article VIII of these By-Laws as the record date for the determination of
stockholders who shall be entitled to receive notice of and to vote at such
meeting; or
(b) if no record date shall have been so fixed, then at the close
of business on the day next preceding the day on which notice of the meeting
shall be given or, if notice of the meeting shall be waived, at the close of
business on the day next preceding the day on which the meeting shall be held,
or if no record date for determining stockholders entitled to express consent
to corporate action in writing without a meeting shall have been fixed, the
day on which the first written consent is expressed.
Shares of its own stock belonging to the Corporation or to another
corporation, if a majority of the shares entitled to vote in the election of
directors of such other corporation is held, directly or indirectly, by the
Corporation, shall neither be entitled to vote nor be counted for quorum
purposes. Any vote of stock of the Corporation may be given at any meeting of
the stockholders by the person entitled to vote the same in person or by proxy
appointed by an instrument in writing delivered to the secretary of the
meeting; provided, however, that no proxy shall be voted or acted upon after
three years from its date unless such proxy provides for a longer period. The
attendance at any meeting of a stockholder who may theretofore have given a
proxy shall not have the effect of revoking the same unless he shall in
writing so notify the secretary of the meeting prior to voting of the proxy.
At all meetings of stockholders for the election of directors a plurality of
the votes cast shall be sufficient to elect. All other elections and questions
shall, unless otherwise provided by law, the certificate of incorporation or
these bylaws, be decided by the vote of the holders of shares of stock having
a majority of the votes which could be cast by the holders of all shares of
stock entitled to vote thereon which are present in person or represented by
proxy at the meeting. Unless otherwise directed by the chairman of the
meeting, the vote at any meeting of the stockholders on any question need not
be by
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ballot. On a vote by ballot, each ballot shall be signed by the stockholder
voting, or by his proxy if there be such proxy, and shall state the number of
shares voted.
SECTION 2.9 Consent in Lieu of Meeting. Anything herein to the
contrary notwithstanding, any action required to be taken at any annual or
special meeting of stockholders of the Corporation, or any action which may be
taken at any annual or special meeting of such stockholders, may be taken at
any annual or special meeting of such stockholders or may be taken without a
meeting, without prior notice and without a vote if a consent in writing,
setting forth the action so taken, shall be signed by the holders of
outstanding stock having not less than the minimum number of votes that would
be necessary to authorize or take such action at a meeting at which all shares
entitled to vote thereon were present and voted. Prompt notice of the taking
of the corporate action without a meeting by less than unanimous written
consent shall be given to those stockholders who have not consented in writing
and any certificate filed with respect to such matter shall state that such
written notice has been given.
SECTION 2.10 List of Stockholders. It shall be the duty of the
officer of the Corporation who shall have charge of the stock ledger of
record, either directly or through another officer of the Corporation or agent
thereof, to prepare and make, at least 10 days before every meeting of the
stockholders, a complete list of the stockholders entitled to vote thereat,
arranged in alphabetical order, and showing the address of each stockholder
and the number of shares registered in the name of each stockholder. Such list
shall be open to the examination of any stockholder, for any purpose germane
to the meeting, during ordinary business hours for a period of at least 10
days prior to the meeting, either at the place where the meeting is to be held
or at such other place within the city where the meeting is to be held, which
place shall be specified in the notice of the meeting. Such list shall also be
produced and kept at the time and place of the meeting during the whole time
thereof and may be inspected by any stockholder who is present. The stock
record shall be the only evidence as to who are the stockholders entitled to
examine the stock record, such list
5
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or the books of the Corporation or to vote in person or by proxy at any
meeting of the stockholders.
SECTION 2.11 Inspectors. Either the Board or, in the absence of a
designation of inspectors by the Board, the chairman of the meeting may, in
its or his discretion, appoint two or more inspectors, who need not be
stockholders, who shall receive and take charge of ballots and proxies and
decide all questions relating to the qualification of those asserting the
right to vote and the validity of ballots and proxies. In the event of the
failure or refusal to serve of any inspector designated by the Board, the
chairman of the meeting shall appoint an inspector to act in place of each
such inspector designated by the Board. In the absence of a designation of
inspectors by the Board and the chairman of the meeting, the secretary of the
meeting shall perform the duties which would otherwise have been performed by
the inspectors.
ARTICLE III
Board of Directors
SECTION 3.1 General Powers. The property, business, affairs and
policies of the Corporation shall be managed by or under the direction of the
Board.
SECTION 3.2 Number and Term of Office. The number of directors which
shall constitute the Board shall be nine or such other number as shall be
fixed from time to time by a vote of a majority of the Board. Each of the
directors of the Corporation shall hold office until the annual meeting after
his election and until his successor shall be elected and shall qualify or
until his earlier death or resignation or removal in the manner hereinafter
provided.
SECTION 3.3 Election. Except as provided in Section 3.6 of this
Article III, directors shall be elected by a plurality of the votes cast at
annual meetings of stockholders, and each director so elected shall hold
office until the next annual meeting and until his successor is duly
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elected and qualified, or until his earlier resignation or removal. Directors
need not be stockholders of the corporation or residents of the State of
Delaware.
SECTION 3.4 Meetings. (a) Regular Meetings. Regular meetings of the
Board or any committee thereof shall be held as the Board or such committee
thereof shall from time to time determine. If any day fixed for a regular
meeting shall be a legal holiday at the place where the meeting is to be held,
then the meeting which would otherwise be held on that day, shall be postponed
until the next succeeding business day.
(b) Special Meetings. Special meetings of the Board, at which any
and all business may be transacted, shall be held whenever called by
President, Chairman or any two directors.
(c) Notice of Meetings. No notice of regular meetings of the Board
or of any committee thereof or of any adjourned meeting thereof need be given.
Notice shall be given to each director of each special meeting of the Board or
adjournment thereof, including the time and place thereof. Notice of each such
meeting shall be mailed to each director, addressed to him at his residence or
usual place of business, at least two days before the day on which such
meeting is to be held, or shall be sent to him at such place by facsimile,
telegraph, cable, wireless or other form of recorded communication, or be
delivered personally or by telephone not later than the day before the day on
which such meeting is to be held, but notice need not be given to any director
who shall attend such meeting. A written waiver of notice, signed by the
person entitled thereto, whether before or after the time of the meeting
stated therein, shall be deemed equivalent to notice. The purposes of a
meeting of the Board or any committee thereof need not be specified in the
notice thereof.
(d) Time and Place of Meetings. Regular meetings of the Board or
any committee thereof shall be held at such time or times and place or places
as the Board or such committee may from time to time determine. Each special
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meeting of the Board or any committee thereof shall be held at such time and
place as the caller or callers thereof may determine. In the absence of such a
determination, each regular meeting or special meeting of the Board or any
committee thereof shall be held at such time and place as shall be designated
in the notices or waiver of notices thereof.
(e) Quorum and Manner of Acting. A majority of the directors then
in office and a majority of the members of any committee shall be present in
person at any meeting thereof in order to constitute a quorum for the
transaction of business at such meeting and the vote of a majority of the
directors present at any such meeting at which a quorum is present shall be
necessary for the passage of any resolution or for an act to be the act of the
Board or such committee. In the absence of a quorum, a majority of the
directors present thereat may adjourn such meeting from time to time until a
quorum shall be present thereat. Notice of any adjourned meeting need not be
given.
(f) Organization of Meetings. At each meeting of the Board, the
Chairman of the Board or, if he is not present or if no person holds such
office, any director chosen by a majority of the directors present thereat
shall act as chairman of the meeting and preside thereat. The person whom the
chairman of the meeting shall appoint shall act as secretary of such meeting
and keep the minutes thereof. The order of business at each meeting of the
Board shall be determined by the chairman of such meeting.
(g) Consent in Lieu of Meetings. Anything herein to the contrary
notwithstanding, any action required or permitted to be taken at any meeting
of the Board or any committee thereof, may be taken without a meeting if all
members of the Board or such committee, as the case may be, consent thereto in
a writing or writings and such writing or writings are filed with the minutes
of the proceedings of the Board or such committee.
(h) Action by Communications Equipment. The directors may
participate in a meeting of the Board or any
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committee thereof by means of conference telephone or similar communications
equipment by means of which all persons participating in the meeting can hear
each other and such participation shall constitute presence in person at such
meeting.
SECTION 3.5 Compensation. Each director, in consideration of his
serving as such, shall be entitled to receive from the Corporation such amount
per annum and such fees for attendance at meetings of the Board or of any
committee, or both, as the Board shall from to time determine. The Board may
likewise provide that the Corporation shall reimburse each director or member
of a committee for any expenses incurred by him on account of his attendance
at any such meeting. Nothing contained in this Section shall be construed to
preclude any director from serving the Corporation in any other capacity and
receiving compensation therefor.
SECTION 3.6 Resignation, Removal and Vacancies. Any director may
resign at any time by giving written notice of his resignation to the Board.
Any such resignation shall take effect at the time specified therein or, if
the time when it shall become effective shall not be specified therein, when
accepted by the Board. Except as aforesaid, the acceptance of such resignation
shall not be necessary to make it effective.
Any director may be removed at any time for cause or without cause by
vote of the holders of a majority in voting interest of shares then entitled
to vote at an election of directors. The vacancy in the Board caused by any
such removal may be filled by the stockholders at such meeting or as provided
in the next paragraph of these By-Laws. Any director may also be removed at
any time for cause by vote of a majority of the Board.
In the case of any vacancy on the Board or in the case of any newly
created directorship, a director to fill the vacancy or the newly created
directorship for the unexpired portion of the term being filled may be elected
by a majority of the directors of the Corporation then in office,
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though less than a quorum, or by a sole remaining director. The director
elected to fill such vacancy shall hold office for the unexpired term in
respect of which such vacancy occurred and until his successor shall be
elected and shall qualify or until his earlier death or resignation or removal
in the manner herein provided.
ARTICLE IV
Committees
SECTION 4.1 Number, Appointment, Term of Office. The Board may
designate one or more committees, each committee to consist of one or more
directors then in office. Each member of any committee shall continue as such
only so long as he remains a director and may be removed at any time, with or
without cause, by the Board. The Board may designate one or more directors as
alternate members of any committee, who may replace any absent or disqualified
member at any meeting of the committee.
In the absence or in case of the disqualification of a member or
members of any such committee, the member or members of such committee present
and not disqualified from voting at a meeting of such committee, whether or
not he or they constitute a quorum, may unanimously appoint another member of
the Board to act at the meeting in place of any such absent or disqualified
member.
SECTION 4.2 Functions and Powers. Subject to applicable law and the
By-Laws, each committee shall have such functions and powers as the Board
shall deem advisable and, subject to any limitations or restrictions which may
be prescribed by resolution of the Board, any such committee, including an
Executive Committee, if one is designated, shall have and may exercise all the
powers and authority of the Board in the management of the business and
affairs of the Corporation, including the power and authority to declare
dividends and to authorize the issuance of stock of the Corporation, and may
authorize the seal of the Corporation to be affixed to all papers which may
require it; provided,
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however, that no committee shall have the power or authority to approve, adopt
or recommend to the stockholders any action or matter expressly required by
the Delaware General Corporation Law to be submitted to stockholders for
approval or to adopt, amend or repeal any By-Law of the Corporation.
SECTION 4.3 Rules. Subject to the provisions of these By-Laws, each
committee by resolution adopted by a majority of all the members thereof shall
fix its rules of procedure.
ARTICLE V
Officers
SECTION 5.1 Election and Appointment and Term of Office. The
Corporation shall have such officers with such titles as shall be stated in a
resolution of the Board, and with such duties as shall be given them as
hereinafter provided or as may otherwise be specifically given them by the
Board, but such officers shall include at least (a) a Chairman of the Board or
one or more Vice-Chairmen of the Board or a President or one or more Vice
Presidents, or any or all the foregoing, and (b) a Secretary or one or more
Assistant Secretaries or a Treasurer or one or more Assistant Treasurers, or
any or all of the foregoing. One of such officers shall have the duty to
record the proceedings of the meetings of stockholders and directors in a book
to be kept for that purpose. Any number of offices may be held by the same
person except that at least one person who holds an office referred to in
clause (a) of the second preceding sentence shall not be the same as at least
one person who holds any office referred to in clause (b) of the second
preceding sentence.
SECTION 5.2 Resignation, Removal and Vacancies. Any officer may
resign at any time by giving written notice of his resignation to the Board.
Any such resignation shall take effect at the time specified therein or, if
the time when it shall become effective shall not be specified
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therein, when accepted by the Board. Except as aforesaid, the acceptance of
such resignation shall not be necessary to make it effective.
Any officer, agent or employee elected or appointed by the Board
may be removed, with or without cause, at any time by the Board. Any agent or
employee appointed by an officer may be removed, with or without cause, at any
time by such officer.
A vacancy in any office may be filled for the unexpired portion of
the term in the same manner as provided in these By-Laws for election or
appointment to such office.
SECTION 5.3 Duties and Functions. If any of the following offices is
created and a person appointed or elected thereto, and unless the Board
otherwise provides, such offices and persons shall have the following duties
and functions:
(a) Chairman. If a Chairman of the Board is appointed or elected,
he shall be a member of the Board; shall preside at meetings of the Board and
of the stockholders at which he shall be present; shall perform such duties as
are incident to the office of the Chairman of the Board; and shall perform
such other duties as may from time to time be prescribed by the Board.
(b) Vice-Chairman. If any Vice-Chairman or Vice-Chairmen of the
Board are appointed or elected, they shall be members of the Board; shall
preside at meetings of the Board and of the stockholders, unless a Chairman of
the Board is appointed or elected and is present; shall perform such duties as
are incident to the office of the Vice Chairman of the Board; and shall
perform such other duties as may from time to time be prescribed by the Board.
(c) Chairman of the Executive Committee. If a Chairman of the
Executive Committee is appointed or elected, he shall preside at meetings of
the Executive Committee; shall when requested consult with and advise the
other officers of the Corporation; and shall perform such
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other duties as may be agreed upon with them or as the Board or the Executive
Committee may from time to time determine.
(d) President. If a President is appointed or elected, he shall,
subject to the control of the Board, have general charge and management of the
property, business and affairs of the Corporation and shall have the direction
of and may assign duties to all other officers (other than the Chairman and
any Vice-Chairman, if either or both is appointed or elected), agents and
employees. He shall preside at meetings of the Board and the stockholders
unless a Chairman or a Vice-Chairman of the Board is appointed or elected and
is present.
(e) Vice Presidents. If any Vice President or Vice Presidents are
appointed or elected, they shall have such powers and duties as shall be
prescribed by the President, if one is appointed or elected, or the Board.
Vice Presidents for this purpose shall include Senior, Executive, Assistant
and all other categories or types of Vice Presidents.
(f) Secretary. If a Secretary is appointed or elected, he shall
attend and keep the records of all meetings of the stockholders and the Board
in one or more books kept for that purpose; shall give or cause to be given
due notice of all meetings in accordance with these By-Laws and as required by
law; shall notify the several officers of the Corporation of all action taken
by the Board concerning matters relating to their duties; shall transmit to
the proper officers copies of all contracts and resolutions approved by the
Board or any committees of the Board; shall be custodian of the seal of the
Corporation and of all contracts, deeds, documents and other corporate papers,
records (except accounting records) and indicia of title to properties owned
by the Corporation as shall not be committed to the custody of another officer
by the President, if one is appointed or elected, or the Board; shall affix or
cause to be affixed the seal of the Corporation to instruments requiring the
same when the same have been signed on behalf of the Corporation by a duly
authorized officer; shall perform all duties and have all powers incident to
the office
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of Secretary; and shall perform such other duties as shall be assigned to him
by the President, if one is appointed or elected, or the Board. One or more
Assistant Secretaries may be appointed or elected, who shall perform all the
duties and have all the powers of the Secretary in the absence of or in case
of a failure to appoint or elect or when so delegated by the Secretary, and as
the President, if one is appointed or elected, or the Board may direct.
(g) Treasurer. If a Treasurer is appointed or elected, he shall
perform all duties incident to the office of Treasurer and such other duties
as shall be assigned to him by the President, if one is appointed or elected,
or the Board. One or more Assistant Treasurers may be appointed or elected who
shall perform all the duties and have all the powers of the Treasurer in the
absence of or in the case of a failure to appoint or elect or when so
delegated by the Treasurer, and as the President, if one is appointed or
elected, or the Board may direct.
(h) Controller. If a Controller is appointed or elected, he shall
perform all the duties incident to the office of Controller and such other
duties as may be assigned to him by the President, if one is appointed or
elected, or the Board. One or more Assistant Controllers may be appointed or
elected who shall perform all the duties and have all the powers of the
Controller in the absence of or in the case of a failure to appoint or elect
or when so delegated by the Controller, and as the President, if one is
appointed or elected, or the Board may direct.
ARTICLE VI
Waiver of Notices; Place of Meetings
SECTION 6.1 Waiver of Notices. Anything herein to the contrary
notwithstanding, whenever notice is required to be given to any director or
member of a committee or stockholder, a waiver thereof in writing, signed by
the person entitled to such notice shall be deemed equivalent to notice,
whether given before or after the time specified therein and, in the case of a
waiver of notice of a meeting,
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whether or not such waiver specifies the purpose of or business to be
transacted at such meeting. Attendance of a person at a meeting shall
constitute a waiver of notice of such meeting, except where the person attends
the meeting for the express purpose of objecting, at the beginning of the
meeting, to the transaction of any business because the meeting is not
lawfully called or convened, and does so object.
SECTION 6.2 Place of Meetings. Any meeting of the stockholders, the
Board or any committee may be held within or without the State of Delaware.
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ARTICLE VII
Execution and Delivery of Documents; Deposits;
Proxies; Books and Records
SECTION 7.1 Execution and Delivery of Documents; Delegation. The
Board shall designate the officers, employees and agents of the Corporation
who shall have power to execute and deliver deeds, contracts, mortgages,
bonds, debentures, checks, drafts and other orders for the payment of money
and other documents for and in the name of the Corporation and may authorize
such officers, employees and agents to delegate such power (including
authority to redelegate) by written instrument to other officers, employees or
agents of the Corporation. Such delegation may be by resolution or otherwise
and the authority granted shall be general or confirmed to specific matters,
all as the Board may determine. In the absence of such designation referred to
in the first sentence of this Section, the officers of the Corporation shall
have such power so referred to, to the extent incident to the normal
performance of their duties.
SECTION 7.2 Deposits. All funds of the Corporation not otherwise
employed shall be deposited from time to time to the credit of the Corporation
or otherwise as the Board or any officer of the Corporation to whom power in
that respect shall have been delegated by the Board shall select.
SECTION 7.3 Proxies in Respect of Stock or Other Securities of Other
Corporations. Unless otherwise provided by the Board, any officer of the
Corporation shall have the authority from time to time to appoint an agent or
agents of the Corporation to exercise in the name and on behalf of the
Corporation the powers and rights which the Corporation may have as the holder
of stock or other securities in any other corporation, to vote or consent in
respect of such stock or securities and to execute or cause to be executed in
the name and on behalf of the Corporation and under its corporate seal or
otherwise, such written proxies, powers of attorney or other instruments as he
may deem necessary or proper in order that the Corporation may exercise such
powers and rights. Such officer may instruct any person or persons appointed
as
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aforesaid as to the manner of exercising such powers and rights.
SECTION 7.4 Books and Records. The books and records of the
Corporation may be kept at such places within or without the State of Delaware
as the proper officers of the Corporation may from time to time determine.
ARTICLE VIII
Certificates; Stock Record; Transfer and Registration;
New Certificates; Record Date, etc.
SECTION 8.1 Certificates for Stock. Every holder of stock of the
Corporation shall be entitled to have a certificate certifying the number of
shares owned by him in the Corporation and designating the class of stock to
which such shares belong, which shall otherwise be in such form as the Board
shall prescribe. Each such certificate shall be signed by, or in the name of
the Corporation by, the Chairman, a Vice-Chairman, the President or a Vice
President of the Corporation and by the Treasurer, an Assistant Treasurer, the
Secretary or an Assistant Secretary of the Corporation. Any of or all such
signatures may be facsimiles. In case any officer or authorized agent who has
signed or whose facsimile signature has been placed upon a certificate shall
have ceased to be such officer or authorized agent before such certificate is
issued, it may nevertheless be issued by the Corporation with the same effect
as if he were such officer or authorized agent at the date of issue. Every
certificate surrendered to the Corporation for exchange or transfer shall be
cancelled and a new certificate or certificates shall not be issued in
exchange for any existing certificate until such existing certificate shall
have been so canceled, except in cases provided for in Section 8.4 of this
Article.
SECTION 8.2 Stock Record. A stock record in one or more counterparts
shall be kept of the name of the person, firm or corporation owning the stock
represented by each certificate for stock of the Corporation issued, the
number
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of shares represented by each such certificate, the date thereof and, in the
case of cancellation, the date of cancellation. The person in whose name
shares of stock stand on the stock record of the Corporation shall be deemed
the owner thereof for all purposes as regards the Corporation.
SECTION 8.3 Transfer and Registration of Stock. (a) Transfer. The
transfer of stock and certificates of stock which represent the stock of the
Corporation shall be governed by Article 8 of Subtitle I of Title 6 of the
Delaware Code (as amended from time to time, the "Uniform Commercial Code").
(b) Registration. Registration or transfers of shares of the
Corporation shall be made only on the books of the Corporation by the
registered holder thereof, or by his attorney thereunto authorized by power of
attorney duly executed and filed with an officer of the Corporation, and on
the surrender of the certificate or certificates for such shares properly
endorsed or accompanied by a stock power duly executed.
SECTION 8.4 New Certificates. (a) Lost, Stolen or Destroyed
Certificates. Where a stock certificate has been lost, apparently destroyed or
wrongfully taken, the issuance of a new stock certificate or the claims based
on such certificate shall be governed by the Uniform Commercial Code.
(b) Mutilated Certificates. Where the holder of any certificate
for stock of the Corporation notifies the Corporation of the mutilation of
such certificate within a reasonable time after he has notice of it, the
Corporation will issue a new certificate for stock in exchange for such
mutilated certificate theretofore issued by it.
(c) Bond. The Board may, in its discretion, require the owner of
the lost, stolen, destroyed,or mutilated certificate to give the Corporation a
bond in such sum, limited or unlimited, in such form and with such surety or
sureties sufficient to indemnify the Corporation against any claim that may be
made against it on account of the loss,
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theft, destruction or mutilation of any such certificate or the issuance of
any such new certificate.
SECTION 8.5 Regulations. The Board may make such rules and
regulations as it may deem expedient, concerning the issue, transfer and
registration of certificates for stock of the Corporation.
SECTION 8.6 Fixing Date for Determination of Stockholders of Record.
In order that the Corporation may determine the stockholders entitled to
notice of or to vote at any meeting of stockholders or any adjournment
thereof, or to express consent to corporate action in writing without a
meeting, or entitled to receive payment of any dividend or other distribution
or allotment of any rights, or entitled to exercise any rights in respect of
any change, conversion or exchange of stock or for the purpose of any other
lawful action, the Board may fix, in advance, a record date, which shall not
be more than 60 nor less than 10 days before the date of such meeting, nor
more than 60 days prior to any other action. A determination of stockholders
entitled to notice of or to vote at a meeting of the stockholders shall apply
to any adjournment of the meeting; provided, however, that the Board may fix a
new record date for the adjourned meeting.
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ARTICLE IX
Seal
SECTION 9.1 Seal. The Board shall provide a corporate seal which
shall be in the form of a circle and shall bear the full name of the
Corporation and the word "Delaware".
ARTICLE X
Fiscal Year
SECTION 10.1 Fiscal Year. The fiscal year of the Corporation shall
end on the last day of December in each year, or such other date as the Board
may determine.
ARTICLE XI
Amendments
SECTION 11.1 Amendments. These By-Laws may be amended, altered or
repealed by the vote of a majority of the Board, subject to the power of the
holders of a majority of the outstanding stock of the Corporation entitled to
vote in respect thereof, by their vote given at an annual meeting or at any
special meeting, to amend, alter or repeal any By-Law made by the Board.
ARTICLE XII
Subject to Law
SECTION 12.1 Subject to Law. All provisions of these By-Laws are
subject to requirements of applicable law and the Certificate of Incorporation
of the Corporation.
ARTICLE XIII
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Indemnification
SECTION 13.1 Power to Indemnify in Actions, Suits or Proceedings
Other Than Those by or Power to Indemnify in Actions, Suits or Proceedings
Other Than Those by or in the Right of the Corporation. Subject to Section
13.3 of this Article XIII, the Corporation shall indemnify and hold harmless,
to the fullest extent permitted by applicable law, any person who is or was a
party or is threatened to be made a party to any threatened, pending or
completed action, suit or proceeding, whether civil, criminal, administrative
or investigative (other than an action by or in the right of the Corporation)
by reason of the fact that he is or was a director, officer, employee or agent
of the Corporation, or is or was serving at the request of the Corporation as
a director, officer, employee or agent of another corporation, partnership,
joint venture, trust, employee benefit plan or other enterprise, against
expenses (including attorneys' fees), judgments, fines and amounts paid in
settlement actually and reasonably incurred by him in connection with such
action, suit or proceeding if he acted in good faith and in a manner he
reasonably believed to be in or not opposed to the best interests of the
Corporation, and, with respect to any criminal action or proceeding, had no
reasonable cause to believe his conduct was unlawful. The termination of any
action, suit or proceeding by judgment, order, settlement, conviction, or upon
a plea of nolo contendere or its equivalent, shall not, of itself, create a
presumption that the person did not act in good faith and in a manner which he
reasonably believed to be in or not opposed to the best interests of the
Corporation, and, with respect to any criminal action or proceeding, had
reasonable cause to believe that his conduct was unlawful.
SECTION 13.2 Power to Indemnify in Actions, Suits or Proceedings by
or in the Right of Power to Indemnify in Actions, Suits or Proceedings by or
in the Right of the Corporation. Subject to Section 13.3 of this Article XIII,
the Corporation shall indemnify and hold harmless, to the fullest extent
permitted by applicable law, any person who is or was a party or is threatened
to be made a party to any threatened, pending or completed action or suit by
or in the right of the Corporation to procure a judgment in its favor by
reason of the fact that he is or was a director, officer, employee or
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agent of the Corporation, or is or was a director or officer of the
Corporation serving at the request of the Corporation as a director, officer,
employee or agent of another corporation, partnership, joint venture, trust,
employee benefit plan or other enterprise against expenses (including
attorneys' fees) actually and reasonably incurred by him in connection with
the defense or settlement of such action or suit if he acted in good faith and
in a manner he reasonably believed to be in or not opposed to the best
interests of the Corporation; except that no indemnification shall be made in
respect of any claim, issue or matter as to which such person shall have been
adjudged to be liable to the Corporation unless and only to the extent that
the Court of Chancery or the court in which such action or suit was brought
shall determine upon application that, despite the adjudication of liability,
in view of all the circumstances of the case, such person is fairly and
reasonably entitled to indemnity for such expenses which the Court of Chancery
or such other court shall deem proper.
SECTION 13.3 Authorization of Indemnification. Any indemnification
under this Article XIII (unless ordered by a court) shall be made by the
Corporation only as authorized in the specific case upon a determination that
indemnification of the director, officer, employee or agent is proper in the
circumstances because he has met the applicable standard of conduct set forth
in Section 13.1 or Section 13.2 of this Article XIII, as the case may be. Such
determination shall be made (i) by the Board of Directors by a majority vote
of a quorum consisting of directors who were not parties to such action, suit
or proceeding, or (ii) if such a quorum is not obtainable, or, even if
obtainable a quorum of disinterested directors so directs, by independent
legal counsel in a written opinion, or (iii) by the stockholders. To the
extent, however, that a director, officer, employee or agent of the
Corporation has been successful on the merits or otherwise in defense of any
action, suit or proceeding described above, or in defense of any claim, issue
or matter therein, he shall be indemnified against expenses (including
attorneys' fees) actually and reasonably incurred by him in connection
therewith, without the necessity of authorization in the specific case.
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SECTION 13.4 Good Faith Defined. For purposes of any determination
under Section 13.3 of this Article XIII, a person shall be deemed to have
acted in good faith and in a manner he reasonably believed to be in or not
opposed to the best interests of the Corporation, or, with respect to any
criminal action or proceeding, to have had no reasonable cause to believe his
conduct was unlawful, if his action is based on the records or books of
account of the Corporation or another enterprise, or on information supplied
to him by the officers of the Corporation or another enterprise in the course
of their duties, or on the advice of legal counsel for the Corporation or
another enterprise or on information or records given or reports made to the
Corporation or another enterprise by an independent certified public
accountant or by an appraiser or other expert selected with reasonable care by
the Corporation or another enterprise. The term "another enterprise" as used
in this Section 13.4 shall mean any other corporation or any partnership,
joint venture, trust, employee benefit plan or other enterprise of which such
person is or was serving at the request of the Corporation as a director,
officer, employee or agent. The provisions of this Section 13.4 shall not be
deemed to be exclusive or to limit in any way the circumstances in which a
person may be deemed to have met the applicable standard of conduct set forth
in Sections 13.1 or 13.2 of this Article XIII, as the case may be.
SECTION 13.5 Indemnification by a Court.3.5 Indemnification by a
Court Notwithstanding any contrary determination in the specific case under
Section 13.3 of this Article XIII, and notwithstanding the absence of any
determination thereunder, any director, officer, employee or agent may apply
to any court of competent jurisdiction in the State of Delaware for
indemnification to the extent otherwise permissible under Sections 13.1 and
13.2 of this Article XIII. The basis of such indemnification by a court shall
be a determination by such court that indemnification of the director,
officer, employee or agent is proper in the circumstances because he has met
the applicable standards of conduct set forth in Sections 13.1 or 13.2 of this
Article XIII, as the case may be. Neither a contrary determination in the
specific case
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under Section 13.3 of this Article XIII nor the absence of any determination
thereunder shall be a defense to such application or create a presumption that
the director, officer, employee or agent seeking indemnification has not met
any applicable standard of conduct. Notice of any application for
indemnification pursuant to this Section 13.5 shall be given to the
Corporation promptly upon the filing of such application. If successful, in
whole or in part, the director, officer, employee or agent seeking
indemnification shall also be entitled to be paid the expense of prosecuting
such application.
SECTION 13.6 Expenses Payable in Advance. Expenses incurred by a
director or officer in defending or investigating a threatened or pending
action, suit or proceeding may be paid by the Corporation in advance of the
final disposition of such action, suit or proceeding upon receipt of an
undertaking by or on behalf of such director, officer, employee or agent to
repay such amount if it shall ultimately be determined that he is not entitled
to be indemnified by the Corporation as authorized in this Article XIII.
SECTION 13.7 Nonexclusivity of Indemnification and Advancement of
Expenses. The indemnification and advancement of expenses provided by or
granted pursuant to this Article XIII shall not be deemed exclusive of any
other rights to which those seeking indemnification or advancement of expenses
may be entitled under any By-Law, agreement, contract, vote of stockholders or
disinterested directors or pursuant to the direction (howsoever embodied) of
any court of competent jurisdiction or otherwise, both as to action in his
official capacity and as to action in another capacity while holding such
office, it being the policy of the Corporation that indemnification of the
persons specified in Section 13.1 and 13.2 of this Article XIII shall be made
to the fullest extent permitted by law. The provisions of this Article XIII
shall not be deemed to preclude the indemnification of any person who is not
specified in Section 13.1 or 13.2 of this Article XIII but whom the
Corporation has the power or obligation to indemnify under the provisions of
the DGCL, or otherwise.
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SECTION 13.8 Insurance. The Corporation may purchase and maintain
insurance on behalf of any person who is or was a director, officer, employee
or agent of the Corporation, or is or was a director or officer of the
Corporation serving at the request of the Corporation as a director, officer,
employee or agent of another corporation, partnership, joint venture, trust,
employee benefit plan or other enterprise against any liability asserted
against him and incurred by him in any such capacity, or arising out of his
status as such, whether or not the Corporation would have the power or the
obligation to indemnify him against such liability under the provisions of
this Article XIII.
SECTION 13.9 Certain Definitions. For purposes of this Article XIII
references to "the Corporation" shall include, in addition to the resulting
corporation, any constituent corporation (including any constituent of a
constituent) absorbed in a consolidation or merger which, if its separate
existence had continued, would have had power and authority to indemnify its
directors, officers, employees or agents, so that any person who is or was a
director, officer, employee or agent of such constituent corporation, or is or
was a director or officer of such constituent corporation serving at the
request of such constituent corporation as a director, officer, employee or
agent of another corporation, partnership, joint venture, trust, employee
benefit plan or other enterprise, shall stand in the same position under the
provisions of this Article XIII with respect to the resulting or surviving
corporation as he would have with respect to such constituent corporation if
its separate existence had continued. For purposes of this Article XIII,
references to "fines" shall include any excise taxes assessed on a person with
respect to an employee benefit plan; and references to "serving at the request
of the Corporation" shall include any service as a director, officer, employee
or agent of the Corporation which imposes duties on, or involves services by,
such director, officer, employee or agent with respect to an employee benefit
plan, its participants or beneficiaries; and a person who acted in good faith
and in a manner he reasonably believed to be in the interest of the
participants and beneficiaries of an employee benefit plan shall be deemed to
have acted in a
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manner "not opposed to the best interests of the Corporation" as referred to
in this Article XIII.
SECTION 13.10 Survival of Indemnification and Advancement of
Expenses. The indemnification and advancement of expenses provided by, or
granted pursuant to, this Article XIII shall, unless otherwise provided when
authorized or ratified, continue as to a person who has ceased to be a
director, officer, employee or agent and shall inure to the benefit of the
heirs, executors and administrators of such a person.
SECTION 13.11 Limitation on Indemnification. Notwithstanding anything
contained in this Article XIII to the contrary, except for proceedings to
enforce rights to indemnification (which shall be governed by Section 13.5
hereof), the Corporation shall not be obligated to indemnify any director,
officer, employee or agent in connection with a proceeding (or part thereof)
initiated by such person unless such proceeding (or part thereof) was
authorized or consented to by the Board of Directors.
SECTION 13.12 Indemnification of Employees and Agents. The
Corporation may, to the extent authorized from time to time by the Board of
Directors, provide rights to indemnification and to the advancement of
expenses to employees and agents of the Corporation similar to those conferred
in this Article XIII to directors and officers of the Corporation.
ARTICLE XIV
Interested Directors
SECTION 14.1 Interested Directors; Quorum. No contract or transaction
between the corporation and one or more of its directors or officers, or
between the corporation and any other corporation, partnership, association,
or other organization in which one or more of its directors or officers are
directors or officers, or have a financial interest, shall be void or voidable
solely for this reason,
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or solely because the director or officer is present at or participates in the
meeting of the Board of Directors or committee thereof which authorizes the
contract or transaction, or solely because his or their votes are counted for
such purpose, if: (1) the material facts as to his relationship or interest
and as to the contract or transaction are disclosed or are known to the Board
of Directors or the committee, and the Board of Directors or committee in good
faith authorizes the contract or transaction by the affirmative votes of a
majority of the disinterested directors, even though the disinterested
directors be less than a quorum; or (2) the material facts as to his
relationship or interest and as to the contract or transaction are disclosed
or are known to the stockholders entitled to vote thereon, and the contract or
transaction is specifically approved in good faith by vote of the
stockholders; or (3) the contract or transaction is fair as to the corporation
as of the time it is authorized, approved or ratified, by the Board of
Directors, a committee thereof, or the stockholders. Common or interested
directors may be counted in determining the presence of a quorum at a meeting
of the Board of Directors or of a committee which authorizes the contract or
transaction.
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PANINI S.P.A.
MARVEL ENTERTAINMENT GROUP, INC.
---------------------------
ITALIAN LIRE 27,000,000,000
TERM LOAN AND GUARANTEE AGREEMENT
dated as of August 5, 1997
---------------------------
THE LENDING INSTITUTIONS
LISTED ON SCHEDULE 1 HERETO,
AS LENDERS
THE CHASE MANHATTAN BANK,
AS AGENT
<PAGE>
TABLE OF CONTENTS
Page
-----
1. DEFINITIONS 1
1 Defined Terms 1
2 Other Definitional Provisions 9
2. AMOUNTS AND TERMS OF TERM LOANS 10
1 Term Loan Commitments 10
2 Term Note 10
3 Procedure for Borrowing Term Loans 10
4 Funding Procedures 11
5 Repayment of Term Loans 11
6 Use of Proceeds of Term Loans 11
SECTION 2. PROVISIONS RELATING TO THE TERM LOANS;
FEES AND PAYMENTS 11
1 Optional Prepayments 11
2 Mandatory Prepayments 12
3 Interest Rate and Payment Dates 12
4 Continuation Options, Minimum Tranches
and Maximum Interest Periods 12
5 Inability to Determine Interest Rate 13
6 Illegality 13
7 Requirements of Law; Changes of Law 14
8 Indemnity 15
9 Taxes and Other Charges 15
10 Facility Fee 16
11 Computation of Interest and Fees 16
12 Payments 16
SECTION 3. REPRESENTATIONS AND WARRANTIES 17
1 Corporate Existence 17
2 Corporate Power 17
3 No Legal Bar to Loans 18
4 Taxes and Recordings 18
SECTION 4. CONDITIONS PRECEDENT TO MAKING OF EACH
TERM LOAN 18
SECTION 5. AFFIRMATIVE COVENANTS 20
1 Punctual Payment 20
2 Prompt Payment of Taxes, Mortgages,
Leases and Indebtedness 20
3 Conduct of Business; Compliance with Law 21
4 Insurance 21
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Page
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5 Accounting; Financial Statements and
Other Information 21
6 Inspection 21
7 Notice of Certain Events and Changes 22
8 Additional Documentary Matters;
Further Assurances 22
SECTION 6. NEGATIVE COVENANTS OF THE COMPANY 22
1 Liens 22
2 Restrictions on Indebtedness 23
3 Restrictions on Investments, Loans, etc. 23
4 Dividends, Distributions and Redemptions 24
5 Sale of Assets; Consolidation, Merger, Acquisition
of Assets 24
6 Transactions with Affiliates 24
7 Restrictions on Leases 24
SECTION 7. GUARANTOR COVENANTS 24
1 Delivery of Certain Information 24
SECTION 8. GUARANTEE 25
1 Guarantee 25
2 Right of Set-Off 25
3 No Subrogation, Contribution, Reimbursement
or Indemnity 26
4 Amendments, etc. 26
5 Guarantee Absolute and Unconditional 26
6 Reinstatement 27
7 Payments 27
8 Modifications Pursuant to Settlement Order;
Provisions in Panini Financing Order 27
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Page
----
SECTION 9. EVENTS OF DEFAULT 27
SECTION 10. THE AGENT 29
1 Appointment and Authorization 29
2 Delegation of Duties 30
3 Liability of Agent-Related Persons 30
4 Reliance by Agent 30
5 Calculations 30
6 Payments 31
7 Indemnification 31
8 Successor Agent 31
SECTION 11. ASSIGNMENT 32
1 Conditions to Assignment by the Lenders 32
2 Certain Representations and Warranties;
Limitations; Covenants 32
3 Register 33
4 New Term Notes 33
5 Disclosure 34
6 Credit Participant Affiliated with the
Company 34
7 Miscellaneous Assignment Provisions 34
8 Assignment by the Company 35
SECTION 12. MISCELLANEOUS 35
1 Amendments and Waivers 35
2 Notices 35
3 No Waiver; Cumulative Remedies 36
4 Survival of Representations and Warranties 37
5 Payment of Expenses and Taxes 37
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Page
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6 Successors and Assigns; Loan Participations 37
7 Set-off 38
8 Judgment Currency 39
9 Replacement of Lender 39
10 Severability 39
11 Effectiveness; Counterparts 39
12 SUBMISSION TO JURISDICTION; WAIVERS 39
13 GOVERNING LAW 40
14 Execution 40
SCHEDULES
Schedule 1 List of Lenders
EXHIBITS
Exhibit A Form of Term Note
Exhibit B Form of Opinion of Mazzetti, Rossi, E Associati
Exhibit C Form of Panini Financing Order
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<PAGE>
Page
----
TERM LOAN AND GUARANTEE AGREEMENT, dated as of August 5, 1997,
among:
(a) PANINI S.p.A., an Italian corporation (the "Company");
(b) MARVEL ENTERTAINMENT GROUP, INC., a Delaware corporation (the
"Guarantor");
(c) The financial institutions listed on Schedule 1 hereto (the
"Lenders"); and
(d) THE CHASE MANHATTAN BANK, at its office in New York, New York, as agent
(the "Agent").
W I T N E S S E T H:
WHEREAS, the Company has requested that the Lenders make term
loans to the Company in the amount equal to Italian Lire 27,000,000,000 for
the purpose of financing the working capital and other general corporate needs
of the Company;
WHEREAS, the Lenders are willing to make such loans to the Company
on the terms and subject to the conditions set forth herein;
NOW, THEREFORE, in consideration of the premises and the mutual
covenants contained herein, the parties hereto hereby agree as follows:
3. DEFINITIONS
1 Defined Terms. As used in this Agreement, the
following terms shall have the following respective meanings (such
definitions to be equally applicable to the singular and plural forms
thereof):
"Affected Loan" shall have the meaning assigned to such term
in Section 3.5;
<PAGE>
"Affiliate" of any Person shall mean any other Person (other than
a Subsidiary) which, directly or indirectly, is in control of, is
controlled by, or is under common control with, the first Person. For
purposes of this definition, a Person shall be deemed to be "controlled
by" another Person if such other Person possesses, directly or
indirectly, power either to (a) vote 10% or more of the securities
having ordinary voting power for the election of directors of such first
Person or (b) direct or cause the direction of the management and
policies of such first Person whether by contract or otherwise;
"Agent" shall have the meaning assigned to such term in the
preamble hereto and shall include any successor Agent pursuant to
Section 11.8 hereof;
"Agreement" shall mean this Term Loan and Guarantee Agreement, as
the same may be amended, supplemented or otherwise modified from time to
time;
"Applicable Eurocurrency Rate" shall mean the Eurocurrency Rate
with respect to the Denomination Currency for the relevant Term Loan;
"Applicable Margin" shall mean, for any day, 2.5% for
Eurodollar Loans;
"Assignment and Acceptance" has the meaning set forth in
Section 12.1 hereof;
"Bankruptcy Court" shall mean the United States Bankruptcy Court
for the District of Delaware or such other court having jurisdiction
over the Reorganization Cases;
"Capital Lease" shall mean any lease of property (real, personal
or mixed) which in accordance with GAAP is or should be capitalized on
the lessee's balance sheet;
"Chase" shall mean The Chase Manhattan Bank;
"Closing Date" shall have the meaning assigned to such term
in Section 5;
"Company" shall have the meaning assigned to such term in the
preamble hereto;
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<PAGE>
"Company Obligations" shall mean the unpaid principal of, and
interest on (including postpetition interest whether or not allowed),
the Term Loan, the Term Note and all other obligations and liabilities
of the Company to the Agent and the Lenders, whether direct or indirect,
absolute or contingent, due or to become due, or now existing or
hereafter incurred, which may arise under, out of, or in connection
with, this Agreement (including, without limitation, any amendment and
restatement or refinancing hereof), the Term Note or any other document
executed and delivered in connection therewith or herewith, whether on
account of principal, interest, reimbursement obligations, fees,
indemnities, costs, expenses (including, without limitation, all fees
and disbursements of counsel to the Lenders) or otherwise;
"Contingent Obligation" as to any Person shall mean any obligation
of such Person guaranteeing or in effect guaranteeing any Indebtedness,
leases, dividends, letters of credit or other obligations ("primary
obligations") of any other Person (the "primary obligor") in any manner,
whether directly or indirectly, including, without limitation, any
"keep-well" or "make-well" agreement, guarantee of return on equity or
other obligation of such Person, whether or not contingent, (a) to
purchase any such primary obligation or any property constituting direct
or indirect security therefor, (b) to advance or supply funds (i) for
the purchase or payment of any such primary obligation or (ii) to
maintain working capital or equity capital of the primary obligor or
otherwise to maintain the net worth or solvency of the primary obligor,
(c) to purchase property, securities or services primarily for the
purpose of assuring the obligee under any such primary obligation of the
ability of the primary obligor to make payment of such primary
obligation or (d) otherwise to assure or hold harmless the obligee under
such primary obligation against loss in respect thereof;
"Contractual Obligation" of any Person shall mean any provision of
any material debt security or of any preferred stock or other equity
interest issued by such Person or of any material indenture, mortgage,
agreement, instrument or undertaking to which such Person is a party or
by which it or any of its material property is bound;
"Credit Documents" shall mean this Agreement and the Term
Note, each, a "Credit Document";
"Cross Default" of any Person shall mean (a) default after the
date hereof in the payment of any amount when due (whether at maturity
or by acceleration) beyond any applicable grace period on any of its
Indebtedness (other than any such
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default in respect of the Term Loans or the Term Note) or in the payment
of any matured Contingent Obligation in respect of any Indebtedness of
any other Person (except for any such payments on account of any such
Indebtedness and Contingent Obligations in an aggregate principal amount
at any one time outstanding of less than $1,000,000 (or the Foreign
Currency Equivalent)) or (b) default after the date hereof in the
observance or performance of any other agreement or condition relating
to any such Indebtedness (except for any such Indebtedness and
Contingent Obligations in an aggregate principal amount at any one time
outstanding of less than $1,000,000 (or the Foreign Currency
Equivalent)) or contained in any instrument or agreement evidencing,
securing or relating thereto, or any other event shall occur or
condition exist, the effect of which default or other event or condition
is to cause, or to permit the holder or holders of such Indebtedness (or
a trustee or agent on behalf of such holder or holders) to cause, with
the giving of notice if required, such Indebtedness (except for any such
Indebtedness in an aggregate principal amount at any one time
outstanding of less than $1,000,000 (or the Foreign Currency
Equivalent)) to become due or to be required to be redeemed or
repurchased prior to its stated maturity; provided that the occurrence
and continuance of (x) a default under the Panini Credit Agreements, (y)
any cross default under any other Indebtedness or any instrument or
agreement relating to Indebtedness that arises directly from a default
under the Panini Credit Agreements or that arises directly from the
commencement or continuance of the Reorganization Cases, and that does
not result in the acceleration of such other Indebtedness, and (z) any
default under any Indebtedness or other claim owed to Guarantor or any
of its Subsidiaries (other than the Company and its Subsidiaries) that
does not result in the acceleration of such Indebtedness or claims,
shall not constitute a "Cross Default";
"Default" shall mean any of the events specified in Section 10,
whether or not any requirement for the giving of notice, the lapse of
time, or both, or any other condition, has been satisfied;
"Denomination Currency" shall mean, with respect to any Term Loan,
the currency in which such Term Loan is denominated;
"Distributions" shall mean the declaration or payment of a
dividend on or in respect of any shares of any class of capital stock of
the Company; the purchase, redemption, or other retirement of any shares
of any class of capital stock of the Company, directly or indirectly
through a Subsidiary of the Company or otherwise; the return of capital
by the Company to its shareholders as such; or any other distribution on
or in respect of any shares of any class of capital stock of the
Company;
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"Dollars" and "$" shall mean dollars in lawful currency of
the United States of America;
"Eligible Assignee" shall mean a commercial bank, insurance
company, commercial finance company or other financial institution
having total assets in excess of $500,000,000 or any other institution
or fund (or affiliate thereof) which, on the Closing Date, is a lender
or participant in respect of the Panini Credit Agreements;
"Eurocurrency Base Rate" with respect to each Eurocurrency Loan of
the Lenders for each Interest Period shall mean the rate per annum equal
to the rate at which the Agent is offered deposits in the Denomination
Currency two Working Days prior to the beginning of such Interest Period
in the interbank eurocurrency market where the foreign currency and
exchange operations or eurocurrency funding operations of the Agent in
the Denomination Currency are customarily conducted at or about 11:00
A.M. (London time) for delivery on the first day of such Interest Period
for the number of days contained therein and in an amount equal to a
representative amount of such deposits;
"Eurocurrency Loan" shall mean each Term Loan hereunder at such
time as it is made and/or being maintained at a rate of interest based
upon the Eurocurrency Rate;
"Eurocurrency Rate" with respect to each Eurocurrency Loan for
each Interest Period shall mean the rate per annum (rounded upwards to
the nearest whole multiple of 1/100th of one percent) equal to the
following:
Eurocurrency Base Rate
-----------------------------------------
1.00 - Eurocurrency Reserve Requirements;
"Eurocurrency Reserve Requirements" with respect to any Interest
Period for any Eurocurrency Loan shall mean the aggregate of the rates
(expressed as a decimal) of reserve requirements current on the date two
Working Days prior to the beginning of such Interest Period (including,
without limitation, basic, supplemental, marginal and emergency reserves
under any regulations of any Governmental Authority having jurisdiction
with respect thereto), as now and from time to time hereafter in effect,
dealing with reserve requirements prescribed for eurocurrency
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funding required to be maintained by a bank regulated by such
Governmental Authority;
"Event of Default" shall mean any of the events specified in
Section 10; provided that any requirement for the giving of notice, the
lapse of time, or both, or any other condition, has been satisfied;
"Foreign Currency Equivalent" shall mean, for any amount of
Dollars (or any other currency) for any day, the amount of any other
currency which, at the exchange rate determined by the Lenders at 10:00
a.m., New York City time, on such day in accordance with its standard
practice for currency exchange transactions in amounts greater than
$1,000,000, equals such amount of Dollars (or any such other currency);
"Fully Satisfied" shall mean, with respect to the Payment
Obligations as of any date, that, on or before such date, (a) the
principal of and interest accrued to such date on such Payment
Obligations shall have been paid in full in cash and (b) all fees,
expenses and other amounts then due and payable which constitute Payment
Obligations shall have been paid in full in cash;
"Governmental Authority" shall mean any nation or government, any
state or other political subdivision thereof and any entity exercising
executive, legislative, judicial, regulatory or administrative functions
of or pertaining to government (including, without limitation, any
governmental department, commission, board, bureau, agency or
instrumentality, or other court or arbitrator, in each case whether of
the United States or foreign);
"Indebtedness" of a Person shall mean (a) indebtedness of such
Person for borrowed money whether short-term or long-term and whether
secured or unsecured, (b) indebtedness of such Person for the deferred
purchase price of services or property, which purchase price (i) is due
twelve months or more from the date of incurrence of the obligation in
respect thereof or (ii) customarily or actually is evidenced by a note
or other written instrument (including, without limitation, any such
indebtedness which is non-recourse to the credit of such Person but is
secured by assets of such Person), (c) obligations of such Person under
Capital Leases, (d) obligations of such Person arising under acceptance
facilities, (e) the undrawn face amount of, and unpaid reimbursement
obligations in respect of, all letters of credit issued for the account
of such Person, (f) all obligations of such Person evidenced by bonds,
debentures, notes or other similar instruments, (g) all obligations of
such Person upon which interest charges are customarily paid, (h) all
obligations of such
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Person under conditional sale or other title retention agreements
relating to property purchased by such Person (even though the rights
and remedies of the seller or lender under such agreement in the event
of default are limited to repossession or sale of such property), (i)
obligations of such Person to purchase, redeem, retire, defease or
otherwise acquire for value any capital stock of such Person or any
warrants, rights or options to acquire such capital stock (with
redeemable preferred stock being valued at the greater of its voluntary
or involuntary liquidation preference plus accrued and unpaid
dividends), (j) all executory obligations of such Person in respect of
interest rate agreements and foreign exchange and other financial hedge
contracts (including, without limitation, equity hedge contracts), (k)
all Indebtedness of the types referred to in clauses (a) through (j)
above for which such Person is obligated under a Contingent Obligation
and (l) renewals, extensions, refundings, deferrals, restructurings,
amendments and modifications of any such indebtedness, obligation or
guarantee;
"Indemnified Liabilities" shall have the meaning assigned to
such term in Section 13.5;
"Interest Payment Date" shall mean, with respect to any Term Loan,
(a) the last day of such Interest Period and (b) the Termination Date;
provided that if any Term Loan is at any time bearing interest at a rate
which is not determined by reference to the Eurocurrency Rate, interest
thereon shall instead be payable thereon on the last day of each March,
June, September and December and on the Termination Date;
"Interest Period" shall mean, (a) initially, with respect to any
Eurocurrency Loan, the period commencing on the borrowing date with
respect to such Eurocurrency Loan and ending one or two months
thereafter as selected by the Company in a notice of borrowing as
provided herein and (b) thereafter, each period commencing on the last
day of the immediately preceding Interest Period applicable to such
Eurocurrency Loan and ending one or two months thereafter, in any such
case as selected by the Company in accordance with the provisions of
Section 3.4; provided that all of the foregoing provisions relating to
Interest Periods are subject to the following:
(x) if any Interest Period relating to a Eurocurrency Loan
would otherwise end on a day which is not a Working Day, such
Interest Period shall be extended to the next succeeding Working
Day, unless the result of
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such extension would be to carry such Interest Period into another
calendar month, in which event such Interest Period shall end on
the immediately preceding Working Day;
(y) the Company shall not select an Interest Period relating
to any Eurocurrency Loan which extends beyond the Termination Date
and any Interest Period relating to any Eurocurrency Loan that
would otherwise extend beyond the Termination Date shall end on
such date; and
(z) if any Interest Period relating to a Eurocurrency Loan
begins on the last Working Day of a calendar month (or on a day
for which there is no numerically corresponding day in the
calendar month at the end of such Interest Period), such Interest
Period shall end on the last Working Day of a calendar month;
"Lender" shall have the meaning set forth in the opening
paragraph of this Agreement.
"Material Adverse Effect" shall mean a material adverse effect
upon (a) the business, assets, operations, condition (financial or
otherwise) or prospects of (i) the Guarantor and its Subsidiaries taken
as a whole (other than the normal deterioration of a business that
occurs after the filing of bankruptcy petition) or (ii) the Company and
its Subsidiaries taken as a whole, (b) the ability of the Guarantor and
each of its Subsidiaries or of the Company and each of its Subsidiaries
to perform its obligations under the Credit Documents or (c) the rights
and remedies available to the Lenders under any Credit Document;
"Net Proceeds" shall mean, with respect to any sale or other
disposition of assets or subsidiaries, (a) the gross cash consideration,
and all cash proceeds (as and when received) of non-cash consideration
(including, without limitation, any such cash proceeds in the nature of
principal and interest payments on account of promissory notes or
similar obligations), received by the Company and its Subsidiaries in
connection with such sale, minus (b) the sum, without duplication, of:
a. any taxes which are actually paid to any federal,
state, local or foreign taxing authority by the Company and
its Subsidiaries that are directly attributable to the
receipt of such Net Proceeds;
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b. the amount of reasonable costs and expenses directly
attributable to such sale or disposition which are paid or payable
by the Company and its Subsidiaries, other than costs and expenses
paid or payable to Affiliates and Subsidiaries of the Company (or
officers or employees of the Company or any of its Affiliates or
Subsidiaries); and
c. the amount of indebtedness secured by the specific
assets subject to any sale or disposition, to the extent the
gross proceeds are used to repay such indebtedness.
"Panini Agent" shall mean The Chase Manhattan Bank as
administrative agent under the Panini Credit Agreements;
"Panini Credit Agreements" means (a) that certain Term Loan and
Guarantee Agreement dated as of August 30, 1994, as amended,
supplemented or otherwise modified from time to time, among Marvel
Entertainment Group, Inc., the Company (formerly named Marvel Comics
Italia S.r.l.), and San Paolo, (b) the related Panini Participation
Agreement, (c)(i)(A) any letter of credit issued for the account of the
Company or any Subsidiary of the Company by a bank or other financial
institution pursuant to any of the Panini Credit Agreements referred to
in clauses (a) or (b) and (B) any related letter of credit applications
and any agreements governing or evidencing reimbursement obligations
relating to any letters of credit referred to in clause (c)(i)(A) or
(ii) any interest rate agreement between the Company or any Subsidiary
of the Company and a bank or other financial institution pursuant to any
of the Panini Credit Agreements referred to in clauses (a) through (b),
inclusive, and (d) any guarantees and security documents, including,
without limitation, mortgages, pledge agreements, security agreements
and trademark security agreements, executed and delivered in connection
with any of the foregoing agreements, together in each case with all
related documents, instruments, consents, amendments, modifications and
waivers;
"Panini Financing Order" shall mean, until September 5, 1997, (a)
that certain interim "Order Authorizing Debtor to (i) Guarantee
Financing of Non-Debtor Subsidiary Pursuant to 11 U.S.C. ss.ss.364(c)(1)
and 364(c)(3) and (ii) Take Corporate and Other Action in Connection
with Borrowings by Non-Debtor Subsidiary Pursuant to 11 U.S.C. ss.363",
which interim order authorizes no more than 23,000,000,000 Italian Lire
in funding under this Agreement and (b) after September 5, 1997, the
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final order of the same name, in each case, in substantially the form of
Exhibit C attached hereto, with such changes as are acceptable to the
Required Lenders;
"Panini Lenders" means each of the holders of Panini Obligations
arising under the Panini Credit Agreements, including any holder of a
Panini Obligation through the Panini Participation Agreement;
"Panini Obligations" means all of the obligations of the Panini
Entities arising under the Panini Credit Agreements including, without
limitation, outstanding principal, accrued and unpaid interest, fees and
charges and any other amounts owing under the Panini Credit Agreements;
"Panini Participation Agreement" means the Participation Agreement
dated as of August 30, 1994 among San Paolo, as Italian Lender, the
Panini Agent and the financial institutions signatory thereto, as
participants;
"Participants" has the meaning set forth in Section 13.6
hereof;
"Payment Obligations" shall mean (a) all principal, interest,
fees, charges, expenses, attorneys' fees and disbursements, indemnities
and any other amounts payable by any Person under any Credit Document
and (b) any amount in respect of any of the foregoing that the Lenders,
in their sole discretion, may elect to pay or advance under this
Agreement on behalf of such Person after the occurrence and during the
continuance of a Default or an Event of Default;
"Person" shall mean an individual, a partnership, a corporation, a
business trust, a joint stock company, a trust, an unincorporated
association, a joint venture, a Governmental Authority or any other
entity of whatever nature;
"Postpetition Credit Agreement" shall mean the Revolving Credit
and Guaranty Agreement, dated as of December 27, 1996, among Marvel
Entertainment Group, Inc., its subsidiaries named therein, the banks and
other financial institutions parties thereto, and The Chase Manhattan
Bank, as agent, as the same from time to time may be amended,
supplemented or otherwise modified, or replaced by another postpetition
financing facility agented by The Chase Manhattan Bank; provided that,
at all times prior to the date upon which such agreement becomes
effective in accordance with its terms, such agreement shall be deemed
to be effective for all purposes hereof;
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"Register" shall have the meaning set forth in Section 12.3
hereof;
"Reimbursed Person" shall have the meaning assigned to such
term in Section 13.5 hereof;
"Reorganization Cases" shall mean the chapter 11 cases of the
Guarantor and certain of its debtor Subsidiaries now pending in the
Bankruptcy Court as Chapter 11 case nos. 96-2069 (412) through
96-2077 (413);
"Required Lenders" means Lenders holding at least sixty-six and
two-thirds percent (66-2/3%) of the aggregate outstanding principal
amount of the Term Loans;
"Requirement of Law" for any Person shall mean the Certificate of
Incorporation and By-Laws or other organizational or governing documents
of such Person, and any law, treaty, rule or regulation, or
determination of an arbitrator or a court or other Governmental
Authority, in each case applicable to or binding upon such Person or any
of its material property or to which such Person or any of its material
property is subject;
"Responsible Officer" shall mean any officer at the level of
vice president or higher of the Company;
"San Paolo" shall mean Istituto Bancario San Paolo di Torino,
S.p.A.;
"Settlement Order" shall mean any final order of the Bankruptcy
Court entered on or before September 15, 1997 approving the settlement
by and among certain prepetition lenders to the Guarantor, each of the
postpetition lenders to the Guarantor, High River Limited Partnership,
Springfield Associates, L.L.C. and Kensington International Limited, on
substantially the same terms that were described to the Bankruptcy Court
in open Court on July 10, 1997.
"Subordination Agreement" shall mean that certain Subordination
Agreement, dated as of August 5, 1997, among the Panini Lenders, the
Panini Agent, and San Paolo as direct lender, the Lenders and the Agent;
"Subsidiary" of any Person shall mean a corporation or other
entity of which shares of stock or other ownership interests having
ordinary voting power (other than stock or other ownership interests
having such power only by reason of the
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happening of a contingency) to elect a majority of the directors of such
corporation, or other Persons performing similar functions for such
entity, are owned, directly or indirectly, by such Person; unless
otherwise qualified, all references to a "Subsidiary" or to
"Subsidiaries" in this Agreement shall refer to a Subsidiary or
Subsidiaries of the Company and all references to a "wholly owned
Subsidiary" in this Agreement shall refer to a Subsidiary or
Subsidiaries of the Company of which the Company directly or indirectly
owns all of the capital stock (other than directors' qualifying shares);
"Taxes" shall have the meaning assigned to such term in
Section 3.9(a);
"Term Loan" and "Term Loans" shall have the meanings assigned
to such terms in Section 2.1;
"Term Note" shall have the meaning assigned to such term in
Section 2.2;
"Termination Date" shall mean the earliest of (i) November 1, 1997
or (ii) the date upon which a sale or disposition of any of the capital
stock of the Company or all or substantially all of the assets of the
Company and its Subsidiaries is consummated;
"Tranche" shall be the collective reference to Eurocurrency Loans
in any Denomination Currency the Interest Periods with respect to all of
which begin on the same date and end on the same later date (whether or
not such Term Loans shall originally have been made on the same day);
"Working Day" shall mean any day other than a Saturday, Sunday or
other day on which banks located in New York, New York, USA are
authorized or required by law to close.
2 Other Definitional Provisions.
1. All terms defined in this Agreement shall have the defined
meanings when used in any other Credit Document or any certificate or other
document made or delivered pursuant hereto or thereto unless otherwise defined
therein.
2. The words "hereof", "herein" and "hereunder" and words of
similar import when used in this Agreement or any other Credit Document shall
refer to this Agreement or such other Credit Document, as the case may be, as
a whole and not to any particular
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provision of this Agreement or such other Credit Document, as the case may be;
and Section, Schedule and Exhibit references contained in this Agreement are
references to Sections, Schedules and Exhibits in or to this Agreement, unless
otherwise specified.
4. AMOUNTS AND TERMS OF TERM LOANS
1 Term Loan Commitments. The Lenders hereby agree to make, subject
to the terms and conditions hereof, including Section 5(l) hereof and the
other borrowing conditions in Section 5 hereof, term loans (each, a "Term
Loan") to the Company at any time and from time to time during the period from
the date hereof and until November 1, 1997 in the Denomination Currency set
forth below in an aggregate principal amount not to exceed for each such
Denomination Currency, the amount set forth opposite such Denomination
Currency:
Currency Amount
-------- ------
Italian Lire 27,000,000,000
Notwithstanding anything herein to the contrary, in accordance with Section
5(l), except for funding on and after the Closing Date in an amount not to
exceed the sum of (x) 20,000,000,000 Italian Lire and (y) amounts to be paid
pursuant to Section 5(g), if the Required Lenders, for any reason or for no
reason, in the exercise of their sole and absolute discretion, so decide, any
Lender may refuse to make any further Term Loans to the Company. The maximum
principal amount of the Term Loans of each Lender shall be the amount
specified opposite such Lender on Schedule 1 hereto, as modified from time to
time. In addition, notwithstanding the commitment amount of Italian Lire
27,000,000,000 set forth above, the Lenders shall not be required to extend
Term Loans from time to time in an aggregate amount that exceeds the amount
which the Guarantor is authorized to guaranty at such time pursuant to the
Panini Financing Order. Without limiting the generality of the preceding
sentence, it is agreed and acknowledged that the interim Panini Financing
Order authorizes the Guarantor to guaranty no more than 23,000,000,000 Italian
Lire in financing.
2 Term Note. The Term Loans shall be evidenced by a promissory
note(s) of the Company, substantially in the form of Exhibit A, with
appropriate insertions (the "Term Note"), payable to the order of each Lender
in a principal amount equal to the aggregate principal amount of the maximum
Term Loans by such Lender. The Term Note shall (a) be dated the date of the
borrowing, (b) be stated to mature (or otherwise become due and payable) in
the amounts and on the dates set forth in Section 2.5, (c) provide for the
payment
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of interest in accordance with the provisions of Section 3.3 and (d) contain
other terms and provision as set forth therein and in this Agreement.
3 Procedure for Borrowing Term Loans. The Company shall give to
the Agent at its office in New York, New York irrevocable notice (which notice
must be received by the Agent at such office prior to 10:00 A.M., New York
City time, four Working Days prior to the date of the requested borrowing, or,
in the case of the initial funding of Term Loans after the Closing Date, 10:00
A.M., New York City time, two Working Days prior to the date of the borrowing)
requesting that the Lenders make the Term Loans on the date of the borrowing
and specifying (a) the amount and Denomination Currency of each Term Loan to
be borrowed and (b) the length of the initial Interest Period with respect to
each such Term Loan. Promptly upon receipt of any such notice, the Agent shall
notify each of the Lenders thereof. Each loan request shall be irrevocable and
binding on the Company and shall obligate the Company to accept the Term Loan
requested from the Lenders on the proposed date of borrowing.
4 Funding Procedures. Provided that all conditions to borrowing in
this Agreement have been satisfied, not later than 2:00 p.m. (New York City
time) two Working Days prior to proposed date of borrowing of any Term Loan,
each of the Lenders will make available to the Agent, at the Agent's head
office in New York City, or, such other location designated by the Agent, in
immediately available funds, the amount of such Lender's ratable portion of
the principal amount of the requested Term Loan. Upon receipt from each Lender
of such amount, and upon the satisfaction of the other conditions set forth
herein, the Agent will make available to the Company the aggregate amount of
such Term Loan made available to the Agent by the Lenders. The failure or
refusal of any Lender to make available to the Agent at the aforesaid time and
place on any date of borrowing the amount of its ratable portion of the
requested Term Loan shall not relieve any other Lender from its several
obligation hereunder to make available to the Agent the amount of such other
Lender's ratable portion of any requested Loans.
5 Repayment of Term Loans. Each Term Loan shall be due and payable
on the Termination Date (together with any accrued and unpaid interest thereon
and any other fees, charges and amounts owed in respect thereon).
6 Use of Proceeds of Term Loans. The proceeds of the Term Loans
shall be utilized by the Company to fund the general working capital needs of
the Company including, without limitation, its obligation to pay the accrued
fees and expenses owing hereunder or under the Panini Credit Agreements or in
connection herewith or therewith (including, without limitation, all amounts
required to be reimbursed or indemnified there-
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under by the participants thereunder and all accrued fees and disbursements of
primary counsel and local counsel to the Agent, any Lender, San Paolo, the
Panini Lenders or the Panini Agent).
5. PROVISIONS RELATING TO THE TERM LOANS; FEES AND PAYMENTS
1 Optional Prepayments. The Company may, at any time and from time
to time, prepay the Term Loans then outstanding, in whole or in part, without
premium or penalty (other than amounts payable pursuant to Section 3.8), upon
at least four Working Days' irrevocable notice to the Agent, specifying (a)
the Term Loans to be prepaid and (b) the date and amount of such prepayment.
If any such notice is given, the Company will make the prepayment specified
therein, and such prepayment shall be due and payable on the date specified
therein. Amounts prepaid on account of the Term Loans may not be reborrowed.
Each partial prepayment of the Term Loans pursuant to this Section 3.1 shall
be in an amount equal to the Foreign Currency Equivalent of $1,000,000 or a
whole multiple of $500,000 (or, if less, the aggregate outstanding principal
amount of the Term Loan being prepaid).
2 Mandatory Prepayments.
1. On the Termination Date, the Company shall repay to the Agent
on behalf of the Lenders in cash an amount equal to all Payment Obligations.
Notwithstanding anything herein to the contrary, on the Termination Date, all
Payment Obligations shall be Fully Satisfied.
2. Without limiting the provisions of Section 7.5 hereof, the
Company shall be obligated to promptly (and, in any event, within one Working
Day following receipt thereof by the Company or any of its Subsidiaries) pay
Net Proceeds received from the sale or other disposition of any of the assets
(including the stock of any of its Subsidiaries) of the Company or any of its
Subsidiaries (other than from the sale of inventory in the ordinary course of
business) to the Agent in an amount equal to the lesser of (i) all such Net
Proceeds and (ii) the Payment Obligations, for permanent application to the
Term Loans.
3 Interest Rate and Payment Dates.
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1. The Term Loans shall bear interest on the unpaid principal
amount thereof for each day during each Interest Period with respect thereto
at a rate per annum equal to (i) the Applicable Eurocurrency Rate for such day
plus (ii) the Applicable Margin.
2. If all or a portion of any amount owing hereunder shall not be
paid when due, then, for so long as such amount remains unpaid, (i) if the
overdue amount represents principal, such overdue amount shall bear interest
at a rate per annum which is two percent (2%) above the rate which would
otherwise be applicable pursuant to Section 3.3(a) or otherwise in this
Agreement and (ii) if the overdue amount represents overdue interest, fees or
other amounts (other than the amounts described in clause (i) of this
paragraph (c)) due under the Credit Documents, such overdue amount shall bear
interest at a rate per annum then payable on Term Loans hereunder (including
the Applicable Margin) plus two percent (2%).
3. Interest on each Term Loan accrued to but not including each
Interest Payment Date applicable thereto shall be payable in arrears on such
Interest Payment Date; provided, however, that interest accruing on (i) the
principal of any Term Loan, (ii) to the extent permitted by applicable law,
interest on any Term Loan or (iii) to the extent permitted by applicable law,
any other amount payable in connection with any Term Loan, which (in any such
case) is not paid when due (whether at stated maturity, by acceleration or
otherwise) shall be payable from time to time upon demand of the Lenders.
4 Continuation Options, Minimum Tranches and Maximum Interest Periods.
1. Any Eurocurrency Loans may be continued upon the expiration of
an Interest Period with respect thereto by the Company giving the Agent at
least four Working Days' irrevocable notice for continuation thereof. No
Interest Period with respect to any Eurocurrency Loan may expire on a date
later than the Termination Date.
2. Unless the Lenders shall have received timely notice in
accordance with Section 3.1 that the Company elects to prepay such
Eurocurrency Loans on the last day of such Interest Period, the Company shall
be deemed irrevocably to have requested that such Eurocurrency Loans be
continued as Eurocurrency Loans having an Interest Period of one month on the
last day of such Interest Period; provided that if the Termination Date shall
occur less than one month after the last day of such expiring Interest Period,
the Lenders may continue the Term Loans for a period of duration shorter than
one month at a eurocurrency rate or other interest rate reasonably equivalent
to the otherwise applicable interest
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rate, as selected by the Agent in its sole discretion, and any such accruing
interest shall be payable by the Company as provided under such eurocurrency
contract or on demand.
3. Any borrowing or continuation of Eurocurrency Loans, or
payments or prepayments of Eurocurrency Loans, shall be in such amounts and be
made pursuant to such elections so that, after giving effect thereto, (i) the
aggregate principal amount of each Tranche of Eurocurrency Loans shall be at
least Italian Lire 5,000,000,000, or the entire remaining availability under
this Agreement at such time (including remaining limit under the Panini
Financing Order), if less than Italian Lire 5,000,000,000, and (ii) there
shall not be more than five tranches of Eurocurrency Loans at any one time
outstanding.
5 Inability to Determine Interest Rate. In the event that the
Agent shall have determined (which determination, in the absence of manifest
error, shall be conclusive and binding upon the Company) that by reason of
circumstances affecting the relevant interbank eurocurrency market, adequate
and reasonable means do not exist for ascertaining the Eurocurrency Rate for
any Interest Period for the relevant Denomination Currency with respect to the
continuation of a Term Loan as such for an additional Interest Period (such
Term Loan being herein called an "Affected Loan"), the Agent shall forthwith
give telecopy or telephonic notice of such determination, confirmed in
writing, to the Company at least two Working Days prior to the last day of the
Interest Period applicable to such Term Loan. Until any such notice has been
withdrawn by the Lenders, no further Affected Loans shall be made and all
Affected Loans shall instead be treated as loans that shall, subject to
Section 3.3(b), bear interest at an annual rate equal to (i) the "prime rate"
as determined by the Italian Bankers Association (ABI) and published in Il
Sole 24 Ore newspaper, or such other equivalent rate as selected by the Agent
in its sole discretion, plus (ii) 1.5%.
6 Illegality. Notwithstanding any other provision herein, if any
change in law, rule, regulation, treaty or directive or in the interpretation
or application thereof, shall make it unlawful for any Lender to make or
maintain Eurocurrency Loans in one or more Denomination Currencies as
contemplated by this Agreement or to accept deposits in order to maintain such
Eurocurrency Loans, (a) such Lender shall promptly notify the Company thereof,
(b) the agreements of such Lender hereunder to maintain Eurocurrency Loans in
each affected Denomination Currency shall be suspended forthwith and (c) each
Term Loan in an affected Denomination Currency which is then outstanding as a
Eurocurrency Loan, if any, shall automatically become a loan that shall,
subject to Section 3.3(b), bear interest at an annual rate equal to (i) the
"prime rate" as determined by the Italian Bankers Association (ABI) and
published in Il Sole 24 Ore newspaper, or such other equivalent rate as
selected by the Agent in its sole discretion plus, (ii) 1.5%. The Company
agrees promptly to pay to
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such Lender any additional amounts necessary to compensate such Lender for any
costs incurred by it as a consequence of the Company making any conversion in
accordance with this Section 3.6, including, without limitation, any interest
or fees payable by such Lender to lenders or other providers of funds obtained
by it in order to make or maintain such Eurocurrency Loans. A certificate as
to any such costs payable pursuant to this Section 3.6 submitted by an officer
of such Lender to the Company shall be conclusive, in the absence of manifest
error.
7 Requirements of Law; Changes of Law.
1. In the event that the adoption of or any change in law, rule,
regulation, treaty or directive or in the interpretation or application
thereof, or compliance by any Lender with any request or directive (whether or
not having the force of law) issued after the date hereof from any central
bank or other Governmental Authority:
a. imposes upon such Lender any tax of any kind whatsoever
with respect to this Agreement, the Term Note or any Term Loan, or
changes the basis of taxation of payments to such Lender of principal,
commitment fee, interest or any other amount payable hereunder (except
for (x) income and franchise taxes imposed on such Lender by the
jurisdiction under the laws of which such Lender is organized or any
political subdivision or taxing authority thereof or therein, or by any
jurisdiction in which such Lender is located or any political
subdivision or taxing authority thereof or therein, (y) taxes resulting
from the substitution of any such system by another system of taxation;
provided that the -------- taxes payable by such Lender subject to such
other system of taxation are not generally charged to borrowers from
such Lender having loans or advances bearing interest at a rate similar
to the Eurocurrency Rate and (z) taxes imposed by way of deduction or
withholding, which shall be exclusively governed by Section 3.9);
b. imposes, modifies or holds applicable any reserve,
special deposit, compulsory loan or similar requirement against any Term
Loan made, or assets held by, or credit extended by, or deposits or
other liabilities in or for the account of, or acquisition of funds by
or for the account of, any office of such Lender, which is not otherwise
included in the determination of the Eurocurrency Rate hereunder; or
c. imposes on such Lender any other condition;
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and the result of any of the foregoing is to increase the cost to such Lender
of making, renewing or maintaining any Term Loan or to reduce any amount
receivable by it in respect of any of its Eurocurrency Loans, then, in any
such case, the Company shall promptly pay such Lender any additional amounts
necessary to compensate such Lender for such additional cost or reduced amount
receivable as reasonably determined by such Lender with respect to this
Agreement, its Term Note or its Term Loans after taking into account any
amounts paid or payable pursuant to Section 3.9(a). If such Lender becomes
entitled to claim any additional amounts pursuant to this Section 3.7(a), it
shall promptly notify the Company of the event by reason of which it has
become so entitled. A certificate as to any additional amounts payable
pursuant to the foregoing sentence submitted by an officer of such Lender to
the Company shall be conclusive, in the absence of manifest error.
2. In the event that any Lender shall have determined that the
adoption of any law, rule, regulation or guideline adopted pursuant to or
arising out of the International Convergence of Capital Measurement and
Capital Standards or of any Requirement of Law otherwise regarding capital
adequacy, or any change therein or in the interpretation or application
thereof or compliance by such Lender with any request or directive regarding
capital adequacy (whether or not having the force of law) from any central
bank or Governmental Authority, does or shall have the effect of reducing the
rate of return on such Lender's capital as a consequence of its obligations
hereunder to a level below that which such Lender could have achieved but for
such adoption, change or compliance (taking into consideration such Lender's
policies with respect to capital adequacy) by an amount which is reasonably
deemed by such Lender to be material, then from time to time, promptly after
submission by such Lender to the Company of a written request therefor, the
Company shall promptly pay to such Lender such additional amount or amounts as
will compensate such Lender for such reduction.
3. The agreements in this Section 3.7 shall survive the
termination of this Agreement and payment of the Term Loans and the Term Note
and all other amounts payable hereunder.
8 Indemnity. The Company agrees to promptly pay and indemnify the
Agent and each Lender (collectively, the "Indemnified Persons") for, and to
hold each Indemnified Person harmless from, any loss or expense which such
Indemnified Person may sustain or incur in its reemployment of funds obtained
in connection with the making or maintaining of Eurocurrency Loans as a
consequence of (a) any default by the Company in borrowing such Eurocurrency
Loans after the Company has given a notice in respect thereof or (b) any
failure by the Company to prepay Eurocurrency Loans after the Company has
given notice
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in respect thereof or (c) any payment, prepayment (whether optional or
mandatory) or conversion (whether optional or mandatory) of any
Eurocurrency Loan on a day which is not the last day of an Interest Period
with respect thereto. Without limiting the effect of the foregoing, the
Company agrees to pay to such Indemnified Person an amount equal to the
excess, if any, of (i) the amount of interest which otherwise would have
accrued on the principal amount paid, prepaid or not borrowed for (A) the
period from the date of such payment or prepayment to the last day of the
Interest Period applicable to such Eurocurrency Loan or (B) in the case of a
failure to borrow or to convert, the Interest Period applicable to such
Eurocurrency Loan which would have commenced on the date specified for such
borrowing or conversion, at the applicable rate of interest for such
Eurocurrency Loan provided for herein exclusive of any margin applicable
thereto minus (ii) the interest component of the amount such Indemnified
Person would have bid in the relevant interbank market in respect of such Term
Loan if such Term Loan were to be made on the date of such payment,
prepayment, failure to borrow or failure to convert, as the case may be. A
certificate as to any additional amounts payable pursuant to this Section 3.8
submitted by an officer of the Agent to the Company shall be conclusive,
absent manifest error. The agreements in this Section 3.8 shall survive
termination of this Agreement and payment of the Term Loans and the Term Note
and all other amounts payable hereunder.
9 Taxes and other Charges.
1. All payments made by the Company under this Agreement shall be
made free and clear of, and without reduction for or on account of, any
present or future, stamp, documentary, property, excise or other taxes,
registration charges, levies, imposts, duties, charges, fees, deductions or
withholdings, now or hereafter imposed, levied, collected, withheld or
assessed by any Governmental Authority, excluding income and franchise taxes
imposed on each such Lender by the jurisdiction under the laws of which such
Lender is organized or any political subdivision or taxing authority thereof
or therein (such non-excluded taxes, being called "Taxes"). All stamp,
documentary, property, excise or other similar taxes, registration charges,
levies, imposts, duties, charges and fees shall be the obligation of the
Company. If any Taxes are required to be withheld from any amounts payable to
any Lender hereunder or under the Term Note, the amounts so payable to such
Lender shall be increased to the extent necessary to yield to such Lender
(after payment of all Taxes) interest or any such other amounts payable
hereunder at the rates or in the amounts specified in this Agreement and the
Term Note. Whenever any Taxes are payable by the Company, as promptly as
possible thereafter, the Company shall send to the relevant Lender a certified
copy of an original official receipt or other evidence reasonably satisfactory
to such Lender showing payment thereof. If the Company fails to pay any Taxes
when due to the appropriate taxing authority or fails to remit to such Lender
the required receipts
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or other required documentary evidence, the Company shall indemnify such
Lender for any incremental taxes, interest or penalties that may become
payable by the Lenders as a result of any such failure. If any Taxes are paid
by any Lender to any Governmental Authority, the Company shall indemnify such
Lender (within 30 days after demand therefor upon the Company), for any
amounts so paid.
2. Each Lender agrees to use reasonable efforts (including
reasonable efforts to change the office in which it is booking any Term Loan)
to avoid or to minimize any amounts which might otherwise be payable pursuant
to this Section 3.9; provided, however, that such efforts shall not cause the
imposition on such Lenders or any Participant any additional costs or legal or
regulatory burdens deemed by such Lenders or such Participant to be material
or otherwise be deemed by such Lender or such Participant to be
disadvantageous to it or contrary to its policies.
3. The agreements in this Section 3.9 shall survive the
termination of this Agreement and the payment of the Term Loans and Term Note,
and all other amounts payable hereunder.
10 Facility Fee. The Company agrees to pay to Agent on the date
hereof a facility fee of Italian Lire 405,000,000, of which the Foreign
Currency Equivalent of fifty thousand dollars ($50,000) shall be distributed
by the Agent to Chase as Chase's advisory and structuring fee and the
remainder shall be distributed ratably among the Lenders in accordance with
their ratable portion of the maximum principal amount of the Term Loans.
11 Computation of Interest and Fees. Interest in respect of Term
Loans and other amounts owing hereunder shall be calculated on the basis of a
360-day year for the actual days elapsed. The Agent will, as soon as
practicable, notify the Company of each determination of a Eurocurrency Rate
and the effective date thereof. Each determination of an interest rate by the
Agent pursuant to any provision of this Agreement shall be conclusive and
binding on the Company, in the absence of manifest error.
12 Payments.
1. All payments (including prepayments) to be made by the Company
on account of principal, interest and fees shall be made without set-off or
counterclaim and shall be made to the Agent at its office specified in Section
13.2, or at such other location as the Agent may direct, on or prior to 1:00
P.M., local time, in lawful money of the juris-
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diction of the Denomination Currency (or, in the case of fees, Italian Lire)
and in immediately available funds.
2. If any payment hereunder (other than payments on Eurocurrency
Loans) becomes due and payable on a day other than a Working Day, such payment
shall be extended to the next succeeding Working Day and, with respect to
payments of principal, interest thereon shall be payable at the then
applicable rate during such extension. If any payment hereunder on a
Eurocurrency Loan becomes due and payable on a day other than a Working Day,
the maturity thereof shall be extended to the next succeeding Working Day
unless the effect of such extension would be to extend such payment into
another calendar month, in which event such payment shall be made on the
immediately preceding Working Day.
6. REPRESENTATIONS AND WARRANTIES
In order to induce the Agent and the Lenders to enter into this
Agreement and to make the Term Loans hereunder, the Guarantor and the Company
each hereby represents and warrants to the Lenders that:
1 Corporate Existence. Each of the Company, the Guarantor and the
Subsidiaries of the Company is duly organized, validly existing and in good
standing under the laws of the jurisdiction of its incorporation, has the
corporate power to own its assets and to transact the business in which it is
presently engaged, and is duly qualified as a foreign corporation and in good
standing under the laws of each jurisdiction where its ownership or lease of
property or the conduct of its business requires such qualification, except
where all such failures to so qualify and be in good standing would not, in
the aggregate, be reasonably likely to have a Material Adverse Effect.
2 Corporate Power.
1. Each of the Company and the Guarantor has the corporate power,
authority and legal right to execute, deliver and perform this Agreement and
the other Credit Documents to which it is a party and to borrow and provide
the guarantees hereunder (as applicable). Each of the Company and the
Guarantor has taken as of the Closing Date all necessary corporate action to
authorize the borrowings and the guarantee (as applicable) on the terms and
conditions of this Agreement and the other Credit Documents. Each of the
Company and the Guarantor has taken as of the Closing Date all necessary
corporate action to authorize the execution, delivery and performance of this
Agreement and the other Credit Documents to which it is a party.
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2. No consent of any other Person (including, without limitation,
stockholders or creditors of the Company or the Guarantor or any of its
Subsidiaries or of any Parent of the Company or the Guarantor), and no
consent, license, permit, approval or authorization of, exemption by, or
registration, filing or declaration with, any Governmental Authority (other
than the Panini Financing Order) is required in connection with the execution,
delivery, performance, validity or enforceability of this Agreement and the
Term Note, other than (i) those which have been obtained or made and remain in
full force and effect and (ii) those which, in the aggregate, would not be
reasonably likely to have a Material Adverse Effect if not obtained or made.
3. This Agreement has been executed and delivered by a duly
authorized officer of each of the Company and the Guarantor and constitutes
the legal, valid and binding obligations of each of the Company and the
Guarantor, enforceable against it in accordance with its terms except as
enforceability may be limited by bankruptcy, insolvency, moratorium,
reorganization or other similar laws affecting creditors' rights generally and
except as enforceability may be limited by general principles of equity. The
Term Note has been executed and delivered by a duly authorized officer of the
Company and constitutes the legal, valid and binding obligations of the
Company, enforceable against it in accordance with its terms except as
enforceability may be limited by bankruptcy, insolvency, moratorium,
reorganization or other similar laws affecting creditors' rights generally and
except as enforceability may be limited by general principles of equity.
3 No Legal Bar to Loans. The execution, delivery and performance
of this Agreement and the Term Note will not violate any Contractual
Obligation or material Requirement of Law to which the Company or the
Guarantor or any of its Subsidiaries is a party, or by which the Guarantor or
any of its Subsidiaries or any of their respective material properties or
assets may be bound, and will not result in the creation or imposition of any
Lien on any of their respective material properties or assets pursuant to the
provisions of any Contractual Obligation.
4 Taxes and Recordings.
1. There are no taxes imposed by any Italian Governmental
Authority either (i) on or by virtue of the execution or delivery of this
Agreement, the Term Note or any other Credit Document or (ii) on any payment
to be made by the Company pursuant hereto.
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2. This Agreement and the Term Note are in proper legal form under
Italian law for the enforcement hereof or thereof against the Company under
Italian law, and to ensure the legality, validity, enforceability, priority or
admissibility in evidence of this Agreement and the Term Note it is not
necessary that this Agreement, the Term Note or any other document be filed,
registered or recorded with, or executed or notarized before, any court or
other authority in Italy or that any registration charge or stamp or similar
tax be paid on or in respect of this Agreement, the Term Note or any other
Credit Document.
7. CONDITIONS PRECEDENT TO MAKING OF EACH TERM LOAN
The agreement of each Lender to make the Term Loans requested to
be made by it shall be subject to the satisfaction or waiver by such Lender of
the following conditions precedent (the date on which said conditions are
first satisfied or waived being herein called the "Closing Date") on the
occasion of each Term Loan:
1. Effectiveness of Agreement. This Agreement shall have become
binding upon the parties hereto in accordance with Section 13.11;
2. Term Note. Such Lender shall have received a Term Note
conforming to the requirements hereof and executed and delivered by a
duly authorized officer of the Company and the Company shall comply with
the other borrowing procedures in Section 2 hereof;
3. No Default. Both before and after giving effect to such Term
Loans and the use of the proceeds thereof, there shall exist no Event of
Default (or condition which would constitute an Event of Default with
the giving of notice or the passage of time);
4. Corporate Proceedings. The Agent shall have received (a)
certified copies of the Charter and by-laws of the Guarantor and the
Company and (b) (i) with respect to the Guarantor, the resolutions, in
form and substance reasonably satisfactory to the Agent, of the Board of
Directors (or Executive Committee or analogous committee thereof) of the
Guarantor, authorizing the execution, delivery and performance of each
Credit Document to which the Guarantor is a party certified by the
Secretary or an Assistant Secretary of the Guarantor as of the date
hereof and such certificate shall state that the resolutions thereby
certified have not been amended, modified, revoked or rescinded as of
the date of such certificate and (ii) with respect to the Company,
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the Agent shall have received such documents and shall otherwise be
satisfied with all corporate proceedings;
5. Incumbency Certificates. The Agent shall have received a
certificate of the Secretary or an Assistant Secretary of the Guarantor,
dated the date hereof, as to the incumbency and signature of the
officers of the Guarantor executing each Credit Document to which it is
a party or any certificate or other document to be delivered by it
pursuant thereto, together with evidence of the incumbency of such
Secretary or Assistant Secretary, as the case may be. With respect to
the Company, the Agent shall have received such evidence as to
incumbency and signature of the officers of the Company as the Agent may
require;
6. Certain Legal Opinions. The Agent shall have received executed
legal opinions of Mazzetti, Rossi, E Associati, as special Italian
counsel to the Company, substantially in the form of Exhibit B. The
foregoing legal opinions shall be accompanied by copies of the legal
opinions, if any, upon which such counsel rely, and in each case shall
contain such changes thereto as may be approved by, and as shall
otherwise be in form and substance reasonably satisfactory to, the Agent
and shall cover such other matters incident to the transactions
contemplated by the Credit Documents as the Agent and each Lender may
reasonably require. Each of the counsel delivering the foregoing legal
opinions is expressly instructed to deliver its opinion for the benefit
of the Agent and each Lender;
7. Fees. The Company shall have paid (including by funding in
connection with the requested Term Loan) to the Agent and the Lenders
all fees and expenses incurred by the Agent or the Lenders, and
presented to the Company for payment prior to the date of the requested
Term Loan, in connection with the preparation, negotiation, execution,
delivery and closing of the Term Loan Agreement and the transactions
contemplated in connection therewith;
8. No Defaults under other Agreements. Except for any default or
events of default arising from a change of control of the Guarantor, any
default or event of default under the Panini Credit Agreements, or any
cross default under any agreement or contract arising from any default
or events of default under the Panini Credit Agreements, there shall
exist no event of default (or condition which would constitute an event
of default with the giving of notice or the passage of time) under any
capital stock, financing agreements, lease agreements or other contracts
of the Company or any of its respective Subsidiaries which event of
default or condition, in
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the aggregate with all other then existing events of default and
conditions, would be reasonably likely to have a Material Adverse Effect;
9. Panini Financing Order. The Bankruptcy Court shall have entered
the Panini Financing Order and such Panini Financing Order shall be in
full force and effect;
10. Representations and Warranties. Each of the representations
and warranties made by each party to each Credit Document in or pursuant
to this Agreement or any other Credit Document, or contained in any
certificate or financial statement furnished at any time under or in
connection with this Agreement or any other Credit Document shall be
true and correct in all material respects on and as of such date as if
made on and as of such date, both before and after giving effect to such
Term Loan and the use of the proceeds thereof;
11. Subordination Agreement. The Subordination Agreement shall
have been executed and delivered by the Agent, each of the Lenders as of
the date thereof and each of the Panini Lenders;
12. Additional Matters. All corporate and other proceedings, and
all documents, instruments and other legal, diligence and financial
matters in connection with the transactions contemplated by the Credit
Documents shall be reasonably satisfactory in form and substance to the
Required Lenders and, except for funding on and after the Closing Date
in an amount not to exceed the sum of (x) 20,000,000,000 Italian Lire
and (y) amounts to be paid pursuant to Section 5(g), the Required
Lenders shall have decided, in their sole and absolute discretion, to
accept the Company's request for borrowing.
8. AFFIRMATIVE COVENANTS
Except with the prior written consent of the Required Lenders, the
Company covenants and agrees that so long as there is outstanding any portion
of the Term Loans, it will, and it will cause each of its Subsidiaries to,
comply or cause compliance with the following provisions:
1 Punctual Payment. The Company will duly and punctually pay all
principal, interest, fees, charges and other items included in the Term Loans
which are owed by it in accordance with the provisions hereof and of the other
Credit Documents.
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2 Prompt Payment of Taxes, Mortgages, Leases and Indebtedness. The
Company will, and the Company will cause its Subsidiaries to, promptly pay and
discharge, or cause to be paid or discharged, prior to the date on which any
penalties, interest or liens commence or attach, all lawful taxes,
assessments, and governmental charges or levies imposed upon its income,
profits, property or business; provided, however, that any such tax,
assessment, charge or levy need not be paid if the validity or amount thereof
shall currently be contested in good faith by appropriate steps diligently
conducted and if it shall have set aside on its books adequate reserves with
respect thereto in accordance with Italian generally accepted accounting
principles. The Company will, and the Company will cause its Subsidiaries to,
promptly pay or cause to be paid when due (or in conformity with customary
trade terms) all other Indebtedness incident to its operations (including,
without limitation, all salaries, royalties, residuals, license fees, service
charges, laboratory charges and the like), and will promptly pay and perform
or cause to be paid or performed all of its obligations under its leases of
real and personal property, under its material contracts and agreements, and
will promptly notify the Lenders of any default or notice of alleged default
received with respect to any such Indebtedness, lease or contract if (x) such
default or alleged default relates to Indebtedness in excess of $1,000,000 (or
the Foreign Currency Equivalent) or (y) such default or alleged default would
be reasonably likely to have a Material Adverse Effect.
3 Conduct of Business; Compliance with Law. The Company will, and
the Company will cause its Subsidiaries to, engage only in the businesses in
which it is presently engaged and is about to engage. The Company will, and
the Company will cause its Subsidiaries to, do all things necessary to
preserve, renew and keep in full force and effect and in good standing its
corporate existence, qualification and franchises, authorizations, permits,
approvals and licenses and items necessary to operate is businesses as
presently being conducted. The Company will, and the Company will cause its
Subsidiaries to, conduct such business in an efficient manner and will
maintain its properties and assets in good order and repair, all in compliance
with applicable federal, state and local judgments, decrees, orders, statutes,
rules and regulations.
4 Insurance. The Company will, and the Company will cause its
Subsidiaries to, obtain and maintain with insurers satisfactory to the Lenders
insurance with respect to its assets, properties and business against loss or
damage to the extent that property of similar character is customarily so
insured by other companies engaged in a similar business.
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5 Accounting; Financial Statements and Other Information. The
Company will, and the Company will cause its Subsidiaries to, maintain true,
complete and accurate books and records in which true, complete and accurate
entries shall be made.
The Company will, and the Company will cause its Subsidiaries to,
deliver or cause to be delivered to each of the Lenders:
1. upon the demand of the Required Lenders, such information or
reports (whether relating to financial information or otherwise) as the
Required Lenders may request, including, without limitation, reports, in
reasonable detail, setting forth (x) all disbursements and expenditures
made during the period requested and the variances against the budget
(together with an explanation thereof) in respect of such period and (y)
all revenues, receipts or other income received during such period by
the Company; and
2. all information and reports from time to time provided by the
Company to the Lenders prior to the date hereof on at least as frequent
a basis.
6 Inspection. The Company will, and the Company will cause its
Subsidiaries to, permit the Lenders and any authorized representatives of the
Lenders to visit and inspect any of its properties or offices including its
books and records, and to make extracts therefrom, and to discuss its affairs,
finances and accounts with its employees, officers and independent certified
public accountants (which by virtue of this provision are hereby authorized to
have such discussions), all at such times during normal business hours and as
often and continuously as may be requested by the Lenders. Without limitation
on any of the foregoing, the Lenders may designate one or more representatives
whom the Company will keep advised as to all phases of the business, and to
whom the Company shall make available all books, records and other information
and data relating to the business.
7 Notice of Certain Events and Changes. Promptly after becoming
aware of any condition, event or state of facts which constitutes an Event of
Default or which, after notice or lapse of time, or both, would constitute an
Event of Default, the Company will, and the Company will cause its
Subsidiaries to, give written notice to the Lenders specifying the nature and
period of existence thereof. The Company will, and the Company will cause its
Subsidiaries to, promptly give the Lenders written notice of any condition,
event or state of facts which causes or may cause material loss or
depreciation in the value of its assets and the amount of such loss or
depreciation, and of the commencement or threat of any action, proceeding or
investigation, including, without limitation, the receipt of notice from any
governmental authority of a violation or possible violation on its part of any
law, rule,
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regulation or guideline of such authority, or the occurrence or existence of
any other event, matter or cause whatsoever, which either in any case or in
the aggregate results or might result in any material adverse change in its
business, prospects, profits, income, properties, operations or condition
(financial or otherwise).
8 Additional Documentary Matters; Further Assurances. As soon as
practicable and in any case no later than twenty (20) days after the Closing
Date, the Company shall provide the Agent with such original, notarized,
certified and otherwise formalized documents and instruments (including,
without limitation, original, notarized and/or certified versions of the
Credit Documents) as the Agent shall reasonably request. In addition, the
Company will from time to time promptly execute and deliver such documents and
perform such other acts as the Required Lenders shall reasonably request in
order to further and more fully vest in the Lenders and the Agent all rights,
interests, powers, benefits, privileges and advantages conferred or intended
to be conferred by this Agreement.
9. NEGATIVE COVENANTS OF THE COMPANY
Except with the prior written consent of the Required Lenders, the
Company covenants and agrees that so long as there is outstanding any portion
of the Term Loans, the Company will not, and the Company will cause each of
its Subsidiaries not to:
1 Liens. Directly or indirectly, create, incur, assume or permit
to exist any mortgage, lien, charge or encumbrance on or pledge or deposit of
or conditional sale, lease or other title retention agreement with respect to
any property or asset, whether now owned or hereafter acquired, or be bound by
or subject to any agreement or option to do so, provided that the foregoing
restrictions shall not apply to:
1. liens for taxes, assessments or governmental charges or levies
the payment of which is not at the time required by Section 6.2;
2. liens incurred or deposits made in the ordinary course of
business in connection with workmen's compensation or unemployment
insurance or to secure the performance of tenders, statutory
obligations, surety and appeal bonds, performance and return-of-money
bonds and other similar obligations (exclusive of obligations for the
payment of borrowed money);
3. statutory or common law possessory liens for charges incurred
in the ordinary course of business the payment of which is not yet due
or is being contested
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in good faith by appropriate steps promptly initiated and diligently
conducted, if adequate reserves or other appropriate provision, if any,
as shall be required by generally accepted accounting principles shall
have been made therefor;
4. encumbrances of accounts receivable or similar financial
arrangements with respect to accounts receivable, in each case, arising
in the ordinary course of business consistent with past practices;
5. liens relating to insurance policy receivables arising from a
casualty prior to July 31, 1997 at the Adespan facility;
6. liens in existence on July 31, 1997;
9. liens securing Indebtedness permitted pursuant to Section 7.2(f); provided
that such liens shall only extend to the property acquired in exchange
for the incurrence of such purchase money Indebtedness described in
Section 7.2(f).
2 Restrictions on Indebtedness. Directly or indirectly, create,
incur, assume, guarantee, or suffer to exist, agree to purchase or repu
rchase, pay or provide funds in respect of, or otherwise become or be or
remain liable, contingently, directly or indirectly, with respect to any
Indebtedness other than:
1. Indebtedness to the Lenders;
2. liabilities of it for trade and other similar obligations
incurred in the ordinary course of its business;
3. Indebtedness arising under leases permitted by Section 7.7;
4. Indebtedness under the Panini Credit Agreements;
5. Indebtedness under unsecured working capital facilities on
terms consistent with terms under working capital facilities utilized by
the Company and its Subsidiaries prior to the date of this Agreement;
6. purchase money Indebtedness incurred for the purpose of
financing all or part of the cost of acquiring any tangible personal
property; provided that the ag-
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gregate principal amount of all such Indebtedness shall not exceed (x)
one hundred percent (100%) of the purchase price or fair market value at
the time of purchase whichever shall be lower and (y) $1,000,000 (or the
Foreign Currency Equivalent);
7. items of Indebtedness in existence as of July 31, 1997;
provided that the principal amount of Indebtedness with respect to each
such item shall not exceed the outstanding amount or, if applicable, the
lending commitment in respect of such Indebtedness as of such date.
3 Restrictions on Investments, Loans, etc. Purchase or otherwise
acquire or own any stock or other securities of Indebtedness of any other
Person, or make or permit to be outstanding any loan or advance or capital
contribution to any other Person, other than:
1. presently outstanding loans, advances and investments described
in Schedule 7.3 hereto; and
2. readily marketable direct obligations of the United States of
America, and certificates of deposit, commercial paper and bankers'
acceptances issued by any bank operating in the United States of America
having a net worth of at least $500,000,000.
4 Dividends, Distributions and Redemptions. Directly or
indirectly, declare, order, pay, make or set apart any sum or property for the
redemption, retirement, purchase or other acquisition, direct or indirect, of
any shares of its capital stock of any class now or hereafter outstanding or
for any dividend or other Distribution, direct or indirect, on account of any
shares of any class of its capital stock now or hereafter outstanding.
5 Sale of Assets; Consolidation, Merger, Acquisition of Assets.
Directly or indirectly, sell, abandon or otherwise dispose of all or any
portion of its properties or assets (other than in the ordinary course of
business), or consolidate with or merge into any other Person, or permit any
other Person to consolidate with or merge into it, or acquire all or a
substantial portion of the assets of another Person.
6 Transactions with Affiliates. Enter into any new transaction
with any Affiliate (other than among the Company and its Subsidiaries only).
Make any payment with respect to any Indebtedness or other claim owed to
Guarantor or any of its Subsidiaries (other than the Company and its
Subsidiaries); provided that after the effective date of the
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Settlement Order the Company shall be permitted to make payments to the
Guarantor or any of its Subsidiaries with respect to intercompany claims
accruing after such date and as otherwise set forth in the Settlement Order.
7 Restrictions on Leases. Enter into:
1. any lease or other arrangement for the use of real or personal
property, and renewals or extensions pursuant to the terms of the
applicable documents of existing or assumed leases for such property,
except with respect to any such leases having fair and reasonable terms
entered into in the ordinary course of its business; or
2. any arrangement with any other Person providing for the leasing
by such Person to it of property which has been or is intended to be
sold or transferred to such Person by it.
10. GUARANTOR COVENANTS
The Guarantor hereby agrees that, until the Payment Obligations
have been Fully Satisfied:
1 Delivery of Certain Information. It will furnish to the Lenders
copies of each financial statement, certificate, notice and other document,
instrument and agreement required to be delivered by any Person pursuant to
sections 5.1, 5.5 and 5.7 of the Postpetition Credit Agreement and any other
financial statement, certificate, notice, document or other information
reasonably requested by the Lenders.
12 GUARANTEE
1 Guarantee. In order to induce the Agent and the Lenders to
execute and deliver this Agreement and to make the Term Loans hereunder, and
in consideration thereof:
1. The Guarantor hereby unconditionally and irrevocably guarantees
to the Lenders the prompt and complete payment and performance when due
(whether at the stated maturity, by acceleration or otherwise) of the
Company Obligations. The Guarantor further agrees to pay any and all
expenses (including, without limitation, all reasonable fees and
disbursements of counsel) which may be paid or incurred by the Agent or
any Lender in enforcing, or obtaining advice of counsel in respect of,
any of their rights under this Section 9. Without limiting the
generality of
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the foregoing, the Guarantor's liability shall extend to all
amounts that constitute part of the Company Obligations and would
be owed by the Company but for the fact that they are unenforceable
or not allowable due to the existence of a bankruptcy,
reorganization or similar proceeding involving the Company. This
Guarantee shall remain in full force and effect until the Payment
Obligations have been Fully Satisfied, notwithstanding that from
time to time prior thereto the Company may be free from any Payment
Obligations.
2. The Guarantor agrees that whenever, at any time, or from time
to time, it shall make any payment to the Lenders on account of its
liability under this Section 9, it will notify the Lenders in writing
that such payment is made under this Section 9 for such purpose. No
payment or payments made by the Company or any other Person or received
or collected by the Lenders from the Company or any other Person by
virtue of any action or proceeding or any set-off or appropriation or
application, at any time or from time to time, in reduction of or in
payment of the Company Obligations shall be deemed to modify, reduce,
release or otherwise affect the liability of the Guarantor hereunder
which shall remain obligated hereunder, notwithstanding any such payment
or payments (other than payments made by or received or collected from
the Guarantor in respect of the Company Obligations) until the date upon
which the Payment Obligations have been Fully Satisfied.
2 Right of Set-Off. Subject to any requirements under applicable
law to seek relief from the automatic stay in the Bankruptcy Court and the
provisions of the Panini Financing Order, upon the occurrence and continuance
of any Event of Default, the Lenders are hereby irrevocably authorized by the
Guarantor at any time and from time to time without notice to the Guarantor,
any such notice being hereby waived by the Guarantor, to set off and
appropriate and apply any and all deposits (general or special, time or
demand, provisional or final), in any currency, and any other credits,
indebtedness or claims, in any currency, in each case whether direct or
indirect, absolute or contingent, matured or unmatured, at any time held or
owing by the Lenders to or for the credit or the account of the Guarantor, or
any part thereof in such amounts as the Lenders may elect, on account of the
liabilities of the Guarantor hereunder and claims of every nature and
description of the Lenders against the Guarantor, in any currency, whether
arising hereunder or any other Credit Document or otherwise, as the Lenders
may elect, whether or not the Lenders have made any demand for payment and
although such liabilities and claims may be contingent or unmatured. The
Lenders shall notify the Guarantor promptly of any such set-off made by it and
the application made by it of the proceeds thereof; provided that the failure
to give such notice shall not affect the validity of such set-off and
application. The rights of the Lenders
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under this Section are in addition to other rights and remedies (including,
without limitation, other rights of set-off) which the Lenders may have.
3 No Subrogation, Contribution, Reimbursement or Indemnity.
Notwithstanding anything to the contrary in this Agreement, so long as the
Payment Obligations are not Fully Satisfied, the Guarantor hereby agrees not
to assert or enforce any right to be subrogated to any of the rights (whether
contractual, under the United States Bankruptcy Code, including Section 509
thereof, under common law or otherwise) of the Lenders against the Company for
the payment of the Company Obligations. The Guarantor hereby further
irrevocably agrees that so long as the Payment Obligations are not Fully
Satisfied, it will not assert or enforce any contractual, common law,
statutory or other rights of reimbursement, contribution, exoneration or
indemnity (or any similar right) from or against the Company or any other
Person which may have arisen in connection with this Section 9. So long as the
Payment Obligations are not Fully Satisfied, if any amount shall be paid by or
on behalf of the Company to the Guarantor on account of any of the rights
waived in this Section 9.3, such amount shall be held by the Guarantor in
trust for the Lenders, segregated from other funds of the Guarantor, and
shall, forthwith upon receipt by the Guarantor, be turned over to the Lenders
in the exact form received by the Guarantor (duly endorsed by the Guarantor to
the Lenders, if required), to be applied against the Company Obligations,
whether matured or unmatured, in such order as the Lenders may determine.
4 Amendments, etc. The Guarantor shall remain obligated hereunder
notwithstanding that, without any reservation of rights against the Guarantor,
and without notice to or further assent by the Guarantor, any demand for
payment of any of the Company Obligations made by the Lenders may be rescinded
by it, and any of the Company Obligations continued, and the Company
Obligations, or the liability of any other party upon or for any part thereof,
or any collateral security or guarantee therefor or right of offset with
respect thereto, may, from time to time, in whole or in part, be renewed,
extended, amended, modified, accelerated, compromised, waived, surrendered or
released by the Lenders, and this Agreement, any other Credit Document and any
other documents executed and delivered in connection therewith may be amended,
modified, supplemented or terminated, in whole or in part, as the Lenders may
deem advisable from time to time, and any collateral security, guarantee or
right of offset at any time held by the Lenders for the payment of the Company
Obligations may be sold, exchanged, waived, surrendered or released. The
Lenders shall have no obligation to protect, secure, perfect or insure any
Lien at any time held by it as security for the Company Obligations or
pursuant to this Section 9 or any property subject thereto.
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5 Guarantee Absolute and Unconditional. The Guarantor waives any
and all notice of the creation, renewal, extension or accrual of any of the
Company Obligations and notice of or proof of reliance by the Lenders upon the
guarantees contained in this Section 9 or acceptance of the guarantee
provisions of this Section 9; the Company Obligations, and any of them, shall
conclusively be deemed to have been created, contracted or incurred in
reliance upon the guarantees contained in this Section 9; and all dealings
between the Company or the Guarantor, on the one hand, and the Lenders, on the
other, shall likewise be conclusively presumed to have been had or consummated
in reliance upon the guarantees contained in this Section 9. The Guarantor
waives (to the extent permitted by law) diligence, presentment, protest,
demand for payment and notice of default or nonpayment to or upon the Company
or the Guarantor with respect to the Company Obligations. The guarantee
contained in this Section 9 shall be construed as a continuing, absolute and
unconditional guarantee of payment without regard to (a) the validity or
enforceability of this Agreement, any other Credit Document or any of the
documents executed in connection therewith, any of the Company Obligations or
any collateral security therefor or guarantee or right of offset with respect
thereto at any time or from time to time held by the Lenders, (b) any defense
(including, without limitation, any statute of limitations), set-off or
counterclaim (other than a defense of payment or performance) which may at any
time be available to or be asserted by the Company against the Lenders, (c)
any other circumstance whatsoever (with or without notice to or knowledge of
the Company or the Guarantor) which constitutes, or might be construed to
constitute, an equitable or legal discharge of the Company for the Company
Obligations, or of the Guarantor under the guarantees contained in this
Section 9, in bankruptcy or in any other instance or (d) any other suretyship
defenses. When the Lenders are pursuing their rights and remedies hereunder
against the Guarantor, the Lenders may, but shall be under no obligation to,
pursue such rights and remedies as they may have against the Company or any
other Person or against any collateral security or guarantee for the Company
Obligations or any right of offset with respect thereto, and any failure by
the Lenders to pursue such other rights or remedies or to collect any payments
from the Company or any such other Person or to realize upon any such
collateral security or guarantee or to exercise any such right of offset, or
any release of the Company or any such other Person or of any such collateral
security, guarantee or right of offset, shall not relieve the Guarantor of any
liability hereunder, and shall not impair or affect the rights and remedies,
whether express, implied or available as a matter of law, of the Lenders
against the Guarantor.
6 Reinstatement. The guarantees contained in this Section 9 shall
continue to be effective, or be reinstated, as the case may be, if at any time
payment, or any part thereof, of any of the Company Obligations is rescinded
or must otherwise be restored or
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returned by the Lenders upon the insolvency, bankruptcy, dissolution,
liquidation or reorganization of the Company or any Subsidiary of the Company
or upon or as a result of the appointment of a receiver, intervenor or
conservator of, or trustee or similar officer for, the Company, any Subsidiary
of the Company or any substantial part of its respective property, or
otherwise, all as though such payments had not been made.
7 Payments. The Guarantor hereby agrees that the amounts payable
by the Guarantor hereunder will be paid to the Agent, without set-off or
counterclaim, in the Denomination Currency (or other currency specified
herein) at the office of the Agent located in New York, New York or at such
other office as the Agent shall designate in writing to the Guarantor.
8 Modifications Pursuant to Settlement Order; Provisions in Panini
Financing Order. Notwithstanding anything in this Section 9 to the contrary,
the guarantee by the Guarantor provided herein shall be modified and
terminated on the effective date of the Settlement Order to the extent
provided in the Settlement Order. The rights of the Lenders to enforce this
Guaranty shall be subject to any applicable provisions of the Panini Financing
Order.
12. EVENTS OF DEFAULT
Upon the occurrence and during the continuance of any of the
following events:
1. Payments. Failure by the Company to pay any principal of or
interest on any Term Loan or the Term Note when due in accordance with
the terms thereof and hereof, or failure by the Company to pay any fee
or other amount payable in connection with any Credit Document within
five days after the date when due; or
2. Representations and Warranties. Any representation or warranty
made or deemed made by the Guarantor or the Company or any of its
Subsidiaries in any Credit Document or which is contained in any
certificate or financial statement furnished at any time under or in
connection herewith or therewith shall prove to have been incorrect,
false or misleading in any respect on or as of the date when made or
deemed to have been made, except for representations and warranties
relating to facts or conditions in which the failure of such
representation or warranty to be correct, true or not misleading could
not (in the aggregate) reasonably be likely to have a Material Adverse
Effect; or
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3. Covenants. Default by the Company or any of its Subsidiaries in
the observance or performance of any covenant or agreement in the first
sentence of Section 6.8, Section 7 or Section 2.6; or
4. Other Covenants. Default by the Guarantor or the Company or its
Subsidiaries in the observance or performance of any other covenant or
agreement contained or incorporated by reference in this Agreement or in
any other Credit Document other than as provided in clauses (a) through
(c) above, and such default shall continue unremedied for a period of 10
days; or
5. Effectiveness of the Guarantee. On or after the Closing Date,
except in the circumstances described in Section 9.8, (i) for any reason
Section 9 of this Agreement shall cease to be, or shall not be, in full
force and effect or (ii) the Guarantor shall assert in writing that
Section 9 of this Agreement has ceased to be, or is not, in full force
and effect; or
6. Cross Default. The Company or any of the Company's Subsidiaries
shall Cross Default; or
7. Commencement of Bankruptcy or Reorganization Proceeding. (i)
The Company or any of its Subsidiaries shall commence any case,
proceeding or other action (A) under any existing or future law of any
jurisdiction, domestic or foreign, relating to bankruptcy, insolvency,
reorganization or relief of debtors, seeking to have an order for relief
or similar order entered with respect to it, or seeking to adjudicate it
as bankrupt or insolvent, or seeking reorganization, arrangement,
adjustment, wind-up, liquidation, dissolution, composition or other
relief with respect to it or its debts, or (B) seeking appointment of a
receiver, trustee, custodian or other similar official for it or for all
or any substantial part of its assets; or, (ii) there shall be commenced
against the Company or any of its Subsidiaries any such case, proceeding
or other action referred to in Section (i), or any other creditors'
rights proceeding, which results in the entry of an order for relief or
similar order or any such adjudication or appointment remains
undismissed, undischarged or unbonded for a period of 60 days, provided
that the Company, for itself and on behalf of each of its Subsidiaries,
hereby expressly authorizes the Agent and the Lenders to appear in
any court conducting any such case, proceeding or other action during
said 60-day period to preserve, protect and defend their rights
under the Credit Documents; or (iii) there shall be commenced against
the Company or any of its Subsidiaries any case, proceeding or other
action seeking issuance of a warrant of attachment, execu-
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tion, distraint or similar process against all or any substantial part
of its assets which results in the entry of an order for any such relief
or similar order which shall not have been vacated, discharged, or
stayed or bonded pending appeal within 60 days from the entry thereof;
or (iv) the Company or any of its Subsidiaries shall take any action
authorizing, or in furtherance of, or indicating its consent to,
approval of, or acquiescence in, any of the acts set forth above in this
paragraph (g), or (v) the Company or any of its Subsidiaries shall
generally not, or shall be unable to, or shall admit in writing its
inability to, pay its debts as they become due; or
8. Panini Financing Order. The Panini Financing Order shall have
been reversed, stayed, vacated, or modified by a court of competent
jurisdiction (except with the consent of the Required Lenders and except
for modifications pursuant to the Settlement Order) or the Panini
Financing Order shall otherwise cease to be of full force and effect; or
9. Material Judgments. (i) One or more judgments or decrees shall
be entered against the Guarantor or the Company or any of its
Subsidiaries involving in the aggregate a liability (not covered by
insurance) of $1,000,000 (or the Foreign Currency Equivalent) or more or
(ii) any non-monetary judgment or order shall be rendered against the
Guarantor or the Company or any of its Subsidiaries that is reasonably
likely to have a Material Adverse Effect, and in the case of either
clause (i) or (ii), there shall be any period of 60 consecutive days
during which a stay of enforcement of such judgment or order, by reason
of a pending appeal or otherwise, shall not be in effect unless such
judgment or order shall have been vacated, satisfied, discharged or
bonded pending appeal;
then, and in any such event, (x) if such event is an Event of Default
specified in clause (i), (ii) or (iii) of paragraph (g) of this Section 10,
automatically any obligations to make Term Loans hereunder shall immediately
terminate and the Term Loans hereunder (with accrued interest thereon) and all
other amounts owing under this Agreement and the other Credit Documents shall
immediately become due and payable, and (y) if such event is any other Event
of Default, the Required Lenders may, by notice to the Company, declare all or
any part of the Term Loans (with accrued interest thereon) and any other
amounts owing under this Agreement and the other Credit Documents to be due
and payable forthwith, whereupon the same shall immediately become due and
payable. Except as expressly provided above in this Section 10, presentment,
demand, protest and all other notices of any kind are hereby expressly waived
to the maximum extent permitted by applicable law.
13. THE AGENT.
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1 Appointment and Authorization. Each Lender hereby irrevocably
appoints, designates and authorizes the Agent to take such action on its
behalf under the provisions of this Agreement and to exercise such powers and
perform such duties as are expressly delegated to it by the terms of this
Agreement, together with such powers as are reasonably incidental thereto.
Notwithstanding any provision to the contrary contained elsewhere in this
Agreement, the Agent shall not have any duties or responsibilities, except
those expressly set forth herein, nor shall the Agent have or be deemed to
have any fiduciary relationship with any Lender, and no implied covenants,
functions, responsibilities, duties, obligations or liabilities shall be read
into this Agreement or otherwise exist against the Agent.
2 Delegation of Duties. The Agent may execute any of its duties
under this Agreement by or through agents, employees or attorneys-in-fact and
shall be entitled to advice of counsel concerning all matters pertaining to
such duties. The Agent shall not be responsible for the negligence or
misconduct of any agent or attorney-in-fact that it selects with reasonable
care.
3 Liability of Agent-Related Persons. Neither the Agent nor any of
its respective affiliates, officers, directors, employees, members,
consultants, advisors, attorneys, accountants or other representatives or
agents (collectively, the "Agent-Related Persons") shall (i) be liable for any
action taken or omitted to be taken by any of them under or in connection with
this Agreement or the transactions contemplated hereby (except for its own
gross negligence or willful misconduct), or (ii) be responsible in any manner
to any of the Lenders for any recital, statement, representation or warranty
contained in this Agreement or in any other document, or in any certificate,
report, statement or other document referred to or provided for in, or
received by the Agent under or in connection with, this Agreement, or the
validity, effectiveness, genuineness, enforceability or sufficiency of this
Agreement, or for any failure of any party hereto to perform its obligations
hereunder or thereunder. No Agent-Related Person shall be under any obligation
to any Assignor to ascertain or to inquire as to the observance or performance
of any of the agreements contained in, or conditions of, this Agreement or to
inspect the properties, books or records of any party hereto in respect
thereof.
4 Reliance by Agent. The Agent shall be entitled to rely, and
shall be fully protected in relying, upon any writing, resolution, notice,
consent, certificate, affidavit, letter, telegram, facsimile, telex or
telephone message, statement or other document or conversation believed by it
to be genuine and correct and to have been signed, sent or made
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by the proper person or persons, and upon advice and statements of legal
counsel, independent accountants, financial advisors and other experts
selected by the Agent. The Agent shall be fully justified in failing or
refusing to take any action under this Agreement unless it shall first receive
such advice or concurrence of all of the Lenders as it deems appropriate and,
if it so requests, it shall first be indemnified to its satisfaction by the
Lenders against any and all liability and expense which may be incurred by it
by reason of taking or continuing to take any such action. The Agent shall in
all cases be fully protected in acting, or in refraining from acting, under
this Agreement in accordance with a request or consent of the Assignors and
such request and any action taken or failure to act pursuant thereto shall be
binding upon all of the Lenders. Notwithstanding anything in this Agreement to
the contrary, the Agent shall not have any liability to any Lender for any
acts or omissions in connection with the matters contemplated by this
Agreement other than for acts or omissions affirmatively taken in bad faith.
5 Calculations. Each Lender shall provide the Agent with such
certificates and other information as the Agent shall request in order to
perform its duties hereunder, including to perform any calculations required
hereunder. Any mathematical calculation by the Agent under this Agreement
shall be conclusive for purposes of this Agreement absent manifest error.
6 Payments.
1. Payments to Agent. A payment by the Agent to the Agent
hereunder or any of the other Credit Documents for the account of any Lender
shall constitute a payment to such Lender; provided, however, for the purposes
of the settlement arrangements hereunder, such Lender shall not be deemed to
have received such payment until it is actually received by such Lender. The
Agent agrees promptly to distribute to each Lender such Lender's pro rata
share of payments received by the Agent for the account of the Lenders except
as otherwise provided herein or in any of the other Credit Documents.
2. Distribution by Agent. If in the opinion of the Agent the
distribution of any amount received by it in such capacity hereunder, under
the Term Notes or under any of the other Credit Documents might involve it in
liability, it may refrain from making distribution until its right to make
such distribution shall have been adjudicated by a court of competent
jurisdiction. If a court of competent jurisdiction shall adjudge that any
amount received and distributed by the Agent is to be repaid, each Person to
whom any such distribution shall have been made shall either repay to the
Agent its proportionate share of the amount so adjudged to be repaid or shall
pay over the same in such manner and to such Persons as shall be determined by
such court.
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7 Indemnification. The Company and the Guarantor shall
indemnify upon demand the Agent-Related Persons from and against any and all
liabilities, obligations, losses, damages, penalties, actions, judgments,
suits, costs, expenses and disbursements of any kind whatsoever which may at
any time be imposed on, incurred by or asserted against any such Person any
way relating to or arising out of this Agreement or any document contemplated
by or referred to herein or therein or the transactions contemplated hereby or
thereby or any action taken or omitted by any such Person under or in
connection with any of the foregoing; provided, however, that the Company and
the Guarantor shall not be liable for the payment to the Agent-Related Persons
of any portion of such liabilities, obligations, losses, damages, penalties,
actions, judgments, suits, costs, expenses or disbursements resulting from
such Person's gross negligence or willful misconduct. The obligation of the
Company and the Guarantor in this Section 11.7 shall survive the termination
of this Agreement and the resignation or replacement of Chase.
8 Successor Agent. Chase as initial Agent and any other Agent may,
and at the request of the Required Lenders shall, resign as agent for the
Lenders, upon thirty days' notice to the Lenders. If the Agent resigns under
this Agreement, the Required Lenders shall appoint from among the Lenders a
successor agent. If no successor agent is appointed prior to the effective
date of the resignation of the Agent, the incumbent Agent may appoint, after
consulting with the Lenders, a successor agent from among the Lenders. Upon
the acceptance of its appointment as successor agent hereunder, such successor
agent shall succeed to all the rights, powers and duties of the retiring agent
and the term "Agent" shall mean such successor agent and the retiring agent's
appointment, rights, powers and duties in such capacity shall be terminated.
After the Agent's resignation hereunder as agent, the provisions of this
Section 11 and the other provisions of this Agreement shall inure to its
benefit as to any actions taken or omitted to be taken by it while it was the
agent under this Agreement. If no successor agent has accepted appointment as
agent by the date which is thirty days following the Agent's notice of
resignation, the Agent's notice of resignation shall nevertheless thereupon
become effective and the Lenders shall collectively perform all of the duties
of the agent until such time, if any, as the Lenders appoint a successor agent
as provided for above.
14. ASSIGNMENT
1 Conditions to Assignment by the Lenders. Except as provided
herein, each Lender may assign to one or more Eligible Assignees all or a
portion of its interests, rights and obligations under this Agreement
(including all or a portion of the Term Loans at the
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time owing to it, the Term Notes held by it); provided that (i) the Agent
shall have given its prior written consent to such assignment, which consent
shall not be unreasonably withheld or delayed, (ii) each such assignment shall
be of a constant, and not a varying, percentage of all the assigning Lender's
interests, rights and obligations under this Agreement, (iii) each assignment
shall be in a minimum amount of Italian Lire 5,000,000,000 (iv) after giving
effect to such assignment, each Bank shall retain Term Loans of at least
Italian Lire 5,000,000,000 in the aggregate, and (v) the parties to such
assignment shall execute and deliver to the Agent, for recording in the
Register (as hereinafter defined), an assignment and acceptance agreement, in
a form, and containing provisions, customary for transactions of such type and
provisions consistent with Section 12.2 (an "Assignment and Acceptance"),
together with any Term Notes subject to such assignment. Upon execution,
delivery, acceptance and recording, from time to time after the effective date
specified in each Assignment and Acceptance, which effective date shall be at
least five (5) Working Days after the execution thereof, (i) the assignee
thereunder shall be a party hereto (and Schedule 1 shall be deemed amended to
reflect such assignment) and, to the extent provided in such Assignment and
Acceptance, have the rights and obligations of a Lender hereunder, and (ii)
the assigning Lender shall, to the extent provided in such assignment and upon
payment to the Agent of the registration fee referred to in Section 11.3, be
released from its obligations under this Agreement. Notwithstanding the
foregoing provisions of this Section 12.1, except for the syndication and
assignment by Chase of Term Loans to holders of indebtedness under the Panini
Credit Agreements as of the date hereof who agree to become Lenders hereunder,
each Lender agrees that until the earlier of (a) forty five (45) days after
the Company has become the subject of a bankruptcy case or similar proceeding
and (b) December 15, 1997, it will not assign its rights in respect of the
Term Loans to any other Person (except for affiliates of such Senior Lender)
unless (i) such Lender assigns to such other Person all of such Lender's Term
Loans and (ii) such Lender concurrently assigns to such other Person all
indebtedness that it holds under the Panini Credit Agreements.
2 Certain Representations and Warranties; Limitations; Covenants.
By executing and delivering an Assignment and Acceptance, the parties
thereunder shall be deemed to confirm to and agree with each other and the
other parties hereto as follows:
1. other than the representation and warranty that it is the legal
and beneficial owner of the interest being assigned thereby free and
clear of any adverse claim, the assigning Lender makes no representation
or warranty, express or implied, and assumes no responsibility with
respect to any statements, warranties or representations made in or in
connection with this Agreement or the execution, legality, validity,
enforceability, genuineness, sufficiency or value of this Agreement, the
other
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Credit Documents or any other instrument or document furnished pursuant
hereto or the attachment, perfection or priority of any security
interest or mortgage;
2. the assigning Lender makes no representation or warranty and
assumes no responsibility with respect to the financial condition of the
Guarantor or the Company or the performance or observance by the
Guarantor or the Company or any other Person primarily or secondarily
liable in respect of any of the Payment Obligations or any of their
obligations under this Agreement or any of the other Credit Documents or
any other instrument or document furnished pursuant hereto or thereto;
3. such assignee confirms that it has received a copy of this
Credit Agreement, and such other documents and information as it has
deemed appropriate to make its own credit analysis and decision to enter
into such Assignment and Acceptance;
4. such assignee will, independently and without reliance upon the
assigning Lender, the Agent or any other Lender and based on such
documents and information as it shall deem appropriate at the time,
continue to make its own credit decisions in taking or not taking action
under this Agreement;
5. such assignee represents and warrants that it is an Eligible
Assignee;
6. such assignee appoints and authorizes the Agent to take such
action as agent on its behalf and to exercise such powers under this
Agreement and the other Credit Documents as are delegated to the Agent
by the terms hereof or thereof, together with such powers as are
reasonably incidental thereto;
7. such assignee agrees that it will perform in accordance with
their terms all of the obligations that by the terms of this Agreement
are required to be performed by it as a Lender; and
8. such assignee represents and warrants that it is legally
authorized to enter into such Assignment and Acceptance.
3 Register. The Agent shall maintain a copy of each Assignment and
Acceptance delivered to it and a register or similar list (the "Register") for
the recordation of the names and addresses of the Banks and the principal
amount of the Term Loans owing to
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the Lenders from time to time. The entries in the Register shall be conclusive
in the absence of manifest error, and the Company, the Agent and the Lenders
may treat each Person whose name is recorded in the Register as a Lender
hereunder for all purposes of this Agreement. The Register shall be available
for inspection by the Company and the Lenders at any reasonable time and from
time to time upon reasonable prior notice. Upon each such recordation, the
assigning Lender agrees to pay to the Agent a processing and registration fee
in the sum of $3,000.
4 New Term Notes. Upon its receipt of an Assignment and Acceptance
executed by the parties to such assignment, together with each Term Note
subject to such assignment, the Agent shall (i) record the information
contained therein in the Register, and (ii) give prompt notice thereof to the
Company and the Lenders (other than the assigning Lender). Within five (5)
Working Days after receipt of such notice, the Company, at its own expense,
shall execute and deliver to the Agent, in exchange for each surrendered Term
Note, a new Term Note to the order of such Eligible Assignee in an amount
equal to the amount assumed by such Eligible Assignee pursuant to such
Assignment and Acceptance and, if the assigning Lender has retained some
portion of its obligations or Term Loans, a new Term Note to the order of the
assigning Lender in an amount equal to the amount retained by it hereunder.
Such new Term Notes shall provide that they are replacements for the
surrendered Term Notes, shall be in an aggregate principal amount equal to the
aggregate principal amount of the surrendered Term Notes, shall be dated the
effective date of such Assignment and Acceptance and shall otherwise be
substantially the form of the assigned Term Notes. The surrendered Term Notes
shall be cancelled and returned to the Company.
5 Disclosure. The Company agrees that in addition to disclosures
made in accordance with standard and customary banking practices any Lender
may disclose information obtained by such Lender pursuant to this Agreement to
assignees or participants and potential assignees or participants hereunder;
provided that such assignees or participants or potential assignees or
participants shall agree (i) to treat in confidence such information unless
such information otherwise becomes public knowledge, (ii) not to disclose such
information to a third party, except as required by law or legal process and
(iii) not to make use of such information for purposes of transactions
unrelated to such contemplated assignment or participation. The Company shall
provide such information as is reasonably necessary to enable the Agent to
complete any syndication of the Term Loans and shall otherwise cooperate in
any reasonable manner requested by the Agent in any such syndication.
6 Credit Participant Affiliated with the Company. If any assignee
Lender is an Affiliate of the Company, then any such assignee Lender shall
have no right to vote as a
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Lender hereunder or under any of the other Credit Documents for purposes of
granting consents or waivers or for purposes of agreeing to amendments or
other modifications to any of the Lenders Documents, and the determination of
the Required Lenders shall for all purposes of this Agreement and the other
Credit Documents be made without regard to such assignee Lender's interest in
any of the Term Loans. If any Lender sells a participating interest in any of
the Term Loans to a participant, and such participant is the Company or an
Affiliate of the Company, then such transferor Lender shall promptly notify
the Agent of the sale of such participation. A transferor Lender shall have no
right to vote as a Lender hereunder or under any of the other Credit Documents
for purposes of granting consents or waivers or for purposes of agreeing to
amendments or modifications to any of the Credit Documents to the extent that
such participation is beneficially owned by the Company or any Affiliate of
the Company, and the determination of the Required Lenders shall for all
purposes of this Agreement and the other Credit Documents be made without
regard to the interest of such transferor Lender in the Term Loans to the
extent of such participation.
7 Miscellaneous Assignment Provisions. Any assigning Lender shall
retain its rights to be indemnified pursuant to Section 3.8 with respect to
any claims or actions arising prior to the date of such assignment. If any
assignee Lender is not incorporated under the laws of the United States of
America or of any state thereof, it shall, prior to the date on which any
interest or fees are payable hereunder or under any of the other Credit
Documents for its account, deliver to the Company and the Agent certification
as to its exemption from deduction or withholding of any United States federal
income taxes. Anything contained in this Section 12.7 to the contrary
notwithstanding, any Lender may at any time pledge all or any portion of its
interest and rights under this Agreement (including all or any portion of its
Term Notes) to any of the twelve Federal Reserve Banks organized under ss. 4
of the Federal Reserve Act, 12 U.S.C. ss. 341. No such pledge or the
enforcement thereof shall release the pledgor Lender from its obligations
hereunder or under any of the other Credit Documents.
8 Assignment by the Company. The Company shall not assign or
transfer any of its rights or obligations under any of the Credit Documents
without the prior written consent of each of the Lenders.
15. MISCELLANEOUS
1 Amendments and Waivers. No modification, amendment or waiver of
any provision of this Agreement or any other Credit Document, and no consent
to any departure by any Person therefrom, shall in any event be effective
unless the same shall be in writing
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and signed by the Required Banks, and then such modification, amendment,
waiver or consent shall be effective only in the specific instance and for the
purpose for which given; provided, however, that no such modification or
amendment shall without the written consent of the Lender affected thereby
reduce the principal amount of any Term Loan or the rate of interest payable
thereon, or extend any date fixed for the payment of principal, interest or
other amount payable under this Agreement; and provided, further, that no such
modification or amendment shall (a) without the written consent of all of the
Lenders (i) amend or modify any provision of this Agreement which provides for
the unanimous consent or approval of the Lenders or (ii) amend this Section
13.1 or (b) without the written consent of the Agent, amend or modify the
provisions of Section 11 or any otherwise adversely affect the rights,
obligations or duties of the Agent under this Agreement. In the case of any
waiver of the terms hereof, the parties to the Credit Documents shall be
restored to their former positions and rights hereunder and under the Term
Note, and any Default or any Event of Default waived shall, to the extent
provided in such waiver, be deemed to be cured and not continuing; but, no
such waiver shall extend to any subsequent or other Default or Event of
Default, or impair any right consequent thereon. Notwithstanding anything to
the contrary in this Section 13.1, the guarantee by the Guarantor provided in
Section 9 shall be modified and terminated on the effective date of the
Settlement Order to the extent provided in the Settlement Order.
2 Notices. All notices, consents, requests and demands to or upon
the respective parties hereto to be effective shall be in writing and, unless
otherwise expressly provided herein, shall be deemed to have been duly given
or made when delivered by hand, or three Working Days after being deposited in
the mail, certified mail, return receipt requested, postage prepaid, or, in
the case of telecopy notice, when transmitted with answerback receipt by
recipient Person received by the transmitting Person, addressed as follows (or
to such address or other address as may be hereafter notified by any of the
respective parties hereto or any future holders of the Term Loans or the Term
Note):
The Company: Panini, S.p.A.
Viale Emilio Po, 380
41100 Modena
Italy
Attention: Aldo Sallustro
Telecopy: 011-39-59-382-221
and
Panini, S.p.A.c/o Marvel Entertainment
Group, Inc.
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387 Park Avenue South
New York, New York 10016
Attention: President
Telecopy: (212) 576-8588
The Guarantor: Marvel Entertainment Group, Inc.
387 Park Avenue South
New York, New York 10016
Attention: President
Telecopy: (212) 576-8588
The Lenders: The Chase Manhattan Bank
270 Park Avenue
New York, New York 10117
Attention: Susan Atkins
Telecopy: (212) 270-5748;
The Agent: The Chase Manhattan Bank
270 Park Avenue
New York, New York 10117
Attention: Susan Atkins
Telecopy: (212) 270-5748;
provided that any notice, request or demand to or upon the Lenders pursuant to
Sections 2 and 3 shall not be effective until received.
3 No Waiver; Cumulative Remedies. No failure to exercise and no
delay in exercising, on the part of the Lenders, any right, remedy, power or
privilege hereunder, shall operate as a waiver thereof; nor shall any single
or partial exercise of any right, remedy, power or privilege hereunder
preclude any other or further exercise thereof or the exercise of any other
right, remedy, power or privilege. The rights, remedies, powers and privileges
herein provided are cumulative and not exclusive of any rights, remedies,
powers and privileges provided by law.
4 Survival of Representations and Warranties. All representations
and warranties made hereunder and in any document, certificate or statement
delivered pursuant
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hereto or in connection herewith shall survive the execution and delivery of
this Agreement and the Term Note.
5 Payment of Expenses and Taxes. The Company acknowledges and
agrees (a) to pay or reimburse San Paolo, the other Panini Lenders, the Panini
Agent, the Lenders and the Agent (collectively, the "Reimbursed Persons") for
all of their reasonable out-of-pocket costs and expenses incurred in
connection with the preparation, execution and delivery of, and any amendment,
supplement or modification to, any Credit Document, the Panini Credit
Agreements and any other documents prepared in connection herewith, and the
consummation of the transactions contemplated hereby and thereby (including,
without limitation, the fees and disbursements of primary counsel and local
counsel), (b) to pay or reimburse each Reimbursed Person for all its
reasonable costs and expenses incurred in connection with the enforcement or
preservation of any rights under the Credit Documents, the Panini Credit
Agreements and any such other documents, including, without limitation, fees
and disbursements of counsel (including, without limitation, the reasonable
invoiced allocated costs and expenses of in-house legal counsel or staff
determined in good faith), (c) to pay, indemnify, and to hold each Reimbursed
Person harmless from, any and all recording and filing fees and any and all
liabilities with respect to, or resulting from any delay in paying, stamp,
excise and other similar taxes, if any, if legal, which may be payable or
determined to be payable in connection with the execution and delivery of, or
consummation of any of the transactions contemplated by, or any amendment,
supplement or modification of, or any waiver or consent under or in respect
of, the Credit Documents, the Panini Credit Agreements and any such other
documents, and (d) to pay, indemnify, and hold each Reimbursed Person and its
officers, directors, employees and agents harmless from and against any and
all other liabilities, obligations, losses, damages, penalties, actions,
judgments, suits, costs, expenses or disbursements of any kind or nature
whatsoever with respect to the execution, delivery, consummation, enforcement,
performance and administration of the Credit Documents, the Panini Credit
Agreements and the use by the Company of the proceeds of the Term Loans (all
of the foregoing, collectively, the "indemnified liabilities"); provided that
the Company shall have no obligation hereunder with respect to indemnified
liabilities arising from (i) the gross negligence or willful misconduct of
such Reimbursed Person, (ii) legal proceedings commenced against such
Reimbursed Person by any security holder or creditor (other than the Company,
its Subsidiaries and its Affiliates) thereof arising out of and based upon
rights afforded any such security holder or creditor solely in its capacity as
such or (iii) amounts of the types referred to in clauses (a) through (c)
above except as provided therein. The Lenders may directly charge to a loan
account of the Company any amount payable under this Section 13.5 and treat
any such charge as an advance and Term Loan hereunder. The provisions of this
Section 13.5 are for the benefits of each Reimbursed Person and any Reimbursed
Person may enforce the provisions of this
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Section 13.5. The agreements in this Section 13.5 shall survive repayment of
the Term Loans and the Term Note and all other amounts payable hereunder.
6 Successors and Assigns; Loan Participations.
1. This Agreement shall be binding upon and inure to the benefit
of the Company, the Guarantor, the Lenders and all future holders of the Term
Loans and the Term Notes, and their respective successors and assigns, except
that neither the Company nor the Guarantor may assign or transfer any of its
rights or obligations under this Agreement without the prior written consent
of all of the Lenders.
2. Any Lender may, in accordance with applicable law, at any time
sell to one or more banks or other entities ("Participants") participating
interests in any Term Loan owing to such Lenders, the Term Note of such
Lenders, any commitment to make the Term Loans on the Closing Date or any
other interest of such Lender hereunder or under any other Credit Document. In
the event of any such sale by a Lender of participating interests to a
Participant, the Lender's obligations under this Agreement to the other
parties to this Agreement shall remain unchanged, such Lender shall remain
solely responsible for the performance thereof, such Lender shall remain the
holder of any such Term Loan or the Term Note for all purposes under this
Agreement and the Company shall continue to deal solely and directly with such
Lender in connection with such Lender's rights and obligations under this
Agreement. The Company agrees that if amounts outstanding under this Agreement
and the Term Notes are due and unpaid, or shall have been declared or shall
have become due and payable upon the occurrence of an Event of Default, each
Participant shall be deemed to have the right of setoff in respect of its
participating interest in amounts owing under this Agreement and the Term
Notes to the same extent as if the amount of its participating interest were
owing directly to it as the Lenders under this Agreement or the Term Notes,
provided, that such right of setoff shall be subject to the obligation of such
Participant to share with the Lenders, and the Lenders agrees to share with
such Participant such that each receives its ratable share of amounts
collected on account of the Term Loans and any collateral security provided
therefor. The Company also agrees that each Participant shall be entitled to
the benefits of Sections 3.5, 3.6, 3.7, 3.8 and 3.9 with respect to its
participation in the Term Loans outstanding from time to time. Upon any
acceleration of the amounts owing hereunder following the occurrence of any
Event of Default, each Lender may assign to any Participants of such Lender
(pursuant to customary documentation) their respective participating interests
in the Term Loans, such that each such Participant becomes a Lender hereunder
with respect to the portion of the Term Loans represented by its participating
interests (and with any matters which are subject to the vote of a participant
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pursuant to the terms of any such participation agreement remaining subject to
the vote of such former participant in its capacity as a Lender hereunder).
7 Set-off. In addition to any rights and remedies of the Lenders
provided by law, upon both the occurrence of an Event of Default and
acceleration of the obligations owing in connection with this Agreement, the
Lenders shall have the right, without prior notice to the Company, any such
notice being expressly waived to the extent permitted by applicable law, to
set off and apply against any indebtedness, whether matured or unmatured, of
the Company to the Lenders, any amount owing from the Lenders to the Company
at, or at any time after, the happening of both of the above mentioned events,
and such right of set-off may be exercised by the Lenders against the Company,
or (to the maximum extent permitted by applicable law) against any trustee in
bankruptcy, debtor in possession, assignee for the benefit of creditors,
receiver, custodian or execution, judgment or attachment creditor of the
Company, or against anyone else claiming through or against the Company or
such trustee in bankruptcy, debtor in possession, assignee for the benefit of
creditors, receivers, or execution, judgment or attachment creditor,
notwithstanding the fact that such right of set-off shall not have been
exercised by the Lenders prior to the making, filing or issuance, or service
upon the Lenders of, or of notice of, any such petition, assignment for the
benefit of creditors, appointment or application for the appointment of a
receiver, or issuance of execution, subpoena, order or warrant. The Lenders
agree promptly to notify the Company after any such set-off and application
made by the Lenders; provided that the failure to give such notice shall not
affect the validity of such set-off and application.
8 Judgment Currency. The obligations of the Company hereunder and
under the Term Notes shall, notwithstanding any judgment in a currency (the
"judgment currency") other than the relevant Denomination Currency, be
discharged only to the extent that on the Working Day following receipt by
such party or such holder (as the case may be) of any sum adjudged to be so
due in the judgment currency such party or such holder (as the case may be)
may in accordance with normal banking procedures purchase the Denomination
Currency with the judgment currency; if the amount of the Denomination
Currency of such Term Loan which is so purchased is less than the sum
originally due hereunder in the Denomination Currency, the Company agrees, as
a separate obligation and notwithstanding any such judgment, to indemnify such
party of such holder (as the case may be) against such loss, and if the amount
of the Denomination Currency so purchased exceeds the sum originally due
hereunder and under the Term Note, the Lenders agrees to remit to the Company
such excess.
9 Replacement of Lender. If at any time the credit rating assigned
to the long-term, unsecured debt of any Lender by Moody's Investors Service,
Inc. or Standard &
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Poor's Corporation is less than A3 or A-, respectively, such Lender may assign
all of its rights and obligations hereunder to an alternate lender which is
reasonably acceptable to the Company.
10 Severability. Any provision of this Agreement which is
prohibited or unenforceable in any jurisdiction shall, as to such
jurisdiction, be ineffective to the extent of such prohibition or
unenforceability without invalidating the remaining provisions hereof, and any
such prohibition or unenforceability in any jurisdiction shall not invalidate
or render unenforceable such provision in any other jurisdiction.
11 Effectiveness; Counterparts. This Agreement shall become
binding upon the parties hereto when the Lenders shall have received one or
more counterparts of this Agreement, executed by a duly authorized officer of
each party hereto. This Agreement may be executed by one or more of the
parties to this Agreement on any number of separate counterparts and all of
said counterparts taken together shall be deemed to constitute one and the
same instrument. A set of the copies of this Agreement signed by all the
parties shall be lodged with the Company, the Agent and the Lenders.
12 SUBMISSION TO JURISDICTION; WAIVERS.
1. EACH OF THE COMPANY AND THE GUARANTOR HEREBY IRREVOCABLY AND
UNCONDITIONALLY:
A. SUBMITS FOR ITSELF AND ITS PROPERTY IN ANY LEGAL
ACTION OR PROCEEDING RELATING TO THIS AGREEMENT OR ANY OTHER CREDIT
DOCUMENT TO WHICH IT IS A PARTY, OR FOR RECOGNITION AND ENFORCEMENT OF
ANY JUDGMENT IN RESPECT THEREOF, TO THE NON-EXCLUSIVE GENERAL
JURISDICTION OF THE COURTS OF THE STATE OF NEW YORK, THE COURTS OF THE
UNITED STATES FOR THE SOUTHERN DISTRICT OF NEW YORK, AND APPELLATE
COURTS FROM ANY THEREOF;
B. CONSENTS THAT ANY SUCH ACTION OR PROCEEDING MAY BE
BROUGHT IN SUCH COURTS AND WAIVES TRIAL BY JURY AND ANY OBJECTION THAT
IT MAY NOW OR HEREAFTER HAVE TO THE VENUE OF ANY SUCH ACTION OR
PROCEEDING IN ANY SUCH COURT OR THAT SUCH ACTION OR PROCEEDING WAS
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BROUGHT IN AN INCONVENIENT COURT AND AGREES NOT TO PLEAD OR CLAIM THE
SAME;
C. AGREES THAT SERVICE OF PROCESS IN ANY SUCH ACTION OR
PROCEEDING MAY BE EFFECTED BY MAILING A COPY THEREOF BY REGISTERED OR
CERTIFIED MAIL (OR ANY SUBSTANTIALLY SIMILAR FORM OF MAIL), POSTAGE
PREPAID, TO IT AT ITS ADDRESS SET FORTH IN SECTION 10.2 OR AT SUCH OTHER
ADDRESS OF WHICH THE LENDERS SHALL HAVE BEEN NOTIFIED PURSUANT THERETO;
AND
D. AGREES THAT NOTHING HEREIN SHALL AFFECT THE RIGHT TO
EFFECT SERVICE OF PROCESS IN ANY OTHER MANNER PERMITTED BY LAW OR SHALL
LIMIT THE RIGHT TO SUE IN ANY OTHER JURISDICTION.
2. EACH OF THE COMPANY, THE GUARANTOR AND THE LENDERS HEREBY
IRREVOCABLY AND UNCONDITIONALLY WAIVES TRIAL BY JURY IN ANY LEGAL ACTION OR
PROCEEDING REFERRED TO IN PARAGRAPH (A) ABOVE.
13 GOVERNING LAW. THIS AGREEMENT, THE TERM NOTES AND THE OTHER
CREDIT DOCUMENTS SHALL BE GOVERNED BY, AND CONSTRUED AND INTERPRETED IN
ACCORDANCE WITH, THE LAW OF THE STATE OF NEW YORK.
14 Execution. This Agreement shall be executed by the Company in
Italy, following which the Lenders, the Guarantor and the Agent shall execute
this Agreement in New York, New York.
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IN WITNESS WHEREOF, the parties hereto have caused this Agreement
to be duly executed and delivered in New York, New York by their proper and
duly authorized officers as of the day and year first above written.
THE COMPANY
Witnessed: PANINI, S.P.A.
- ----------------------- By:
-----------------------------------
Name
Title:
THE GUARANTOR
-------------
MARVEL ENTERTAINMENT GROUP, INC.
By:
------------------------------------
Title:
THE AGENT
---------
THE CHASE MANHATTAN BANK
By:
-----------------------------------
Title:
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THE LENDERS
THE CHASE MANHATTAN BANK
By:
-----------------------------------
Title:
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Schedule 1
Lenders:
Maximum Term
Lender Loan Amount
- ------ ------------
The Chase Manhattan Bank 27,000,000,000 Italian Lire
-1-
<PAGE>
NOTICE OF ACTION BY WRITTEN CONSENT
To The Stockholders of Marvel Entertainment Group, Inc.:
Pursuant to ss. 228 of the Delaware General Corporation Law (the
"DGCL"), this letter hereby notifies you that Marvel Holdings Inc.
("Holdings"), the owner of 50.03% of the issued and outstanding shares of
common stock of Marvel Entertainment Group, Inc. ("Marvel") (the "Marvel Common
Stock"), on June 20, 1997 acted without a meeting by written consent, and among
other things described more fully below, removed each and every member of
Marvel's Board of Directors (the "Old Board") and replaced them with the
following directors: Carl C. Icahn, Harold First, Charles K. MacDonald, Glen
Adams, J. Winston Fowlkes, III, Robert J. Mitchell, Jouko T. Tamminen, Vincent
J. Intrieri, and Michael J. Koblitz (collectively, the "New Board").
Information concerning the backgrounds of the directors consisting of the New
Board is contained in Annex A attached hereto.
Background
Holding Company Debt
Holdings is a wholly-owned subsidiary of Marvel (Parent) Holdings Inc.
("Parent") which, in turn is a wholly owned subsidiary of Marvel III Holdings,
Inc. ("Marvel III", and collectively with Holdings and Parent, the "Holdings
Companies"). In 1993, Holdings issued, pursuant to an indenture (the "Holdings
Indenture"), certain notes due 1998 (the "Holdings Notes") secured by, among
other things, 48 million shares (as adjusted to reflect a subsequent stock
split) of Marvel Common Stock. In 1993, Parent issued, pursuant to an indenture
(the "Parent Indenture"), certain notes due 1998 (the "Parent Notes") secured
by, among other things, 100% of the shares of common stock of Holdings (the
"Holdings Stock") and 20 million shares (as adjusted to reflect a subsequent
stock split) of Marvel Common Stock. In 1994, Marvel III issued, pursuant to an
indenture (the "Marvel III Indenture"), certain notes due 1998 (the "Marvel III
Notes") secured by, among other things, 100% of the shares of common stock of
Marvel Parent (the "Parent Stock") and 9,302,326 shares of Marvel Common Stock.
Bankruptcy Filings
On December 27, 1996, Marvel, eight of its wholly-owned subsidiaries,
and each of the Holding Companies filed petitions for relief under chapter 11
of title 11, United States Code (the "Bankruptcy Code") in the United States
Bankruptcy Court for the District of Delaware (the "Bankruptcy Court"). On
January 9, 1997, the United States Trustee appointed an Official Bondholders
Committee (the "Bondholders Committee") to represent the interests of all
holders (collectively, the "Noteholders")
<PAGE>
Notice of Written Consent
Page 2
of the Holdings Notes, the Parent Notes and the Marvel III Notes (collectively,
the "Notes"). The Bondholders Committee is currently composed of High River
Limited Partnership ("High River"), Westgate International, L.P. ("Westgate"),
Schultz Investments, WHERCO, Inc., M3, LLC, and United Equities Commodities
Company ("United Equities").
Noteholders Change the Board of Holdings
The commencement of the chapter 11 cases by the Holding Companies was
an event of default under each of the Holdings Indenture, the Parent Indenture,
and the Marvel III Indenture (collectively, the "Indentures"). After its
formation, the Bondholders Committee filed a motion (the "Lift Stay Motion")
with the Bankruptcy Court seeking an order lifting the automatic stay in the
chapter 11 cases of the Holding Companies (the "Holdings Cases") and, thus,
permitting the Trustee to vote and to foreclose upon shares of stock pledged to
secure repayment of the Notes, including (i) 100% of the Holdings Stock, (ii)
100% of the Parent Stock and (iii) approximately 78.8% of the Marvel Common
Stock (collectively, the "Pledged Stock"). On January 13, 1997, the Bank of New
York, then trustee under the Indentures, joined in the Lift Stay Motion, and on
January 30, 1997, (after its appointment as successor trustee) LaSalle National
Bank (the "Trustee") also joined the Lift Stay Motion. On February 26, 1997,
the Bankruptcy Court entered an order granting the Lift Stay Motion and
permitting the Bondholders Committee and the Trustee, on behalf of the
Noteholders, to vote and to foreclose upon the Pledged Stock (the "Lift Stay
Order").
On March 24, 1997, at the request of Marvel and its bank lenders (the
"Bank Lenders"), the Bankruptcy Court entered an order (the "Stay Order")
enjoining the Bondholders Committee and the Trustee from voting Marvel Common
Stock to remove and replace the Old Board (either directly or through the
actions of one or more of the Holding Companies) without first seeking and
obtaining relief from the automatic stay imposed under the Bankruptcy Code in
the chapter 11 cases of Marvel and its debtor-subsidiaries (the "Marvel
Cases"). The Stay Order, however, did not prevent the holders of Parent Notes
from exercising voting power over the Holdings Stock for the purpose of
removing and replacing the Board of Directors of Holdings.
On April 24, 1997, the Trustee exercised such power on behalf of and
pursuant to the direction of certain Noteholders and notified Marvel Parent
that, pursuant to the Parent Indenture, the rights of Marvel Parent to exercise
voting and other consensual rights relating to its ownership of 100% of the
shares of Holdings Stock had terminated as of 3:00 p.m. (New York time) on such
date and that as of such time all such rights had vested in the Trustee.
Immediately after such notice, the Trustee executed an action by
written consent as the sole stockholder of Holdings pursuant to Delaware law
which, among other things, removed each and every then-current member of the
Board of Directors of
<PAGE>
Notice of Written Consent
page 3
Holdings, namely, Ronald O. Perelman, Donald A. Drapkin, William C. Bevins,
Irwin Engelman and Laurence Winoker and replaced them with the following
individuals: Carl C. Icahn, Robert J. Mitchell and Vincent J. Intrieri.
Litigation Leading to Current Actions
Between March 24, 1997 and June 20, 1997 Marvel and the Bank Lenders
requested action by the Bankruptcy Court and the United States District Court
for the District of Delaware (the "District Court") seeking, among other
things, to prevent the Noteholders and Holdings from exercising voting
authority with respect to the shares of Common Stock owned by Holdings for the
purpose of removing the Old Board and replacing it with the New Board. At the
same time, the Bondholders Committee and the Trustee also requested action by
the Bankruptcy Court and the District Court seeking to permit the Noteholders
and/or Marvel Holdings to exercise voting authority over such shares for such
purpose. Such litigation culminated in the issuance of an order by the District
Court vacating the Bankruptcy Court's Stay Order effective as of 5:00 p.m. (New
York time) on June 20, 1997. The effect of such order was to permit Holdings,
as the majority stockholder of Marvel, to vote such stock to remove the Old
Board and to replace it with the New Board.
Action by Written Consent
As a result of the foregoing litigation, on June 20, 1997, effective
as of 5:01 p.m. (New York time), Holdings, acting as a holder of a majority of
Marvel Common Stock, took the following actions by written consent:
(1) Removed each and every then current member of Marvel's Old Board;
(2) Amended and modified Marvel's By-laws to provide that Marvel's Board
of Directors shall be composed of nine persons or such other number
of persons as may thereafter be fixed by Marvel's Board of Directors
and
(3) Elected the New Board.
Holdings elected the members of the New Board with the intention of
implementing the Joint Plan (as defined below). Holdings believes that each of
the members of the New Board will, subject to their fiduciary duties, support
the Joint Plan. Each member of the New Board will be entitled to the same
compensation and indemnification that was applicable to members of the Old
Board for serving as members of Marvel's Board of Directors.
The Joint Plan
On June 13, 1997, Holdings and the Bondholders Committee filed their
First Amended Joint Chapter 11 Plan of Reorganization (the "Joint Plan") in the
Holdings Cases and the Marvel Cases, amending the Joint Chapter 11 Plan of
Reorganization and
<PAGE>
Notice of Written Consent
page 4
Rights Offering filed on April 28, 1997. The Joint Plan provides proposed
treatment of all claims against and equity interests in (a) the Holding
Companies, and (b) Marvel and its direct and indirect subsidiaries that are
chapter 11 debtors in the Marvel Cases (collectively, the "Marvel Debtors").
With respect to the Holding Companies, the Joint Plan proposes an
orderly liquidation of such companies' assets and the distribution of such
assets or their proceeds to the creditors of the Holding Companies in the order
contemplated by the Bankruptcy Code. The 48,000,000 shares of Marvel Common
Stock held by Holdings as collateral for the Holdings Notes would be
distributed on a pro rata basis to the holders of the Holdings Notes; the
20,000,000 shares of Marvel Common Stock held by Parent as the collateral for
the Parent Notes would be distributed on a pro rata basis to the holders of the
Parent Notes; and, the 9,302,326 shares of Marvel Common Stock held by Marvel
III as collateral for the Marvel III Notes would be distributed on a pro rata
basis to the holders of the Marvel III Notes. In addition, the 2,932,167 shares
of Marvel Common Stock held by Holdings that are unencumbered would also be
distributed on a pro rata basis to the holders of the Holdings Notes. The
remaining assets of the Holding Companies, if any, and the stock evidencing a
100% ownership interest in each of them would be transferred to a trust for the
benefit of creditors.
As a result of the foregoing transactions under the Joint Plan with
respect to the Holding Companies, the Noteholders would receive approximately
78.6% of the issued and outstanding shares of Marvel Common Stock, if the Joint
Plan is confirmed by the Bankruptcy Court.
With respect to Marvel and the Marvel Debtors, the Joint Plan provides
for the satisfaction in full of all claims and the exchange of each outstanding
share of Marvel Common Stock for one-half share of new common stock to be
issued by Marvel (the "New Common Stock") and 1.93 rights (the "Rights") to
purchase shares of New Common Stock. The Rights may be exercised as part of a
rights offering (the "Rights Offering") to purchase an aggregate of 196,492,638
shares of New Common Stock (the "Rights Offering Shares") at a price of
$1.857576 per share, less $0.005089 for each $1.0 million by which the amount
members of the Bondholders Committee paid for Bank Debt (as defined below) is
less than the face amount of Bank Debt. The Rights Offering is intended to
raise $365 million of new capital for Marvel and the Rights Offering Shares
will represent approximately 77.2% of the issued and outstanding shares of New
Common Stock as of the consummation of the Rights Offering. Under the Joint
Plan, High River, Westgate, and United Equities, all of whom are members of the
Bondholders Committee, will act as standby purchasers with respect to the
Rights Offering in order to ensure that the entire $365 million is raised by
Marvel, for which they will receive shares of New Common Stock representing an
aggregate of 2.8% of the issued and outstanding shares of New Common Stock. The
proceeds of the Rights Offering will be used to retire Marvel's
debtor-in-possession credit facility (at least
<PAGE>
Notice of Written Consent
page 5
$100 million, and perhaps as much as $150 million), to facilitate the payment
in full of certain claims, and to satisfy Marvel's working capital
requirements.
Marvel's prepetition secured bank debt (the "Bank Debt") is to be
satisfied in full under the Joint Plan by the distribution to the holders of
the Bank Debt (a) the stock of Fleer Corp. and Panini S.p.A. (the "Distributed
Collateral") and (b) newly issued senior secured notes of Marvel in aggregate
principal amount equal to the aggregate amount of the Bank Debt less (i) the
value of the Distributed Collateral as determined by the Bankruptcy Court and
(ii) the face amount of the Bank Debt acquired by members of the Bondholders
Committee (which shall be retired in exchange for cash payment in an amount
equivalent to the amount paid for such Bank Debt); provided that if the
Bankruptcy Court determines that the value of the Distributed Collateral is
less than $385 million, then, at the sole discretion of the proponents of the
Joint Plan, Marvel may retain some or all of the Distributed Collateral and
increase the principal amount of the newly issued senior secured notes
accordingly.
The foregoing discussion of the Joint Plan is subject to and qualified
in its entirety by the terms and provisions of the Joint Plan. A copy of the
Joint Plan was filed by Holdings as an exhibit to Amendment No. 10 to Schedule
13D filed by Holdings on June 25, 1997.
June 27, 1997
MARVEL ENTERTAINMENT GROUP, INC.
MARVEL HOLDINGS INC.
<PAGE>
ANNEX A
DIRECTOR INFORMATION
Carl C. Icahn
Mr. Icahn (61) was recently elected as a director and President of
Marvel Holdings Inc. Mr. Icahn has been Chairman of the Board and Chief
Executive Officer of (i) ACF Industries Incorporated, a privately-held railcar
leasing and manufacturing company, since 1984, (ii) Icahn & Co., Inc., a
registered broker-dealer, since 1968, (iii) American Property Investors, Inc.,
the general partner of American Real Estate Partners, L.P., a public limited
partnership that invests in real estate, since November 1990, (iv) Bayswater
Realty & Capital Corp., a privately-held real estate company, for more than the
past ten years, (v) Starfire Holding Corporation, a privately-held holding
company, since 1982, and (vi) Trans World Airlines, Inc., a public airline
company, from 1990 until January 1993. Since July 1993, he has been a director
of Cadus Pharmaceutical Corporation, a public company engaged in gene research.
In addition, from 1993 to 1997, Mr. Icahn was a director of Samsonite
Corporation, and from 1995 to 1996, a director of Culligan Water Technologies,
Inc., each a publicly-held corporation.
Vincent J. Intrieri
Mr. Intrieri (40) was recently elected as a director and Secretary and
Treasurer of Marvel Holdings Inc. Mr. Intrieri is also a director of Australian
Food & Fibre Ltd. Mr. Intrieri has worked as a portfolio manager for Stonington
Management Corporation, which provides services to Martley International, Inc.,
Westgate International, L.P. and Elliott Associates, L.P., since 1995. Mr.
Intrieri was a partner in Arthur Anderson & Co. from 1993 to 1995 and was a
director of Price Waterhouse since before 1991 to 1993.
Robert J. Mitchell
Mr. Mitchell (50) was recently elected as a director of Marvel Holdings
Inc. Since May 1996, he has been a director of Cadus Pharmaceutical
Corporation, a public company engaged in gene research. Mr. Mitchell has been
Senior Vice President-Finance of ACF Industries Incorporated since March 1995
and was Treasurer of ACF Industries Incorporated from December 1984 to March
1995. Mr. Mitchell has also served as President and Treasurer of ACF Industries
Holdings Inc. since August 1993 and as Vice President, Liaison Officer of Icahn
& Co., Inc. since November 1984. Mr. Mitchell served as Treasurer of Trans
World Airlines, Inc. from 1987 to January 1993. Mr. Mitchell has been a
director of National Energy Group, Inc., a public company involved in the
exploration of oil and gas reserves, since August 1996.
Jouko T. Tamminen
Mr. Tamminen (37) has been a Senior Vice President-Investments of Icahn
Associates Corp. since 1996. From 1991 to 1996, Mr. Tamminen worked as
Portfolio Manager at Morgens, Waterfall Vintiadis & Company, Inc. Mr. Tamminen
is a citizen of Finland.
<PAGE>
Harold First
Mr. First (61) has been a director of Cadus Pharmaceutical Corporation,
a public company engaged in gene research since April 1995. He has been a
financial consultant since January 1993. He has been a director of Tel-Save
Holdings, Inc., a public long-distance telephone service company, since
September 1995. From December 1990 through January 1993, Mr. First served as
Chief Financial Officer of Icahn Holding Corp., a privately-held holding
company, and related entities. He was a director of Trump Taj Mahal Realty
Corp., a privately-held real estate company, from October 1991 until September
1996; a member of the Supervisory Board of Memorex Telex N.V., a public
technology company, from February 1992 until February 1997; a director of Trans
World Airlines, Inc., a public airline company, from December 1990 through
January 1993; a director of ACF Industries, Inc., a privately-held railcar
leasing and manufacturing company, from February 1991 through December 1992;
and Vice-Chairman of the Board of American Property Investors, Inc., the
general partner of American Real Estate Partners, L.P., a public limited
partnership that invests in real estate, from March 1991 through December 1992.
Charles K. MacDonald
Mr. MacDonald (38) has served as a director of Live Entertainment, Inc.
since May 1996. Currently, he is President of Morgandane Management Corp., an
investment advisory firm which provides investment advisory services to various
clients including Stonington Management Corporation, which in turn provides
services to Westgate International, L.P. and Elliott Associates, L.P. From
November 1987 to July 1995, Mr. MacDonald was a Securities Analyst and
Portfolio Manager for Elliott Associates, L.P. He also serves as a director of
Atlantic Gulf Communities Corp.
Glen Adams
Mr. Adams (59) is a private investor. He has been a director of Zale
Corporation since July 1993 and a director of U.S. Home Corporation since June
1993. Mr. Adams was previously Chairman, President and Chief Executive Officer
of Southmark Corporation from August 1990 until August 1996.
Michael J. Koblitz
Mr. Koblitz (47) is a private investor. From 1983 until 1997, he worked
as a Managing Director specializing in bankruptcy and reorganization advisory
services at Gruntal & Co., Incorporated, a New York based investment banking
firm.
J. Winston Fowlkes III
Mr. Fowlkes (64) is a private investor and has served as a director of
Cylex, Inc. since July 1995. From January 1995 through August 1996, Mr. Fowlkes
was the President of the Broadway Comics Division of Broadway Video Inc. From
February 1993 to August 1994, Mr. Fowlkes worked as the Publisher of
Enlightened Entertainment Partners L.P. and was an Executive Vice President for
Novatek Medical, Inc. from March 1991 through January 1993.
A-2
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<LEGEND>
This schedule contains summary financial information extracted
from the Marvel Entertainment Group, Inc. Condensed Consolidated
Balance Sheets and Statements of Operations.
</LEGEND>
<CIK> 0000874808
<NAME> MARVEL ENTERTAINMENT GROUP, INC.
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-START> JAN-01-1997
<PERIOD-END> JUN-30-1997
<CASH> 25,300
<SECURITIES> 0
<RECEIVABLES> 228,200
<ALLOWANCES> 42,700
<INVENTORY> 79,700
<CURRENT-ASSETS> 360,000
<PP&E> 114,300
<DEPRECIATION> 34,800
<TOTAL-ASSETS> 788,300
<CURRENT-LIABILITIES> 508,600
<BONDS> 0
0
0
<COMMON> 1,000
<OTHER-SE> (327,100)
<TOTAL-LIABILITY-AND-EQUITY> 788,300
<SALES> 286,300
<TOTAL-REVENUES> 286,300
<CGS> 200,900
<TOTAL-COSTS> 200,900
<OTHER-EXPENSES> 112,500
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 29,600
<INCOME-PRETAX> (74,000)
<INCOME-TAX> (800)
<INCOME-CONTINUING> (73,200)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (69,700)
<EPS-PRIMARY> (0.68)
<EPS-DILUTED> 0
</TABLE>
