<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 March 31, 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.
- ------------------------------------------------------------------------------
(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 May 5, 1997, there were 101,809,657 shares of the registrant's Common
Stock, par value $.01 per share, outstanding, of which 31,696,225 shares are
beneficially owned by indirect wholly owned subsidiaries of Mafco Holdings
Inc.
<PAGE>
MARVEL ENTERTAINMENT GROUP, INC.
(DEBTOR-IN-POSSESSION)
INDEX TO CONTENTS OF THE FIRST QUARTER 1997 FORM 10-Q
Page
----
Condensed Consolidated Balance Sheets as of March
31, 1997 and December 31, 1996 ........................................ 3
Condensed Consolidated Statements of Operations for
the quarters ended March 31, 1997 and 1996 ............................. 4
Condensed Consolidated Statements of Cash Flows
for the quarters ended March 31, 1997 and 1996 ......................... 5
Notes to Condensed Consolidated Financial Statements .................... 6
Management's Discussion and Analysis of Financial
Condition and Results of Operations ..................................... 18
Other Information ....................................................... 24
Signatures .............................................................. 24
2
<PAGE>
MARVEL ENTERTAINMENT GROUP, INC.
(DEBTOR-IN-POSSESSION)
CONDENSED CONSOLIDATED BALANCE SHEETS
(DOLLARS IN MILLIONS)
(UNAUDITED)
<TABLE>
<CAPTION>
March 31, December 31,
1997 1996
--------------- --------------
<S> <C> <C>
ASSETS
Current assets:
Cash ............................... $ 21.7 $ 25.1
Accounts receivable, net ........... 215.7 229.1
Inventories, net ................... 78.2 78.1
Deferred income taxes .............. 6.2 6.2
Income tax receivable .............. 11.8 11.8
Prepaid expenses and other ......... 51.3 49.2
--------------- --------------
Total current assets .......... 384.9 399.5
Property, plant and equipment, net ...... 77.4 79.5
Goodwill and other intangibles, net ..... 309.3 317.6
Deferred charges and other .............. 47.3 47.4
--------------- --------------
Total Assets .................. $ 818.9 $ 844.0
================ -=============
LIABILITIES AND STOCKHOLDERS' DEFICIT
Current liabilities:
Accounts payable ................... $ 85.8 $ 98.5
Accrued expenses and other ......... 168.9 174.7
Short term borrowings .............. 87.0 47.3
Current portion of long-term debt .. 9.7 10.6
Liabilities subject to settlement
under reorganization .......... 28.8 29.7
--------------- --------------
Total current liabilities ..... 380.2 360.8
Long-term debt .......................... 127.5 145.0
Other long-term liabilities ............. 21.7 20.4
Liabilities subject to settlement
under reorganization ............... 473.5 473.5
--------------- --------------
Total Liabilities ............. 1,002.9 999.7
Minority interest in Toy Biz ............ 101.0 100.6
--------------- --------------
Stockholders' deficit:
Common Stock ....................... 1.0 1.0
Additional paid-in capital ......... 93.1 93.1
Accumulated deficit ................ (378.1) (350.3)
Cumulative translation adjustment .. (1.0) (0.1)
--------------- --------------
Total Stockholders' Deficit ... (285.0) (256.3)
--------------- --------------
Total Liabilities and
Stockholders' Deficit ....... $818.9 $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
Three Montns Ended
March 31,
----------------------------------
1997 1996
--------------- --------------
<S> <C> <C>
Net revenues ............................. $156.7 $ 189.6
Cost of sales ............................ 104.5 113.9
Selling, general & administrative expenses 48.5 52.3
Depreciation and amortization ............ 4.8 4.4
Amortization of goodwill, intangibles
and deferred charges ................... 4.3 5.5
Interest expense, net .................... 15.6 13.7
Foreign exchange loss/(gain), net......... (0.7) 0.6
Equity in net income of unconsolidated
subsidiaries and other, net ............ 0.1 0.1
--------------- --------------
Loss before reorganization items,
provision for income taxes,
and minority interest .................. (20.2) (0.7)
Reorganization items ..................... 3.4 --
--------------- --------------
Loss before provision for income
taxes and minority interest ............ (23.6) (0.7)
Provision for income taxes ............... 3.8 1.7
--------------- --------------
Loss before minority interest ............ (27.4) (2.4)
Minority interest in earnings of Toy Biz . 0.4 2.0
--------------- --------------
Net loss ................................. $(27.8) $(4.4)
=============== ==============
Loss per share ........................... $( .27) $( .04)
=============== ==============
Common shares outstanding (in millions) .. 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
Three Months Ended
March 31,
------------------
1997 1996
--------- --------
<S> <C> <C>
Cash flows from operating activities:
Net loss .............................................................. $(27.8) $(4.4)
--------- -------
Adjustments to reconcile net loss to net cash (used in) provided by
operating activities:
Depreciation and amortization ...................................... 9.2 9.9
Provision (benefit) for deferred income taxes ...................... 2.7 3.8
Undistributed earnings of unconsolidated subsidiaries ............. (0.1) (0.1)
Minority interest in earnings of Toy Biz ........................... 0.4 2.0
Other .............................................................. 0.3 --
Changes in assets and liabilities:
Decrease in accounts receivable, net .............................. 9.7 21.4
Increase in inventories ........................................... (2.0) (8.0)
Increase in other assets .......................................... (5.2) (2.9)
(Decrease) increase in accounts payable ........................... (7.8) 4.5
Decrease in accrued expenses and other ............................ (3.3) (48.5)
-------- --------
Total adjustments ..................................................... 3.9 (17.9)
-------- --------
Net cash used in operating activities ............................. (23.9) (22.3)
-------- --------
Cash flows from investing activities:
Capital expenditures (including product development and package
design costs) ....................................................... (7.3) (11.1)
Other acquisitions, net of cash and cash equivalents acquired ....... (4.2) --
Other investing activities ........................................... (1.1) (1.7)
-------- --------
Net cash used in investing activities ............................. (12.6) (12.8)
-------- --------
Cash flows from financing activities:
Net repayments under Term Loan Agreement ............................. (5.1) (2.6)
Net borrowings under Toy Biz credit facility ......................... 5.0 --
Net borrowings under DIP Loan ........................................ 40.0 --
Net (repayments) borrowings under other debt ......................... (4.7) 13.4
Proceeds from exercise of stock options .............................. -- 0.4
Other financing activities ........................................... 0.1 0.2
-------- --------
Net cash provided by financing activities ........................... 35.3 11.4
-------- --------
Effect of exchange rate changes on cash ............................... (2.2) (0.1)
-------- --------
Net decrease in cash .................................................. (3.4) (23.8)
Cash, at beginning of period .......................................... 25.1 53.6
-------- --------
Cash, at end of period ................................................ $ 21.7 $ 29.8
======== ========
Supplemental disclosures of cash flow information:
Interest paid during the period ...................................... $ 17.3 $ 18.6
Income taxes paid, net of refunds, during the period ................. $ 1.4 $ 7.8
</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.
2. CHAPTER 11 REORGANIZATION
On December 27, 1996, Marvel along with certain 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 of the United States Bankruptcy 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, Inc. ("Toy Biz"), all of
which are active, as well as certain other subsidiaries did not file petitions
under the Bankruptcy Code.
The Plan of Reorganization, filed on December 27, 1996 (as amended,
the "Plan"), contemplated that pursuant to the Stock Purchase Agreement dated
December 26, 1996, between Andrews Group Incorporated ("Andrews") and Marvel,
Andrews Group, 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 Group, shares of
class A 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 Plan
contemplated that in connection with the Andrews Investment, the Company would
acquire the Class A Common Stock not owned by Marvel, Andrews Group or their
affiliates pursuant to a Merger Agreement between Andrews Group and Toy Biz
and a Stock Purchase Agreement with the two other principal stockholders of
Toy Biz. The 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 March 31, 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. This plan has since been withdrawn as described
below.
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. The DIP Loan
matures 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.
In 1993, Marvel Holdings Inc. ("Marvel Holdings") issued
approximately $517.4 principal amount at maturity of Senior Secured Discount
Notes due 1998. In 1993, Parent Holdings issued approximately $251.7
6
<PAGE>
MARVEL ENTERTAINMENT GROUP, INC.
DEBTOR-IN-POSSESSION
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(DOLLARS IN MILLIONS, EXCEPT PER SHARE AMOUNTS)
(UNAUDITED)
principal amount at maturity of Senior Secured Discount Notes due 1998 (the
"Parent Holdings Notes"). In 1994, Marvel III Holdings Inc. ("Marvel III" and
collectively with Marvel Holdings and Parent Holdings, the "Marvel Holding
Companies") issued $125 principal amount of 9-1/8% Senior Secured Notes due
1998 (the "Marvel III Notes"). Marvel Holdings and Parent Holdings have, in
the aggregate, pledged 77,302,326 shares of the Company's common stock to
secure such notes (the "Pledged Common Stock"), and an additional
approximately 2.9 million shares are subject to a negative pledge under the
indenture to the notes issued by Marvel Holdings. In addition, Parent Holdings
has pledged the common stock of Marvel Holdings to secure the Parent Holding
Notes, and Marvel III has pledged the common stock of Parent Holdings to
secure the Marvel III Notes (collectively with the Pledged Common Stock, the
"Pledged Stock").
On December 27, 1996, the Marvel Holding Companies filed voluntary
petitions for relief under chapter 11 of the Bankruptcy Code with the United
States Bankruptcy Court for the District of Delaware. The chapter 11 cases
commenced by the Marvel Holding Companies have not been procedurally
consolidated and are not jointly administered with the Debtor Companies'
chapter 11 cases.
On January 9, 1997, the United States Trustee appointed a committee
of creditors holding unsecured claims against the Marvel Holding Companies
(the "Creditors Committee") under section 1102(a) of the Bankruptcy Code. The
members of the Creditors Committee, as originally appointed, include: The Bank
of New York, High River Limited Partnership, Westgate International, L.P.,
Schultz Investments, WHERCO, Inc., M3, LLC and United Equities Commodities
Company.
On January 13, 1997, the Creditors Committee filed a motion (the
"Stay Relief Motion") in the Holdings Companies' chapter 11 cases seeking (i)
relief from the automatic stay to permit LaSalle National Bank, as successor
indenture trustee (the "Holding Companies' Trustee"), on behalf of the holders
of the notes issued by the Marvel Holding Companies, to foreclose upon, and
vote, the Pledged Stock and (ii) dismissal of the Marvel Holding Companies'
chapter 11 cases. On February 26, 1997, the Bankruptcy Court entered an order
granting relief from the automatic stay to allow the Holding Companies'
Trustee to vote and to foreclose upon the Pledged Stock. On February 27, 1997,
the Company and the Marvel Holding Companies filed a notice of appeal with
respect to such order. Such appeal will be heard on June 19, 1997 in the
United States District Court for Delaware.
On February 12, 1997, the Office of 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 Group exercised its right to terminate the
Stock Purchase Agreement with the Company. On the same date, Andrews Group
informed Toy Biz and the two principal stockholders of Toy Biz that, as a
result of the termination of the Andrews Investment, a condition to closing
under the 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 Plan has been withdrawn.
On March 7, 1997, the Creditors Committee indicated that it would make a
proposal whereby the holders of Common Stock (other than Mafco and its
affiliates) and holders of the notes of the Marvel Holding Companies would
make a $365.0 infusion into the Company as part of a new Plan of
Reorganization through a rights offering that would be backstopped by certain
members of the Creditors Committee, including High River Limited Partnership,
an entity controlled by Carl Icahn, Westgate International L.P. and United
Equities Commodities Company (the "Icahn Group") (as subsequently amended, the
"Committee Proposal"). The Committee Proposal did not specify whether all of
the $365.0 would be added to the equity of the Company or whether a portion of
the
7
<PAGE>
MARVEL ENTERTAINMENT GROUP, INC.
DEBTOR-IN-POSSESSION
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(DOLLARS IN MILLIONS, EXCEPT PER SHARE AMOUNTS)
(UNAUDITED)
proceeds would be used to repay borrowings under the Credit Agreements, and
did not contemplate Toy Biz becoming a wholly owned subsidiary of Marvel.
On March 19, 1997, the Creditors Committee notified the Company that on
March 25, 1997 it would cause the Holding Companies' Trustee to vote the
Pledged Stock to replace the Board of Directors of the Company and the Holding
Companies. On March 24, 1997, the Court in the Debtor Companies' bankruptcy
cases issued a restraining order (the "Restraining Order") preventing the
Creditors Committee and the Holding Companies' Trustee from voting the Pledged
Stock or otherwise replacing the Board of Directors of the Company and
determined that the Creditors Committee and the Holding Companies' Trustee
must comply with the procedural requirements of Section 362 of the Bankruptcy
Code to seek relief from the automatic stay to take such action. The Court,
however, also ruled that the Creditors Committee and Holding Companies'
Trustee could replace the Board of Directors of Marvel Holdings and Parent
Holdings. On March 28, 1997, the Creditors Committee and the Holding
Companies' Trustee filed a motion to lift the automatic stay in the Debtor
Companies' cases in order to permit the Creditors Committee and the Holding
Companies' Trustee to replace the Board of Directors of Marvel. A hearing date
on such motion, originally set for May 14, 1997, has been rescheduled by the
Creditors Committee and the Holding Companies' Trustee for June 6, 1997. On
the same date, the Creditors Committee filed an emergency appeal in the
Federal District Court for Delaware of the restraining order of the Bankruptcy
Court issued on March 24, 1997 preventing the replacement of the Board of
Directors of Marvel. A hearing on such appeal was heard on May 1, 1997, and on
May 14, 1997, the District Court overturned the Restraining Order but the
District Court stayed the effectiveness of its ruling for 10 days. The Company
intends to pursue available options to maintain the status quo.
On April 24, 1997, the Indenture Trustee voted the shares of common
stock of Marvel Holdings pledged to secure the Parent Holdings Notes to remove
the directors of Marvel Holdings and replace them with Messrs. Carl Icahn,
Vincent Intrieri and Robert Mitchell, designees of the Icahn Group. As a
result, Mafco no longer beneficially owns the approximately 50.03% of the
Common Stock of Marvel owned by Marvel Holdings, and 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 of net
operating loss carryforwards ("NOLs") of the Mafco affiliated group. Such
allocation is not yet determinable. Such NOL's may be limited under federal
income tax laws in the event of a change of control of the Company, including
as a result of the consummation of a plan of reorganization.
On April 25, 1997, the Company and Toy Biz signed a letter of intent
(the "Letter of Intent") proposing a new plan (the "Marvel/Toy Biz Plan") of
reorganization for the Debtor Companies. The Marvel/Toy Biz Plan was filed on
May 7, 1997 with the Bankruptcy Court.
The Marvel/Toy Biz Plan contemplates that there will be an auction
(the "Newco Auction") of the enterprise resulting from the business
combination of the Company (other than Fleer/SkyBox and Panini and their
respective subsidiaries) and Toy Biz ("Newco"). Pursuant to the Marvel/Toy Biz
Plan, under the Newco Auction, the minimum acceptable bid for Newco would be
one that yields net cash proceeds (after payment of administrative expenses,
amounts owed under the $100.0 DIP Loan and certain costs and expenses of the
Company's lenders under the Credit Agreements (the "Secured Lenders") and Toy
Biz with, in the case of Toy Biz, such fees and expenses being capped at $3.5)
to the Company's Secured Lenders in an amount equal to the aggregate amount
owing such lenders less $180.0, and that yields to the stockholders of Toy Biz
(other than Marvel) $285.0, or approximately $14 per share.
As part of the auction process contemplated by the Marvel/Toy Biz
Plan, as an alternative to bids for Newco, a bid may be accepted for the
Company's publishing and licensing businesses and its approximately 26.6%
interest in Toy Biz (the "Marvel Auction") in an amount at least sufficient to
yield net cash proceeds (after payment of administrative expenses, amounts
owed under the DIP Loan and certain costs and expenses of the Company's
Secured Lenders) to the Company's Secured Lenders equal to approximately
$430.0 and includes a means for payment of a breakup fee of $7.0 to Toy Biz's
stockholders (other than the Company).
If an offer or offers satisfying the minimum conditions under the
Newco Auction or Marvel Auction are received and a transaction based on such
offer closes, pursuant to the Marvel/Toy Biz Plan the net cash proceeds are
8
<PAGE>
MARVEL ENTERTAINMENT GROUP, INC.
DEBTOR-IN-POSSESSION
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(DOLLARS IN MILLIONS, EXCEPT PER SHARE AMOUNTS)
(UNAUDITED)
expected to be distributed in accordance with the preceding paragraph and the
Secured Lenders will accept 100% of the common stock of Fleer and Panini.
Pursuant to the Marvel/Toy Biz Plan, if an offer exceeding the
minimum conditions are received and a transaction based on such offer closes,
any excess proceeds shall be distributed to unsecured creditors, equity
holders and securities litigation claimants of the Debtor Companies in order
of priority; provided, that prior to any sale of Fleer and its subsidiaries
and Panini and its subsidiaries, the Secured Lenders may elect to be
distributed such excess proceeds, in which event the unsecured creditors,
equity holders and securities litigation claimants of the Debtor Companies
shall be distributed subordinated debt or equity securities equal in value to
such excess in order of priority.
If no offers satisfying the minimum conditions for the Newco Auction or
Marvel Auction set forth above are received, or if no transaction based on an
offer satisfying such minimum conditions closes, then pursuant to the
Marvel/Toy Biz Plan, the Company's publishing and licensing businesses and Toy
Biz would combine to form Newco. Pursuant to the Marvel/Toy Biz Plan, in such
merger, the Company's Secured Lenders are expected to receive in satisfaction
of their claims: (i) cash proceeds of a new $250.0 term loan net of, among
other things, amounts required to repay borrowings under the DIP Loan, and a
5-year, $170.0 note accruing interest at 11.5% per annum (payable at maturity)
from Newco, (ii) 28% of the primary shares of Newco, and (iii) the economic
interest in Fleer/SkyBox and Panini subject to certain limitations. Toy Biz
stockholders will receive 72% of the primary shares of Newco. Pursuant to the
Marvel/Toy Biz Plan, an amount of cash acceptable to Toy Biz and the Secured
Lenders will be dedicated to the payment of general unsecured claims.
In addition, pursuant to the Marvel/Toy Biz Plan, Marvel stockholders
would receive two series of three-year warrants. The first series would
entitle Marvel shareholders to acquire 7.5% of the common stock of Newco on a
fully diluted basis with an exercise price based upon Marvel/Toy Biz having an
enterprise value of $950.0. The second series would entitle Marvel
shareholders to acquire an additional 5% of the common stock of Newco on a
fully diluted basis with an exercise price based on Newco having an enterprise
value of $1,100.0.
Pursuant to the Marvel/Toy Biz Plan, Newco will obtain a loan
facility (the "Loan Facility") in the amount of $250.0 on a term-loan basis
and $75.0 on a revolving-credit basis, in each case having terms reasonably
acceptable to the Secured Lenders. Pursuant to the Letter of Intent, if Newco
is unable to obtain a term loan facility for such amount from a third-party
lender as of the effective date of the Marvel/Toy Biz Plan, pursuant to the
Marvel/Toy Biz Plan, the Secured Lenders will provide a senior secured term
loan facility in the amount of $150.0, provided that the remainder of the Loan
Facility is provided by a third party on terms reasonably acceptable to the
Secured Lenders.
Pursuant to the Marvel/Toy Biz Plan, the payment of the breakup fee
is subject to the following conditions: (i) Toy Biz sends to Marvel and the
Secured Lenders a copy of a firm financing commitment, subject only to the
payment of a customary fee and otherwise in form and substance reasonably
acceptable to the Secured Lenders, with respect to the Loan Facility described
above; (ii) Toy Biz is otherwise willing and diligently proceeding to close,
and (iii) Messrs. Isaac Perlmutter and Avi Arad have entered into a voting
agreement, in form and substance reasonably acceptable to Marvel and the
Secured Lenders, on or before the date on which Toy Biz must complete its due
diligence, pursuant to which they agree to vote their shares of Toy Biz common
stock in favor of the transactions contemplated under the Letter of Intent,
and not in favor of any competing offers.
There is no breakup fee in the context of a Newco Auction or the
consummation of a competing plan. On May 7, 1997, the Bankruptcy Court
approved, subject to certain conditions, the breakup fee.
Pursuant to the Marvel/Toy Biz Plan, Marvel's Fleer/SkyBox and Panini
businesses will also be marketed and may be sold in a separate auction.
9
<PAGE>
MARVEL ENTERTAINMENT GROUP, INC.
DEBTOR-IN-POSSESSION
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(DOLLARS IN MILLIONS, EXCEPT PER SHARE AMOUNTS)
(UNAUDITED)
The Company has retained the Blackstone Group LLP, to act as
financial advisor to the Company, including to assist the Company in
identifying potential bidders and conducting the Newco Auction, the Marvel
Auction and the auction of the businesses of Fleer and Panini.
Consummation of the Marvel/Toy Biz Plan is subject to a number of
conditions, including, among other things, approval by the Bankruptcy Court by
August 15, 1997 and Toy Biz stockholders of the Marvel/Toy Biz Plan.
On April 26, 1997, the Creditors Committee filed a plan of
reorganization for the Debtor Companies and the Marvel Holding Companies (the
"Creditors Committee Plan") and a disclosure statement for such plan with the
Bankruptcy Court. The Creditors Committee Plan provides for a rights offering
in which the holders of the notes issued by the Marvel Holding Companies and
the public stockholders of Marvel would participate. The Icahn Group would
backstop the rights offering for a fee. The proceeds of the rights offering
would be used to repay the DIP Loan and unsecured creditors in full and
purchase from the Icahn Group bank debt purchased by the Icahn Group at the
cost of such purchase. The other holders of bank debt under the Company's
Credit Agreements (as defined below) would receive the distribution of the
stock of the Company's Fleer/SkyBox and Panini businesses in exchange for the
cancellation of $385.0 of claims and a ten year promissory note for the
remaining amount. The promissory notes would pay interest at either 10.5% when
paid in cash or 13.5% when paid in additional promissory notes, the form of
payment being at the election of the Company. The promissory notes would be
secured by all of the Company's assets.
There can be no assurance that the Marvel/Toy Biz Plan, the Creditors
Committee Plan 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.
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 Chapter 11 filings
and circumstances relating to these events, 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. An event of a sale of the Company or parts thereof may
necessitate a material write down of assets, including goodwill associated
with the Company's businesses.
As part of the chapter 11 process, the Debtor Companies have received
a significant amount of proofs of claims. The Company is currently in the
process of reviewing these claims and have found that a majority of these
claims are without merit. Although the Company believes that reserves as of
March 31, 1997 are adequate to cover the ultimate liability of 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:
10
<PAGE>
MARVEL ENTERTAINMENT GROUP, INC.
DEBTOR-IN-POSSESSION
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(DOLLARS IN MILLIONS, EXCEPT PER SHARE AMOUNTS)
(UNAUDITED)
<TABLE>
<CAPTION>
March 31, December 31,
1997 1996
--------------- --------------
<S> <C> <C>
Total accrued expenses .................... $ 13.8 $ 14.7
Additional Revolving Credit Facility ....... 15.0 15.0
--------- ---------
Total current liabilities .................. $ 28.8 $ 29.7
========= =========
Debt:
U.S. Term Loan Agreement ................. $ 350.0 $ 350.0
Amended and Restated Credit Agreement .... 120.0 120.0
Additional Revolving Credit Facility ..... 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>
3. DETAIL OF CERTAIN BALANCE SHEET ACCOUNTS
ACCOUNTS RECEIVABLE, NET:
<TABLE>
<CAPTION>
March 31, December 31,
1997 1996
-------------- --------------
<S> <C> <C>
Accounts receivable......................... $ 256.2 $ 275.3
Less: Allowances........................... (40.5) (46.2)
--------- ---------
$ 215.7 $ 229.1
========== =========
INVENTORIES, NET:
Finished goods ............................. $ 74.2 $ 69.4
Work in process............................. 14.4 16.3
Raw materials .............................. 21.3 22.0
Less: Reserve for obsolescence ............. (31.7) (29.6)
--------- ---------
$ 78.2 $ 78.1
========= =========
GOODWILL AND OTHER INTANGIBLES, NET:
Goodwill and other intangibles ............. $ 378.7 $ 374.3
Less: Accumulated amortization ............ (69.4) (56.7)
--------- ---------
$ 309.3 $ 317.6
========= =========
ACCRUED EXPENSES AND OTHER:
Royalties and incentives................... $ 23.7 $ 23.0
Reserve for returns ....................... 45.5 51.2
Income taxes payable ...................... 10.4 10.9
Other ..................................... 103.1 104.3
Less amounts reclassified to liabilities
subject to settlement under reorganization
(See Note 2) ............................. (13.8) (14.7)
--------- ---------
$ 168.9 $ 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)
4. SHORT-TERM BORROWINGS AND DEBT
Short term borrowings consists of the following:
<TABLE>
<CAPTION>
March 31, December 31,
1997 1996
------------------ --------------
<S> <C> <C>
Panini credit arrangements ............... $ 32.0 $ 37.3
DIP Loan ................................. 50.0 10.0
Toy Biz Credit Facility .................. 5.0 --
--------- -------------
Short term borrowings..................... $ 87.0 $ 47.3
========== =============
</TABLE>
Debt consists of the following:
<TABLE>
<CAPTION>
March 31, December 31,
1997 1996
------------------ --------------
<S> <C> <C>
U.S. Term Loan Agreement ................. $ 350.0 $ 350.0
Amended and Restated Credit Agreement .... 120.0 120.0
Additional Revolving Credit Facility ..... 15.0 15.0
Term Loan Agreement ......................
Other long term debt ..................... 122.3 139.3
Subtotal ................................. 14.9 16.3
--------- -------------
Less amount reclassified * ............... 622.2 640.6
Less current maturities ................. (485.0) (485.0)
Long-term debt ........................... (9.7) (10.6)
--------- -------------
$ 127.5 $ 145.0
========== =============
</TABLE>
* Amounts as of March 31, 1997 have been reclassified to "Liabilities
subject to settlement under reorganization" in accordance with bankruptcy
reporting prescribed by Statement 90-7. See Note 2.
Under credit arrangements for short-term borrowings arranged with a group
of banks, Panini may borrow up to Italian Lire 58.3 billion as of March 31,
1997 (approximately $34.8 based on exchange rates at March 31, 1997) on such
terms as Panini and the banks may mutually agree upon. These arrangements
generally do not have termination dates but are reviewed annually for renewal.
At March 31, 1997, the unused portion of the credit lines was Italian Lire 4.6
billion (approximately $2.8 based on exchange rates at March 31, 1997). The
weighted average interest rate on short-term borrowings as of March 31, 1997
was 6.3%.
At the time that the Debtor Companies commenced their reorganization
cases, they anticipated that their financing needs would be satisfied through
the DIP Loan. On January 24, 1997, the Bankruptcy Court entered an order (the
"DIP Order") approving the DIP Loan. The DIP Loan is scheduled to mature on
June 30, 1997. The Debtor Companies 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 (as defined below).
The liens securing the DIP Loan prime the liens securing the Credit
Agreements (as defined below) 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 rounded upwards to the
next 1/16 of 1% (as defined in the DIP Loan) , 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. The
interest rate on Alternate Base Rate Loans at March 31, 1997, was 10%.
Interest on Eurodollar Rate Loans is payable at the end of the applicable
interest period, and interest on Alternate Base Rate Loans is payable monthly
in arrears. At March 31, 1997, amounts available to borrow under this
facility, net of amounts reserved under letters of credit, were $43.1.
12
<PAGE>
MARVEL ENTERTAINMENT GROUP, INC.
DEBTOR-IN-POSSESSION
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(DOLLARS IN MILLIONS, EXCEPT PER SHARE AMOUNTS)
(UNAUDITED)
The DIP Loan includes various restrictive covenants prohibiting the
Company from, among other things, incurring additional indebtedness, with
certain limited exceptions, making investments, except for certain limited
exceptions, including for the Company's strategic initiatives, 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 financing 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 Company's bankruptcy proceedings.
On April 24, 1997, the Indenture Trustee voted the shares of common
stock of Marvel Holdings pledged to secure the Parent Holdings Notes to remove
the directors of Marvel Holdings and replace them with Messrs. Carl Icahn,
Vincent Intrieri and Robert Mitchell, designees of the Icahn Group. However,
in light of the Restraining Order, the Company does not believe that the
replacement of the directors of Marvel Holdings with designees of the Icahn
Group is a change of control of the Company. A hearing on such appeal was
heard on May 1, 1997, but the District Court has not yet rendered a decision.
However, if the Holding Companies' Trustee were to among other things, vote
the Pledged Stock to replace the Board of Directors of Marvel, such action
would likely be a change of control of Marvel and therefore a default under,
among other agreements, the DIP Loan.
On December 20, 1996, the banks and financial institutions that were
parties to the Credit Agreements entered into a Standstill Agreement and
Amendment (the "Standstill Agreement") which grants the Company the right, for
any outstanding loans under the Credit Agreements to remain as either
Eurodollar or Eurocurrency Loans during the Standstill Period (as defined
below). The Standstill Agreement also provides that the commitments under the
Credit Agreements will not automatically terminate or be accelerated upon the
commencement of the reorganization cases but rather will be suspended and
reinstated upon confirmation of the Plan. Unless a payment default is
continuing or certain other termination events are triggered, each lender
under the Credit Agreements will agree not to exercise any remedies against
any subsidiary of the Company 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 Plan. Pursuant to the Standstill
Agreement, the lenders under the Credit Agreements will permit 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 Loans is longer than one month, such
interest period shall have a scheduled expiry on or prior to June 30, 1997.
The Standstill Period is the period commencing on December 27, 1996 and ending
on June 30, 1997 (or, sooner, if a Final Order is entered confirming the Plan
prior to such date or a payment default occurs).
The Company's indebtedness is principally represented by the outstanding
balance under the U.S. Term Loan Agreement, as defined below, the Amended and
Restated Credit Agreement effective August 30, 1994 between the Company, a
syndicate of banks, the Co-Agents and The Chase Manhattan Bank, as
administrative agent (the "Amended and Restated Credit Agreement"), and the
outstanding balance of the Term Loan Agreement, as defined below. The
Applicable Margin under the Amended and Restated Credit Agreement for
Alternate Base Rate loans is 2% and for Eurodollar Rate loans is 3%. The
interest rate on Eurodollar Rate Loans at March 31, 1997 was approximately 8
1/2% to 8 23/32% per annum, depending upon the length of the relevant interest
period.
In April 1995, the Company entered into a $350.0 term loan agreement 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%. The interest rate on
Eurodollar Rate Loans at March 31, 1997, was approximately 8.54% to 8 9/16%
depending upon the length of the relevant interest period. Interest on
Alternate Base Rate Loans is payable quarterly in arrears, and interest on
Eurodollar
13
<PAGE>
MARVEL ENTERTAINMENT GROUP, INC.
DEBTOR-IN-POSSESSION
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(DOLLARS IN MILLIONS, EXCEPT PER SHARE AMOUNTS)
(UNAUDITED)
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.
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 "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 Term Loan Facility bears interest at a rate per annum equal to
the Eurocurrency Rate (as defined in the Term Loan Agreement) or, in certain
limited circumstances, the Negotiated Rate (as defined in the 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%. The interest rate on Eurocurrency Rate Loans at March 31, 1997, was
approximately 10 5/16%. 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.
The U.S. Term Loan Agreement (through incorporation by reference to
the Amended and Restated Credit Agreement), the Amended and Restated Credit
Agreement and the 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 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).
During March 1996, the Company entered into an additional $25.0
revolving credit facility which was subsequently reduced to $15.0. The
additional revolving credit facility is pari passu with the loans extended by
the banks pursuant to the Company's existing loan agreements (collectively
with the U.S. Term Loan Agreement, the Amended and Restated Credit Agreement,
the additional revolving credit facility and the Term Loan Agreement, the
"Credit Agreements"). The additional revolving credit facility bears interest
at a rate per annum equal to the Eurodollar Rate (as defined in the Term Loan
Agreement), plus 2 3/4%, or the Alternate Base Rate (as defined in the Term
Loan Agreement) plus 1 3/4%. The interest rate on the additional revolving
credit facility at March 31, 1997 was 8.5%.
The Credit Agreements 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 (as
defined below).
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. Substantially all of the
assets of Toy Biz have been pledged to secure borrowings under the Toy Biz
credit facility. Borrowings under the 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%. 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.
14
<PAGE>
MARVEL ENTERTAINMENT GROUP, INC.
DEBTOR-IN-POSSESSION
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(DOLLARS IN MILLIONS, EXCEPT PER SHARE AMOUNTS)
(UNAUDITED)
The Toy Biz credit facility contains various financial covenants, as
well as restrictions, on the incurrence of 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.
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 $9.2 has been paid as of March 31, 1997. Additionally, approximately
$6.7 of the restructuring charges relates to facility closure, of which $5.7
has been paid as of March 31, 1997, and $7.6 of the restructuring charges
relates to other costs, of which $6.7 has been paid as of March 31, 1997. A
substantial portion of the remaining amount of $3.4 as of March 31, 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
$1.7 has been paid as of March 31, 1997. The remaining approximate $9.2 of the
restructuring charges relates to facility closure or sale of which $0.1 has
been paid as of March 31, 1997 and $6.5 was used to write-down certain fixed
assets. A substantial portion of the remaining amount of $7.5 as of March 31,
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".
15
<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 March 31, 1997 of the Debtor
Companies is as follows (See Note 2):
<TABLE>
<S> <C>
ASSETS
Current assets:
Cash ............................... $ 12.5
Accounts receivable, net ........... 50.8
Inventories, net ................... 22.4
Income tax receivable .............. 11.8
Prepaid expenses and other ......... 5.5
---------------
Total current assets .......... 103.0
Property, plant and equipment, net ...... 9.1
Goodwill and other intangibles, net ..... 190.8
Deferred charges and other .............. 26.1
Investments in and advances to
subsidiaries, at cost .............. 58.3
---------------
Total Assets .................. $ 387.3
===============
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable ................... $ 19.6
Accrued expenses and other ......... 89.9
Short term borrowings .............. 50.0
Liabilities subject to settlement
under reorganization .......... 28.8
---------------
Total current liabilities ..... 188.3
Other long-term liabilities ............. 10.5
Liabilities subject to settlement
under reorganization ............... 473.5
--------------
Total Liabilities ............. 672.3
--------------
Stockholders' deficit:
Additional paid-in capital ......... 94.1
Accumulated deficit ................ (378.1)
Cumulative translation adjustment .. (1.0)
---------------
Total Stockholders' Deficit ... (285.0)
---------------
Total Liabilities and
Stockholders' Deficit ....... $ 387.3
===============
</TABLE>
16
<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 three months ended
March 31, 1997 of the Debtor Companies is as follows:
<TABLE>
<CAPTION>
<S> <C>
Net revenues ............................. $ 53.2
Cost of sales ............................ 38.0
Selling, general & administrative expenses 25.1
Depreciation and amortization ............ 0.5
Amortization of goodwill, intangibles
and deferred charges ................... 3.4
Interest expense, net .................... 11.4
Equity in net loss of unconsolidated
subsidiaries and other, net ......... 0.9
---------------
Loss before reorganization items and
provision for income taxes .......... (24.3)
Reorganization items ..................... 3.4
---------------
Loss before provision for income
taxes ............................... (27.7)
Provision for income taxes ............... 0.1
---------------
Net loss ................................. $ (27.8)
===============
</TABLE>
17
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
GENERAL
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
trading card market related in part to lower speculative purchases. In
addition, as a result of the baseball, hockey and basketball labor situations
in 1994 and 1995, fan interest declined which adversely affected sports
trading card sales and increased returns for those periods. The level of fan
interest, although showing some signs of improvement during 1996, has not
returned to the levels experienced prior to the labor situations in
professional sports. The Company believes that these factors have negatively
affected the sports trading card business, causing the Company to experience
lower sales, higher returns and higher inventory obsolescence. 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 Company's sales
of entertainment trading cards have been adversely affected by lack of
commercial success of properties licensed from third parties as well as the
lower demand for trading cards based on comic book characters. The result of
the minimum royalty and advertising contractual commitments to licensors
coupled with declines in the Company's trading card net revenues have
significantly and adversely affected the profit margins of the trading card
business and the Company anticipates a continued significant adverse effect on
profit margins due to the current contractual commitments. In response, the
Company has undertaken several strategic actions to increase sales in the face
of the contraction in the sports trading card and entertainment card
businesses. However, to date these actions have not been sufficient to
overcome the overall market decline in the sales of sports trading cards and
entertainment cards.
The Company experienced significant operating losses during 1995 and
1996, and failed to satisfy certain financial covenants contained in the
Credit Agreements (as defined below, 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, 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.
18
<PAGE>
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 matures 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 May 7, 1997, the Company and Toy Biz filed the Marvel/Toy Biz Plan
for the Debtor Companies. The Marvel/Toy Biz Plan contemplates that there will
be the Newco Auction and, as an alternative, the Marvel Auction. If no offers
satisfying the minimum conditions for the Newco Auction or Marvel Auction are
received, or if no transaction based on an offer satisfying such minimum
conditions closes, then pursuant to the Marvel/Toy Biz Plan, the Company's
publishing and licensing businesses and Toy Biz would combine to form Newco.
Pursuant to the Marvel/Toy Biz Plan, Marvel's Fleer/SkyBox and Panini
businesses will also be marketed and may be sold in a separate auction. See
Note 2 of Notes to Condensed Consolidated Financial Statements.
On April 26, 1997, the Creditors Committee filed the Creditors
Committee Plan for the Debtor Companies and the Marvel Holding Companies and a
disclosure statement for such plan with the Bankruptcy Court. See Note 2 of
Notes to Condensed Consolidated Financial Statements.
There can be no assurance that the Marvel/Toy Biz Plan, the Creditors
Committee Plan 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.
From December 27, 1996 through May 5, 1997 these amounts approximated $9.3
million.
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 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 MARCH 31, 1997 COMPARED WITH THE THREE MONTHS ENDED
MARCH 31, 1996
The Company's net revenues were $156.7 million and $189.6 million in
1997 and 1996, respectively, a decrease of $32.9 million or 17.4%. This
reflects a decrease of $28.2 million in net trading card and sticker revenues,
a decrease of $4.0 million in toy revenues, a decrease of $2.5 million in
licensing revenues and a decrease of $1.2 million in net publishing revenues,
partially offset by a $3.0 million increase in other revenues.
The decrease in trading card net revenues was primarily due to greater
than expected weakness due to, among other things, certain mass merchandisers
maintaining lower than expected levels of inventory in part resulting from
concerns arising out of the Company's chapter 11 proceedings and the
continuing general decline in the demand for trading cards. In addition,
entertainment card net revenues decreased due to lower sales of cards based on
properties licensed from third parties resulting from lower commercial success
of such properties in the 1997 period as compared to the 1996 period, as well
as lower sales of cards based on the Marvel Characters due in part to market
conditions in the comic book specialty store market. The decrease in net
revenues of stickers was primarily due to certain actions taken to minimize
returns. In addition, the Company experienced lower net revenues in certain
European markets principally due to lower net revenues from entertainment
stickers based on properties licensed from third parties as a result of lower
commercial success of such properties in the 1997 period as compared to the
1996 period.
19
<PAGE>
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. Licensing revenues decreased in the 1997 period as compared to
the 1996 period primarily 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 was due to the impact on the Company
of the continuing decline in the overall comic book market. The improvement in
other revenues was due to increased sales of confectionery products by Fleer
and adhesive paper by Panini.
Gross profit was $52.2 million and $75.7 million in the 1997 and 1996
periods, respectively, a decrease of $23.5 million. As a percentage of net
revenues, gross profit was 33.3% in the 1997 period as compared to 39.9% 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.
Selling, General & Administrative ("SG&A") expenses were $48.5
million and $52.3 million in the 1997 and 1996 periods, respectively. The
decrease of $3.8 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 31.0% in the 1997 period as compared
to 27.6% in the 1996 period. The increase in SG&A as a percentage of net
revenues was due primarily to lower revenues without a corresponding reduction
in SG&A.
Depreciation and amortization was $4.8 million and $4.4 million in
the 1997 and 1996 periods, respectively. The increase of $.4 million was
primarily due to higher expense primarily resulting from an increased
investment to support Toy Biz's expanded product line and higher depreciation
expense related to fixed assets of Panini, 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 restructuring.
Amortization of goodwill, intangibles and deferred charges was $4.3
million and $5.5 million in the 1997 and 1996 periods, respectively. The
decrease of $1.2 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. 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.
Interest expense, net was $15.6 million and $13.7 million in the 1997
and 1996 periods, respectively. The increase in interest expense of $1.9
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.
Total bankruptcy reorganization items of $3.4 million for the 1997
period includes professional charges and other costs typical to those incurred
by entities in bankruptcy.
Provision for income taxes was $3.8 million and $1.7 million in the
1997 and 1996 periods, respectively. In 1997, the tax provision primarily
represents foreign taxes on income from Panini's operations, taxes on income
from Toy Biz's operations and certain state and local taxes. In 1996, the tax
provision primarily represented foreign taxes on income from Panini's
operations and taxes on income from Toy Biz's operations, offset by a benefit
from remaining operations.
20
<PAGE>
Minority interest in earnings of Toy Biz was $.4 million and $2.0
million in the 1997 and 1996 periods, respectively. The decrease in minority
interest was primarily due to lower net income of Toy Biz partially offset by
Marvel's reduced ownership percentage.
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 matures 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".
At May 5, 1997, the Company's outstanding bank indebtedness was
approximately $719.5 million, of which $69.4 million relates to borrowings
under the DIP Loan (including approximately $6.9 million drawn under letters
of credit), $604.7 million relates to borrowings under the Credit Agreements,
approximately Italian Lire 25 billion (approximately $14.6 million based on
exchange rates at May 5, 1997) relates to borrowings for Panini's Adespan
adhesives facility and approximately Italian Lire 52.8 billion (approximately
$30.8 million based on exchange rates at May 5, 1997) relates to borrowings
under Panini's short term lines of credit. Panini had less than Italian Lire
0.1 billion (less than $100,000 based on exchange rates at May 5, 1997)
available under its foreign credit facilities at May 5, 1997. In addition,
there was approximately $24.5 million (net of letters of credit outstanding)
available under the Toy Biz credit agreement at May 5, 1997.
The Credit Agreements and DIP Loan provide that it is an event of default
if there is a change of control of Marvel. On May 14, 1997, the District Court
overturned the Restraining Order, but stayed the effectiveness of its ruling
for 10 days. If by the end of such 10 day period the Company is unable to
obtain an injunction or stay against actions to change the Board of Directors
of the Company, there will likely be a change of control of the Company. See
Notes 2 of "Notes to Condensed Consolidated Financial Statements." Toy Biz's
credit agreement provides it is an event of default if Marvel does not control
Toy Biz, although Toy Biz believes that upon any such default it will be able
to obtain an amendment or waiver of such event of default or refinance such
indebtedness. There can be no assurance as to the terms and conditions of such
amendment or refinancing.
Although there can be no assurance, the Company believes that borrowings
under the DIP Loan and internally generated funds will be sufficient through
the date of maturity of the DIP Loan to enable the Debtor Companies to meet
their consolidated cash requirements, including debt service. The DIP Loan
matures June 30, 1997 at which time the Company expects it will have borrowed
the full amount available under the DIP Loan. The DIP Loan is subject to a
number of events of default and conditions of borrowing. The Company will need
to extend the maturity of the DIP Loan and increase the amount available for
borrowing under the DIP Loan in order to meet its consolidated cash
requirements until the consummation of a plan of reorganization. There can be
no assurance that any such extension and increase in the amount available for
borrowing can be obtained. In the event borrowings under the DIP Loan become
due either upon maturity or an event of default, prior to a plan of
reorganization being confirmed under the Bankruptcy Code and consummated, or
in the event that the maturity of the DIP Loan is not extended and the amount
available for borrowing under the DIP Loan is not increased, then the Debtor
Companies will have to seek one or more alternatives to provide for its cash
requirements (including the repayment of borrowings under the DIP Loan),
including seeking alternative debtor-in-possession financing and/or sales of
assets and/or sales of one or more of the Company's businesses. Although there
can be no assurance, the Company believes that Panini should be able to meet
its cash requirements, including for debt service and repayment for the next
six months, from permissible advances by Marvel of borrowings under the DIP
Loan, local borrowings and internally generated funds. In the event advances
under the DIP Loan are not available to Panini, 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
21
<PAGE>
terms. The Company anticipates that internally generated funds of Toy Biz and
borrowings under Toy Biz's credit agreement will be sufficient to enable Toy
Biz to meet its cash requirements, including debt service, for the next six
months. See Notes 2 and 4 of "Notes to Condensed Consolidated Financial
Statements".
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
Marvel/Toy Biz Plan or the Creditors Committee Plan. 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 $23.9 million and $22.3
million for the three months ended March 31, 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 March 31, 1997 of $21.7 million, includes $5.2
million of Toy Biz cash.
Cash used in investing activities was $12.6 million and $12.8 million
for the three months ended March 31, 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 $35.3 million in 1997 was
primarily due to borrowings under the DIP Loan, and for 1996 cash provided by
financing activities was $11.4 million, primarily due to net borrowings of
debt.
On April 24, 1997, the Indenture Trustee voted the shares of common
stock of Marvel Holdings pledged to secure the Parent Holdings Notes to remove
the directors of Marvel Holdings and replace them with Messrs. Carl Icahn,
Vincent Intrieri and Robert Mitchell. As a result, Mafco no longer
beneficially owns the approximately 50.03% of the Common Stock of Marvel owned
by Marvel Holdings, and 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 of NOL's carryforwards of the Mafco
affiliated group. Such allocation is not yet determinable. Such NOL's may be
limited under federal income tax laws in the event of a change of control of
the Company, including as a result of the consummation of a plan of
reorganization.
The Company expects to incur approximately $1.0 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, along with its joint venture partner, is continuing
development of Marvel theme restaurants. The first restaurant to open is in
Los Angeles, which is under construction and is projected to open in the
second half of 1997. The Company has posted a reducing standby letter of
credit currently in the amount of approximately $5.2 million to fund
development costs associated with the restaurant being constructed in Los
Angeles.
Toy Biz has authorized the repurchase of up to three million shares
of Class A Common Stock. The repurchase program requires the consent of Marvel
Characters, Inc., a wholly owned subsidiary of Marvel, which has announced
that it will seek approval of the bankruptcy court for such consent. Such
stock repurchase also requires approval under Toy Biz's credit agreement. The
Company has not commenced the repurchase program pending the outcome of the
Marvel/Toy Biz Plan.
22
<PAGE>
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 March 31, 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 continue to draw on the DIP Loan and to obtain additional DIP
Loan financing subsequent to the maturity of the DIP Loan on June 30, 1997 or
in the event of an earlier termination of the DIP Loan, (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 existed 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.
23
<PAGE>
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 March 31, 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.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K.
(A) Exhibits
2.1 Joint Plan of Reorganization dated May 15, 1997.
(B) Reports on Form 8-K
None.
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: May 15, 1997 August J. Liguori
Vice President, Finance
Principal Accounting Officer
<PAGE>
IN THE UNITED STATES BANKRUPTCY COURT
FOR THE DISTRICT OF DELAWARE
- -----------------------------------x
:
In re :
: Chapter 11 Case Nos.
Marvel Entertainment Group, Inc. : 96-2069(HSB) through
et al., : 96-2077(HSB)
:
Debtors.: (Jointly Administered)
:
- -----------------------------------x
JOINT PLAN OF REORGANIZATION
WEIL, GOTSHAL & MANGES LLP BATTLE FOWLER LLP
Attorneys for Toy Biz, Inc. Attorneys for the Debtors
and Debtors in Possession 75 East 55th Street
767 Fifth Avenue New York, New York 10022
New York, New York 10153 (212) 856-7000
(212) 310-8000
-and- -and-
YOUNG, CONAWAY, STARGATT & TAYLOR PEPPER, HAMILTON & SCHEETZ
Debtors Attorneys for Toy Biz, Inc. Attorneys for the
and Debtors in Possession 1201 Market Street
Rodney Square North P.O. Box 1709
Wilmington, Delaware 19899 Wilmington, Delaware 19899
(302) 571-6600 (302) 777-6500
Dated: Wilmington, Delaware
May 15, 1997
<PAGE>
TABLE OF CONTENTS
Page
SECTION 1. DEFINITIONS AND INTERPRETATION.................................. 1
A. Definitions...................................... 1
B. Interpretation; Application of
Definitions and Rules of Construction............ 15
C. Exhibits and Schedules........................... 15
SECTION 2. PROVISIONS FOR PAYMENT OF ADMINISTRATION
EXPENSE CLAIMS AND PRIORITY TAX CLAIMS........................... 16
2.1. Administration Expense Claims.................... 16
2.2. Compensation and Reimbursement Claims............ 16
2.3. Priority Tax Claims.............................. 17
SECTION 3. CLASSIFICATION OF CLAIMS AND EQUITY
INTERESTS........................................................ 17
SECTION 4. PROVISIONS FOR TREATMENT OF CLAIMS AND
EQUITY INTERESTS UNDER THE PLAN.................................. 18
4.1. Priority Non-Tax Claims (Class 1)................ 18
4.2. Senior Secured Claims (Class 2).................. 18
(a) Allowance of Senior Secured Claims............... 18
(b) Treatment of Allowed Fixed Senior
Secured Claims................................... 19
Fixed Senior Secured Claims
(Subclass 2A).................................... 19
(i) Qualifying Transaction............................19
(A) Distributions..............................................19
(B) Distributed Excess Proceeds................................19
(C) Adjustment Distributions...................................19
(ii) No Qualifying Transaction.........................20
(A) Distributions..............................................20
(B) Adjustment to Distributions................................20
Contingent Senior Secured Claims
(Subclass (2B).............................................20
4.3. Other Secured Claims (Class 3)................... 21
i
<PAGE>
TABLE OF CONTENTS
(cont'd)
Page
4.4. General Unsecured Claims (Class 4)............ 21
(a) Qualifying Transaction........................ 21
(i) Distributions............................ 21
(ii) Limitation on Distribution............... 22
(b) No Qualifying Transaction..................... 22
(c) Intercompany Claims........................... 22
4.5. Class Securities Litigation Claims
(Class 5)..................................... 22
(a) Qualifying Transaction. Distributions........ 22
(b) No Qualifying Transaction..................... 23
(c) Calculation of Distribution................... 23
(d) Parity of and Limitation on
Distributions................................. 23
4.6. Equity Interests (Class 6).................... 24
(a) Marvel Entertainment Group, Inc.
(Subclass 6A)................................. 24
(i) Qualifying Transaction.................. 24
(ii) No Qualifying Transaction............... 24
(iii) Parity of an Limitation on
Distributions........................... 24
(b) Fleer Corp. (Subclass 6B)..................... 24
(c) Other Subsidiary Equity Interests
Subclass 6C).................................. 25
4.7. Existing Warrants (Class 7)................... 25
SECTION 5. IDENTIFICATION OF CLASSES OF CLAIMS AND
INTERESTS IMPAIRED AND NOT IMPAIRED UNDER
THE PLAN; ACCEPTANCE OR REJECTION OF THE
PLAN......................................................... 25
5.1. Holders of Claims and Equity Interests
Entitled to Vote.............................. 25
5.2. Subtraction and Addition of Classes and
Subclasses.................................... 26
ii
<PAGE>
TABLE OF CONTENTS
(cont'd)
Page
(a) Subtraction of Classes and Subclasses........... 26
(b) Addition of Classes and Subclasses.............. 26
5.3. Nonconsensual Confirmation...................... 26
5.4. Severability of Plan of Reorganization.......... 27
5.5. Revocation of Plan of Reorganization............ 27
SECTION 6. MEANS OF IMPLEMENTATION........................................ 28
6.1. Closing of Transaction.......................... 28
6.2. Dismissal of Derivative Securities
Litigation Claims............................... 28
6.3. Board of Directors of the Reorganized
Debtors......................................... 29
6.4. Officers of the Reorganized Debtors............. 29
6.5. Toy Biz Cash Distribution....................... 29
6.6. Dissolution of Equity Committees................ 30
6.7. Transfer of FSB-P Entities...................... 30
6.8. Sale of FSB-P Entities.......................... 30
6.9 Expense Reimbursement........................... 31
SECTION 7. PROVISIONS GOVERNING DISTRIBUTIONS............................. 31
7.1. Date of Distributions........................... 31
7.2. Entities to Exercise Function of
Disbursing Agent................................ 31
7.3. Surrender and Cancellation of
Instruments..................................... 31
7.4. Delivery of Distributions....................... 32
7.5. Manner of Payment Under Plan of
Reorganization.................................. 33
7.6. Reserves and Distributions...................... 33
7.7. Distributions After Consummation Date........... 33
7.8. Rights And Powers Of Disbursing Agent........... 33
(a) Powers of the Disbursing Agent.................. 33
(b) Expenses Incurred on or After the
Consummation Date............................... 33
(c) Exculpation..................................... 34
SECTION 8. PROCEDURES FOR TREATING DISPUTED CLAIMS
UNDER THE PLAN OF REORGANIZATION............................... 34
8.1. Objections to Claims............................ 34
8.2. No Distributions Pending Allowance.............. 34
iii
<PAGE>
TABLE OF CONTENTS
(cont'd)
Page
8.3. Distributions After Allowance.................. 34
SECTION 9. PROVISIONS GOVERNING EXECUTORY CONTRACTS
AND UNEXPIRED LEASES UNDER THE PLAN........................... 35
9.1. General Treatment.............................. 35
9.2. Amendments to Schedule; Effect of
Amendments..................................... 36
9.3. Bar to Rejection Damage Claims................. 36
SECTION 10. CONDITIONS PRECEDENT TO CONFIRMATION
DATE AND CONSUMMATION DATE................................... 37
10.1. Conditions Precedent to Confirmation of
Plan of Reorganization......................... 37
(a) Notice of Termination......... 37
(b) Board Authorizations.......... 37
(c) Insurance and Related
Matters....................... 37
(d) Transaction Agreement......... 38
(e) Voting Agent.................. 38
(f) Confirmation Order............ 38
(g) Confirmation Date............. 38
10.2. Conditions Precedent to Consummation
Date of Plan of Reorganization................. 38
(a) Finality of the Confirmation
Order......................... 39
(b) Transaction Agreement......... 39
(c) Consummation Date............. 39
(d) Execution and Delivery of
Documents..................... 39
(e) No Material Adverse Change.... 39
(f) Continuing Directors.......... 39
(g) Toy Biz Fairness Opinion...... 39
(h) Toy Biz Authorization......... 40
(i) Governmental Consents......... 40
(j) Certain Administration
Expense Claims Limitation..... 40
(k) Certain Arrangements with
FSB-P Entities................ 40
10.3. Waiver of Conditions Precedent................. 41
iv
<PAGE>
TABLE OF CONTENTS
(cont'd)
Page
SECTION 11. EFFECT OF CONFIRMATION....................................... 41
11.1. General Authority.............................. 41
11.2. Discharge of Debtors........................... 41
(a) General Discharge.......................41
(b) Specific Release and
Discharge.............................. 42
(c) Treatment of Indemnification
Claims..................................42
11.3. Term of Injunctions or Stays................... 43
SECTION 12. WAIVER OF CLAIMS............................................. 43
12.1. Avoidance Actions.............................. 43
SECTION 13. RETENTION OF JURISDICTION.................................... 43
13.1. Retention of Jurisdiction...................... 43
13.2. Amendment of Plan of Reorganization............ 45
SECTION 14. MISCELLANEOUS PROVISIONS..................................... 45
14.1. Payment of Statutory Fees...................... 45
14.2. Retiree Benefits 41...................... ..... 45
14.3. Compliance with Tax Requirements............... 46
14.4. Recognition of Guarantee Rights................ 46
14.5. Severability of Plan Provisions................ 46
14.6. Governing Law.................................. 46
14.7. Time of the Essence............................ 47
14.8. Standard of Discretion......................... 47
14.9. Counterparts................................... 47
14.10. Notices........................................ 47
v
<PAGE>
LIST OF EXHIBITS AND SCHEDULES
Exhibit A - Confirmation Order
Exhibit B - Merger Agreement
Exhibit C - New FSB-P Debt Securities Agreement
Exhibit D - New FSB-P Holdings Preferred Stock
Certificate of Designation
Exhibit E - New FSB-P Warrants Agreement
Exhibit F - New Series A Secured Notes Agreement
Exhibit G - New Series B Secured Notes Agreement
Exhibit H - Newco Warrants Agreement
Exhibit I - Voting Agreement
Schedule 1.13 - Class Securities Litigation Claims
Schedule 1.22 - Derivative Securities Litigation
Claims
Schedule 1.28 - Equity Rights Schedule
Schedule 9.1 - Certain Executory Contracts and
Unexpired Leases
vi
<PAGE>
JOINT PLAN OF REORGANIZATION
Marvel Entertainment Group, Inc., The Asher Candy Company,
Fleer Corp., Frank H. Fleer Corp., Heroes World Distribution, Inc., Malibu
Comics Entertainment, Inc., Marvel Characters, Inc., Marvel Direct Marketing
Inc. and SkyBox International Inc. and Toy Biz, Inc. jointly and severally
propose the following Joint Plan of Reorganization dated as of May 15, 1997:
SECTION 1. DEFINITIONS AND INTERPRETATION
A. Definitions.
The following terms used herein shall have the respective
meanings defined below:
1.1. Administration Expense Claim means any right to payment
constituting a cost or expense of administration of any of the Reorganization
Cases allowed under sections 503(b) and 507(a)(1) of the Bankruptcy Code,
including, without limitation, (a) any actual and necessary costs and expenses
of preserving the estates of the Debtors, (b) any actual and necessary costs
and expenses of operating the business of the Debtors, (c) any indebtedness or
obligations incurred or assumed by the Debtors in Possession, including,
without limitation, all Obligations (as such term is defined in the DIP Credit
Agreement) outstanding under the DIP Credit Agreement, (d) any allowances of
compensation and reimbursement of expenses to the extent allowed by Final Order
under section 330 or 503 of the Bankruptcy Code, and (e) any fees or charges
assessed against the estates of the Debtors under section 1930, title 28,
United States Code.
1.2. Administrative Agent means The Chase Manhattan Bank as
administrative agent under each of the applicable Existing Credit Agreements or
any successor administrative agent appointed in accordance with any of the
applicable Existing Credit Agreements.
1.3. Allowed means, with reference to any Claim or Equity
Interest, (a) any Claim or Equity Interest against any Debtor which has been
listed by such Debtor in its Schedules, as such Schedules may be amended by the
Debtors from time to time in accordance with Bankruptcy Rule 1009, as
liquidated in amount and not disputed or contingent and for which no contrary
proof of claim has been filed, (b) any Claim or Equity Interest allowed by
Final Order, (c) any
1
<PAGE>
Claim or Equity Interest as to which the liability of the Debtors and the
amount thereof are determined by final order of a court of competent
jurisdiction other than the Bankruptcy Court or (d) any Claim allowed expressly
hereunder.
1.4. Ballot means any form or forms distributed to each
holder of a Claim or Equity Interest entitled to vote on this Plan of
Reorganization on which is to be indicated the acceptance or rejection by such
holder of this Plan of Reorganization.
1.5. Ballot Date means the date fixed by the Bankruptcy Court
as the date by which all Ballots must be received by the Balloting Agent (as
such term is defined in the Disclosure Statement) from holders of impaired
Claims and Equity Interests other than holders of Equity Interests in Subclass
6B (Fleer Corp.) of Class 6 (Equity Interests) and Class 7 (Existing Warrants)
to be counted as acceptances or rejections of this Plan of Reorganization.
1.6. Bankruptcy Code means title 11, United States Code, as
applicable to the Reorganization Cases as in effect on the Confirmation Date.
1.7. Bankruptcy Court means the United States District Court
for the District of Delaware having jurisdiction over the Reorganization Cases
and, to the extent of any reference under section 157, title 28, United States
Code, the unit of such District Court under section 151, title 28, United
States Code.
1.8. Bankruptcy Rules means the Federal Rules of Bankruptcy
Procedure as promulgated by the United States Supreme Court under section 2075,
title 28, United States Code, and any Local Rules of the Bankruptcy Court.
1.9. Business Day means any day other than a Saturday, a
Sunday or any other day on which banking institutions in New York, New York are
required or authorized to close by law or executive order.
1.10. Cash means legal tender of the United States of
America.
1.11. Causes of Action means, without limitation, any and all
actions, causes of action, liabilities, obligations, rights, suits, debts, sums
of money, damages, judgments, claims and demands whatsoever, whether known or
unknown, in law, equity or otherwise.
2
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1.12. Claim means (a) any right to payment from any of the
Debtors, whether or not such right is reduced to judgment, liquidated,
unliquidated, fixed, contingent, matured, unmatured, disputed, undisputed,
legal, equitable, secured, or unsecured or (b) any right to an equitable remedy
for breach of performance if such breach gives rise to a right of payment from
any of the Debtors, whether or not such right to an equitable remedy is reduced
to judgment, fixed, contingent, matured, unmatured, disputed, undisputed,
secured, or unsecured.
1.13. Class Securities Litigation Claims means any Claim
whether or not the subject of an existing lawsuit (other than a Derivative
Securities Litigation Claim) arising from rescission of a purchase or sale of
shares of common stock of Marvel Entertainment Group, Inc., for damages arising
from the purchase or sale of any such security, or for reimbursement or
contribution allowed under section 502 of the Bankruptcy Code on account of any
such Claim including, without limitation, any such Claims identified on
Schedule 1.13 hereto, which Claims shall be subordinated in accordance with
section 510(b) of the Bankruptcy Code.
1.14. Collateral means any property or interest in property
of the estate of any Debtor subject to a Lien to secure the payment or
performance of a Claim, which Lien is not subject to avoidance under the
Bankruptcy Code.
1.15. Confirmation Date means the date on which the Clerk of
the Bankruptcy Court enters the Confirmation Order on its docket.
1.16. Confirmation Hearing means the hearing held by the
Bankruptcy Court on confirmation of this Plan of Reorganization, as such
hearing may be adjourned or continued from time to time.
1.17. Confirmation Order means the order of the Bankruptcy
Court confirming this Plan of Reorganization in substantially the form of the
order annexed as Exhibit A hereto.
1.18. Consummation Date means the latest to occur of (a) the
eleventh day (calculated under Bankruptcy Rule 9006) after the Confirmation
Date if no stay of the Confirmation Order is then in effect, (b) the first
Business Day after any stay of the Confirmation Order expires or otherwise
terminates, and (c) such other date as may be fixed from time to time after the
Confirmation Date by the
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Proponents or, in the event that a Qualifying Transaction is scheduled to close
on the Consummation Date, the Debtors by filing a notice thereof with the
Bankruptcy Court; provided, that in no event shall the Consummation Date occur
earlier than the date of the satisfaction of each of the conditions precedent
to the occurrence of the Consummation Date of this Plan of Reorganization in
section 10.2 hereof unless waived as provided in section 10.3 hereof.
1.19. Contingent Secured Claim means any Claim against Marvel
Entertainment Group, Inc. or any of its subsidiaries governed by or arising out
of the guarantee provisions contained in the Existing Panini Credit Agreements
or evidenced by any of the promissory notes issued thereunder or any letter of
credit issued by a bank or other financial institution which is a party to the
Existing Panini Credit Agreements for the account of Panini S.p.A. or any of
its subsidiaries.
1.20. Continuing Directors means, at any time, any or all of
the members of the Board of Directors of a Debtor as of the Petition Date
(other than any of such members that have resigned from the Board of Directors
of such corporation after the Petition Date) and any other director of such
corporation whose nomination or election to the Board of Directors of such
corporation was approved by a majority of the Continuing Directors then in
office.
1.21. Debtor means each of Marvel Entertainment Group, Inc.,
The Asher Candy Company, Fleer Corp., Frank H. Fleer Corp., Heroes World
Distribution, Inc., Malibu Comics Entertainment, Inc., Marvel Characters, Inc.,
Marvel Direct Marketing Inc., and SkyBox International Inc., each (other than
Malibu Comics Entertainment, Inc.) being a Delaware corporation and Malibu
Comics Entertainment, Inc. being a California corporation, the debtors in
Chapter 11 Case Nos. 96-2069 (HSB) through 96-2077 (HSB), respectively.
1.22. Debtor in Possession means each Debtor in its capacity
as a debtor in possession under sections 1107(a) and 1108 of the Bankruptcy
Code.
1.23. Derivative Securities Litigation Claims means any Claim
being or admitting of being prosecuted derivatively, including, without
limitation, those identified on Schedule 1.23 hereto.
1.24. DIP Credit Agreement means that certain Revolving
Credit and Guaranty Agreement dated as of December 27, 1996 among Marvel
Entertainment Group, Inc., the
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guarantors named therein, the banks party thereto and The Chase Manhattan Bank
as agent as the same may be amended from time to time in accordance with the
terms thereof.
1.25. Disbursing Agent means any entity in its capacity as a
disbursing agent under section 7.2 hereof.
1.26. Disclosure Statement means that certain Disclosure
Statement, including, without limitation, all exhibits and schedules thereto,
in the form approved by the Bankruptcy Court relating to this Plan of
Reorganization.
1.27. Disputed Claim means a Claim against a Debtor that is
not an Allowed Claim.
1.28. Distributed Excess Proceeds has the meaning assigned to
such terms in section 4.2(b)(i)(B) hereof.
1.29. Equity Interest means any share of common stock or
other instrument evidencing a present ownership interest in any of the Debtors,
whether or not transferable, or any option, warrant or right, contractual or
otherwise, to acquire any such interest. For purposes of Subclass 6A (Marvel
Entertainment Group, Inc.) of Class 6 (Equity Interests), the Existing Warrants
shall not be included in such subclass.
1.30. Equity Rights Schedule means Schedule 1.30 hereto
authorizing certain rights relating to the shares of Newco Common Stock to be
distributed under section 4.2(b)(ii)(A)(4) hereof, including, without
limitation, (a) appropriate corporate governance rights, including, without
limitation, appropriate special voting rights and the right to designate a
specified number of directors and (b) rights to access public markets,
including, without limitation, customary registration rights, piggy-back rights
and the right to have the securities listed or admitted for trading on a
national stock exchange or stock market.
1.31. Excess Proceeds means, with reference to a Qualifying
Transaction, the difference, only to the extent positive, of (a) the Net Cash
Proceeds generated by such Qualifying Transaction and (b) the minimum Net Cash
Proceeds required for such Qualifying Transaction to constitute a Marvel
Qualifying Transaction or a Newco Qualifying Transaction, as applicable.
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1.32. Existing Credit Agreements means, collectively, the
Existing Fleer Credit Agreements and the Existing Panini Credit Agreements.
1.33. Existing Fleer Credit Agreements means, collectively,
(a) that certain Amended and Restated Credit and Guarantee Agreement dated as
of August 30, 1994, as amended, among Marvel Entertainment Group, Inc., Fleer
Corp., the financial institutions parties thereto, the co- agents named therein
and The Chase Manhattan Bank (formerly named Chemical Bank) as administrative
agent, (b) that certain Credit and Guarantee Agreement dated as of April 24,
1995, as amended, by and among Marvel Entertainment Group, Inc., Fleer Corp.,
the financial institutions party thereto, the co-agents named therein and The
Chase Manhattan Bank (formerly named Chemical Bank) as administrative agent,
(c) that certain Line of Credit, dated as of March 27, 1996, as amended, among
Fleer Corp., the banks and other financial institutions parties thereto and The
Chase Manhattan Bank as Administrative Agent, (d)(i)(A) any letter of credit
issued for the account of Marvel Entertainment Group, Inc. or any of its
subsidiaries by a bank or other financial institution which is a party to any
of the Existing Credit Agreements referred to in clauses (a) or (b) of this
section 1.33 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 (d)(i)A) of this section 1.33 or (ii)
any interest rate agreement between Marvel Entertainment Group, Inc. or any of
its subsidiaries and a bank or other financial institution which is a party to
any of the Existing Credit Agreements referred to in clauses (a) through (c)
inclusive, of this section 1.33 and (e) 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.
1.34. Existing Panini Credit Agreements means (a) that
certain Term Loan and Guarantee Agreement dated as of August 30, 1994, as
amended, among Marvel Entertainment Group, Inc., Panini, S.p.A. (formerly named
Marvel Comics Italia S.r.l.), and Instituto Bancario San Paolo Di Torino,
S.p.A., and (b) the related Participation Agreement dated as of August 30, 1994
among Instituto Bancario San Paolo Di Torino, S.p.A., New York Limited Branch,
as Italian Lender, The Chase Manhattan Bank, as Administrative Agent, and the
financial institutions signatory thereto, as participants and (c)(i)(A) any
letter of credit issued for the account of Panini S.p.A. or any of its
subsidiaries by a bank or other financial institution which is a party to any
of the
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Existing Panini Credit Agreements referred to in clauses (a) or (b) of this
section 1.34 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) of this section 1.34 or (ii)
any interest rate agreement between Panini S.p.A. or any of its subsidiaries
and a bank or other financial institution which is a party to any of the
Existing Panini Credit Agreements referred to in clauses (a) through (b),
inclusive, of this section 1.34 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.
1.35. Existing Warrants means, collectively, all incentive
stock options, non-qualified stock options and stock appreciation rights
granted under that certain Marvel Entertainment Group, Inc. Amended and
Restated Stock Option Plan and any other options, warrants or rights,
contractual or otherwise, if any, to acquire an Equity Interest.
1.36. Final Order means an order or judgment of the
Bankruptcy Court entered by the Clerk of the Bankruptcy Court on the docket in
the Reorganization Cases, which has not been reversed, vacated or stayed and as
to which (a) the time to appeal, petition for certiorari or move for a new
trial, reargument or rehearing has expired and as to which no appeal, petition
for certiorari or other proceedings for a new trial, reargument or rehearing
shall then be pending or (b) if an appeal, writ of certiorari, new trial,
reargument or rehearing thereof has been sought, such order or judgment of the
Bankruptcy Court shall have been affirmed by the highest court to which such
order was appealed, or certiorari shall have been denied or a new trial,
reargument or rehearing shall have been denied or resulted in no modification
of such order, and the time to take any further appeal, petition for certiorari
or move for a new trial, reargument or rehearing shall have expired; provided,
that the possibility that a motion under Rule 60 of the Federal Rules of Civil
Procedure, or any analogous rule under the Bankruptcy Rules, may be filed
relating to such order shall not cause such order not to be a Final Order.
1.37. Fixed Senior Secured Claim means any Claim governed by
any of the Existing Fleer Credit Agreements or evidenced by any of the
promissory notes issued thereunder or any letter of credit issued by a bank or
other financial institution which is a party to any of the Existing Fleer
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Credit Agreements for the account of Marvel Entertainment Group, Inc. or any of
its subsidiaries or any interest rate agreement between Marvel Entertainment
Group, Inc. or any of its subsidiaries and a bank or other financial
institution which is a party to any of the Existing Fleer Credit Agreements.
1.38. FSB-P Entities means, collectively, Fleer Corp. and
Panini S.p.A. and the respective subsidiaries of each of the foregoing
entities.
1.39. FSB-P Holdings means FSB-P Holding Company, Inc., a
Delaware corporation to be formed on or before the Consummation Date in the
event that the FSB-P Entities shall not have been sold before the Consummation
Date, which corporation shall hold directly all of the existing or newly issued
common stock of Fleer Corp. and Panini S.p.A.
1.40. FSB-P Proceeds means any and all net proceeds realized
from the sale of the FSB-P Entities on or before the Consummation Date net of
cash payment of expenses associated with such sale, including, without
limitation, reasonable attorneys' and investment bankers' fees. For purposes of
calculating any amount of FSB-P Proceeds, amounts distributed on account of
indebtedness owed by Panini S.p.A. under any of the Existing Panini Credit
Agreements shall constitute FSB-P Proceeds.
1.41. FSB-P Sale Termination Date means the earlier to occur
of (a) the ninetieth day after the Consummation Date and (b) December 31, 1997.
1.42. General Unsecured Claim means any Unsecured
Claim other than a Class Securities Litigation Claim.
1.43. Intercompany Claims means any and all Claims held by
any Debtor against any other Debtor, including, without limitation, all
derivative Claims asserted by or on behalf of any one Debtor against any other
Debtor.
1.44. Lien means any charge against or interest in property
or an interest in property to secure payment of a debt or performance of an
obligation.
1.45. Marvel means, collectively, Marvel Entertainment Group,
Inc. and each of its subsidiaries other than the FSB-P Entities.
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1.46. Marvel Qualifying Transaction means (a) a transaction
acceptable to Marvel to acquire all of the common stock of Marvel or all of the
properties and interests in property of Marvel that generates Net Cash Proceeds
equal to or greater than the sum of (i) the Senior Secured Cash Distribution,
plus (ii) seven million dollars ($7,000,000) Cash in the event that such seven
million dollars ($7,000,000) is payable to holders of common stock of Toy Biz
(other than Marvel) in accordance with any order of the Bankruptcy Court or (b)
such other transaction approved by Marvel and consented to by the holders of
the Senior Secured Claims provided that such transaction includes a mechanism
for the payment at closing of the seven million dollars ($7,000,000) payment
contemplated by clause (a) of this section 1.46.
1.47. Merger Agreement means that certain Agreement and Plan
of Merger dated as of May [ ], 1997 among Toy Biz, Inc., Marvel Entertainment
Group, Inc. [and other entity] annexed as Exhibit B hereto as the same may be
amended from time to time in accordance with the terms thereof.
1.48. Net Cash Proceeds means the gross proceeds in Cash
generated from any Qualifying Transaction that closes on or before the
Consummation Date net of Cash payments of the following, without duplication:
(a) the aggregate amount of Allowed Administration Expense Claims, including,
without limitation, the Obligations (as such term is defined in the DIP Credit
Agreement) outstanding under the DIP Credit Agreement, (b) the aggregate amount
of Allowed Priority Non-Tax Claims, (c) the aggregate amount of Allowed
Priority Tax Claims, (d) the aggregate amount of Cash required to cure
executory contracts and unexpired leases assumed and assigned under section 365
of the Bankruptcy Code, (e) $[ ], representing the distribution to be made on
account of Allowed General Unsecured Claims under sections 4.4(a)(i) and 4.4(b)
hereof, (f) in the event of a Newco Qualifying Transaction, the out-of-pocket
costs and expenses, including, without limitation, reasonable fees and expenses
of attorneys and investment bankers, incurred by Toy Biz in connection with the
Reorganization Cases and the transactions contemplated hereby, including,
without limitation, costs and expenses incurred in connection with or related
to the preparation of any proxy statement, the making of any securities
registration and the solicitation of any proxies for Toy Biz, all in an
aggregate amount not to exceed three million, five hundred thousand dollars
($3,500,000) and (g) all fees and charges due and owing on the Consummation
Date under the Existing Credit Agreements
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and all other costs and expenses of the holders of the Senior Secured Claims,
including, without limitation, all reasonable fees and expenses of attorneys
and investment bankers, incurred by the holders of the Senior Secured Claims.
1.49. New FSB-P Debt Securities means the senior term notes
issued by any of the FSB-P Entities and governed by the New FSB-P Debt
Securities Agreement, which notes shall be issued in an aggregate original
principal amount equal to the difference, to the extent positive, of (a) one
hundred eighty million dollars ($180,000,000), minus (b) the sum of (i) the
amount of the Distributed Excess Proceeds, if any, plus (ii) the aggregate
obligations outstanding under the Existing Panini Credit Agreements as of the
Consummation Date and, in the event and to the extent issued by Panini S.p.A.,
be contractually subordinated to the obligations outstanding under the Existing
Panini Credit Agreements.
1.50. New FSB-P Debt Securities Agreement means that certain
FSB-P Debt Securities Agreement governing the New FSB-P Debt Securities in
substantially the form of Exhibit C hereto.
1.51. New FSB-P Holdings Common Stock means all of the issued
and outstanding common stock of FSB-P Holdings.
1.52. New FSB-P Holdings Preferred Stock means the 11.5%
Redeemable Preferred Stock issued by FSB-P Holdings and governed by the New
FSB-P Holdings Preferred Stock Certificate of Designation, which preferred
stock shall accrue cumulative dividends at a fixed annual rate of 11.5%, shall
have an aggregate liquidation preference equal to the Distributed Excess
Proceeds, and shall be redeemable at a redemption price equal to the aggregate
liquidation preference, plus accrued dividends to the date of redemption and
redeemed ratably after the sale of the FSB-P Entities and only to the extent of
net cash proceeds realized from such sale after full satisfaction and discharge
in Cash of all indebtedness issued by any or all of the FSB-P Entities or FSB-P
Holdings, including, without limitation, interest accrued on such indebtedness,
owing to the holders of Senior Secured Claims (which indebtedness shall be in
an aggregate original principal amount not exceeding one hundred eighty million
dollars ($180,000,000) as of the Consummation Date) and all reasonable fees and
expenses associated with such sale, including, without limitation, reasonable
attorneys' and investment bankers' fees and expenses.
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1.53. New FSB-P Holdings Preferred Stock Certificate of
Designation means that certain Certificate of Designation of Rights and
Preferences of 11.5% Redeemable Preferred Stock of FSB-P Holding Company, Inc.,
in substantially the form of Exhibit D hereto.
1.54. New FSB-P Warrants means, collectively, those certain
Warrants issued by each of Fleer Corp. and Panini S.p.A. and evidencing the
right to purchase during the period beginning on the Consummation Date and
ending on FSB-P Sale Termination Date ninety-percent (90.0%) of the fully
diluted common stock of each of Fleer Corp. and Panini S.p.A., respectively,
with an exercise price of one cent ($.01) for each share and appropriate
corporate governance rights associated therewith, in substantially the form of
Exhibits 1-A and 1-B, respectively, to the New FSB-P Warrants Agreement.
1.55. New FSB-P Warrants Agreement means that certain Warrant
Agreement governing the New FSB-P Warrants in substantially the form of Exhibit
E hereto.
1.56. New Series A Secured Notes means those certain 11.5%
Series A Secured Notes issued by Newco and governed by the New Series A Secured
Notes Agreement, which notes shall accrue interest, at a fixed annual rate of
11.5%, compounded monthly, payable in Cash or in kind at the option of Newco
and mature on the fifth anniversary of the Consummation Date, in substantially
the form of Exhibit [ ] to the New Series A Secured Notes Agreement.
1.57. New Series A Secured Notes Agreement means that certain
11.5% Series A Secured Notes Agreement in substantially the form of Exhibit F
hereto.
1.58. New Series B Secured Notes means those certain 14.5%
Series B Non-Recourse Secured Notes issued by Newco and governed by the New
Series B Secured Notes Agreement, which notes shall have recourse limited only
to the capital stock of the FSB-P Entities and the properties and interests in
property of Fleer Corp. and its subsidiaries and otherwise be non-recourse to
the properties and interests in property of Newco and its subsidiaries, accrue
interest, at a fixed annual rate of 14.5%, compounded monthly, payable in cash
or in kind at the option of Newco and mature on the fifth anniversary of the
Consummation Date, in substantially the form of Exhibit E to the New Series B
Secured Notes Agreement.
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1.59. New Series B Secured Notes Agreement means that certain
14.5% Series B Non-Recourse Secured Notes Agreement in substantially the form
of Exhibit G hereto.
1.60. Newco means, as applicable, (a) the entity resulting
from the combination of Marvel and Toy Biz or (b)(i) in the event that such
combination is effected through a merger or other combination of a subsidiary
of Marvel Entertainment Group, Inc. and Toy Biz, Marvel Entertainment Group,
Inc. after the effective time of such merger and (ii) in the event that such
combination is effected through a merger or other combination of a subsidiary
of Toy Biz and Marvel Entertainment Group, Inc., Toy Biz after the effective
time of such merger.
1.61. Newco Common Stock means issued and outstanding shares
of common stock of Newco as of the Consummation Date.
1.62. Newco Qualifying Transaction means a transaction to
acquire (a) all of the common stock of Newco, or (b) all of the common stock of
Marvel and Toy Biz that generates Net Cash Proceeds equal to or greater than
the sum of (i) the Senior Secured Cash Distribution, plus (ii) the Toy Biz Cash
Distribution.
1.63. Newco Warrants means, collectively, (a) those certain
Series A Warrants issued by Newco and evidencing the right to purchase during
the period beginning on the Consummation Date and ending on the third
anniversary of the Consummation Date seven and one-half percent (7.5%) of the
fully diluted common stock of Newco (before giving effect to the exercise of
the Series B Warrants) with an exercise price to be fixed as of the
Consummation Date at an assumed total enterprise value of Newco of nine hundred
fifty million dollars ($950,000,000) in substantially the form of Exhibit 1-A
to the Newco Warrants Agreement and (b) those certain Series B Warrants issued
by Newco and evidencing the right to purchase during the period beginning on
the Consummation Date and ending on the third anniversary of the Consummation
Date five percent (5.0%) of the fully diluted common stock of Newco with an
exercise price fixed as of the Consummation Date at an assumed total enterprise
value of Newco of one billion, one hundred million dollars ($1,100,000,000) in
substantially the form of Exhibit 1-B to the Newco Warrants Agreement.
1.64. Newco Warrants Agreement means that certain Warrant
Agreement governing the Newco Warrants in substantially the form of Exhibit H
hereto.
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1.65. Other Secured Claims means any Secured Claim not
constituting a Senior Secured Claim.
1.66. Other Subsidiary Equity Interests means the Equity
Interests in any of the Debtors other than Fleer Corp. held by any of the other
Debtors.
1.67. Petition Date means December 27, 1996, the date on
which each of the Debtors filed its voluntary petition for relief under the
Bankruptcy Code.
1.68. Plan of Reorganization means this Joint Plan of
Reorganization dated as of May 15, 1997, including, without limitation, the
exhibits and schedules hereto, as the same may be amended or modified from time
to time in accordance with the terms hereof.
1.69. Priority Non-Tax Claim means any Claim of a kind
specified in section 507(a)(2), (3), (4), (5), (6), (7) or (9) of the
Bankruptcy Code.
1.70. Priority Tax Claim means any Claim of a governmental
unit of the kind specified in section 507(a)(8) of the Bankruptcy Code.
1.71. Proponents means, collectively, the Debtors and Toy
Biz, subject to the operation of section 5.5 hereof.
1.72. Qualifying Transaction means (a) a Marvel Qualifying
Transaction or (b) a Newco Qualifying Transaction.
1.73. Ratable Proportion means, with reference to any
distribution on account of any Allowed Claim or Allowed Equity Interest in any
class or subclass, as applicable, a distribution equal in amount to the ratio
(expressed as a percentage) that the amount of such Allowed Claim or Allowed
Equity Interest, as applicable, bears to the aggregate amount of Allowed Claims
or Allowed Equity Interests of the same class or subclass.
1.74. Reorganization Cases means the cases commenced under
chapter 11 of the Bankruptcy Code by the Debtors on the Petition Date.
1.75. Reorganized means, with reference to any Debtor, such
Debtor (unless such Debtor is a Debtor for which this Plan of Reorganization is
not confirmed in accordance with section 5.4 hereof) or any successor in
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interest thereto from and after the Consummation Date, including, without
limitation, Newco, if applicable.
1.76. Required Holders means the holders of [ ] of the
aggregate Allowed Fixed Senior Secured Claims and Allowed Contingent Senior
Secured Claims.
1.77. Schedules means the schedules of assets and liabilities
and the statements of financial affairs filed by the Debtors under section 521
of the Bankruptcy Code and the Official Bankruptcy Forms of the Bankruptcy
Rules as such schedules and statements have been or may be supplemented or
amended.
1.78. Secured Claim means a Claim secured by a Lien on
Collateral to the extent of the value of such Collateral, as determined in
accordance with section 506(a) of the Bankruptcy Code or, in the event that
such Claim is subject to setoff under section 553 of the Bankruptcy Code, to
the extent of such setoff.
1.79. Securities Act means the Securities Act of 1933, as
amended, and the rules and regulations promulgated thereunder.
1.80. Senior Secured Cash Distribution means Cash in an
amount equal to the difference of (a) the aggregate Allowed Senior Secured
Claims as of the Consummation Date, minus (b) one hundred eighty million
dollars ($180,000,000), subject to reduction in the event that FSB-P Proceeds
are applied on or before the Consummation Date to the obligations outstanding
under the Existing Credit Agreements.
1.81. Senior Secured Claim means any Contingent Senior
Secured Claim and any Fixed Senior Secured Claim.
1.82. Toy Biz means Toy Biz, Inc., a Delaware corporation.
1.83. Toy Biz Cash Distribution means two hundred eighty-five
million dollars ($285,000,000) Cash payable in immediately available funds to
the holders of common stock of Toy Biz (other than Marvel) in accordance with
instructions to be provided to the Debtors by Toy Biz on or before the
Consummation Date.
1.84. Transaction Agreement means (a) the Merger Agreement or
(b) any definitive agreement governing any
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Qualifying Transaction that is to close on or before the Consummation Date, as
applicable.
1.85. Transaction means (a) the transactions contemplated by
the Merger Agreement or (b) any Qualifying Transaction that is to close on or
before the Consummation Date.
1.86. Unsecured Claim means any Claim against a Debtor that
is not an Administration Expense Claim, a Priority Non-Tax Claim, a Priority
Tax Claim or a Secured Claim.
1.87. U.S. Trustee means the United States Trustee appointed
under section 581, title 28, United States Code to serve in the District of
Delaware.
1.88. Voting Agreement means that certain Voting Agreement
among Avi Arad, Isaac Perlmutter, Marvel Entertainment Group, Inc. and the
Administrative Agent under which, among other things, Messrs. Arad and
Perlmutter agree to vote shares of common stock of Toy Biz owned or controlled
by such individuals to approve the merger of Toy Biz and Marvel in
substantially the form of Exhibit H hereto.
B. Interpretation; Application of
Definitions and Rules of Construction.
Unless otherwise specified, all section, schedule or exhibit
references in this Plan of Reorganization are to the respective section in,
article of, or schedule or exhibit to, this Plan of Reorganization, as the same
may be amended, waived, or modified from time to time. The words "herein,"
"hereof," "hereto," "hereunder," and other words of similar import refer to
this Plan of Reorganization as a whole and not to any particular section,
subsection or clause contained in this Plan of Reorganization. A term used
herein that is not defined herein shall have the meaning assigned to that term
in the Bankruptcy Code. The rules of construction contained in section 102 of
the Bankruptcy Code shall apply to the construction of this Plan of
Reorganization. The headings in this Plan of Reorganization are for convenience
of reference only and shall not limit or otherwise affect the provisions
hereof.
C. Exhibits and Schedules.
The Merger Agreement and the Voting Agreement, which shall be
in form and substance satisfactory to each of
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the Proponents, shall be contained in a separate Exhibit Volume that shall be
filed with the Clerk of the Bankruptcy Court not later than ten days prior to
the commencement of the hearing on approval of the Disclosure Statement or such
later date as the Bankruptcy Court may fix. All Exhibits (other than the Merger
Agreement and the Voting Agreement) and Schedules to this Plan of
Reorganization, which shall be in form and substance acceptable to each of the
Proponents, shall be contained in a separate Exhibit Volume that shall be filed
with the Clerk of the Bankruptcy Court not later than ten days prior to the
commencement of the Confirmation Hearing or such later date as the Bankruptcy
Court may fix.
SECTION 2. PROVISIONS FOR PAYMENT OF
ADMINISTRATION EXPENSE CLAIMS
AND PRIORITY TAX CLAIMS
2.1. Administration Expense Claims.
On the Consummation Date, each holder of an Allowed
Administration Expense Claim shall be distributed on account of such Allowed
Administration Expense Claim an amount in Cash equal to the amount of such
Allowed Administration Expense Claim, except to the extent that any entity
entitled to payment of any Allowed Administration Expense Claim agrees to a
different treatment of such Administration Expense Claim; provided, that
Allowed Administration Expense Claims representing liabilities incurred in the
ordinary course of business by the Debtors in Possession or liabilities arising
under loans or advances to or other obligations incurred by the Debtors in
Possession, whether or not incurred in the ordinary course of business, shall
be assumed and paid by the Reorganized Debtors in accordance with the terms and
subject to the conditions of any agreements governing, instruments evidencing
or other documents relating to such transactions.
This Plan of Reorganization constitutes a motion by the
Proponents governed by this Plan of Reorganization to fix a bar date for the
filing of Administrative Expense Claims other than the Administration Expense
Claims treated under section 2.2 hereof, which shall be a date fixed by order
of the Bankruptcy Court.
2.2. Compensation and Reimbursement Claims.
All entities seeking an award by the Bankruptcy Court of
compensation for services rendered or reimbursement of expenses incurred
through and including the Consummation
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Date under sections 503(b)(2), of the Bankruptcy Code (a) shall (i) serve
notice of an estimate of their respective final applications for allowance of
compensation for services rendered and reimbursement of expenses incurred on
the Proponents, or, in the event that a Qualifying Transaction is scheduled to
close on the Consummation Date, the Debtors one (1) Business Day prior to the
commencement of the Confirmation Hearing and (ii) file their respective final
applications for allowances of compensation for services rendered and
reimbursement of expenses incurred by the date that is forty-five (45) days
after the Consummation Date and, if granted such an award by the Bankruptcy
Court, (b) shall be paid in full in such amounts as are allowed by the
Bankruptcy Court (i) upon the later of (A) the Consummation Date and (B) the
date upon which the order relating to any such Administration Expense Claim
becomes a Final Order or (ii) upon such other terms as may be mutually agreed
upon between such holder of an Administration Expense Claim and the Debtors or,
on and after the Consummation Date, the Reorganized Debtors.
2.3. Priority Tax Claims.
On the Consummation Date, each holder of an Allowed Priority
Tax Claim shall be distributed on account of such Allowed Priority Tax Claim a
payment in Cash equal to the amount of such Allowed Priority Tax Claim.
SECTION 3. CLASSIFICATION OF CLAIMS
AND EQUITY INTERESTS
Claims against and Equity Interests in the Debtors are
divided into the following classes:
Class 1 - Priority Non-Tax Claims
Class 2 - Senior Secured Claims
Subclass 2A - Fixed Senior Secured Claims
Subclass 2B - Contingent Senior Secured Claims
Class 3 - Other Secured Claims
Subclass 3A - Marvel Entertainment Group, Inc.
Subclass 3B - The Asher Candy Company
Subclass 3C - Fleer Corp.
Subclass 3D - Frank H. Fleer Corp.
Subclass 3E - Heroes World Distribution, Inc.
Subclass 3F - Malibu Comics Entertainment, Inc.
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Subclass 3G - Marvel Characters, Inc.
Subclass 3H - Marvel Direct Marketing Inc.
Subclass 3I - SkyBox International Inc.
Class 4 - General Unsecured Claims
Subclass 4A - Marvel Entertainment Group, Inc.
Subclass 4B - The Asher Candy Company
Subclass 4C - Fleer Corp.
Subclass 4D - Frank H. Fleer Corp.
Subclass 4E - Heroes World Distribution, Inc.
Subclass 4F - Malibu Comics Entertainment, Inc.
Subclass 4G - Marvel Characters, Inc.
Subclass 4H - Marvel Direct Marketing Inc.
Subclass 4I - SkyBox International Inc.
Subclass 4J - Intercompany Claims
Class 5 - Class Securities Litigation Claims
Class 6 - Equity Interests
Subclass 6A - Marvel Entertainment Group, Inc.
Subclass 6B - Fleer Corp.
Subclass 6C - Other Subsidiary Equity Interests
Class 7 - Existing Warrants
SECTION 4. PROVISIONS FOR TREATMENT OF CLAIMS
AND EQUITY INTERESTS UNDER THE PLAN
4.1. Priority Non-Tax Claims (Class 1).
On the Consummation Date, each holder of an Allowed Priority
Non-Tax Claim shall be distributed on account of such Allowed Priority Claim a
payment in Cash equal to the amount of its Allowed Priority Non-Tax Claim.
4.2. Senior Secured Claims (Class 2).
(a) Allowance of Senior Secured Claims. On the Consummation
Date, the Claims of each holder of a Senior Secured Claim under each of the
Existing Credit Agreements (other than Claims held by any holder of a Senior
Secured Claim or any affiliate thereof that serves or has served as an
appointee on any committee organized by the U.S. Trustee in the cases commenced
by Marvel Holdings Inc., Marvel (Parent) Holdings Inc. and Marvel III Holdings
Inc.) shall be allowed in the amounts owing to such holder under the applicable
Existing Credit Agreement as of the date hereof,
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together with interest, fees, charges and other amounts owing under the
Existing Credit Agreements through the Consummation Date.
(b) Treatment of Allowed Fixed Senior Secured
Claims.
Fixed Senior Secured Claims (Subclass 2A).
(i) Qualifying Transaction.
(A) Distributions. In the event that a Qualifying Transaction
closes on the Consummation Date, each holder of an Allowed Fixed Senior Secured
Claim shall be distributed on the Consummation Date its Ratable Proportion of
(1) the Senior Secured Cash Distribution, (2), subject to sections 4.2(b)(i)(B)
and 4.2(b)(i)(C) hereof, as applicable, hereof, the New FSB-P Debt Securities
and the New FSB-P Holdings Common Stock and (3) subject to the operation of
section 4.2(b)(i)(B) hereof, the Distributed Excess Proceeds.
(B) Distributed Excess Proceeds. In the event that a
Qualifying Transaction that closes on the Consummation Date generates Excess
Proceeds, the holders of Allowed Fixed Senior Secured Claims and, to the extent
applicable, the holders of the Allowed Contingent Senior Secured Claims shall
be distributed all such Excess Proceeds in an aggregate amount not to exceed
one hundred eighty million dollars ($180,000,000) (the "Distributed Excess
Proceeds"). In the event that the holders of the Allowed Fixed Senior Secured
Claims and, to the extent applicable, the holders of the Allowed Contingent
Senior Secured Claims are distributed Distributed Excess Proceeds, New FSB-P
Holding Company Preferred Stock with an aggregate original liquidation
preference equal to such Distributed Excess Proceeds shall be distributed on
account of Allowed Claims in Class 4 (General Unsecured Claims), Class 5 (Class
Securities Litigation Claims) and Equity Interests in Subclass 6A (Marvel
Entertainment Group, Inc.) of Class 6 (Equity Interests) and, as applicable,
each subclass thereof in accordance with sections 4.4, 4.5 and 4.6 hereof. Such
Distributed Excess Proceeds shall be distributed, first, to the holders of
Allowed Fixed Senior Secured Claims in an amount equal to the difference, to
the extent positive, of one hundred eighty million ($180,000,000), minus the
Allowed Contingent Senior Secured Claims outstanding as of the Consummation
Date and, second, to the holder of Allowed Contingent Senior Secured Claims to
be applied ratably to
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the obligations outstanding under the Existing Panini Agreements.
(C) Adjustment Distributions. In the event that a Qualifying
Transaction that closes on the Consummation Date generates Excess Proceeds, and
to the extent that the FSB-P Entities are sold on or before the Consummation
Date and the FSB-P Proceeds realized therefrom are less than one hundred eighty
million dollars ($180,000,000), the holders of Allowed Fixed Senior Secured
Claims and, to the extent applicable, the Allowed Contingent Senior Secured
Claims shall be distributed ratably such Excess Proceeds before any
distributions of Excess Proceeds are made to the holders of Claims in Class 4
(General Unsecured Claims), Class 5 (Class Securities Litigation Claims) and
Equity Interests in Subclass 6A (Marvel Entertainment Group, Inc.) of Class 6
(Equity Interests) and, as applicable, each subclass thereof in accordance with
sections 4.4, 4.5 and 4.6 hereof.
(ii) No Qualifying Transaction.
(A) Distributions. In the event that no Qualifying
Transaction closes on the Consummation Date, each holder of an Allowed Fixed
Senior Secured Claim shall be distributed on the Consummation Date its Ratable
Proportion of (1) the difference, to the extent positive, of (a) two hundred
fifty million dollars ($250,000,000) Cash, minus (b) all Obligations (as such
term is defined in the DIP Credit Agreement) outstanding under the DIP Credit
Agreement as of the Consummation Date, (2) one hundred seventy million dollars
($170,000,000) in aggregate original principal amount of New Series A Secured
Notes, (3) eighty million dollars ($80,000,000) in aggregate original principal
amount of New Series B Secured Notes, (4) shares of Newco Common Stock
representing 28.0% of the issued and outstanding primary shares of Newco Common
Stock as of the Consummation Date having the rights outlined on the Equity
Rights Schedule, and (5) the New FSB-P Warrants.
(B) Adjustment to Distributions. In the event that (1) any or
all of the FSB-P Entities are sold before the Consummation Date, (2) the net
cash proceeds realized therefrom exceed one hundred eighty million dollars
($180,000,000) and (3) no Qualifying Transaction closes on the Consummation
Date, the distribution of Cash provided in section 4.2(b)(ii)(A) hereof shall
be increased and the distribution of shares of Newco Common Stock provided
under section 4.2(b)(ii)(D) hereof shall be decreased each by an amount equal
to such excess, assuming the 28.0% of Newco Common Stock otherwise
distributable shall have a value as
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of the Consummation Date equal to one hundred ten million dollars
($110,000,000).
Contingent Senior Secured Claims (Subclass 2B). Each holder
of an Allowed Contingent Senior Secured Claim shall be distributed its Ratable
Proportion of (1) the net proceeds from a sale of Panini S.p.A. on or before
the Consummation Date, (2) to the extent applicable, the portion of the
Distributed Excess Proceeds payable on account of Allowed Contingent Senior
Secured Claims under section 4.2(b)(i)(B) hereof and (3) to the extent
applicable, the portion of the distribution payable on account of Allowed
Contingent Senior Secured Claims under section 4.2(b)(i)(C) hereof.
Notwithstanding anything herein to the contrary, in the event that Panini
S.p.A. has not been sold on or prior to the Consummation Date, the obligations
outstanding against Panini S.p.A. under the Existing Panini Credit Agreements
shall remain outstanding. In the event of a sale of Panini S.p.A., the net
proceeds thereof shall be applied to reduce and satisfy the obligations under
the Existing Panini Credit Agreements.
4.3. Other Secured Claims (Class 3).
On the Consummation Date, each holder of an Allowed Other
Secured Claim in each subclass of Class 3 (Other Secured Claims) shall (a) be
distributed on account of such Allowed Other Secured Claim Cash equal to such
Allowed Other Secured Claim, (b) be distributed on account of such Allowed
Other Secured Claim the Collateral securing such Allowed Other Secured Claim or
(c) have such Allowed Other Secured Claim reinstated as against the applicable
Reorganized Debtor and made unimpaired in accordance with section 1124(2) of
the Bankruptcy Code, notwithstanding any contractual provision or applicable
nonbankruptcy law that entitles the holder of an Allowed Other Secured Claim to
demand and receive payment of such Claim prior to the stated maturity of such
Claim from and after the occurrence of a default. Such treatment shall be
determined by Toy Biz in the event that no Qualifying Offer closes on the
Consummation Date, subject to the approval of the holders of the Senior Secured
Claims which may not be unreasonably withheld or delayed.
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4.4. General Unsecured Claims (Class 4).
(a) Qualifying Transaction.
(i) Distributions.
In the event that a Qualifying Transaction closes on the
Consummation Date, each holder of an Allowed General Unsecured Claim in each of
Subclass 4A (Marvel Entertainment Group, Inc.), Subclass 4B (The Asher Candy
Company), Subclass 4C (Fleer Corp.), Subclass 4D (Frank H. Fleer Corp.),
Subclass 4E (Heroes World Distribution, Inc.), Subclass 4F (Malibu Comics
Entertainment, Inc.), Subclass 4G (Marvel Characters, Inc.), Subclass 4H
(Marvel Direct Marketing Inc.) and Subclass 4I (SkyBox International Inc.) of
Class 4 (General Unsecured Claims) shall, to the extent not paid prior to the
Consummation Date, be distributed its Ratable Proportion of (A) $[ ], (B)
subject to section 4.2 hereof and to the extent applicable, the Excess Proceeds
and (C) subject to section 4.2 hereof and to the extent applicable, the New
FSB-P Holdings Preferred Stock.
(ii) Limitation on Distribution.
In the event that a Qualifying Transaction closes on the
Consummation Date, in no event shall any holder of an Allowed General Unsecured
Claim in any of Subclass 4A (Marvel Entertainment Group, Inc.), Subclass 4B
(The Asher Candy Company), Subclass 4C (Fleer Corp.), Subclass 4D (Frank H.
Fleer Corp.), Subclass 4E (Heroes World Distribution, Inc.), Subclass 4F
(Malibu Comics Entertainment, Inc., (Subclass 4G (Marvel Characters, Inc.,),
Subclass 4H (Marvel Direct Marketing Inc.) and Subclass 4I (SkyBox
International Inc.) of Class 4 (General Unsecured Claims) be distributed on
account of such Allowed General Unsecured Claims an amount greater than such
Allowed General Unsecured Claim and interest thereon at a fixed annual rate
equal to [ ]% accruing from the period beginning on the Petition Date and
ending on the date of payment.
(b) No Qualifying Transaction. In the event that no
Qualifying Transaction closes on the Consummation Date, each holder of an
Allowed General Unsecured Claim in each of Subclass 4A (Marvel Entertainment
Group, Inc.), Subclass 4B (The Asher Candy Company), Subclass 4C (Fleer Corp.),
Subclass 4D (Frank H. Fleer Corp.), Subclass 4E (Heroes World Distribution,
Inc.), Subclass 4F (Malibu Comics
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Entertainment, Inc., Subclass 4G (Marvel Characters, Inc.,), Subclass 4H
(Marvel Direct Marketing Inc.) and Subclass 4I (SkyBox International Inc.) of
Class 4 (General Unsecured Claims) shall be distributed on the Consummation
Date its Ratable Proportion of $[ ].
(c) Intercompany Claims. No distribution shall be made on
account of Intercompany Claims, and the holders of Intercompany Claims shall
not receive or retain an account of such Claims any property or interest in
property on account of such Claims. At the election of Newco (assuming its
formation), any Intercompany Claims shall be treated as contributions to the
capital of the obligor on such Intercompany Claims.
4.5. Class Securities Litigation Claims (Class 5).
(a) Qualifying Transaction. In the event that a Qualifying
Transaction closes on the Consummation Date, subject to allocation between
holders of Allowed Class Securities Litigation Claims and holders of Allowed
Equity Interests in Subclass 6A (Marvel Entertainment Group, Inc.) of Class 6
(Equity Interests) in accordance with section 4.5(c) and 4.5(d) hereof, each
holder of an Allowed Class Securities Litigation Claim shall be distributed on
account of such Allowed Class Securities Litigation Claim its Ratable
Proportion of (i) subject to section 4.2 hereof and to the extent applicable,
any Excess Proceeds after giving effect to the distributions of Excess Proceeds
provided under sections 4.2(a) and 4.4(a) hereof, and (ii) to the extent
applicable, the New FSB-P Holdings Preferred Stock after giving effect to the
distribution of the New FSB-P Holdings Preferred Stock provided under section
4.4(a)(i) hereof.
(b) No Qualifying Transaction. In the event that no
Qualifying Transaction closes on the Consummation Date, subject to allocation
between holders of Allowed Class Securities Litigation Claims and holders of
Allowed Equity Interests in Subclass 6A (Marvel Entertainment Group, Inc.) of
Class 6 (Equity Interests) in accordance with section 4.5(c) hereof, each
holder of an Allowed Equity Interest in Marvel Entertainment Group, Inc. shall
be distributed on account of such Allowed Class Securities Litigation Claim its
Ratable Proportion of the New Warrants.
(c) Calculation of Distribution. For purposes of effecting
distributions hereunder on account of Allowed Class Securities Litigation
Claims and Allowed Equity Interests in Subclass 6A (Marvel Entertainment Group,
Inc.)
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of Class 6 (Equity Interests), any judgment evidencing any Allowed Class
Securities Litigation Claims shall be converted into an implied number of
shares of common stock of Marvel Entertainment Group, Inc. calculated as the
quotient of (i) the aggregate amount of any such judgment, divided by (ii) the
average of intraday high and low average sales prices of a share of common
stock of Marvel Entertainment Group, Inc. on the New York Stock Exchange, as
reported in The Wall Street Journal (National Edition) for the ten consecutive
trading days ending on the trading day immediately preceding the date of the
commencement of any action underlying any Allowed Class Securities Litigation
Claim.
(d) Parity of and Limitation on Distributions. The
distributions to be made under this section 4.5 on account of Allowed Class
Securities Litigation Claims shall be made on the basis of parity with the
Equity Interests in Subclass 6A (Marvel Entertainment Group, Inc.) of Class 6
(Equity Interests) and subject to the limitation that holders of Allowed Class
Securities Litigation Claims and Equity Interests in Subclass 6A (Marvel
Entertainment Group, Inc.) of Class 6 (Equity Interests) shall only be entitled
to a single recovery on account of such Claims and Equity Interests.
4.6. Equity Interests (Class 6).
(a) Marvel Entertainment Group, Inc. (Subclass 6A).
(i) Qualifying Transaction. Distributions. In the event that
a Qualifying Transaction closes on the Consummation Date, subject to allocation
between holders of Allowed Class Securities Litigation Claims and holders of
Allowed Equity Interests in Subclass 6A (Marvel Entertainment Group, Inc.) of
Class 6 (Equity Interests) in accordance with section 4.5(c) and 4.5(d) hereof,
each holder of an Allowed Equity Interest in Subclass 6A (Marvel Entertainment
Group, Inc.) of Class 6 (Equity Interests) shall be distributed on account of
such Allowed Equity Interest its Ratable Proportion of (A) subject to section
4.2 hereof and to the extent applicable, any Excess Proceeds after giving
effect to the distributions of Excess Proceeds provided under sections 4.2(a)
and 4.4(a)(i) hereof and (B) to the extent applicable, the New FSB-P Holdings
Preferred Stock after giving effect to the distribution of the New FSB-P
Holdings Preferred Stock provided under section 4.4(a)(i) hereof.
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(ii) No Qualifying Transaction. In the event that no
Qualifying Transaction closes on the Consummation Date, subject to allocation
between holders of Allowed Class Securities Litigation Claims and holders of
Allowed Equity Interests in Subclass 6A (Marvel Entertainment Group, Inc.) of
Class 6 (Equity Interests) in accordance with section 4.5(c) hereof, each
holder of an Allowed Equity Interest in Subclass 6A (Marvel Entertainment
Group, Inc.) of Class 6 (Equity Interests) shall be distributed its Ratable
Proportion of the New Warrants.
(iii) Parity of and Limitation on Distributions. The
distributions to be made under this section 4.6 on account of Equity Interests
in Subclass 6A (Marvel Entertainment Group, Inc.) of Class 6 (Equity Interests)
shall be made on the basis of parity with the Allowed Class Securities
Litigation Claims and subject to the limitation that holders of Allowed Class
Securities Litigation Claims and Equity Interests in Subclass 6A (Marvel
Entertainment Group, Inc.) of Class 6 (Equity Interests) shall only be entitled
to a single recovery on account of such Claims and Equity Interests.
(b) Fleer Corp. (Subclass 6B). On the Consummation Date, the
Equity Interests in Fleer Corp. shall be cancelled, and the holders of Equity
Interests in Fleer Corp. shall not be entitled to, and shall not, receive or
retain any property or interest in property on account of such Equity Interests
in Subclass 6B (Fleer Corp.) of Class 6 (Equity Interests).
(c) Other Subsidiary Equity Interests (Subclass 6C). On the
Consummation Date, each holder of an Allowed Subsidiary Interest shall retain
unaltered the legal equitable and contractual rights to which such Allowed
Subsidiary Equity Interest entitles such holder and be made unimpaired in
accordance with section 1124(1) of the Bankruptcy Code.
4.7. Existing Warrants (Class 7).
On the Consummation Date, the Existing Warrants shall be
cancelled, and the holders of Existing Warrants shall not be entitled to, and
shall not, receive or retain any property or interest in property on account of
such Equity Interests in Class 7 (Existing Warrants).
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SECTION 5. IDENTIFICATION OF CLASSES OF CLAIMS
AND INTERESTS IMPAIRED AND NOT
IMPAIRED UNDER THE PLAN; ACCEPTANCE
OR REJECTION OF THE PLAN
5.1. Holders of Claims and Equity Interests Entitled to
Vote.
Each of Class 1 (Priority Non-Tax Claims), Class 2 (Senior
Secured Claims), Class 3 (Other Secured Claims), Class 4 (General Unsecured
Claims), Class 5 (Class Securities Litigation Claims), Subclass 6A (Marvel
Entertainment Group) of Class 6 (Equity Interests), Subclass 6B (Fleer Corp.)
of Class 6 (Equity Interests) and Class 7 (Existing Warrants) and, as
applicable, each subclass thereof, are impaired hereunder, and the holders of
Claims in each of Class 1 (Priority Non-Tax Claims), Class 2 (Senior Secured
Claims), Class 4 (General Unsecured Claims), Class 5 (Class Securities
Litigation Claims) and Subclass 6A (Marvel Entertainment Group, Inc.) of Class
6 (Equity Interests) and, as applicable, each subclass thereof, are entitled to
vote separately to accept or reject this Plan of Reorganization as provided in
the order of the Bankruptcy Court fixing the Ballot Date and otherwise
governing the balloting procedures applicable to this Plan of Reorganization.
Holders of Claims in Subclass 4J (Intercompany Claims) of Class 4 (General
Unsecured Claims) and Equity Interests in Subclass 6B (Fleer Corp.) of Class 6
(Equity Interests) and Class 7 (Existing Warrants) are not entitled to vote on
this Plan of Reorganization and are presumed to have rejected it in accordance
with section 1126(g) of the Bankruptcy Code.
For purposes of calculating the number of Allowed Claims held
by holders of Allowed Claims that have voted to accept or reject this Plan of
Reorganization under section 1126(c) of the Bankruptcy Code, all Allowed Claims
held by any entity or any Affiliate thereof that acquired record ownership of
such Allowed Claims after the Petition Date shall be aggregated and treated as
one Allowed Claim.
Subclass 6C (Other Subsidiary Equity Interests) of Class 6
(Equity Interests) is not impaired hereunder, and the holders of Claims and
Equity Interests in such classes and, as applicable, each subclass thereof, are
conclusively presumed under section 1126(f) of the Bankruptcy Code to have
accepted this Plan of Reorganization and are not entitled to vote on this Plan
of Reorganization.
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5.2. Subtraction and Addition of Classes and
Subclasses.
(a) Subtraction of Classes and Subclasses. Any class or
subclass of Claims that does not contain as an element thereof an Allowed Claim
or a Claim temporarily allowed under Bankruptcy Rule 3018 as of the date of the
commencement of the Confirmation Hearing shall be deemed subtracted from this
Plan of Reorganization for purposes of voting to accept or reject this Plan of
Reorganization and for purposes of determining acceptance or rejection of this
Plan of Reorganization by such class or subclass under section 1129(a)(8) of
the Bankruptcy Code.
(b) Addition of Classes and Subclasses. In the event that any
subclass of Class 3 (Other Secured Claims) would contain as elements thereof
two or more Secured Claims collateralized by different properties or interests
in property or collateralized by liens against the same property or interest in
property having different priority, such Claims shall be divided into separate
subclasses of such subclass of Class 3 (Other Secured Claims).
5.3. Nonconsensual Confirmation.
In the event that any impaired class of Claims or Equity
Interests entitled to vote shall not accept this Plan of Reorganization by the
requisite statutory majorities provided in sections 1126(c) or 1126(d) of the
Bankruptcy Code, as applicable, after giving effect to any vote designated
under section 1126(e) of the Bankruptcy Code, the Proponents shall, subject to
any obligations under the Merger Agreement, amend this Plan of Reorganization
in accordance with section 13.2 hereof or undertake to have the Bankruptcy
Court confirm this Plan of Reorganization under section 1129(b) of the
Bankruptcy Code or both. The Proponents hereby move to have the Bankruptcy
Court confirm this Plan of Reorganization under section 1129(b) of the
Bankruptcy Code in the event of the rejection of this Plan of Reorganization by
holders of Claims or Equity Interests in Subclass 6A (Marvel Entertainment
Group, Inc.) of Class 6 (Equity Interests) and notwithstanding the deemed
rejection of this Plan of Reorganization by holders of Claims in Subclass 4J
(Intercompany Claims) of Class 4 (General Unsecured Claims) and Equity
Interests in Subclass 6B (Fleer Corp.) of Class 6 (Equity Interests) and
Existing Warrants in Class 7 (Existing Warrants) in accordance with section 5.1
hereof.
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5.4. Severability of Plan of Reorganization.
This Plan of Reorganization is, severally, a plan of
reorganization for each of the Debtors. In the event that this Plan of
Reorganization is not confirmed for all Debtors, then this Plan of
Reorganization may not be confirmed for any Debtor; provided, that,
notwithstanding the foregoing, in the event that this Plan of Reorganization is
not confirmed for Heroes World Distribution, Inc., the Proponents may, subject
to any obligations under the Merger Agreement, waive this limitation and this
Plan of Reorganization may be confirmed for such other Debtors.
5.5. Revocation of Plan of Reorganization.
The Proponents reserve the right to revoke and withdraw this
Plan of Reorganization as to any or all Debtors at any time prior to entry of
the Confirmation Order, subject to any obligations under the Merger Agreement
and subject to the prior approval of the Required Holders. In the event that
this Plan of Reorganization is so revoked or withdrawn as to any or all Debtors
by the Proponents, then this Plan of Reorganization shall be deemed null and
void as it relates to each such Debtor. In the event that any of the Debtors
undertake to revoke or withdraw this Plan of Reorganization without the consent
of all of the Proponents, the Proponents not so consenting may, subject to the
next succeeding sentence, prosecute confirmation of this Plan of Reorganization
notwithstanding such revocation or withdrawal. Notwithstanding the foregoing,
in the event that this Plan of Reorganization is revoked or withdrawn by Marvel
Entertainment Group, Inc. by resolution of the Continuing Directors thereof,
then this Plan shall be revoked or withdrawn, as applicable, and none of the
Proponents may prosecute confirmation of this Plan of Reorganization.
Notwithstanding the foregoing, in the event that (a) Toy Biz delivers the
notice contemplated by the first sentence of section 10.1 hereof in accordance
with the terms thereof (b) the condition precedent contained in section 10.1(b)
hereof shall not have been satisfied or waived in accordance with section 10.3
hereof by the date provided in such section 10.1(b) or (c) the condition
precedent contained in section 10.1(c) hereof shall not have been satisfied or
waived in accordance with section 10.3 hereof by the date and time provided in
such section 10.1(c), then this Plan of Reorganization shall be revoked, in
either event, without any cost, expense, fee or other liability of Marvel
Entertainment Group, Inc. or Toy Biz, respectively, to any entity.
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SECTION 6. MEANS OF IMPLEMENTATION
6.1. Closing of Transaction.
On the Consummation Date, the closing of the Transaction
shall occur in accordance with the Transaction Agreement and, on the terms and
subject to the conditions contained in such Transaction Agreement, the Debtors,
subject to the Liens of the holders of the Senior Secured Claims to the extent
such Liens do not attach to the consideration distributable in exchange for the
shares of common stock of Toy Biz (other than the shares of common stock of Toy
Biz held by Marvel), shall receive the consideration provided therein and shall
make the distributions provided hereunder. In connection therewith, all
outstanding letters of credit or other similar obligations issued for the
account of any of the Debtors or the Debtors in Possession under the Existing
Credit Agreements or the DIP Credit Agreement, as applicable, shall be
terminated or otherwise treated in a manner acceptable to the Administrative
Agent. In the event that no Qualifying Transaction closes, the transactions
contemplated by the Merger Agreement shall be consummated.
6.2. Dismissal of Derivative Securities Litigation
Claims.
The Derivative Securities Litigation Claims are property of
the estate of Marvel Entertainment Group, Inc. under section 541 of the
Bankruptcy Code. On or after the Consummation Date, all Derivative Securities
Litigation Claims shall, based on the confirmation of this Plan of
Reorganization, be dismissed with prejudice and the Reorganized Debtors shall
be entitled to effect any actions that may be necessary or appropriate, and to
execute, deliver and file in all courts in which the Derivative Securities
Litigation Claims are pending, all documents and instruments, including,
without limitation, stipulations of dismissal of the Derivative Securities
Litigation Claims, to fully implement and effect the dismissal of the
Derivative Securities Litigation Claims. The Confirmation Order shall provide
that all named plaintiffs in any action relating to the Derivative Securities
Litigation Claims and their respective servants, agents, attorneys and
representatives shall, on and after the Confirmation Date, be permanently
enjoined, stayed and restrained from pursuing or prosecuting any of the
Derivative Securities Litigation Claims.
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6.3. Board of Directors of the Reorganized Debtors.
The initial members of the Board of Directors of Newco,
assuming its formation, shall be determined by Toy Biz and the holders of the
Allowed Senior Secured Claims in accordance with the Equity Rights Schedule.
The initial members of the Board of Directors of Newco, assuming its formation,
are or shall be stated in the Disclosure Statement under "GENERAL INFORMATION -
Board of Directors and Executive Officers of the Reorganized Debtors" or an
amendment or supplement to the Disclosure Statement or such other filing as may
be made with the Bankruptcy Court.
6.4. Officers of the Reorganized Debtors.
The initial officers of Newco, assuming its formation, shall
be determined by Toy Biz and the holders of Allowed Senior Secured Claims. The
initial officers of Newco, assuming its formation, are stated in the Disclosure
Statement under "GENERAL INFORMATION - Board of Directors and Executive
Officers of the Reorganized Debtors." The selection of officers of the
Reorganized Debtors after the Consummation Date shall be as provided in the
articles or certificates of incorporation and bylaws.
6.5. Toy Biz Cash Distribution.
In the event that a Newco Qualifying Transaction closes on or
before the Consummation Date, the holders of common stock of Toy Biz (other
than Marvel) shall be distributed the Toy Biz Cash Distribution.
6.6. Dissolution of Equity Committees.
On the Consummation Date, the committee of equity security
holders of Marvel Entertainment Group, Inc. appointed by the U.S. Trustee in
the Reorganization Cases shall automatically dissolve and such committee shall
cease to exercise any functions and be divested of all rights, powers and
duties.
6.7. Transfer of FSB-P Entities.
All intercompany agreements, understandings and relationships
between any of the FSB-P Entities and Marvel or any of its affiliates (other
than the FSB-P Entities), including, without limitation, any material licensing
agreement designated by the holders of the Senior Secured Claims) shall remain
in full force and effect unless modified or terminated in the ordinary course
of business or
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the holders of the Senior Secured Claims and Toy Biz otherwise agree in
writing.
6.8. Sale of FSB-P Entities.
On and after the Consummation Date, Newco (assuming its
formation) shall undertake to effect a sale of the FSB-P Entities before the
FSB-P Sale Termination Date. In the event that such sale is consummated by the
FSB-P Sale Termination Date or a definitive and legally binding agreement not
containing any material conditions to closing governing such sale is executed
and delivered by the FSB-P Sale Termination Date and such sale is consummated
within ninety (90) days of the date of such agreement, the proceeds realized
from such sale shall be distributed in accordance with the terms hereof as if
such sale had occurred on the Consummation Date, subject to the prior payment
in Cash of (a) any and all interest accrued on the New Series B Secured Notes
during the period beginning on the Consummation Date and ending on the date of
the closing of such sale, (b) any and all amounts outstanding under the credit
facility extended to the FSB-P Entities referred to in section 10.2[ ] hereof,
including, without limitation, accrued and unpaid interest on obligations
outstanding under such which shall accrue at a floating annual rate not to
exceed Alternate Base Rate (as such term is defined in the Existing Panini
Credit Agreements), plus three and one-half percent (3.5%) and (c) the costs
and expenses of the holders of the Allowed Senior Secured Claims and Panini
S.p.A., including, without limitation, reasonable attorneys' and investment
bankers' fees incurred in connection with such sale.
6.9. Expense Reimbursement.
In the event that a Newco Qualifying Transaction closes on or
before the Consummation Date, Toy Biz shall be distributed Cash equal in amount
to the things referred to in clause (f) of section 1.48 hereof. In the event
that a Qualifying Transaction closes on or before the Consummation Date, the
holders of Allowed Fixed Senior Secured Claims and Allowed Contingent Senior
Secured Claims shall be distributed Cash equal in amount (without duplication)
to the items referred to in clause (g) of section 1.48 hereof.
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SECTION 7. PROVISIONS GOVERNING DISTRIBUTIONS
7.1. Date of Distributions.
Any distributions and deliveries to be made hereunder (other
than the Toy Biz Cash Distribution) shall be made on the Consummation Date or
as soon as practicable thereafter and deemed made on the Consummation Date, and
the Toy Biz Cash Distribution shall be made on the Consummation Date and deemed
made on the Consummation Date only if then made. In the event that any payment
or act under this Plan of Reorganization is required to be made or performed on
a date that is not a Business Day, then the making of such payment or the
performance of such act may be completed on the next succeeding Business Day,
but shall be deemed to have been completed as of the required date.
7.2. Entities to Exercise Function of Disbursing Agent.
All distributions under this Plan of Reorganization shall be
made by the applicable Reorganized Debtor as Disbursing Agent or such other
entity designated by such applicable Reorganized Debtor as a Disbursing Agent
on the Consummation Date. A Disbursing Agent shall not be required to give any
bond or surety or other security for the performance of its duties unless
otherwise ordered by the Bankruptcy Court; and, in the event that a Disbursing
Agent is so otherwise ordered, all costs and expenses of procuring any such
bond or surety shall be borne by the applicable Reorganized Debtor.
7.3. Surrender and Cancellation of Instruments.
Each holder of a promissory note, Existing Warrant or other
instrument evidencing a Claim or Equity Interest (other than a holder of a
promissory note issued under any of the Existing Credit Agreements) shall
surrender such promissory note, Existing Warrant or instrument to the
Disbursing Agent, and the Disbursing Agent shall distribute or shall cause to
be distributed to the holder thereof the appropriate distribution, if any,
hereunder. No distribution hereunder shall be made to or on behalf of any
holder of such a Claim unless and until such promissory note or instrument is
received or the unavailability of such note or instrument is reasonably
established to the satisfaction of the Disbursing Agent. In accordance with
section 1143 of the Bankruptcy Code, any such holder of such a Claim or Equity
Interest that fails to (a) surrender or cause to be surrendered such promissory
note or instrument or to execute and deliver an affidavit of loss and indemnity
reasonably
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satisfactory to the Disbursing Agent and (b) in the event that the Disbursing
Agent requests, furnish a bond in form and substance (including, without
limitation, amount) reasonably satisfactory to the Disbursing Agent, within one
(1) year from and after the Consummation Date shall be deemed to have forfeited
all rights, claims and interests and shall not participate in any distribution
hereunder.
7.4. Delivery of Distributions.
Subject to Bankruptcy Rule 9010, all distributions to any
holder of an Allowed Claim or an Allowed Equity Interest shall be made at the
address of such holder as scheduled on the Schedules filed with the Bankruptcy
Court unless the Debtors or Reorganized Debtors, as applicable, have been
notified in writing of a change of address, including, without limitation, by
the filing of a proof of claim or interest by such holder that relates an
address for such holder different from the address reflected on such Schedules
for such holder. In the event that any distribution to any holder is returned
as undeliverable, the Disbursing Agent shall use reasonable efforts to
determine the current address of such holder, but no distribution to such
holder shall be made unless and until the Disbursing Agent has determined the
then current address of such holder, at which time such distribution shall be
made to such holder without interest; provided that such distributions shall be
deemed unclaimed property under section 347(b) of the Bankruptcy Code at the
expiration of one year from the Consummation Date. After such date, all
unclaimed property or interest in property shall revert to the applicable
Reorganized Debtor, and the claim of any other holder to such property or
interest in property shall be discharged and forever barred. The distributions
to be made on the Consummation Date to each holder of an Allowed Senior Secured
Claim shall be made to the Administrative Agent for distribution to holders of
Allowed Senior Secured Claims in accordance with the provisions of the Existing
Credit Agreements.
7.5. Manner of Payment Under Plan of Reorganization.
At the option of the Disbursing Agent, any Cash payment to be
made hereunder may be made by a check or wire transfer or as otherwise required
or provided in applicable agreements.
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7.6. Reserves and Distributions
The Disbursing Agent shall reserve amounts deemed appropriate
in the judgement of the Disbursing Agent on account of Disputed Claims in Class
4 (General Unsecured Claims) and Class 5 (Class Securities Litigation Claims)
and, as applicable, each subclass thereof. Upon the resolution from time to
time of Disputed Claims in Class 4 (General Unsecured Claims) and Class 5
(Class Securities Litigation Claims) and, as applicable, each subclass thereof,
the Disbursing Agent may make distributions on account of such claims in such
manner deemed appropriate in the judgment of the Disbursing Agent.
7.7. Distributions After Consummation Date.
Distributions made after the Consummation Date to holders of
Disputed Claims that are not Allowed Claims as of the Consummation Date but
which later become Allowed Claims shall be deemed to have been made on the
Consummation Date.
7.8. Rights And Powers Of Disbursing Agent.
(a) Powers of the Disbursing Agent. The Disbursing Agent
shall be empowered to (a) effect all actions and execute all agreements,
instruments and other documents necessary to perform its duties this Plan of
Reorganization, (b) make all distributions contemplated hereby, (c) employ
professionals to represent it with respect to its responsibilities, and (d)
exercise such other powers as may be vested in the Disbursing Agent by order of
the Bankruptcy Court, pursuant to this Plan of Reorganization, or as deemed by
the Disbursing Agent to be necessary and proper to implement the provisions
hereof.
(b) Expenses Incurred on or After the Consummation Date.
Except as otherwise ordered by the Bankruptcy Court, the amount of any
reasonable fees and expenses incurred by the Disbursing Agent on or after the
Consummation Date (including, without limitation, taxes) and any reasonable
compensation and expense reimbursement claims (including, without limitation,
reasonable fees and expenses of counsel) made by the Disbursing Agent, shall be
paid in Cash by the Reorganized Debtors.
(c) Exculpation. Each Disbursing Agent, from and after the
Consummation Date, is hereby exculpated by all entities, including, without
limitation, holders of Claims and Equity Interests and other parties in
interest from any and all claims, causes of action and other assertions of
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liability (including, without limitation, breach of fiduciary duty) arising out
of the discharge by such Disbursing Agent of the powers and duties conferred
upon it hereby or any order of the Bankruptcy Court entered pursuant to or in
furtherance hereof, or applicable law, except solely for actions or omissions
arising out of the gross negligence or willful misconduct of such Disbursing
Agent. No holder of a Claim or an Equity Interest or other party in interest
shall have or pursue any claim or cause of action against the Disbursing Agent
for making payments in accordance herewith or for implementing the terms
hereof.
SECTION 8. PROCEDURES FOR TREATING DISPUTED
CLAIMS UNDER THE PLAN OF REORGANIZATION
8.1. Objections to Claims.
The Reorganized Debtors or, in the event of its formation,
Newco, shall be entitled to object to Claims. Any objections to Claims shall be
filed by the latest of (a) ninety (90) days after the Consummation Date, (b)
thirty (30) days after a proof of claim is filed and (c) such later date as may
be fixed by the Bankruptcy Court.
8.2. No Distributions Pending Allowance.
Notwithstanding any other provision hereof, if any portion of
a Claim is a Disputed Claim, no payment or distribution provided hereunder
shall be made on account of such Claim unless and until such Disputed Claim
becomes an Allowed Claim.
8.3. Distributions After Allowance.
Payments and distributions to each holder of a Disputed Claim
or Equity Interest or any other Claim or Equity Interest that is not an Allowed
Claim or Equity Interest, to the extent that such Claim or Equity Interest
ultimately becomes an Allowed Claim or Equity Interest, shall be made in
accordance with the provisions hereof governing the class or subclass of Claims
or Equity Interests in which such Claim or Equity Interest is classified. As
soon as practicable after the date that the order or judgment of the Bankruptcy
Court allowing any Disputed Claim or Equity Interest or any other Claim or
Equity Interest that is not an Allowed Claim or Equity Interest becomes a Final
Order, the Disbursing Agent shall distribute to the holders of such Claim or
Equity Interest any payment or property that would have been distributed to
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such holder if the Claim or Equity Interest had been allowed on the
Consummation Date, without any interest thereon.
SECTION 9. PROVISIONS GOVERNING EXECUTORY CONTRACTS
AND UNEXPIRED LEASES UNDER THE PLAN
9.1. General Treatment.
This Plan of Reorganization constitutes a motion by the
Debtors governed by this Plan of Reorganization to assume, as of the
Consummation Date, all executory contracts and unexpired leases to which any of
the Debtors are parties, except for an executory contract or unexpired lease
that, subject to the approval of the holders of the Senior Secured Claims,
which shall not be unreasonably withheld or delayed, (a) has been assumed or
rejected pursuant to Final Order of the Bankruptcy Court, (b) is specifically
rejected on Schedule 9.1 hereto filed by the Proponents at the direction of Toy
Biz or, in the event that a Qualifying Transaction is scheduled to close on the
Consummation Date, by the Debtors on or before the commencement of the
Confirmation Hearing or such later date as may be fixed by the Bankruptcy
Court, (c) is the subject of a separate motion filed under section 365 of the
Bankruptcy Code by the Debtors prior to the filing of the schedule described in
section 9.1(b) hereof or (d) is otherwise assumed hereunder. Any executory
contract or unexpired lease assumed hereunder may be freely assigned by any
Debtor to any other Debtor or Reorganized Debtor or, assuming its formation,
Newco and any such assignment shall constitute a novation of the obligations of
the assigning Debtor under any such executory contract or unexpired lease. Any
such assignment shall be effected by filing a notice thereof with the
Bankruptcy Court on or before the commencement of the Confirmation Hearing. For
purposes hereof, each executory contract and unexpired lease listed on Schedule
9.1 hereto that relates to the use of occupancy of real property shall include
(a) modifications, amendments, supplements, restatements, or other agreements
made directly or indirectly by any agreement, instrument, or other document
that in any manner affects such executory contract or unexpired lease, without
regard to whether such agreement, instrument or other document is listed on
Schedule 9.1 hereto and (b) executory contracts or unexpired leases appurtenant
to the premises listed on Schedule 9.1 hereto including all easements,
licenses, permits, rights, privileges, immunities, options, rights of first
refusal, powers, uses, usufructs, reciprocal easement agreements, vault, tunnel
or bridge agreements or franchises, and any other interests in real estate or
rights
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in rem relating to such premises to the extent any of the foregoing are
executory contracts or unexpired leases, unless any of the foregoing agreements
are assumed.
9.2. Amendments to Schedule; Effect of Amendments.
The Debtors shall assume each of the executory contracts and
unexpired leases not listed on Schedule 9.1 hereto; provided, that the
Proponents at the direction of Toy Biz or, in the event that a Qualifying
Transaction is scheduled to close on the Consummation Date, the Debtors may at
any time with the consent of the holders of the Senior Secured Claims, which
consent may not be unreasonably withheld, on or before the first Business Day
before the Consummation Date amend Schedule 9.1 hereto to delete or add any
executory contract or unexpired lease thereto, in which event such executory
contract or unexpired lease shall be deemed to be, respectively, assumed and,
if applicable, assigned as provided therein, or rejected, provided, that in the
event such Qualifying Transaction does not close on the Consummation Date, any
amendment to such Schedule 9.1 hereto effected by the Debtors shall be
automatically revoked and withdrawn. The Debtors shall provide notice of any
amendments to Schedule 9.1 hereto to the parties to the executory contracts or
unexpired leases affected thereby. The fact that any contract or lease is
scheduled on Schedule 9.1 hereto shall not constitute or be construed to
constitute an admission by any Debtor that any Debtor has any liability
thereunder.
9.3. Bar to Rejection Damage Claims.
In the event that the rejection of an executory contract or
unexpired lease by any of the Debtors results in damages to the other party or
parties to such contract or lease, a Claim for such damages, if not heretofore
evidenced by a filed proof of claim, shall be forever barred and shall not be
enforceable against the Debtors, or their respective properties or interests in
property as agents, successors, or assigns, unless a proof of claim is filed
with the Bankruptcy Court and served upon counsel for the Debtors on or before
thirty (30) days after the earlier to occur of (a) the giving of notice to such
party under section 9.1 or 9.2 hereof and (b) the entry of an order by the
Bankruptcy Court authorizing rejection of a particular executory contract or
lease.
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SECTION 10. CONDITIONS PRECEDENT TO CONFIRMATION
DATE AND CONSUMMATION DATE
10.1. Conditions Precedent to Confirmation of Plan of
Reorganization.
This Plan of Reorganization and the transactions contemplated
hereby are subject to the performance of a business, financial, legal or other
due diligence investigation of Marvel by Toy Biz (including, without
limitation, relating to the operation of the business of Marvel) for the period
ending at 11:59 p.m. (New York City time) on May 21, 1997, during which period
Toy Biz may, in its sole, unfettered and unreviewable discretion, for any
reason or for no reason, elect not to proceed with the prosecution of
confirmation of this Plan of Reorganization and the transactions contemplated
hereby upon delivery of a written notice during such period to the Debtors and
the holders of the Senior Secured Claims. The confirmation of this Plan of
Reorganization is subject to satisfaction of the following conditions
precedent:
(a) Notice of Termination. Toy Biz shall not have delivered
the notice contemplated by the first sentence of this section 10.1;
(b) Board Authorizations. (i) The Boards of Directors of each
of the Debtors, including, without limitation, Marvel Entertainment
Group, Inc., shall have duly authorized this Plan of Reorganization on
or before the fifth Business Day after the later of (A) receipt of
notice from Toy Biz that Toy Biz has satisfactorily completed the due
diligence investigation referred to in the first sentence of this
section 10.1 and (B) each of Marvel Entertainment Group, Inc. and Toy
Biz shall have approved the Merger Agreement, subject (a) to the due
authorization of each of the Boards of Directors of Marvel
Entertainment Group, Inc. and Toy Biz, respectively and (b) the due
authorization of the shareholders of Toy Biz and (ii) the Board of
Directors of Toy Biz shall have duly authorized this Plan of
Reorganization on or before the second Business Day after the
authorization contemplated by clause (i) of this section 10.1(b);
(c) Insurance and Related Matters. Before 11:59 p.m. (New
York City time) May 21, 1997, Toy Biz and Marvel shall have agreed
upon provisions to be contained in the Merger Agreement acceptable to
Toy Biz and the Debtors relating to "tail" insurance coverage
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of current and former directors and officers of Marvel relating to
events occurring before, on or after the Petition Date; it being
understood and agreed that under no circumstances shall the Merger
Agreement or this Plan of Reorganization contain or provide,
respectively, for the existence or continuation of any indemnification
for current or former directors or officers of Marvel which exceed the
insurance coverage, provided, that (i) existing indemnification
obligations may survive to the extent of insurance coverage (if
necessary to maintain insurance coverage), but shall, except as
provided in section 11.2(c) hereof, in no event entitle such directors
or officers to assert any Claim (including, without limitation, with
respect to any deductible) against Newco, Toy Biz, Marvel or any of
their affiliates except as may be necessary to establish or prosecute
claims under any insurance policies, and (ii) any such directors or
officers shall only be entitled to make Claims only against the
insurance and the proceeds thereof.
(d) Transaction Agreement. The applicable Transaction
Agreement shall then be in full force and effect;
(e) Voting Agreement. Avi Arad and Isaac Perlmutter shall
have each executed and delivered the Voting Agreement on or before May
21, 1997, and the Voting Agreement shall then be in full force and
effect.
(f) Confirmation Order. The Confirmation Order to be entered
by the Clerk of the Bankruptcy Court shall be in a form that (i) does
not materially and adversely affect the benefits to be received
hereunder by any of (A) the estates constituting Marvel, (B) Toy Biz
or (C) the holders of the Allowed Senior Secured Claims, without the
consent of the affected entities to be given or withheld in the sole
and absolute discretion of each such affected entity, (ii) determined
that Toy Biz has acted in good faith under this Plan of Reorganization
and (iii) is otherwise in form and substance reasonably acceptable to
the Administrative Agent and the Proponents; and,
(g) Confirmation Date. The Confirmation Date shall occur not
later than August 15, 1997.
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10.2. Conditions Precedent to Consummation Date of Plan
of Reorganization.
The occurrence of the Consummation Date of this Plan of
Reorganization is subject to satisfaction of the following conditions
precedent:
(a) Finality of the Confirmation Order. The Clerk of the
Bankruptcy Court shall have entered the Confirmation Order, the
Confirmation Order shall not have been amended or modified and the
Confirmation Order shall have become a Final Order;
(b) Transaction Agreement. All conditions precedent to the
obligations of the Purchaser (as such term is defined in the
applicable Transaction Agreement) and the Seller (as such term is
defined in the applicable Transaction Agreement) shall have been
satisfied or waived in accordance with the applicable Transaction
Agreement;
(c) Consummation Date. The Consummation Date shall occur not
later than the later to occur of (i) [ ], and (ii) the first Business
Day that is eighty-four (84) days after the entry by the Clerk of the
Bankruptcy Court of an order authorizing and approving the acceptance
by the Debtors of an offer for a Qualifying Transaction; provided,
that in no event shall the Consummation Date occur later than December
31, 1997;
(d) Execution and Delivery of Documents. All other actions
and all agreements, instruments or other documents necessary to
implement the terms and provisions hereof shall have been effected or
executed and delivered in form and substance and in a manner
acceptable to the Proponents;
(e) No Material Adverse Change. No Material Adverse Change
(as such term is defined in the Merger Agreement) shall have occurred
relating to Marvel or Toy Biz after the date hereof;
(f) Continuing Directors. The Board of Directors of Marvel
Entertainment Group, Inc. shall consist only of Continuing Directors
other than by operation of a confirmed plan of reorganization in the
Reorganization Cases;
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(g) Toy Biz Fairness Opinion. Toy Biz shall have received an
appropriate fairness opinion from an investment banking firm opining
that the exchange consideration to be distributed to holders of common
stock of Toy Biz (other than Marvel) consisting of seventy-two percent
(72.0%) of the primary shares of common stock of Newco or two hundred
eighty-five million dollars ($285,000,000) Cash is fair from a
financial point of view to the existing holders of common stock of Toy
Biz (other than Marvel);
(h) Toy Biz Authorization. The transactions contemplated
hereby relating to Toy Biz shall have been duly authorized by the
holders of common stock of Toy Biz;
(i) Governmental Consents. All necessary consents,
assignments or approvals from any domestic and foreign governmental
authorities shall have been received and any necessary or domestic or
foreign governmental filings, including, without limitation, under the
Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended,
shall have been made and any specified waiting periods thereunder
shall have expired without challenge;
(j) Certain Administration Expense Claims Limitation. The
aggregate amount of requests for payment of Administration Expense
Claims filed and not disallowed by Final Order or by Final Order
estimating any Administration Expense Claim under the Bankruptcy Code
for purposes of allowance and payment (any order of estimation shall
be final in all respects and may not be subject to any subsequent
order increasing the amount allowed as an Administration Expense
Claim, to the extent any such request is unliquidated) as of the
Consummation Date based upon rights of indemnification or other
similar obligations shall not exceed one million dollars ($1,000,000)
in excess of available insurance coverage. The Proponents undertake to
use their respective best efforts to cause the Bankruptcy Court to
estimate the allowed amount of any unliquidated request for payment of
such Administration Expense Claims, provided, that to the extent that
any unliquidated Claim for payment of an Administration Expense Claim
is not subject to estimation as set forth, it shall be deemed to
exceed one million dollars ($1,000,000) for purposes of this section
10.2(j); and
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(k) Certain Arrangements with FSB-P Entities. In the event
that no Qualifying Transaction closes on the Consummation Date, Newco
and the FSB-P Entities shall have executed and delivered a tax sharing
agreement in form and substance satisfactory to Toy Biz and arranged
priority financing for the FSB-P Entities in form and substance
satisfactory to Toy Biz.
10.3. Waiver of Conditions Precedent.
Each of the conditions precedent in sections 10.1 and 10.2
hereof (other than the condition precedent in section 10.2(f) hereof) may only
effectively be waived, in whole or in part, if waived, by each of the
Proponents and the Administrative Agent. The condition precedent in section
10.2(f) may only effectively be waived, if waived, by each of Toy Biz and the
Administrative Agent. Any such waiver of a condition precedent in section 10.1
or 10.2 hereof may be effected at any time, without notice, without leave or
order of the Bankruptcy Court and without any formal action other than filing a
notice of waiver with the Bankruptcy Court and otherwise proceeding to
consummate this Plan of Reorganization.
SECTION 11. EFFECT OF CONFIRMATION
11.1. General Authority.
Until the Consummation Date, the Bankruptcy Court shall
retain custody and jurisdiction of each of the Debtors, its properties and
interests in property and its operations. On the Consummation Date, each of the
Debtors, its properties and interests in property and its operations shall be
released from the custody and jurisdiction of the Bankruptcy Court, except as
provided in section 14.1 hereof.
11.2. Discharge of Debtors.
(a) General Discharge. Subject to section 11.4 hereof, the
treatment of all Claims against or Equity Interests in each of the Debtors
hereunder shall be in exchange for and in complete satisfaction, discharge and
release of all Claims against or Equity Interests in such Debtor of any nature
whatsoever, known or unknown, including, without limitation, any interest
accrued or expenses incurred thereon from and after the Petition Date, or
against its estate or properties or interests in property. Except as otherwise
provided herein, upon the Consummation Date, all Claims against and Equity
Interests
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in each of the Debtors will be satisfied, discharged and released in full
exchange for the consideration provided hereunder. All entities shall be
precluded from asserting against any Debtor or Reorganized Debtor or their
respective properties or interests in property, any other Claims based upon any
act or omission, transaction or other activity of any kind or nature that
occurred prior to the Consummation Date.
(b) Specific Release and Discharge. Except as otherwise
provided in section 6.7 hereof, each of Marvel, Newco (assuming its formation)
and Toy Biz shall be released and discharged from all obligations borne or the
responsibility of Marvel primarily for the benefit of the FSB-P Entities and
the FSB-P Entities shall be released and discharged from all obligations
relative to each of Marvel, Newco (assuming its formation) and Toy Biz.
(c) Treatment of Indemnification Claims. Notwithstanding Del.
Code Ann. (General Corporation) ss. 145 (1997) or any other state or local
statute or rule, all existing indemnification and other similar obligations as
of the Confirmation Date of any Debtor or any subsidiary of any Debtor are
released or discharged except as provided in this section 11.2(c), and the
Confirmation Order shall contain injunctions enforcing such releases and
discharge; provided, that: (i) existing indemnity obligations may survive to
the extent of insurance coverage (if necessary to maintain insurance coverage),
but shall in no event entitle such directors or officers to assert any Claim
(including, without limitation, with respect to any deductible) against Newco,
Toy Biz, Marvel or any of their affiliates, and (ii) any such directors or
officers shall only be entitled to make Claims only against the insurance and
the proceeds thereof. This section 11.2(c) shall not limit any right of
directors or officers or former directors and officers from asserting
notwithstanding any bar order Claims against any Debtor based upon rights of
indemnification or other similar obligations by filing proofs of claim or
requests for payment of Administration Expense Claims prior to the later of the
Confirmation Date and any bar date for the filing of Administration Expense
Claims, which bar date shall be before the Consummation Date, based upon acts
or omissions occurring prior to the Petition Date or during the administration
of the Reorganization Cases. To the extent such Claims are Allowed Claims, such
Claims shall be treated under this Plan of Reorganization with Claims in any
class or subclass, as applicable, having the same legal rights and priority as
such Claims; provided, that the Confirmation Order shall establish a bar date
for Administration Expense
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Claims, which bar date shall be before the Consummation Date and encompass
Claims through the Consummation Date relating to any such Claims based on
rights of indemnification or other similar obligations during the period
beginning on the Petition Date and ending on and including the Consummation
Date.
11.3. Term of Injunctions or Stays.
Unless otherwise provided, all injunctions or stays provided
for in the Reorganization Cases under sections 105 or 362 of the Bankruptcy
Code, or otherwise, and in existence on the Confirmation Date, shall remain in
full force and effect until the Consummation Date.
SECTION 12. WAIVER OF CLAIMS
12.1. Avoidance Actions.
Effective as of the Consummation Date, the Debtors waive the
right to prosecute and release any avoidance or recovery actions under sections
545, 547, 548, 549, 550, 551 and 553 of the Bankruptcy Code, that belong to the
Debtors or Debtors in Possession, other than any such actions that may be
pending on such date. The Reorganized Debtors shall retain and may prosecute
any such actions that may be pending on such date.
SECTION 13. RETENTION OF JURISDICTION
13.1. Retention of Jurisdiction.
The Bankruptcy Court may retain jurisdiction of and, if the
Bankruptcy Court exercises its retained jurisdiction, shall have exclusive
jurisdiction of all matters arising out of, and related to, the Reorganization
Cases and this Plan of Reorganization pursuant to, and for the purposes of,
sections 105(a) and 1142 of the Bankruptcy Code and for, among other things,
the following purposes:
(a) To hear and determine pending applications
for the assumption or rejection of executory contracts
or unexpired leases, if any are pending, and the
allowance of Claims resulting therefrom;
(b) To determine any and all adversary proce-
edings, applications and contested matters;
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(c) To ensure that distributions to holders of Allowed Claims
and Allowed Equity Interests are accomplished as provided herein;
(d) To hear and determine any timely objections to
Administration Expense Claims or to proofs of claim and equity
interests filed, both before and after the Confirmation Date,
including, without limitation, any objections to the classification of
any Claim or Equity Interest, and to allow or disallow any Disputed
Claim or Equity Interest, in whole or in part;
(e) To enter and implement such orders as may be appropriate
in the event the Confirmation Order is for any reason stayed, revoked,
modified, or vacated;
(f) To issue such orders in aide of execution of this Plan of
Reorganization, to the extent authorized by section 1142 of the
Bankruptcy Code;
(g) To consider any amendments to or modifications of this
Plan of Reorganization, to cure any defect or omission, or reconcile
any inconsistency in any order of the Bankruptcy Court, including,
without limitation, the Confirmation Order;
(h) To hear and determine all applications for awards of
compensation for services rendered and reimbursement of expenses
incurred prior to the Consummation Date;
(i) To hear and determine disputes arising in connection with
the interpretation, implementation, or enforcement of this Plan of
Reorganization, the Confirmation Order, any transactions or payments
contemplated hereby or any agreement, instrument or other document
governing or relating to any of the foregoing;
(j) To hear and determine matters concerning state, local and
federal taxes in accordance with sections 346, 505, and 1146 of the
Bankruptcy Code;
(k) To hear any other matter not inconsistent with the
Bankruptcy Code;
(l) To hear and determine all disputes involving the
existence, scope and nature of the discharges granted under section
11.2 hereof;
45
<PAGE>
(m) To issue injunctions and effect any other actions that
may be necessary or desirable to restrain interference by any entity
with the consummation or implementation of this Plan of
Reorganization; and
(n) To enter a final decree closing the Reorganization Cases.
13.2. Amendment of Plan of Reorganization.
Amendments of this Plan of Reorganization may be proposed in
writing only jointly by the Proponents at any time before confirmation,
provided that this Plan of Reorganization, as amended, satisfies the conditions
of sections 1122 and 1123 of the Bankruptcy Code, and the Debtors shall have
complied with section 1125 of the Bankruptcy Code. This Plan of Reorganization
may be amended only jointly by the Proponents at any time after confirmation
and before substantial consummation, provided that this Plan of Reorganization,
as amended, satisfies the requirements of sections 1122 and 1123 of the
Bankruptcy Code and the Bankruptcy Court, after notice and a hearing, confirms
this Plan of Reorganization as amended under section 1129 of the Bankruptcy
Code and the circumstances warrant such amendments. A holder of a Claim or
Equity Interest that has accepted this Plan of Reorganization shall be deemed
to have accepted this Plan of Reorganization as amended if the proposed
amendment does not materially and adversely change the treatment of the Claim
or Equity Interest of such holder.
SECTION 14. MISCELLANEOUS PROVISIONS
14.1. Payment of Statutory Fees.
All fees payable under section 1930, chapter 123, title 28,
United States Code, as determined by the Bankruptcy Court at the Confirmation
Hearing, shall be paid on the Consummation Date. Any such fees accrued after
the Consummation Date will constitute an Allowed Administration Expense Claim
and be treated in accordance with section 2.1 hereof.
14.2. Retiree Benefits.
On and after the Consummation Date, pursuant to section
1129(a)(13) of the Bankruptcy Code, the Reorganized Debtors shall continue to
pay all retiree benefits (within the meaning of section 1114 of the Bankruptcy
Code), at the
46
<PAGE>
level established in accordance with subsection (e)(1)(B) or (g) of section
1114 of the Bankruptcy Code, at any time prior to the Confirmation Date, for
the duration of the period each Debtor has obligated itself to provide such
benefits.
14.3. Compliance with Tax Requirements.
In connection with the consummation of this Plan of
Reorganization, the Debtors shall comply with all withholding and reporting
requirements imposed by any taxing authority, and all distributions hereunder
shall be subject to such withholding and reporting requirements.
14.4. Recognition of Guarantee Rights.
The classification of and manner of satisfying all Claims
hereunder take into account (a) the existence of guarantees by certain Debtors
of obligations of other Debtors and (b) the fact that the Debtors may be joint
obligors with each other or other entities with respect to an obligation. All
Claims against the Debtors based upon any such guarantees or joint obligations
shall be discharged in the manner provided in this Plan of Reorganization;
provided, that no creditor shall be entitled to receive more than a single
satisfaction of its Allowed Claims.
14.5. Severability of Plan Provisions.
In the event that, prior to the Confirmation Date, any term
or provision of this Plan of Reorganization is held by the Bankruptcy Court to
be invalid, void or unenforceable, the Bankruptcy Court shall, with the consent
of the Proponents, have the power to alter and interpret such term or provision
to make it valid or enforceable to the maximum extent practicable, consistent
with the original purpose of the term or provision held to be invalid, void or
unenforceable, and such term or provision shall then be applicable as altered
or interpreted. Notwithstanding any such holding, alteration or interpretation,
the remainder of the terms and provisions hereof shall remain in full force and
effect and shall in no way be affected, impaired or invalidated by such
holding, alteration or interpretation. The Confirmation Order shall constitute
a judicial determination and shall provide that each term and provision hereof,
as it may have been altered or interpreted in accordance with the foregoing, is
valid and enforceable in accordance with its terms.
47
<PAGE>
14.6. Governing Law.
Except to the extent that the Bankruptcy Code or other
federal law is applicable, or to the extent an Exhibit hereto provides
otherwise, the rights, duties and obligations arising under this Plan of
Reorganization shall be governed by, and construed and enforced in accordance
with, the laws of the State of New York without regard to the principles of the
conflicts of law.
14.7. Time of the Essence.
Time shall be of the essence relative to any and all dates
contained in this Plan of Reorganization on the Confirmation Date.
14.8. Standard of Discretion.
Except as otherwise expressly provided herein, any agreement,
instrument or other document, including, without limitation, all Exhibits and
Schedules hereto, provided to be acceptable to any entity, including, without
limitation, the Administrative Agent, each of the Debtors and Toy Biz, and any
approval, consent or waiver to be given by or obtained from any entity,
including, without limitation, the Administrative Agent, each of the Debtors
and Toy Biz, shall be so acceptable or given or obtained in the sole and
absolute discretion of such entity.
14.9. Counterparts.
This Plan of Reorganization may be executed in any number of
counterparts and by different parties hereto in separate counterparts, each of
which when so executed shall be deemed to be an original and all of which taken
together shall constitute one and the same agreement.
14.10. Notices.
All notices, requests, and demands to or upon the Debtors to
be effective shall be in writing (including by facsimile transmission) and,
unless otherwise expressly provided herein, shall be deemed to have been duly
given or made when actually delivered or, in the case of notice by facsimile
transmission, when received and telephonically confirmed, addressed as follows:
48
<PAGE>
If to the Debtors:
MARVEL ENTERTAINMENT GROUP, INC.
387 Park Avenue South
12th Floor
New York, New York 10016
Attn: Steven R. Isko, Esq.
Telephone: (212) 696-0808
Telecopier: (212) 576-9260
-and-
WEIL, GOTSHAL & MANGES LLP
767 Fifth Avenue
New York, New York 10153
Attn: Harvey R. Miller, Esq.
Marcia L. Goldstein, Esq.
Edward A.C. Sutherland, Esq.
Paul D. Leake, Esq.
Telephone: (212) 310-8000
Telecopier: (212) 310-8007
-and-
YOUNG, CONAWAY, STARGATT & TAYLOR
Rodney Square North
Wilmington, Delaware 19899
Attn: James L. Patton, Jr., Esq.
Laura Davis Jones, Esq.
Telephone: (302) 571-6600
Telecopier: (302) 571-1253
If to the holders of Senior Secured Claims:
WACHTELL, LIPTON, ROSEN & KATZ
51 West 52nd Street
New York, New York 10019
Attn: Chaim J. Fortgang, Esq.
Scott K. Charles, Esq.
Telephone: (212) 403-1000
Telecopier: (212) 403-2000
-and-
RICHARDS, LAYTON & FINGER, P.A.
One Rodney Square
Wilmington, Delaware 19894
Attn: Thomas L. Ambro, Esq.
Telephone: (302) 658-6541
Telecopier: (302) 658-6548
49
<PAGE>
If to Toy Biz:
TOY BIZ, INC.
333 East 38th Street
New York, New York 10016
Attn: Mr. Joseph M. Ahearn
Telephone: (212) 682-4700
Telecopier: (212) 682-5272
-and-
BATTLE FOWLER LLP
75 East 55th Street
New York, New York 10022
Attn: Lawrence Mittman, Esq.
Douglas L. Furth, Esq.
Telephone: (212) 856-7000
Telecopier: (212) 856-7807
-and-
PEPPER, HAMILTON & SCHEETZ
1201 Market Street, Suite 1601
P.O. Box 1709
Wilmington, Delaware 19899
Attn: David B. Stratton
Telephone: (302) 777-6500
Telecopier: (302) [ ]
50
<PAGE>
Dated: Wilmington, Delaware
May 15, 1997
Respectfully submitted,
MARVEL ENTERTAINMENT GROUP, INC.
THE ASHER CANDY COMPANY
FLEER CORP.
FRANK H. FLEER CORP.
HEROES WORLD DISTRIBUTIONS, INC.
MALIBU COMICS ENTERTAINMENT, INC.
MARVEL CHARACTERS, INC.
MARVEL DIRECT MARKETING INC.
SKYBOX INTERNATIONAL INC.
By:/s/ Paul E. Shapiro
--------------------------------------
Name: Paul E. Shapiro, Esq.
Title: Executive Vice President
WEIL, GOTSHAL & MANGES LLP Attorneys for
the Debtors and Debtors in Possession 767
Fifth Avenue New York, New York 10153 (212)
310-8000
-and-
YOUNG, CONAWAY, STARGATT & TAYLOR
Attorneys for the Debtors
and Debtors in Possession
Rodney Square North
Wilmington, Delaware 19899
(302) 571-6600
By:/s/ Brendan Shannon
--------------------------------------
51
<PAGE>
TOY BIZ, INC.
By:/s/ Joseph M. Ahearn
--------------------------------------
Name: Joseph M. Ahearn
Title: President
BATTLE FOWLER LLP
Attorneys for Toy Biz, Inc.
75 East 51st Street
New York, New York 10022
(212) 856-7000
-and-
PEPPER, HAMILTON & SCHEETZ
1201 Market Street
Wilmington, Delaware 19899
(302) 777-6500
By: /s/ David Stratton
--------------------------------------
52
<PAGE>
SCHEDULE 1.13
CLASS SECURITIES LITIGATION CLAIMS
<PAGE>
SCHEDULE 1.22
DERIVATIVE SECURITIES LITIGATION CLAIMS
<PAGE>
SCHEDULE 1.28
EQUITY RIGHTS SCHEDULE
The shares of Newco Common Stock distributed on account of
Allowed Senior Secured Claims under section 4.2(b)(ii)(c) hereof shall have,
among other rights, (a) appropriate corporate governance rights, including,
without limitation, appropriate special voting rights and the right to
designate a specified number of directors and (b) rights to access public
markets, including, without limitation, customary registration rights,
piggy-back rights and the right to have the securities listed or admitted for
trading on a national stock exchange or stock market. Such rights shall be
governed by the certificate of incorporation and by-laws of Newco, a
registration rights agreement and a shareholders agreement, each of which shall
be Exhibits hereto.
<PAGE>
SCHEDULE 9.1
SCHEDULE OF EXECUTORY CONTRACTS
<PAGE>
EXHIBIT A
CONFIRMATION ORDER
<PAGE>
EXHIBIT B
MERGER AGREEMENT
<PAGE>
EXHIBIT C
NEW FSB-P DEBT SECURITIES AGREEMENT
<PAGE>
EXHIBIT D
NEW FSB-P HOLDINGS PREFERRED STOCK CERTIFICATE OF
DESIGNATION
<PAGE>
EXHIBIT E
NEW FSB-P WARRANTS AGREEMENT
<PAGE>
EXHIBIT F
NEW SERIES A SECURED NOTES AGREEMENT
<PAGE>
EXHIBIT G
NEW SERIES B SECURED NOTES AGREEMENT
<PAGE>
EXHIBIT H
NEWCO WARRANTS AGREEMENT
<PAGE>
EXHIBIT I
VOTING AGREEMENT
<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> 3-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-START> JAN-01-1997
<PERIOD-END> MAR-31-1997
<CASH> 21,700
<SECURITIES> 0
<RECEIVABLES> 256,200
<ALLOWANCES> 40,500
<INVENTORY> 78,200
<CURRENT-ASSETS> 384,900
<PP&E> 111,800
<DEPRECIATION> 34,400
<TOTAL-ASSETS> 818,900
<CURRENT-LIABILITIES> 380,200
<BONDS> 0
0
0
<COMMON> 1,000
<OTHER-SE> (286,000)
<TOTAL-LIABILITY-AND-EQUITY> 818,900
<SALES> 156,700
<TOTAL-REVENUES> 156,700
<CGS> 104,500
<TOTAL-COSTS> 104,500
<OTHER-EXPENSES> 53,300
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 15,900
<INCOME-PRETAX> (23,600)
<INCOME-TAX> 3,800
<INCOME-CONTINUING> (27,400)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (27,800)
<EPS-PRIMARY> (0.27)
<EPS-DILUTED> 0.00
</TABLE>
