SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
Date of Report (Date of Earliest Event Reported) April 28, 1997
--------------
Toy Biz, Inc.
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(Exact Name of Registrant as Specified in its Charter)
<TABLE>
<CAPTION>
Delaware 1-13638 13-3711775
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<S> <C> <C>
(State or Other (Commission (I.R.S. Employer
Jurisdiction of File Number) Identification
incorporation) No.)
333 East 38th Street, New York, New York 10016
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(Address of Principal Executive Offices) (Zip Code)
(212) 682-4700
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(Registrant's Telephone Number, Including Area Code)
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(Former Name or Former Address, If Changed Since Last Report.)
</TABLE>
486952.1
<PAGE>
ITEM 5. Other Events.
On April 28, 1997, the Registrant issued a press release, a
copy of which is attached hereto as Exhibit 99.1, announcing that it had signed
a letter of intent with Marvel Entertainment Group, Inc. ("Marvel") with respect
to a proposed plan of reorganization of Marvel and certain of its subsidiaries
(collectively with Marvel, the "Debtors") to be to be filed on a joint basis by
Marvel and the Registrant in the jointly administered chapter 11 cases of the
Debtors currently pending in the United States Bankruptcy Court for the District
of Delaware. A copy of the letter of intent is attached hereto as Exhibit 99.2.
ITEM 7. Financial Statements and Exhibits.
(c) Exhibits.
99.1. Press release of the Registrant, dated April 28, 1997.
99.2. Letter of Intent, dated April 25, 1997, between Marvel Entertainment
Group, Inc. and the Registrant.
486952.1
2
<PAGE>
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 hereunto duly authorized.
TOY BIZ, INC.
(Registrant)
Date: April 29, 1997
By /s/ Joseph M. Ahearn
------------------------------------------
Name: Joseph M. Ahearn
Title: President and Chief Executive Officer
486952.1
3
<PAGE>
EXHIBIT INDEX
Exhibit
99.1. Press release of the Registrant, dated April 28, 1997
99.2. Letter of Intent, dated April 25, 1997, between Marvel Entertainment
Group, Inc. and the Registrant.
486952.1
4
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News Release
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Marvel & Toy Biz Sign Letter of Intent
New York, N.Y., April 28, 1997 - Marvel Entertainment Group, Inc.
(NYSE: MRV) and Toy Biz, Inc. (NYSE: TBZ) signed a letter of intent proposing a
new plan of reorganization for Marvel and its subsidiaries.
Under the plan announced today, Marvel's publishing and licensing
businesses and Toy Biz would merge to form a new entity. Under the contemplated
transaction, Toy Biz would merge with the Marvel character-based businesses and
Marvel's secured lenders would receive in satisfaction of their claims (i) cash
proceeds of a new $250 million term loan and a 5-year, $170 million note from
the merged Marvel/Toy Biz, (ii) 28% of the equity of the merged Marvel/Toy Biz,
and (iii) all of the stock of Marvel's Fleer/SkyBox and Panini subsidiaries.
In addition, Marvel shareholders would receive two series of three-year
warrants. The first series would entitle Marvel shareholders to acquire 7.5% of
the common stock of the new Marvel/Toy Biz on a fully diluted basis with an
exercise price based upon Marvel/Toy Biz having an enterprise value of $950
million. The second series would entitle Marvel shareholders to acquire an
additional 5% of the common stock of Marvel/Toy Biz on a fully diluted basis
with an exercise price based on Marvel/Toy Biz having an enterprise value of
$1.1 billion.
The proposed plan contemplates that the Marvel/Toy Biz transaction
would be subject to higher or better offers through an auction process. Under
the auction process, the minimum acceptable bid for the new Marvel/Toy Biz would
be one that yields net cash proceeds (after payment of administrative expenses
and amounts owed under the DIP credit facility) to Marvel's pre-petition secured
lenders in an amount equal to approximately $430 million, and that yields to the
stockholders of Toy Biz (other than Marvel) $285 million, or approximately $14
per share.
As an alternative, notwithstanding the auction process described above,
a bid may be accepted for Marvel's publishing and licensing businesses and its
approximately 26.7% interest in Toy Biz in an amount at least sufficient to
yield net cash proceeds (after payment of administrative expenses and amounts
owed under the DIP credit facility) to Marvel's pre-petition secured lenders of
approximately $430 million. In such instance, Toy Biz's
Page - 1
486966.1
<PAGE>
shareholders (other than Marvel) would receive a breakup fee of $7 million.
Marvel's Fleer/SkyBox and Panini businesses will also be marketed and
may be sold in a separate auction.
Marvel also announced its intention to retain, subject to court
approval, an investment banking firm to assist the company in identifying
potential bidders and conducting the auctions.
Marvel's lead lender, Chase Manhattan Bank, has indicated its support
of this proposed plan.
Scott Sassa, Chairman and CEO of Marvel, said: "This proposal paves the
way for a plan that treats all parties as fairly as possible, and provides for
an opportunity for the holding company bondholders and Marvel's equity holders
to receive a recovery."
Joseph M. Ahearn, CEO of Toy Biz, said: "We believe this plan is in the
best interests of our shareholders and our business. Acquiring the Marvel
character-based businesses presents great opportunities to expand our revenues
by integrating Marvel media, licensing and publishing. Alternatively, our
shareholders have the opportunity to receive a meaningful premium to the
market." Mr. Ahearn said Dillon, Read & Co. Inc. would act as Toy Biz's
financial advisor in these transactions.
Completion of the transactions contemplated by the letter of intent is
subject to, among other things, approval by the Marvel and Toy Biz boards,
negotiation and execution of definitive documentation (including a plan),
confirmation by the bankruptcy court, and approval of Toy Biz's shareholders.
Contacts: For Marvel: Gary Fishman, of The Hudson Stone Group,
212-685-6890. For Toy Biz: Diane Perry, 212-704-8156 or Joe Kist, 212-704-8239,
both of Edelman Financial.
-END-
Page - 2
486966.1
Toy Biz, Inc.
333 East 38th Street
New York, New York 10016
April 25, 1997
Scott M. Sassa
Chairman of the Board of Directors
and Chief Executive Officer of
Marvel Entertainment Group, Inc.
387 Park Avenue South
New York, NY 10016
Re: Marvel Entertainment Group, Inc., et al., Chapter
-- --
11 Case Nos. 96-2069(HSB) through 96-2077(HSB)
-------------------------------------------------
Dear Mr. Sassa:
This letter identifies the major business points (although the
structure thereof may be subject to variation) which will pertain to a chapter
11 plan of reorganization (the "Plan") which will be proposed on a joint basis
by Marvel Entertainment Group, Inc. ("Marvel") and Toy Biz, Inc. ("Toy Biz") in
the jointly administered chapter 11 cases of Marvel and certain of its direct
and indirect subsidiaries (collectively, the "Debtors") now pending in the
United States Bankruptcy Court for the District of Delaware (the "Bankruptcy
Court") as chapter 11 case nos. 96-2069(HSB) through 96-2077(HSB) (collectively,
the "Chapter 11 Cases").
This letter is not, and shall in no event or under any
circumstances be deemed or construed to be a commitment on behalf of any of
Marvel, Toy Biz, The Chase Manhattan Bank ("Chase"), in its capacity as
administrative agent for the secured lenders (the "Secured Lenders") under those
certain agreements set forth on Schedule 1.1 hereto (together with all related
documents, instruments and amendments, the "Credit Agreements") or any of the
Secured Lenders to proceed with the Plan or the other transactions contemplated
hereby. The following entities referred to herein shall become obligated to
proceed with the Plan and the other transactions contemplated hereby with
respect to each such entity as follows:
1. With respect to Toy Biz. (A) Toy Biz shall have indicated
-----------------------
in writing by not later than two weeks after the date on which it has commenced
its due diligence that it has completed its due diligence, (B) the terms of the
Plan and the transactions contemplated thereby shall have been duly authorized
by the Board of Directors of Toy Biz, (C) definitive documents, including
C/M: 11391.0010 480895.16
<PAGE>
without limitation the Plan, shall have been duly executed, delivered or
consented to by Toy Biz in the exercise of its sole and absolute discretion, and
(D) the Bankruptcy Court shall have entered an order approving the transactions
contemplated by Section II hereof.
2. With respect to Marvel. (A) The terms of the Plan and the
----------------------
transactions contemplated thereby shall have been duly authorized by the Board
of Directors of Marvel, (B) definitive documents, including without limitation
the Plan, shall have been duly executed, delivered or consented to by Marvel in
the exercise of its sole and absolute discretion, and (C) the transactions
contemplated hereby shall have been approved by the Bankruptcy Court.
3. With respect to the Secured Lenders. (A) The Secured
-----------------------------------
Lenders shall have completed their due diligence, (B) the Secured Lenders shall
have voted by the requisite statutory majorities under section 1126(c) of the
Bankruptcy Code taking into account any votes designated under section 1126(e)
of the Bankruptcy Code, (C) definitive documents, including without limitation
the Plan, shall have been duly executed, delivered or consented to by the
Secured Lenders in the exercise of their sole and absolute discretion, and (d)
the transactions contemplated hereby shall have been approved by the Bankruptcy
Court.
I. Plan of Reorganization.
----------------------
A. Classification and Treatment of Claims. Administrative expense
--------------------------------------
claims (including all amounts due and owing with respect to the Debtor in
Possession financing facility, as amended (the "DIP Facility"), including but
not limited to principal, accrued interest, fees, expenses, charges and other
amounts heretofore obtained by the Debtors in the Chapter 11 Cases (the "DIP
Amount")) and priority tax claims shall be paid in full, it being understood and
agreed that all outstanding letters of credit or other similar obligations or
exposure shall be terminated and the Secured Lenders shall have been released
from any liability relating thereto. The Plan shall classify and treat the
claims against and the equity interests in the Debtors as follows:
1. Priority Non-Tax Claims. Priority non-tax claims
-----------------------
shall be paid in full.
2. Secured Lender Claims. The Secured Lenders or
---------------------
their nominee(s), designee(s) or assignee(s) as directed by Chase
(the "Designees") shall receive:
(a) If a Qualifying Offer Closes. In the event
----------------------------
that a Qualifying Offer (as hereinafter defined) closes on or
before the Effective Date (as hereinafter defined), cash equal in
C/M: 11391.0010 480895.16
2
<PAGE>
amount to the amount by which (x) all principal, interest, fees, expenses and
other amounts then due and owing pursuant to the Credit Agreements, exceeds (y)
one hundred and eighty million dollars ($180,000,000) (such excess being
hereinafter referred to as the "Secured Lender Cash Payment") plus one hundred
percent (100%) of the issued and outstanding capital stock of Fleer Corp.
("Fleer") and Panini S.p.A. ("Panini"), it being understood and agreed that all
outstanding letters of credit or other similar obligations or exposure shall be
terminated and the Secured Lenders shall have been released from any liability
relating thereto. Additionally, in the event such Qualifying Offer generates
Excess Proceeds (as hereinafter defined), the Secured Lenders may elect, in
their sole and absolute discretion, to be distributed all or any a part of such
Excess Proceeds in which event holders of claims and interests in the classes
described in section I.A.4, 5 and 6 hereof shall be distributed subordinated
notes or securities issued by a newly formed trust or other acceptable entity
formed for the benefit of such classes in an aggregate amount equal to such
Excess Proceeds so elected to be distributed to the Secured Lenders. Fleer
and/or Panini may issue new notes to the Secured Lenders, in addition to the
indebtedness owed to the Secured Lenders currently outstanding against Panini,
on terms and conditions and in an aggregate principal amount reasonably
acceptable to the Secured Lenders.
(b) If No Qualifying Offer Closes. If no
-----------------------------
Qualifying Offer is received or no Qualifying Offer closes on or before the
Effective Date:
(i) Cash: Cash in an amount equal to two
----
hundred and fifty million dollars ($250,000,000) less the DIP
Amount.
(ii) Note: Notes in an aggregate principal
----
amount of one hundred seventy million dollars ($170,000,000) (the "Notes")
issued by Newco (as hereinafter defined) with interest to accrue (but not be
paid) and to compound on a monthly basis at the rate of eleven and one half
percent (11.5%) per annum and a maturity date of the fifth (5th) anniversary of
the Effective Date of the Plan. The Notes will contain reasonable and customary
representations, covenants, warranties, and events of default acceptable to the
Secured Lenders including reasonable and customary covenants for indebtedness
secured by a "silent" lien which is junior to any liens granted in connection
with the Loan Facility (as hereinafter defined).
(iii) Stock of Newco: Twenty-eight percent
--------------
(28%) of the common stock of Newco before dilution by warrants or options
together with (a) appropriate corporate governance rights, including appropriate
special voting rights and the right to designate a specified number of
directors, and (b) access to public markets including customary registration
rights, piggy-
C/M: 11391.0010 480895.16
3
<PAGE>
back rights and the right to have the securities listed on a national stock
exchange or stock market.
(iv) Stock of Panini and Fleer: One hundred
-------------------------
percent (100%) of the issued and outstanding capital stock of Fleer and Panini,
it being understood that Fleer and/or Panini may issue new notes to the Secured
Lenders, in addition to the indebtedness owed to the Secured Lenders currently
outstanding against Panini, on terms and conditions and in an aggregate
principal amount reasonably acceptable to the Secured Lenders.
3. Other Secured Claims. All other allowed secured claims
--------------------
shall receive (x) payment in full in respect of their allowed secured claims,
(y) the return of their collateral or (z) reinstatement of their claim, if no
Qualifying Offer is received or closes as shall be determined by Toy Biz in the
exercise of its sole and absolute discretion, subject to the approval of the
Secured Lenders which may not be unreasonably withheld or delayed.
4. Unsecured Claims. All allowed unsecured claims shall be
----------------
paid a pro rata share of (i) an amount (the "Designated Distribution") to be
determined by Toy Biz and acceptable to the Secured Lenders, and (ii) subject to
the second sentence of section I.A.2(a) hereof, Excess Proceeds until all
allowed unsecured claims have been paid in full.
5. Securities Litigation Claims. Allowed securities litigation
----------------------------
claims shall be subordinated to all other claims and shall be pari passu with
all equity interests in Marvel (other than warrants) pursuant to section 510(b)
of the Bankruptcy Code and, subject to the second sentence of section I.A.2(a)
hereof, shall receive the treatment set forth in section I.A.6(a) below, it
being understood that the holders thereof are only entitled to one recovery in
respect of any equity interest.
6. Equity Interests.
----------------
(a) Marvel. All equity interests in Marvel shall
------
be cancelled, and, subject to the second sentence of section I.A.2(a) hereof,
Excess Proceeds after payment in full of all allowed unsecured claims pursuant
to section I.A.4 above shall be distributed to the holders of all allowed equity
interests on a pari passu basis with the securities litigation claims pursuant
to section I.A.5 above. In the event that no Qualifying Offer closes, the
holders of equity interests in Marvel shall receive three (3) year warrants
entitling the holders thereof to acquire seven and one half percent (7.5%) of
the common stock of Newco on a fully diluted basis with an exercise price based
upon Newco having an enterprise value of nine hundred and fifty million dollars
($950,000,000) and an additional five percent (5%) of the common stock of Newco
on a fully diluted basis with an exercise
C/M: 11391.0010 480895.16
4
<PAGE>
price based upon Newco having an enterprise value of one billion one hundred
million dollars ($1,100,000,000).
(b) Other Equity Interests. Each holder of an
----------------------
allowed equity interest (other than warrants) in any other Debtor shall retain
unaltered the legal, equitable and contractual rights to which such allowed
equity interest entitles the holder thereof unless the Secured Lenders, Toy Biz
and Marvel agree otherwise.
7. Warrants. All warrants shall be canceled.
--------
B. Means of Implementation.
-----------------------
1. Auction. An investment banking firm (the "Investment
-------
Banker") to be selected by Marvel and acceptable to Toy Biz and the Secured
Lenders shall seek offers in accordance with procedures to be formulated by the
Investment Banker after consultation with Marvel, Toy Biz and the Secured
Lenders (the "Auction Procedures") to purchase either (a) one hundred percent
(100%) of the common stock of Newco (the, "Newco Auction") or, in the
alternative, (b) Marvel or all of the assets of Marvel, exclusive in each case
of Fleer, Panini and their subsidiaries (such assets exclusive of Fleer, Panini
and their subsidiaries are hereinafter referred to as the "Designated Marvel
Assets") (the "Marvel Auction"); it being understood and agreed that Toy Biz
shall be entitled to receive a Breakup Fee (as hereinafter defined) if (x) all
of the conditions set forth in section VI below have been satisfied, and (y) the
Designated Marvel Assets are sold or disposed of other than pursuant to the
Newco Auction. The Designated Marvel Assets shall be sold to the highest or best
bidder making a Qualifying Offer in the event of one or more Qualifying
Offer(s). No offer which is not a Qualifying Offer shall be accepted. For
purposes of a sale pursuant to a Newco Auction, any offer yielding Net Proceeds
of Sale in an amount greater than or equal to the Secured Lender Cash Payment
plus two hundred and eighty five million dollars ($285,000,000) (the "Toy Biz
Payment") shall be a "Qualifying Offer" provided that (1) an amount at least
equal to the Secured Lender Cash Payment and the Toy Biz Payment shall be in
cash and (2) all outstanding letters of credit or other similar obligations or
exposure of the Secured Lenders under the Credit Agreements shall be terminated
and the Secured Lenders shall have been released from any liability relating
thereto. For purposes of a sale pursuant to a Marvel Auction, any offer that
Marvel accepts shall be a "Qualifying Offer" provided that it includes a
mechanism for payment of the Breakup Fee in cash. The highest or best Qualifying
Offer shall close and all consideration shall be paid, if at all, by not later
than the Effective Date, time being of the essence. The term "Net Proceeds of
Sale" means proceeds of a sale pursuant to this section I.B.1 net of cash
payment without duplication of (i) all allowed administrative expense claims
(including the DIP
C/M: 11391.0010 480895.16
5
<PAGE>
Amount), all allowed priority tax claims, all allowed priority non-tax claims,
the Designated Distribution, and all amounts required to cure executory
contracts or unexpired leases to be assumed pursuant to section 365 of the
Bankruptcy Code, (ii) all of Toy Biz's costs, including reasonable attorneys'
and investment bankers' fees (in an aggregate amount not to exceed three million
five hundred thousand dollars ($3,500,000)), in connection with the Chapter 11
Cases and the transactions contemplated by this letter (including fees and costs
with respect to any proxy statement), and (iii) all fees and charges then due
and owing pursuant to the Credit Agreements and all other costs or expenses of
the Secured Lenders, including all reasonable attorneys' and investment bankers'
fees incurred by the Secured Lenders. In the event of a sale pursuant to the
Newco Auction, the term "Excess Proceeds" means Net Proceeds of Sale in excess
of an amount of cash required to pay both the Secured Lender Cash Payment and
the Toy Biz Payment. In the event of a sale pursuant to a Marvel Auction, the
term "Excess Proceeds" means Net Proceeds of Sale in excess of an amount
required to satisfy the Secured Lender Cash Payment (whether or not in cash) and
the Breakup Fee, if applicable.
(a) No Qualifying Offer. If no Qualifying Offer
-------------------
is received or no Qualifying Offer closes on or before the Effective Date,
seventy two percent (72%) of the common stock of Newco shall be issued to the
holders of Toy Biz common stock (other than Marvel) in accordance with their
interests and the Secured Lenders or their Designees shall receive the treatment
set forth in section I.A.2(b) hereof.
(b) Qualifying Offer Closes. If a Qualifying
-----------------------
Offer closes on or before the Effective Date, (i) the Secured Lenders or their
Designees shall receive the treatment set forth in section I.A.2(a) hereof, (ii)
Toy Biz shall receive, if applicable, the Toy Biz Payment or the Breakup Fee to
be distributed to the holders of Toy Biz common stock (other than Marvel) in
accordance with their interests, and (iii) any Excess Proceeds shall be
distributed as set forth in section I.A hereof.
2. Merger of Marvel and Toy Biz. Except in the event of a sale
----------------------------
pursuant to the Marvel Auction, Marvel and Toy Biz shall merge or enter into
some other form of business combination to form "Newco" on terms to be agreed
upon consistent with this letter.
3. Fleer and Panini. Marvel shall convey all of the issued and
----------------
outstanding common stock of Fleer and Panini to the Secured Lenders or their
Designees, it being understood and agreed that all intercompany agreements,
understandings and relationships between Fleer or Panini on the one hand and
Marvel or any of its affiliates on the other hand (including any material
licensing agreement designated by the Secured Lenders)
C/M: 11391.0010 480895.16
6
<PAGE>
shall remain in full force and effect unless (a) modified or terminated in the
ordinary course of business or (b) the Secured Lenders and Toy Biz agree in
writing otherwise.
4. Fleer and Panini Obligations. Except as otherwise provided
----------------------------
by Section I.B.3 hereof, the Plan will provide that (a) Toy Biz, Marvel and
Newco shall be released and discharged from all obligations borne or the
responsibility of Marvel primarily for the benefit of Fleer or Panini, and (b)
Fleer and Panini shall be released and discharged from all obligations relative
to Toy Biz, Marvel and Newco.
5. Compliance With Securities Laws. Toy Biz, Marvel and, in
-------------------------------
the event of its formation, Newco shall comply with all applicable securities
laws in order to permit the consummation of the transactions contemplated
hereby, including the issuance and delivery of securities required to be issued
or delivered by the Plan.
6. Loan Facility. Newco shall obtain a loan facility or
-------------
facilities (collectively, the "Loan Facility") in the amount of two hundred and
fifty million dollars ($250,000,000) on a term loan basis and seventy-five
million dollars ($75,000,000) on a revolving credit basis in each case having
terms reasonably acceptable to the Secured Lenders. In the event that the
parties hereto are unable to obtain a term loan facility for such amount from a
third-party lender as of the Effective Date after reasonable efforts to obtain
such a facility, the Secured Lenders will provide a senior secured term loan
facility in the amount of one hundred and fifty million dollars ($150,000,000)
with a maturity date of not earlier than the first (1st) anniversary of the
Effective Date and otherwise on terms reasonably acceptable to the Secured
Lenders and Toy Biz provided that the remainder of the Loan Facility is provided
by a third party on terms reasonably acceptable to the Secured Lenders.
C. Executory Contracts. If no Qualifying Offer is
-------------------
received or closes, all executory contracts and unexpired leases
of any of the Debtors shall be assumed and assigned to Newco or
Fleer as applicable except for such executory contracts or
unexpired leases as may be designated for rejection by Toy Biz in
the exercise of its sole and absolute discretion prior to the
commencement of the hearing to consider confirmation of the Plan,
subject to the approval of Marvel and the Secured Lenders which
may not be unreasonably withheld or delayed.
D. Conditions Precedent.
--------------------
1. Conditions Precedent to Confirmation.
------------------------------------
Confirmation of the Plan shall be subject to the following
conditions precedent:
C/M: 11391.0010 480895.16
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<PAGE>
(a) Form of Confirmation Order. The Clerk of the
--------------------------
Bankruptcy Court shall have entered an order confirming the Plan (the
"Confirmation Order") in a form which (i) does not materially and adversely
affect the benefits to be received hereunder by any of the estate of Marvel, Toy
Biz or the Secured Lenders without the consent of the affected party to be given
or withheld in the exercise of each entity's sole and absolute discretion, (ii)
determines that Toy Biz has acted in good faith under the Plan, and (iii) is
otherwise in form and substance reasonably acceptable to Marvel, Toy Biz and the
Secured Lenders.1
(b) Confirmation Date. The Confirmation Date
-----------------
shall be no later than August 15, 1997, time being of the
essence.
2. Conditions Precedent to Effective Date. The
--------------------------------------
occurrence of the Effective Date of the Plan is subject to the
satisfaction of the following conditions precedent:
(a) Finality of Confirmation Order. The
------------------------------
confirmation order shall be final and no longer subject to appeal
or review.
(b) Execution of Documents. All actions,
----------------------
documents, financing statements and instruments necessary to implement the
provisions of the Plan shall have been effected or executed and delivered as the
case may be.
(c) No Material Adverse Change. There shall have
--------------------------
been no material adverse change in the financial condition of either Toy Biz or
Marvel after the date hereof, it being understood that the definitive
documentation will contain objective criteria defining what constitutes a
material adverse change.
(d) Approval by Toy Biz Shareholders. The
--------------------------------
transactions contemplated hereby as they relate to Toy Biz shall have been duly
authorized by the shareholders of Toy Biz.
(e) HSR. The waiting period under the Hart-
---
Scott-Rodino Antitrust Improvements Act shall have expired.
- --------
1 The form of confirmation order will be annexed to the Plan and should
address such matters as compliance with applicable securities laws, the
validity and enforceability of all applicable plan documents, the
validity and enforceability of all releases and injunctions
contemplated hereby to be contained in the Plan and tax matters
including exemption from transfer taxes under Bankruptcy Code section
1146(c).
C/M: 11391.0010 480895.16
8
<PAGE>
(f) Fairness Opinion for Toy Biz. Toy Biz shall
----------------------------
have received a suitable fairness opinion indicating that the exchange
consideration to be received by Toy Biz Class A shareholders (other than
Marvel), i.e. being a minimum of either seventy-two percent (72%) of the common
stock of Newco before dilution by warrants or options or two hundred and
eighty-five million dollars ($285,000,000) in cash, is fair from a financial
point of view to the existing holders of Class A Toy Biz common stock.
3. Waiver of Conditions Precedent. The conditions precedent
------------------------------
contained in this section I.D may be waived only with the consent of Marvel, Toy
Biz and the Secured Lenders, as applicable, to be given or withheld in the
exercise of each entity's sole and absolute discretion.
E. Definition of Effective Date. The "Effective Date" of the Plan shall
----------------------------
be the first business day which is eleven (11) days after the Confirmation Order
has been entered and on which all of the conditions precedent contained in
section I.D.2 hereof shall have been satisfied or waived unless a later date is
designated in a writing executed by Marvel, Toy Biz and the Secured Lenders to
be given in the exercise of their respective sole and absolute discretion.
II. Retention of Investment Banker and Approval of Breakup Fee. Marvel
----------------------------------------------------------
shall file a motion or motions requesting an order of Bankruptcy Court in a form
acceptable to Toy Biz and the Secured Lenders by not later than April 29, 1997
(1) authorizing the retention by Marvel of the Investment Banker to begin
seeking Qualifying Offers in accordance with the Auction Procedures, and (2)
approving the Breakup Fee.
III. Filing of Plan. Marvel and Toy Biz shall file the Plan
--------------
and a disclosure statement with respect to the Plan not later
than May 15, 1997.
IV. Governing Law. The transactions contemplated hereby
-------------
shall be governed by the internal laws of the State of Delaware
and to the extent applicable Federal law.
V. Section 363 Sale. Nothing contained herein shall
----------------
preclude a motion to sell assets (including stock) not subject to
the merger contemplated hereby pursuant to section 363 of the
Bankruptcy Code.
VI. Breakup Fee. In the event that the Designated Marvel
-----------
Assets are sold or disposed of pursuant to a higher or better
offer, Toy Biz shall be entitled to receive a breakup fee (the
"Breakup Fee") from Marvel out of the proceeds of such
transaction to be distributed to the holders (other than Marvel)
of Toy Biz common stock in accordance with their interests in the
C/M: 11391.0010 480895.16
9
<PAGE>
amount of seven million dollars ($7,000,000) provided that (a) 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 in section I.B.6 above, (b) Toy Biz is otherwise willing and
diligently proceeding to close, and (c) Isaac Perlmutter and Avi Arad shall 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 merger and other transactions contemplated
hereby and not in favor of any competing offers.
VII. Toy Biz Proxy Statement/Registration Statement. Toy
----------------------------------------------
Biz shall file a preliminary proxy statement/registration
statement on form S-4 with the Securities and Exchange Commission
seeking approval of the transactions contemplated hereby no later
than two (2) weeks after the entry of an order by the Bankruptcy
Court approving the Breakup Fee provided that such order is not
the subject of a stay of a court of competent jurisdiction, but
in no event earlier than the date in which the Plan and a
disclosure statement therefore have been filed with the
Bankruptcy Court.
VIII. Acceptance. If the foregoing terms and conditions
----------
are satisfactory to you, please signify your agreement thereto by
signing and returning the enclosed copy of this letter. If these
terms are not accepted by you by the close of business on April
25, 1997, this proposal shall automatically, and without
C/M: 11391.0010 480895.16
10
<PAGE>
necessity of notice of any kind, be deemed terminated and of no further force or
effect. This letter may be executed and delivered in counterparts by facsimile.
Very truly yours,
TOY BIZ, INC.
By:
-----------------------------
Name: Joseph M. Ahearn
Title: President and
Chief Executive
Officer
Accepted and Agreed to this
____ day of _____, 1997
MARVEL ENTERTAINMENT
GROUP, INC.
By: _______________________
Name:__________________
Title:_________________
C/M: 11391.0010 480895.16
11
<PAGE>
Schedule 1.1
------------
Existing Agreements
I. Obligations Secured
-------------------
o Amended and Restated Credit and Guarantee Agreement,
dated as of August 30, 1994 (as amended, supplemented
or otherwise modified from time to time, the "Fleer
Credit Agreement"), among Marvel Entertainment Group,
Inc. ("Marvel"), Fleer Corp. ("Fleer"), the banks and
other institutions from time to time parties thereto,
the co-agents named therein and The Chase Manhattan
Bank (formerly known as Chemical Bank) ("Chase"), as
administrative agent.
o Term Loan and Guarantee Agreement, dated as of August
30, 1994 (as amended, supplemented or otherwise
modified from time to time, the "Panini Loan
Agreement"), among Marvel, Panini, S.p.A. (as successor
to Marvel Comics Italia, S.r.l.) and Istituto Bancario
Sao Paolo di Torino, S.p.A.
o Credit and Guarantee Agreement, dated as of April 24, 1995 (as
amended, supplemented or otherwise modified from time to time,
the "SkyBox Credit Agreement"), among Marvel, Fleer, the banks
and other institutions from time to time parties thereto, the
co-agents named therein and Chase.
o Line of Credit, dated as of March 27, 1996, among Fleer, the
banks and other financial institutions from time to time
parties thereto and Chase, as administrative agent (in such
capacity, the "Administrative Agent").
o Each letter of credit issued by a bank or other financial
institution which is party to the Fleer Credit Agreement or
the SkyBox Credit Agreement for the account of Marvel or any
of its subsidiaries.
o Each interest rate agreement between Marvel or any of its
subsidiaries and a bank or other financial institution which
is a party to the Fleer Credit Agreement or the SkyBox Credit
Agreement.
II. Guarantees
----------
o Marvel Guarantee, dated March 27, 1996, made by Marvel in
favor of the Administrative Agent, as amended.
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o Fleer Guarantee, dated March 27, 1996, made by Fleer in favor
of the Administrative Agent, as amended.
o Subsidiary Guarantee, dated as of March 27, 1996, made
by The Asher Candy Company, Fleer Sales Corp., Frank H.
Fleer Corp., SkyBox International Inc., Impel
Movieline, Inc., SkyBox Management, Inc., Heroes World
Distribution, Inc., Malibu Comics Entertainment, Inc.,
Marvel Characters, Inc., Marvel Direct Marketing, Inc.,
Marvel Restaurant Venture Corp., MRV, Inc. and Welsh
Publishing Group, Inc. in favor of the Administrative
Agent, as amended.
o Each of the SkyBox Credit Agreement, the Fleer Credit
Agreement and the Panini Loan Agreement contains a guarantee
by Marvel of the obligations of Fleer or Panini, S.p.A., as
the case may be, thereunder.
III. Security Agreements
-------------------
o Company Security Agreement, dated as of March 27, 1996, made
by Marvel in favor of the Administrative Agent, as amended.
o Fleer Security Agreement, dated as of March 27, 1996, made by
Fleer in favor of the Administrative Agent, as amended.
o Subsidiary Security Agreement, dated as of March 27, 1996,
made by The Asher Candy Company in favor of the Administrative
Agent, as amended.
o Subsidiary Security Agreement, dated as of March 27,
1996, made by Fleer Sales Corp. in favor of the
Administrative Agent, as amended.
o Subsidiary Security Agreement, dated as of March 27,
1996, made by Frank H. Fleer Corp. in favor of the
Administrative Agent, as amended.
o Subsidiary Security Agreement, dated as of March 27,
1996, made by SkyBox International, Inc. in favor of
the Administrative Agent, as amended.
o Subsidiary Security Agreement, dated as of March 27,
1996, made by Impel Movieline, Inc. in favor of the
Administrative Agent, as amended.
o Subsidiary Security Agreement, dated as of March 27,
1996, made by SkyBox Management, Inc. in favor of the
Administrative Agent, as amended.
-2-
483824.1
<PAGE>
o Subsidiary Security Agreement, dated as of March 27,
1996, made by Heroes World Distribution, Inc. in favor
of the Administrative Agent, as amended.
o Subsidiary Security Agreement, dated as of March 27,
1996, made by Malibu Comics Entertainment. Inc. in
favor of the Administrative Agent, as amended.
o Subsidiary Security Agreement, dated as of March 27,
1996, made by Marvel Characters, Inc. in favor of the
Administrative Agent, as amended.
o Subsidiary Security Agreement, dated as of March 27,
1996, made by Marvel Direct Marketing, Inc. in favor of
the Administrative Agent, as amended.
o Subsidiary Security Agreement, dated as of March 27,
1996, made by MRV, Inc. in favor of the Administrative
Agent, as amended.
o Subsidiary Security Agreement, dated as of March 27,
1996, made by Welsh Publishing Group, Inc. in favor of
the Administrative Agent, as amended.
o Fleer Trademark Security Agreement, dated as of March 27,
1996, made by Fleer in favor of the Administrative Agent, as
amended.
o Subsidiary Trademark Security Agreement, dated as of
March 27, 1996, made by Marvel Characters, Inc. in
favor of the Administrative Agent, as amended.
o Subsidiary Trademark Security Agreement, dated as of
March 27, 1996, made by SkyBox International, Inc. in
favor of the Administrative Agent, as amended.
o Subsidiary Trademark Security Agreement, dated as of
March 27, 1996, made by Malibu Comics Entertainment,
Inc. in favor of the Administrative Agent, as amended.
o Fleer Copyright Security Agreement, dated as of March 27,
1996, made by Fleer in favor of the Administrative Agent, as
amended.
o Subsidiary Copyright Security Agreement, dated as of
March 27, 1996, made by Marvel Characters, Inc. in
favor of the Administrative Agent, as amended.
o Additional Subsidiary Copyright Security Agreement,
dated as of March 27, 1996, made by Malibu Comics
Entertainment, Inc. in favor of the Administrative
Agent, as amended.
-3-
483824.1
<PAGE>
IV. Pledge Agreements
-----------------
o Company Pledge Agreement, dated as of March 27, 1996, made by
Marvel in favor of the Administrative Agent, as amended.
o Fleer Pledge Agreement, dated as of March 27, 1996, made by
Fleer in favor of the Administrative Agent, as amended.
o SkyBox Pledge Agreement, dated as of March 27, 1996,
made by SkyBox International Inc. (formerly Impel
Marketing Inc.) in favor of the Administrative Agent,
as amended.
o Italian Pledge Agreement, dated as of March 27, 1996, made by
Marvel in favor of the Administrative Agent, as amended.
o Share Pledge Agreement (Germany), dated as of May 24, 1996,
made by Fleer in favor of the Administrative Agent, as
amended.
V. Mortgages
---------
o Open-End Mortgage, dated May 15, 1996 (but effective as
of March 27, 1996), from Frank H. Fleer Corp. to the
Administrative Agent with respect to the real property
and improvements located at North Tenth Street in
Philadelphia.
-4-
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