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) October 13, 1998
Marvel Enterprises, Inc.
(Exact Name of Registrant as Specified in its Charter)
Delaware 1-13638 13-3711775
(State or Other (Commission (I.R.S. Employer
Jurisdiction of File Number) Identification
incorporation) No.)
685 Third Avenue, New York, New York 10017
(Address of Principal Executive Offices) (Zip Code)
(212) 588-5100
(Registrant's Telephone Number, Including Area Code)
(Former Name or Former Address, If Changed Since Last Report.)
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ITEM 2. Acquisition or Disposition of Assets.
The plan of reorganization (the "Plan") for Marvel Entertainment Group,
Inc. ("Marvel") that was proposed by the Registrant and certain senior secured
lenders of Marvel, in the bankruptcy cases of Marvel and various subsidiaries of
Marvel in the District Court for the District of Delaware (the "District Court")
was consummated on October 1, 1998. Pursuant to the Plan, MEG Acquisition Corp.
("Acquisition"), a Delaware corporation and a wholly-owned subsidiary of the
Registrant, merged with and into Marvel, with Marvel continuing as the surviving
corporation and as a wholly-owned subsidiary of the Registrant (the "Merger").
As a result of the Merger, the Registrant acquired all of the tangible
and intangible assets of Marvel. The assets acquired include plant, equipment
and other physical property which were used by Marvel in its operations (as
described below). Marvel'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) licensing of fictional action adventure characters owned by
Marvel for consumer products, media and advertising promotion, and (iv) the
manufacture and distribution of adhesive paper. The Registrant intends to
continue to use such plant, equipment and other physical property substantially
in the same manner.
The following cash payments and securities issuances were made by the
Registrant in consideration for its acquisition of Marvel:
(i) Equity Securities Issuances. The Registrant issued: (a) 9,000,000
shares of its 8% Cumulative Convertible Exchangeable Preferred Stock, par value
$.01 per share (the "8% Preferred Stock"), to certain purchasers, including
affiliates of Dickstein Partners Inc. ("Dickstein Partners"), Object Trading
Corp., a Delaware corporation ("Object Trading"), an entity owned by Isaac
Perlmutter (a director of the Registrant and the Registrant's largest single
stockholder) and to certain Fixed Senior Secured Lenders (as defined below) for
$90 million, and (b) 13,100,000 shares of its Common Stock, par value $.01 per
share (the "Common Stock"), and, pursuant to the Plan, 7,900,000 shares of 8%
Preferred Stock to holders (the "Fixed Senior Secured Lenders") of fixed senior
indebtedness of Marvel. The Registrant has also issued to LaSalle National Bank,
in settlement of litigation claims, the following warrants (collectively the
"Stockholder Warrants"): (a) three year warrants to purchase 300,000 shares of
Common Stock (the "Class A Warrants"), (b) six month warrants to purchase
225,000 shares of 8% Preferred Stock (the "Class B Warrants"), and (c) four year
warrants to purchase 525,000 shares of Common Stock (the "Class C Warrants").
Furthermore, the Registrant will issue, upon the conclusion of various
proceedings in the District Court relating to Marvel's bankruptcy proceedings,
(a) warrants (the "Plan Warrants") to purchase up to 1,750,000 shares of Common
Stock to certain unsecured pre-petition creditors of Marvel (the "Unsecured
Creditors"), and (b) 3,700,000 Class A Warrants, 2,775,000 Class B Warrants and
6,475,000 Class C Warrants to the holders of shares of
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common stock, par value $.01 per share of Marvel (the "Marvel Shares"), and to
holders of certain class securities litigation claims arising in relation to the
purchase or sale of Marvel Shares, the Unsecured Creditors and certain other
creditors of Marvel;
(ii) Fixed Senior Secured Lenders Cash Payment. The Registrant paid
approximately $222 million in cash to the Fixed Senior Secured Lenders. An
additional $10 million was paid to the Fixed Senior Secured Lenders in the
second quarter of 1998 in connection with the sale of Marvel's confectionery
business;
(iii) Unsecured Creditors Cash Payment. The Registrant will make a cash
payment to the Unsecured Creditors in an amount equal to the lesser of (i) $2
million plus fifteen percent (15%) of the amount of their allowed claims and
(ii) $8 million upon the conclusion of various proceedings in the District Court
relating to Marvel's bankruptcy proceedings;
(iv) Administrative Expense Claims Payment. The Registrant will pay in
cash (the "Administration Expense Claims Payment") all administration expense
claims (the "Adminis tration Expense Claims") incurred in connection with the
Bankruptcy Case. A portion of the Administration Expense Claims Payment in the
amount of approximately $18 million was paid on the consummation date of the
Plan. If the aggregate amount of Administration Expense Claims is in excess of
$35 million, Zib Inc. ("Zib"), an affiliate of Mr. Perlmutter, has agreed that
Zib or one of its affiliates will lend the Registrant the amount of such excess
in exchange for a promissory note from the Registrant (the "Excess
Administration Expense Claims Note"). The Registrant currently anticipates that
the Administration Expense Claims will not exceed $35 million. Accordingly, the
Excess Administration Expense Claims Note is not expected to be issued;
(v) Panini Payment and Panini Guaranty. The Registrant paid $13 million
in cash (the "Panini Payment") to certain creditors (the "Panini Creditors") of
Panini, S.p.A., a wholly-owned subsidiary of Marvel ("Panini SpA"), and the
Registrant and certain of its subsidiaries issued to the Panini Creditors a
deficiency guaranty (the "Panini Guaranty") of up to $27 million in respect of
Panini SpA's indebtedness. The Registrant also agreed to indemnify the Panini
Creditors against certain costs and expenses incurred by the Panini Creditors in
enforcing their rights under the Panini Guaranty;
(vi) Dispute Settlement Payment. The Registrant paid $3.5 million in
cash to certain claimants in the Bankruptcy Case in settlement of disputes;
(vii) Dickstein Professional Fee Reimbursement. The Registrant paid
$200,000 in cash to Dickstein Partners to reimburse Dickstein Partners for
professional fees and costs relating to the purchase of 8% Preferred Stock by
affiliates of Dickstein Partners;
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(viii) Refinancing. The Registrant refinanced all of its outstanding
indebtedness under its existing working capital facility with UBS AG, Stamford
Branch ("UBS") and The Chase Manhattan Bank, N.A.; and
(ix) Miscellaneous Payments. The Registrant paid Chase Manhattan Bank
approximately $3 million for various fees and to reimburse Chase for payments
made on the Registrant's letters of credit.
The amount of the consideration paid by the Registrant was determined
through negotiations between various interested parties involved in Marvel's
bankruptcy proceedings in the District Court under the supervision of the
District Court. The amount of consideration paid by the Registrant is embodied
in the Plan which was confirmed by the District Court on July 31, 1998.
In order to finance the consummation of the Plan and the consummation
of the Merger the Registrant received funds from the following sources:
(i) a $200 million credit agreement (the "Bridge Credit Agreement")
with UBS, as agent and collateral agent, certain lenders and Warburg Dillon Read
LLC, as Arranger. All $200 million available under the Bridge Credit Agreement
was borrowed at the time of the consummation of the Plan and Merger and net
proceeds of approximately $183 million were used to partially finance
consummation of the Plan and Merger. The Bridge Credit Agreement includes
extensive affirmative and negative covenants (including financial covenants) and
must be repaid by September 27, 1999. The outstanding borrowing under the Bridge
Credit Agreement bears interest, in the Registrant's discretion, at either (x) a
base rate (the higher of the prime or Federal funds rates) plus 5.50% per annum
(subject to certain specified increases) or (y) a Euro-dollar rate plus 6.50%
(subject to certain specified increases) per annum. The outstanding borrowing is
secured by substantially all of the assets of the Registrant and its domestic
subsidiaries and is guaranteed by each domestic subsidiary;
(ii) the proceeds from the purchase of 8% Preferred Stock by certain
Fixed Senior Secured Lenders, Object Trading, Whippoorwill Associates Inc., and
certain affiliates of Dickstein Partners in the amount of $90 million;
(iii) approximately $11 million from the working capital account of
Fleer Corp., a subsidiary of Marvel; and
(iv) approximately $1 million from Zib, and $455,000 from Avi Arad, a
major stockholder of the Registrant.
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ITEM 7. Financial Statements and Exhibits.
(a) Financial Statements of Business Acquired.
The financial statements required by this Item 7(a) will be filed not
later than 60 days from the date hereof.
(b) Pro Forma Financial Information.
The pro forma financial information required by this Item 7(b) will be
filed not later than 60 days from the date hereof.
(c) Exhibits.
2.1 Fourth Amended Plan of Reorganization filed with the United States
District Court for the District of Delaware on July 31, 1998 by the
Fixed Senior Secured Lenders and the Registrant, with attached
exhibits.
2.2 Agreement and Plan of Merger, dated as of August 12, 1998, by and among
the Registrant, Marvel Entertainment Group, Inc., and MEG Acquisition
Corp.
4.1 Restated Certificate of Incorporation of the Registrant.
4.2 Plan Warrant Agreement, dated as of October 1, 1998, between the
Registrant and American Stock Transfer and Trust Company, as warrant
agent.
4.3 Class A Warrant Agreement, dated as of October 1,1998, between the
Registrant and American Stock Transfer and Trust Company, as warrant
agent.
4.4 Class B Warrant Agreement, dated as of October 1,1998, between the
Registrant and American Stock Transfer and Trust Company, as warrant
agent.
4.5 Class C Warrant Agreement, dated as of October 1,1998, between the
Registrant and American Stock Transfer and Trust Company, as warrant
agent.
99.1 Credit Agreement, dated September 28, 1998, among the Registrant (by
change of name Marvel Enterprises, Inc.) and UBS AG Stamford Branch, as
Agent and Collateral Agent, et al.
99.2 Security Agreement, dated September 28, 1998, among the Registrant (by
change of name Marvel Enterprises, Inc.) and UBS AG Stamford Branch AG,
as Collateral Agent, et al.
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99.3 Stock Purchase Agreement, dated as of October 1, 1998, among the
Registrant and Dickstein & Co., L.P., Dickstein Focus Fund L.P.,
Dickstein International Limited, Elyssa Dickstein, Jeffrey Schwarz and
Alan Cooper as Trustees U/T/A/D 12/27/88, Mark Dickstein, Grantor, Mark
Dickstein and Elyssa Dickstein, as Trustees of the Mark and Elyssa
Dickstein Foundation, Elyssa Dickstein, Object Trading Corp., and
Whippoorwill Associates, Incorporated (to be filed as an Amendment).
99.4 Stockholders' Agreement, dated as of October 1, 1998, by and among Avi
Arad, Dickstein & Co., L.P., Dickstein Focus Fund L.P., Dickstein
International Limited, Elyssa Dickstein, Jeffrey Schwarz and Alan
Cooper as Trustees U/T/A/D 12/27/88, Mark Dickstein, Grantor, Mark
Dickstein and Elyssa Dickstein, as Trustees of the Mark and Elyssa
Dickstein Foundation, Elyssa Dickstein, Isaac Perlmutter, Isaac
Perlmutter T.A., The Laura & Isaac Perlmutter Foundation Inc., Object
Trading Corp., Zib Inc., Whippoorwill Associates, Incorporated, and the
Registrant (to be filed as an Amendment).
99.5 Registration Rights Agreement, dated as of October 1, 1998, by and
among the Registrant, Dickstein & Co., L.P., Dickstein Focus Fund L.P.,
Dickstein International Limited, Elyssa Dickstein, Jeffrey Schwarz and
Alan Cooper as Trustees U/T/A/D 12/27/88, Mark Dickstein, Grantor, Mark
Dickstein and Elyssa Dickstein, as Trustees of the Mark and Elyssa
Dickstein Foundation, Elyssa Dickstein, Object Trading Corp.,
Whippoorwill/Marvel Obligations Trust - 1997, and Whippoorwill
Associates, Incorporated (to be filed as an Amendment).
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SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934,
the Registrant has duly caused this report to be signed on its behalf by the
undersigned hereunto duly authorized.
MARVEL ENTERPRISES, INC.
(Registrant)
Date: October 13, 1998
By:
Name: Morton E. Handel
Title: Chairman of the Board
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EXHIBIT 2.1
IN THE UNITED STATES DISTRICT COURT
FOR THE DISTRICT OF DELAWARE
)
IN RE: )
)
MARVEL ENTERTAINMENT GROUP, INC.; THE )
ASHER CANDY COMPANY; FLEER CORP.; )
FRANK H. FLEER CORP.; HEROES WORLD )
DISTRIBUTION, INC.; MALIBU COMICS ) Case No. 97-638-RRM
ENTERTAINMENT, INC.; MARVEL )
CHARACTERS, INC.; MARVEL DIRECT )
MARKETING INC.; and SKYBOX )
INTERNATIONAL, INC., )
)
Debtors. )
FOURTH AMENDED JOINT PLAN OF REORGANIZATION PROPOSED BY THE
SECURED LENDERS AND TOY BIZ, INC.
--------------------------------
WACHTELL, LIPTON, ROSEN & KATZ BATTLE FOWLER LLP
Attorneys for Toy Biz, Inc. Attorneys for The Secured
Lenders 75 East 55th Street
51 West 52nd Street New York, New York 10022
New York, New York 10019 (212) 856-7000
(212) 403-1000
-and- -and-
RICHARDS, LAYTON & FINGER, P.A. PEPPER HAMILTON LLP
Attorneys for The Secured Attorneys for Toy Biz, Inc.
Lenders 1201 Market Street
One Rodney Square P.O. Box 1709
Wilmington, Delaware 19899 Wilmington, Delaware 19899
(302) 658-6541 (302) 777-6500
Dated: Wilmington, Delaware
July 31, 1998
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SECTION 1. DEFINITIONS AND INTERPRETATION..............................................................1
A. Definitions........................................................................1
B. Interpretation; Application of Definitions
and Rules of Construction..............................................24
C. Exhibits and Schedules............................................................25
SECTION 2. PROVISIONS FOR PAYMENT OF ADMINISTRATION EXPENSE
CLAIMS AND PRIORITY TAX CLAIMS ...........................................................25
2.1 Administration Expense Claims.........................................................25
2.2 Compensation and Reimbursement Claims.................................................25
2.3 Priority Tax Claims...................................................................26
SECTION 3. CLASSIFICATION OF CLAIMS
AND EQUITY INTERESTS...................................................26
SECTION 4. PROVISIONS FOR TREATMENT OF CLAIMS
AND EQUITY INTERESTS UNDER THE PLAN....................................27
4.1 Priority Non-Tax Claims (Class 1).....................................................27
4.2 Senior Secured Claims.................................................................27
(a) Allowance of Senior Secured Claims................................................27
(b) Treatment of Allowed Fixed Senior Secured
Claims............................................................................27
(i) No Qualifying.................................................................27
(ii)Qualifying....................................................................29
(c) Treatment of Allowed Contingent Senior Secured
Claims............................................................................29
(i) No Panini....................................................................29
(ii) Panini.......................................................................29
4.3 Other Secured Claims (Class 3)........................................................29
4.4 Unsecured Claims (Class 4)............................................................30
(a) Distributions.....................................................................30
(i) No Qualifying.................................................................30
(ii) Qualifying...................................................................31
(b) Intercompany Claims...............................................................31
(c) LaSalle Claim.....................................................................31
4.5 Class Securities Litigation Claims
(Class 5)..............................................................31
(a) Distributions.....................................................................31
(b) Calculation of Distribution.......................................................32
(c) Parity of and Limitation on Distributions.........................................32
4.6 Equity Interests (Class 6)............................................................32
(a) Entertainment (Subclass 6A).......................................................32
(i) Distributions................................................................32
(ii) Parity of and Limitation on
Distributions..........................................................33
(b) Subsidiary Equity Interest (Subclass 6B)..........................................33
4.7 Existing Warrants (Class 7)...........................................................33
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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...................................................................33
5.1 Holders of Claims and Equity Interests Entitled
to Vote...........................................................................33
5.2 Nonconsensual Confirmation............................................................34
5.3 Severability of Plan of Reorganization................................................34
SECTION 6. MEANS OF IMPLEMENTATION....................................................................34
6.1 Closing of Transaction................................................................34
6.2 Derivative Securities Litigation Claims...............................................34
6.3 Board of Directors of the Reorganized
Debtors................................................................35
6.4 Officers of the Reorganized Debtors...................................................35
6.5 Distribution to New Investors.........................................................35
6.6 Toy Biz Distribution..................................................................35
(a) No Qualifying Transaction.........................................................35
(b) Qualifying Transaction............................................................35
6.7 Fees to New Investors.................................................................36
6.8 Dissolution of Committees.............................................................36
6.9 Intentionally deleted.................................................................36
6.10 Newco Financing......................................................................36
6.11 Vote of Characters' Toy Biz Stock....................................................36
6.12 Forgiveness of Panini Obligations....................................................37
6.13 Panini Indemnity.....................................................................37
6.14 Outstanding Toy Biz Stock Interests..................................................37
6.15 Distribution of Subsidiary Equity
Interests..............................................................37
6.16 Continuation of Creditors Committee..................................................37
6.17 Right to Object to Fees..............................................................37
6.18 Certain Securities Law Matters.......................................................38
6.19 Settlement Amount....................................................................39
6.20 Excess Administration Claims Amount Loan.............................................39
6.21 Perlmutter Capital Contribution..................................................... 39
SECTION 7. LITIGATION TRUST...........................................................................39
7.1 Assignment of Rights..................................................................39
(a) Avoidance Litigation Trust............................................................39
(b) MAFCO Litigation Trust................................................................40
7.2 Control of Litigation.................................................................40
7.3 Liability of Trustee..................................................................40
7.4 Distribution of Net Avoidance Litigation
Proceeds and Net MAFCO Litigation Proceeds........................................41
7.5 Professional Fees and Expenses........................................................41
(a) Avoidance Litigation Trust............................................................41
(b) MAFCO Litigation Trust................................................................42
7.6 Commencement of Avoidance Actions.....................................................43
7.7 Reduction of Judgment and Indemnifications............................................43
7.8 Timing of Distributions...............................................................45
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7.9 Objections to Claims..................................................................45
7.10 Jurisdiction.........................................................................46
SECTION 8. PROVISIONS GOVERNING DISTRIBUTIONS.........................................................46
8.1 Date of Distributions.................................................................46
8.2 Entities to Exercise Function of Disbursing
Agent.............................................................................47
8.3 Surrender and Cancellation of Instruments.............................................47
8.4 (a)Delivery of Distributions......................................................47
(b)LaSalle Distributions..........................................................48
8.5 Manner of Payment Under Plan of
Reorganization.........................................................48
8.6 Reserves and Distributions............................................................49
8.7 Resulting Claims......................................................................49
8.8 Distributions After Consummation Date.................................................49
8.9 Rights And Powers Of Disbursing Agent.................................................49
(a) Powers of the Disbursing Agent....................................................49
(b) Expenses Incurred on or after the
Consummation Date......................................................50
(c) Exculpation.......................................................................50
8.10 Distributions of Certain Warrants.....................................................50
SECTION 9. PROCEDURES FOR TREATING DISPUTED CLAIMS UNDER THE
PLAN OF REORGANIZATION.....................................................................51
9.1 Objections to Claims..................................................................51
9.2 No Distributions Pending Allowance....................................................51
9.3 Cash Reserve..........................................................................51
9.4 Distributions After Allowance.........................................................51
9.5 Fractional Securities.................................................................52
SECTION 10. PROVISION GOVERNING EXECUTORY CONTRACTS AND
UNEXPIRED LEASES UNDER THE PLAN............................................................52
10.1 General Treatment....................................................................52
10.2 Amendments to Schedule; Effect of
Amendments.............................................................53
10.3 Bar to Rejection Damage Claims.......................................................53
10.4 Certain Panini Agreements............................................................54
(a) Panini Sticker Agreement.........................................................54
(b) Panini Comic Distribution Agreement..............................................54
(c) Other Panini Agreements..........................................................54
SECTION 11. CONDITIONS PRECEDENT TO CONFIRMATION DATE AND
CONSUMMATION DATE..........................................................................54
11.1 Conditions Precedent to Confirmation of Plan
of Reorganization.................................................................54
(a) Confirmation Order................................................................54
11.2 Conditions Precedent to Consummation Date of
Plan of Reorganization............................................................55
(a) SEC Proxy Statement...............................................................55
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(b) HSR ..................................................................................55
(c) Restructured Panini Loan Documents....................................................56
(d) Secured Lender Consummation Date......................................................56
(e) Toy Biz Consummation Date.............................................................56
(f) Standstill Agreements.................................................................56
(g) NBA Agreement.........................................................................56
(h) Receipt of Certain Funds..............................................................56
(i) Receipt of Settlement Amount..........................................................56
(j) Certain Payments for Contingent Senior
Secured Claims.........................................................56
(k) Shareholders Agreement................................................................56
11.3 Waiver of Conditions Precedent........................................................57
SECTION 12. EFFECT OF CONFIRMATION.....................................................................57
12.1 General Authority....................................................................57
12.2 Discharge of Debtors.................................................................57
(a) General Discharge.................................................................57
(b) Exculpations......................................................................58
12.3 Term of Injunctions or Stays.........................................................59
SECTION 13. WAIVER OF CLAIMS...........................................................................59
13.1 Avoidance Actions....................................................................59
SECTION 14. RETENTION OF JURISDICTION..................................................................60
14.1 Retention of Jurisdiction............................................................60
14.2 Amendment of Plan of Reorganization..................................................61
SECTION 15. MISCELLANEOUS PROVISIONS...................................................................62
15.1 Payment of Statutory Fees............................................................62
15.2 Retiree Benefits.....................................................................62
15.3 Compliance with Tax Requirements.....................................................63
15.4 Recognition of Guaranty Rights.......................................................63
15.5 Severability of Plan Provisions......................................................63
15.6 Governing Law........................................................................64
15.7 Further Assurances...................................................................64
15.8 Time of the Essence..................................................................64
15.9 Counterparts.........................................................................64
15.10 Notices..............................................................................64
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EXHIBITS
1.Avoidance Litigation Trust Agreement
2.Avoidance Litigation Trust Loan Agreement
3.Avoidance Professional Fee Reimbursement Note
4.Bylaws for Newco
5.Charter for Newco
6.Designated Competitors
7.Excess Administration Claims Note
8.MAFCO Litigation Trust Agreement
9.MAFCO Litigation Trust Loan Agreement
10.MAFCO Professional Fee Reimbursement Note
11.Merger Agreement
12.New Investors
13.Newco Guaranty
14.Panini Indemnity
15.Plan Warrant Agreement
16.Secured Lenders
17.Standstill Agreements
18.Stockholder Series A Warrant Agreement
19.Stockholder Series B Warrant Agreement
20.Stockholder Series C Warrant Agreement
21.Transmittal Material
SCHEDULES
6.1. Letter of Credit and related obligations
10.1. Rejection Schedule
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JOINT PLAN OF REORGANIZATION
The Secured Lenders and Toy Biz, Inc., creditors and parties
in interest in these chapter 11 cases, hereby propose this Plan of
Reorganization dated July 31, 1998 for 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.
SECTION 1. DEFINITIONS AND INTERPRETATION
------------------------------
A. Definitions.
----------
The following terms used herein shall have the respective
meanings defined below:
"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 allowances of
compensation and reimbursement of expenses to the extent allowed by Final Order
under Section 330 or 503 of the Bankruptcy Code, and (d) any fees or charges
assessed against the estates of the Debtors under Section 1930, title 28, United
States Code.
"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.
"Affiliate" means, with reference to any person or entity, any
other person or entity that, within the meaning of Rule 12b-2 promulgated under
the Securities Exchange Act of 1934, as amended, "controls," is "controlled by"
or is under "common control with" such entity or person.
"Allowed" means, with reference to any Claim or Equity
Interest, (a) any and all DIP Claims, (b) any Claim or Equity Interest or any
portion thereof 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, (c) any
Claim or Equity Interest allowed by Final Order, (d) any Claim or Equity
Interest as to which the liability of the
729939.15
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Debtors and the amount thereof are determined by final order of a court of
competent jurisdiction other than the Bankruptcy Court,(e) any Claim allowed
expressly hereunder, or (f) for purposes of voting only, any Claim evidenced by
a proof of Claim filed by or before the last date designated by the Bankruptcy
Court as the last date for filing Claims against the Debtors, provided that such
Claim has not been disallowed by order of the Court or the Bankruptcy Court, and
is not the subject of an objection filed at least ten (10) days prior to the
voting deadline.
"Avoidance Beneficiaries" means Newco, all holders of Allowed
Fixed Senior Secured Claims and all holders of Allowed Unsecured Claims (other
than Intercompany Claims and the LaSalle Claim).
"Avoidance Litigation Trust" means the trust created by the
Avoidance Litigation Trust Agreement to be executed on the Consummation Date
pursuant to Section 7.1 hereof by the Debtors and the Avoidance Litigation
Trustee.
"Avoidance Litigation Trust Agreement" means the trust
agreement to be executed by the Debtors and the Avoidance Litigation Trustee in
the form of Exhibit 1 hereto, subject to non-substantive changes.
"Avoidance Litigation Trust Assets" means all assets of
the Avoidance Litigation Trust.
"Avoidance Litigation Trustee" means the individual designated
by the Creditors Committee subject to the consent of the Proponents, and from
and after the Consummation Date, any successor trustees designated in accordance
with the Avoidance Litigation Trust Agreement.
"Avoidance Litigation Trust Loan Agreement" means the Loan
Agreement to be executed by Newco in the form of Exhibit 2 hereto, subject to
non-substantive changes.
"Avoidance Professional Fee Reimbursement Note" means the note
to be executed by the Avoidance Litigation Trustee on behalf of the Avoidance
Litigation Trust in the form of Exhibit 3 hereto, subject to non-substantive
changes.
"Bankruptcy Code" means title 11, United States Code, as
applicable to the Reorganization Cases as in effect on the Confirmation Date.
"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
2
729939.15
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section 157, title 28, United States Code, the unit of such District Court under
section 151, title 28, United States Code.
"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.
"Beneficiaries" means all Avoidance Beneficiaries and
all MAFCO Beneficiaries.
"Breakup Fee" means Cash in the amount of the breakup fee
payable pursuant to the Convertible Preferred Stock Purchase Agreement to DPI or
its assignees, but in no event more than eight million dollars ($8,000,000).
"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.
"Bylaws" means the bylaws for Newco in the form of Exhibit 4
hereto, subject to non-substantive changes.
"Cash" means legal tender of the United States of America and,
with respect to payments under this Plan of Reorganization, cash (U.S. dollars),
certified check, bank check or wire transfer from a domestic bank.
"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.
"Characters" means Marvel Characters, Inc., one of the
Debtors herein.
"Charter" means the Certificate of Incorporation for Newco in
the form of Exhibit 5 hereto, subject to non-substantive changes.
"Chase" means The Chase Manhattan Bank in its capacity as
agent under the Existing Credit Agreements.
"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
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reduced to judgment, fixed, contingent, matured, unmatured, disputed,
undisputed, secured, or unsecured.
"Class Securities Litigation Claim" means any Claim whether or
not the subject of an existing lawsuit arising from rescission of a purchase or
sale of shares of common stock of Entertainment, 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
(which shall exclude the LaSalle Claim) which Claims shall be subordinated in
accordance with section 510(b) of the Bankruptcy Code.
"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.
"Confection Business" means any and all of the assets and
properties relating to the confection business operated and owned by Fleer
including, without limitation, all of its rights relating to Dubble Bubble,
Razzles and any other food and candy products produced thereby.
"Confirmation Date" means the date on which the Clerk of the
Bankruptcy Court enters the Confirmation Order on its docket.
"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.
"Confirmation Order" means the order of the Bankruptcy Court
confirming this Plan of Reorganization.
"Consummation Date" means the latest to occur of (a) the
thirtieth (30th) 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 filing a notice thereof by the Proponents with
the Bankruptcy Court upon the consent of the Creditors Committee, the Equity
Committee, High River, Westgate, LaSalle and the Trustee not to be unreasonably
withheld or delayed; provided, however, 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 11.2 hereof unless waived as provided in Section 11.3
hereof.
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"Contingent Senior Secured Claim" means any Claim against
Entertainment or any of its Debtor subsidiaries governed by or arising out of
the guaranty 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 or any of its
subsidiaries and any Claim for adequate protection relating to the Collateral
securing the Claims previously referred to in this definition arising out of
that certain Revolving Credit Guaranty Agreement by and among Entertainment, the
other Debtors and Chase dated December 27, 1996, the order entered by the
Bankruptcy Court on January 24, 1997, or any amendments entered into or further
orders entered by the Bankruptcy Court with respect to either of the foregoing.
"Contribution Bar Party" means any person or entity asserting
claims in the nature of contribution or indemnity in connection with, arising
out of or in any way related to Litigation Claims or Covered Claims.
"Convertible Preferred Stock" means convertible preferred
stock in Newco (a) each share of which shall be convertible into 1.039 shares of
Newco Common Stock, and (b) which shall have the terms set forth in the Charter.
"Convertible Preferred Stock Purchase Agreement" means
a Convertible Preferred Stock Purchase Agreement to be executed
on the Confirmation Date by Toy Biz, Zib Inc. or its assignees
and DPI or its assignees.
"Covered Claims" means any claim or matter as to which
Exculpated Persons are exculpated pursuant to section 12.2(b) of this Plan of
Reorganization, including, without limitation, matters asserted or claims made
in the LaSalle Action.
"Covered Person" means any person or entity asserting a
Covered Claim.
"Creditors Committee" means the Official Committee of
Unsecured Creditors appointed for the Debtors by the United States Trustee for
the District of Delaware on October 22, 1997.
"Debtor" means each of Entertainment, 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 Marvel Characters, Inc. and
Malibu Comics Entertainment, Inc.) being a Delaware corporation
and Marvel Characters, Inc. and Malibu Comics Entertainment, Inc.
being California corporations, the debtors in Chapter 11 Case
Nos. 96-2069 (HSB) through 96-2077 (HSB), respectively.
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"Debtor in Possession" means each Debtor in its capacity as a
debtor in possession under sections 1107(a) and 1108 of the Bankruptcy Code.
"Designated Competitor" means those entities listed on
Exhibit 6 hereto.
"Designated Contingent Senior Secured Claims" means on any
date all Contingent Senior Secured Claims other than those beneficially owned or
controlled (directly, indirectly or by participation) by any entity purchasing
Convertible Preferred Stock pursuant to the Convertible Preferred Stock Purchase
Agreement other than solely by virtue of the exercise of such entity's rights
pursuant to Section 4.2(b)(i)(A)(6) hereof.
"Designated Fixed Senior Secured Claims" means on any date all
Fixed Senior Secured Claims other than those beneficially owned or controlled
(directly, indirectly or by participation) by any entity purchasing Convertible
Preferred Stock pursuant to the Convertible Preferred Stock Purchase Agreement
other than solely by virtue of the exercise of such entity's rights pursuant to
Section 4.2(b)(i)(A)(6) hereof.
"DIP Claim" shall mean any claim arising under the DIP Credit
Agreement.
"DIP Credit Agreement" means that certain Revolving Credit and
Guaranty Agreement dated as of December 27, 1996 among Marvel Entertainment
Group, Inc., the 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 or the agreements or other documents
evidencing any successor or replacement post-petition financing facility.
"Disbursing Agent" means any entity in its capacity as a
disbursing agent under Section 8.2 hereof.
"Disputed Claim" means a Claim against a Debtor that is
not an Allowed Claim.
"District Court Complaint" means the complaint in Case
No. 97-586(RRM) filed on October 30, 1997 in the United States
District Court for the District of Delaware.
"DPI" means Dickstein Partners Inc.
"Effective Time" shall have the meaning given to such term in
the Merger Agreement.
"Entertainment" means Marvel Entertainment Group, Inc.
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"Equity Committee" means the Official Committee of Equity
Security Holders appointed for Entertainment by the United States Trustee for
the District of Delaware on February 12,1997.
"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
(Entertainment) of Class 6 (Equity Interests), the Existing Warrants shall not
be included in such subclass.
"Excess Administration Claims Amount" means the amount, if
any, by which the sum of (a) all Allowed Administration Expense Claims
(exclusive of (i) all DIP Claims through October 7, 1997 and (ii) Allowed
Administration Expenses Claims constituting the actual and necessary expenses of
running the Debtors' business in the ordinary course), and (b) the aggregate
amount of all professional fees, costs and expenses of professionals engaged by
Chase in its capacity as agent or acting on behalf of all of the holders of
Senior Secured Claims including, without limitation, all fees and expenses of
counsel and financial advisors incurred in connection with the Reorganization
Cases, exceeds thirty-five million dollars ($35,000,000).
"Excess Administration Claims Note" means one or more
unsecured notes of Newco and its subsidiaries in the form of Exhibit 7 hereto,
subject to non-substantive changes, in an aggregate original principal amount
equal to the Excess Administration Claims Amount, which shall, at the election
of Newco, be paid semi-annually or accrue and compound, shall have a maturity
date of the fifth anniversary of the Consummation Date, and which shall bear
interest at the rate of two hundred (200) basis points over the rate of interest
for the Term Loan Facility.
"Excess Proceeds" means all net proceeds of a Qualifying
Transaction which closes on the Consummation Date in excess of the aggregate
amount required to satisfy Fixed Senior Secured Claims in full in accordance
with the Existing Fleer Credit Agreements, to pay the Toy Biz Cash Distribution
and all amounts (other than Excess Proceeds) due to holders of Allowed Unsecured
Claims pursuant to Section 4.4(a)(ii) hereof.
"Exculpated Persons" means (a) the Reorganized Debtors, Newco,
all past, present and future holders of DIP Claims, all past, present and future
holders of Senior Secured Claims, Chase, Toy Biz, the New Investors, Dickstein
Partners L.P., Dickstein & Co. L.P., Dickstein Focus Fund, L.P., Dickstein
International Limited, Mark Dickstein, the Creditors Committee, all members of
the Creditors Committee solely in their capacity as members of
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the Creditors Committee, High River, Carl Icahn, Westgate, Vince Intrieri,
LaSalle, the Equity Committee, all members of the Equity Committee solely in
their capacity as members of the Equity Committee, Affiliates of any of the
foregoing, the Trustee and all officers, directors, employees, shareholders,
limited liability entity members, partners, consultants, advisors, investment
bankers, attorneys, accountants or other representatives or agents of any of the
foregoing acting as such, and (b) the Debtors; provided, however, that the term
"Exculpated Persons" shall not, under any circumstances, include the MAFCO
Defendants.
"Existing Credit Agreements" means, collectively, the
Existing Fleer Credit Agreements and the Existing Panini Credit
Agreements.
"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 Entertainment, 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 Entertainment, 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
Entertainment 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 definition of "Existing Fleer Credit
Agreements" 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 definition of "Existing Fleer
Credit Agreements" or (ii) any interest rate agreement between Entertainment 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 definition of "Existing Fleer Credit
Agreements", 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.
"Existing Panini Credit Agreements" means the Existing
Panini Junior Credit Agreements and the Existing Panini Senior
Credit Agreements.
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"Existing Panini Junior Credit Agreements" means (a) that
certain Term Loan and Guarantee Agreement dated as of August 30, 1994, as
amended, supplemented or otherwise modified from time to time, among
Entertainment, Panini, S.p.A. (formerly named Marvel Comics Italia S.r.l.), and
Istituto Bancario San Paolo di Torino, S.p.A.; (b) the Panini Participation
Agreements; (c)(i)(A) any letter of credit issued for the account of any of the
Panini Entities by a bank or other financial institution pursuant to any of the
Panini Credit Agreements referred to in clauses (a) or (b) and (B) any related
letter of credit applications and any agreements governing or evidencing
reimbursement obligations relating to any letters of credit referred to in
clause (c)(i)(A) or (ii) any interest rate agreement between any of the Panini
Entities and a bank or other financial institution pursuant to any of the Panini
Credit Agreements referred to in clauses (a) and (b); and (d) any guarantees and
security documents, including, without limitation, mortgages, pledge agreements,
security agreements and trademark security agreements, executed and delivered in
connection with any of the foregoing agreements, together in each case with all
related documents, instruments, consents, amendments, modifications and waivers.
"Existing Panini Senior Credit Agreements" means that certain
Italian Lire 27,000,000,000 Term Loan and Guaranty Agreement dated as of August
5, 1997 as amended, supplemented or otherwise modified from time to time, among
Entertainment, Panini, the lenders listed on Schedule 1 thereto as lenders, and
The Chase Manhattan Bank as agent, and the related Panini financing order
entered by the Bankruptcy Court and any guarantees and security documents,
including, without limitation, mortgages, pledge agreements, security agreements
and trademark security agreements, executed and delivered in connection with any
of the foregoing agreements, together in each case with all related documents,
instruments, consents, amendments, modifications and waivers.
"Existing Warrants" means, collectively, all incentive stock
options, non-qualified stock options and stock appreciation rights granted under
any employee benefits plan and any other options, warrants or rights,
contractual or otherwise, if any, to acquire an Equity Interest.
"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
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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.
"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 Credit
Agreements for the account of Entertainment or any of its subsidiaries (other
than the Panini Entities) or any interest rate agreement between Entertainment
or any of its subsidiaries (other than the Panini Entities) and a bank or other
financial institution which is a party to any of the Existing Fleer Credit
Agreements and any Claim for adequate protection relating to the Collateral
securing the Claims previously referred to in this definition arising out of
that certain Revolving Credit Guaranty Agreement by and among Entertainment, the
other Debtors and Chase dated December 27, 1996, the order entered by the
Bankruptcy Court on January 24, 1997, or any amendments entered into or further
orders entered by the Bankruptcy Court with respect to either of the foregoing.
"Fleer" means Fleer Corp., one of the Debtors.
"Fractional Warrant" means a Warrant to acquire a fractional
share of Convertible Preferred Stock or a fractional share of Newco Common
Stock.
"Governance Litigation" means case No. 97-648 (RRM)
pending in the Bankruptcy Court.
"High River" means High River Limited Partnership.
"Holdings I" means Marvel Holdings, Inc.
"Holdings II" means Marvel (Parent) Holdings, Inc.
"Holdings III" means Marvel III Holdings, Inc.
"Holdings I Indenture" means an indenture dated as of April
15, 1993 between Holdings I, as issuer, and NationsBank of Georgia, N.A.
(LaSalle National Bank succeeded Bank of New York, the successor to NationsBank
of Georgia, N.A. as indenture trustee).
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"Holdings II Indenture" means an indenture dated as of October
1, 1993 between Holdings II, as issuer, and NationsBank of Georgia, N.A.
(LaSalle National Bank succeeded Bank of New York, the successor to NationsBank
of Georgia, N.A. as indenture trustee).
"Holdings III Indenture" means an indenture dated as of
February 15, 1994 between Holdings III, as issuer, and NationsBank of Georgia,
N.A. (LaSalle National Bank succeeded Bank of New York, the successor to
NationsBank of Georgia, N.A.
as indenture trustee).
"Holdings Notes" means those certain: (a) Senior Secured
Discount Notes due 1998 issued by Marvel Holdings, Inc. pursuant to the Holdings
I Indenture, which were subsequently exchanged for those certain Series B Senior
Secured Discount Notes due 1998; (b) Senior Secured Discount Notes due 1998
issued by Marvel (Parent) Holdings Inc. pursuant to the Holdings II Indenture;
and (c) 9-1/8% Senior Secured Notes due 1998 issued by Marvel III Holdings Inc.
pursuant to the Holdings III Indenture, which were subsequently exchanged for
those certain Series B 9- 1/8% Senior Secured Notes due 1998.
"Holdings Noteholders" means the registered holders or
beneficial owners of any Holdings Notes.
"Immaterial Debtors" means The Asher Candy Company,
Frank H. Fleer Corp., Heroes World Distribution, Inc. and any
other Debtor which the Proponents, acting reasonably, jointly
determine to have de minimis value.
"Independent Cause of Action" means any cause of action which
(i) arises solely out of an act or omission of an Exculpated Person occurring
after the Consummation Date or (ii) does not arise directly or indirectly in any
manner whatsoever out of an act or omission of an Exculpated Person concerning
or relating to (v) the Debtors or their subsidiaries or Affiliates, (w) the
Reorganization Cases, (x) the creation of the Debtors or any of their
subsidiaries or Affiliates, (y) the relationship between Toy Biz (or its
predecessors in interest) and any of the Debtors or their subsidiaries and
Affiliates, or (z) the LaSalle Action; provided, however, that any claim,
counterclaim or right of offset that any defendant in the LaSalle Action may
have against any plaintiff or against any person on whose behalf plaintiff is
suing in such action shall be deemed to be an Independent Cause of Action.
"Indentures" means, collectively, (a) the Holdings I
Indenture, (b) the Holdings II Indenture, and (c) the Holdings III Indenture.
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"Intercompany Claim" means any Claim 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.
"LaSalle" means LaSalle National Bank solely in its capacity
as successor indenture trustee pursuant to the Indentures.
"LaSalle Action" means Civ. No. 97-645 pending in the
District Court, or any similar actions asserting similar claims
brought by LaSalle on behalf of the Holdings Noteholders against
the MAFCO Defendants.
"LaSalle Claim" means any and all Claims of LaSalle and
holders of the Holdings Notes against the Debtors whether asserted or not it
being understood that LaSalle has filed the LaSalle Withdrawal, which states
that such claims comprise only a claim for tortious interference with
contractual relations of LaSalle against Entertainment. For the avoidance of any
doubt "LaSalle Claim" shall not include the claims or causes of action asserted
or that could be asserted by LaSalle on behalf of the Holdings Noteholders in
the LaSalle Action against the MAFCO Defendants.
"LaSalle Settlement Amount" means three hundred thousand
(300,000) Stockholder Series A Warrants, two hundred twenty five thousand
(225,000) Stockholder Series B Warrants and five hundred twenty-five thousand
(525,000) Stockholder Series C Warrants.
"LaSalle Withdrawal" means LaSalle National Bank as
Indenture Trustee's Withdrawal of Certain Proofs of Claim, filed
with the District Court on July 31, 1998.
"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.
"Litigation Claim" means all Causes of Action (including any
avoidance action pursuant to sections 510, 544, 545, 547, 548, 549, 550, 551 and
553 of the Bankruptcy Code) of the Debtors other than (i) those relating to any
tax sharing or other similar agreement, or (ii) against any person or entity
released or exculpated pursuant to this Plan.
"Litigation Trust Agreements" means the Avoidance
Litigation Trust Agreement and the MAFCO Litigation Trust
Agreement.
"Litigation Trust Assets" means all assets of the
Litigation Trusts.
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"Litigation Trustees" means the Avoidance Litigation
Trustee and the MAFCO Litigation Trustees.
"Litigation Trust Loan Agreements" means the Avoidance
Litigation Trust Loan Agreement and the MAFCO Litigation Trust
Loan Agreement.
"Litigation Trusts" means the Avoidance Litigation
Trust and the MAFCO Litigation Trust.
"MAFCO Beneficiaries" means all holders of Allowed Unsecured
Claims (other than Intercompany Claims), holders of Allowed Class Securities
Litigation Claims, and holders of Allowed Equity Interests in Entertainment.
"MAFCO Causes of Action" means all Litigation Claims
(exclusive of all Causes of Action pursuant to sections 544, 545, 547, 548, 549,
550, 551 and 553 of the Bankruptcy Code) asserted in the District Court
Complaint against the MAFCO Defendants or which could have been asserted in the
District Court Complaint against the MAFCO Defendants.
"MAFCO Defendants" means (i) Ronald O. Perelman, (ii) MAFCO
Holdings, Inc., (iii) MacAndrews & Forbes Holdings, Inc., (iv) the Andrews
Group, Inc., (v) Marvel IV Holdings, Inc., (vi) Marvel V Holdings, Inc., (vii)
Four Star Holdings, Inc., (viii) William C. Bevins, (ix) Donald G. Drapkin,(x)
Holdings I, (xi) Holdings II, (xii) Holdings III, (xiii) any individual who
served prior to June 20, 1997 as a director of Entertainment, (xiv) any
individual who served on or prior to April 24, 1997 as to Holdings I and
Holdings II, or is presently serving or has ever served as to Holdings III, as a
director, and (xv) any insider (other than a Releasing Party), Affiliate (other
than a Releasing Party or an officer or director of Holdings I or Holdings II
serving from and after April 24, 1997), director, employee, attorney (other than
a Releasing Party), investment banker (other than a Releasing Party), or agent
of any party identified in clauses (i) through (xiv) of this definition acting
in such capacity in connection with the MAFCO Causes of Action and the LaSalle
Action.
"MAFCO Litigation Trust" means the trust created by the MAFCO
Litigation Trust Agreement to be executed on the Consummation Date pursuant to
Section 7.1 hereof by the Debtors and the MAFCO Litigation Trustees.
"MAFCO Litigation Trust Agreement" means the trust agreement
to be executed by the Debtors and the MAFCO Litigation Trustee in the form of
Exhibit 8 hereto, subject to non-substantive changes.
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"MAFCO Litigation Trust Assets" means all assets of the
MAFCO Litigation Trust.
"MAFCO Litigation Trust Loan Agreement" means the Loan
Agreement to be executed by Newco in the form of Exhibit 9 hereto, subject to
non-substantive changes.
"MAFCO Litigation Trustees" means the three (3) individuals
one of which shall be designated by the Equity Committee, one of which shall be
designated by the Creditors Committee and one of which shall be designated by
the Trustee, and from and after the Consummation Date, any successor trustees
designated in accordance with the MAFCO Litigation Trust Agreement.
"MAFCO Professional Fee Reimbursement Note" means the note to
be executed by the MAFCO Litigation Trustees on behalf of the MAFCO Litigation
Trust in the form of Exhibit 10 hereto, subject to non-substantive changes.
"Marvel" means, collectively, Entertainment and each of its
subsidiaries other than the Panini Entities.
"Master Agreement" means that certain Master Agreement by and
among the Proponents dated as of October 7, 1997 as the same has been or may be
amended from time to time.
"Merger Agreement" means that certain Agreement and Plan of
Merger dated as of the Consummation Date in the form annexed as Exhibit 11
hereto, subject to non-substantive changes.
"NBA" means NBA Properties, Inc.
"NBA License Agreement" means that certain Retail Product
License Agreement dated July 21, 1995 between Entertainment and the NBA, as
amended, supplemented or otherwise modified from time to time.
"NBA Settlement Agreement" means an agreement with the NBA
pursuant to which (i) the NBA shall have consented to the Allowance of the
unsecured component of its Claim in an amount not to exceed twenty million
dollars ($20,000,000) in the aggregate and agreed to waive and release any other
Claims it has or may have in classes 4A through 4I, (ii) the NBA withdraws its
objection to the Creditors Committee motion pursuant to Fed. R. Civ. P. 60(b)
filed on December 23, 1997, and (iii) except as permitted by Paragraph 7 of the
Stipulation and Agreement, the distributions to holders of Allowed Unsecured
Claims in classes 4A through 4I are not otherwise impacted in a manner which has
an impact disproportionate to such classes from the impact, if any, upon the
distributions to any other class of Claims or Equity Interests.
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"Net Avoidance Litigation Proceeds" means the gross proceeds
realized by the Avoidance Litigation Trust in respect of all of the Debtors'
Causes of Action pursuant to sections 510, 544, 545, 547, 548, 549, 550, 551 and
553 of the Bankruptcy Code net of payment of all expenses of the Avoidance
Litigation Trust including, without limitation, (i) payment without duplication
of all sums due and owing pursuant to the Avoidance Professional Fee
Reimbursement Note, and (ii) any set-off effected by the holders of Resulting
Claims pursuant to Section 8.7 hereof.
"Net Cash Proceeds" means the gross proceeds in Cash realized
from the sale of capital stock of Newco net of Cash payments, if necessary to
cause the occurrence of the Consummation Date, in an amount equal to the
aggregate of (i) Administration Expense Claims, including, without limitation,
all DIP Claims, (ii) Priority Non-Tax Claims, (iii) Priority Tax Claims, and
(iv) any other Cash payments necessary to cause the occurrence of the
Consummation Date other than the Toy Biz Cash Distribution and the Required
Secured Lender Consideration.
"Net MAFCO Litigation Proceeds" means the gross proceeds
realized by the MAFCO Litigation Trust in respect of all of the MAFCO Causes of
Action net of payment of all expenses of the MAFCO Litigation Trust including,
without limitation, payment without duplication of all sums due and owing
pursuant to the MAFCO Professional Fee Reimbursement Note.
"New Investors" means the entities set forth on Exhibit 12
hereto and the holders of Fixed Senior Secured Claims exercising the right to
purchase Convertible Preferred Stock in accordance with Section 4.2(b)(i)(A)(6)
hereof.
"New Panini Securities" means debt securities of Newco having
a present value as of the Consummation Date of twenty seven million dollars
($27,000,000) as determined by a fairness opinion (taking into account, inter
alia, the liquidity of the securities) of a nationally recognized investment
banking firm reasonably acceptable to Toy Biz and the Panini Lenders, provided,
however, that such securities may be equity securities with the consent of the
holders two-thirds in amount of the Contingent Senior Secured Claims.
"Newco" means Toy Biz, as its name may be changed, from and
after the Consummation Date.
"Newco Common Stock" means the issued and outstanding shares
of common stock of Newco as of the Consummation Date.
"Newco Guaranty" means an absolute and unconditional guaranty
of Newco and its subsidiaries secured by a valid, binding, enforceable and
perfected first priority lien against the Panini Stock to be executed and
delivered by Newco in the
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form annexed hereto as Exhibit 13 subject to non-substantive changes, pursuant
to which Newco and its subsidiaries shall guaranty the Restructured Panini
Obligations; provided, however, that such guaranty obligation shall be limited
to forty million dollars ($40,000,000), thirteen million dollars ($13,000,000)
of which shall be payable in Cash on the Consummation Date and the remainder of
which shall be payable, at the election of Newco, in the form of either Cash or
debt securities of Newco having a then present value of twenty seven million
dollars ($27,000,000) as the latter value may be determined by a fairness
opinion (taking into account, inter alia, the liquidity of the securities) of a
nationally recognized investment banking firm reasonably acceptable to Newco and
the Panini Lenders; provided, further, that such securities may be equity
securities with the consent of the holders two-thirds in amount of the
Contingent Senior Secured Claims.
"Other Secured Claims" means any Secured Claim not
constituting a Senior Secured Claim.
"Panini" means Panini S.p.A.
"Panini Comic Distribution Agreement" means that certain
agreement to manufacture, reprint, publish and sell Marvel Comics dated December
1995 between Panini and
Entertainment.
"Panini Entities" means Panini and its subsidiaries.
"Panini Indemnified Liabilities" means any and all claims,
liabilities, obligations, losses, damages, distributions, recoveries, penalties,
actions, judgments, suits, costs, expenses (including reasonable fees and
expenses of counsel and other professionals) and disbursements of any kind
whatsoever which may at any time be imposed on, incurred by or asserted against
any Panini Entity in any way relating to, or arising out of, directly or
indirectly, any contracts or other agreements to which any of the Debtors are
party, including, without limitation, the NBA License Agreement, provided,
however, that (i) obligations to repay the Panini Lenders pursuant to the Panini
Credit Agreements shall not constitute Panini Indemnified Liabilities and (ii)
the Debtors shall not be responsible for making any royalty payments owed to or
for the benefit of the National Basketball Association under the NBA License
Agreement solely in respect of sticker sales or card sales made by the Panini
Entities from and after the Consummation Date; provided that Newco shall control
the prosecution, settlement or resolution of such Panini Indemnified Liabilities
and provided further that the Panini Entities shall not assert any claims
against Newco in respect of Panini Indemnified Liabilities that are asserted
outside of any applicable statute of limitations period.
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"Panini Indemnity" means an indemnity in the form of Exhibit
14 hereto, subject to non-substantive changes, pursuant to which Newco and its
subsidiaries will indemnify and hold harmless the Panini Entities from and
against any and all claims, liabilities, obligations, losses, damages,
distributions, recoveries, penalties, actions, judgments, suits, costs, expenses
(including reasonable fees and expenses of counsel and other professionals) and
disbursements of any kind whatsoever which may at any time be imposed on,
incurred by or asserted against any Panini Entity in any way relating to, or
arising out of directly or indirectly, any contracts or other agreements to
which any of the Debtors are party, including, without limitation, the NBA
License Agreement, provided, however, that (i) obligations to repay the Panini
Lenders pursuant to the Existing Credit Agreements shall not constitute Panini
Indemnified Liabilities and (ii) Newco shall not be responsible for making any
royalty payments owed to or for the benefit of the National Basketball
Association under the NBA License Agreement solely in respect of sticker sales
or card sales made by Panini from and after the Consummation Date.
"Panini Lenders" means each of the holders of Panini
Obligations arising under the Existing Panini Credit Agreements including any
holder of a Panini Obligation through the Panini
Participation Agreements.
"Panini Liquidation Event" means the commencement of any
insolvency proceeding under the laws of the Republic of Italy or other
applicable law which mandates the liquidation of Panini.
"Panini Obligations" means all of the obligations of the
Panini Entities arising under the Existing Panini Credit Agreements including,
without limitation, outstanding principal, accrued and unpaid interest, fees,
costs, expenses, charges and any other amounts owing under the Existing Panini
Credit Agreements.
"Panini Participation Agreement" means, collectively, (i) the
Participation Agreement dated as of August 30, 1994 among Istituto 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 (ii) the Participation Agreement dated as
of August 5, 1997 among The Chase Manhattan Bank, as Lender, The Chase Manhattan
Bank, as Administrative Agent, and the financial institutions signatory thereto,
as participants.
"Panini Sticker Agreement" means that certain License
Agreement dated as of November 15, 1996 by and between Characters and Panini.
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"Panini Stock" means all of the issued and outstanding
capital stock of Panini.
"Panini Subordination Agreement" means the subordination
agreement dated as of August 5, 1997 by and among (a) each of the Junior
Participating Lenders (as defined therein), (b) the Junior Direct Lenders (as
defined therein), and (c) Chase as a Senior Lender (as defined therein) and as
agent on behalf of itself and the other Senior Lenders (as defined therein).
"Perlmutter Capital Contribution" shall mean an amount of Cash
equal to one million five hundred thousand dollars ($1,500,000).
"Petition Date" means December 27, 1996, the date on which
each of the Debtors filed its voluntary petition for relief under the Bankruptcy
Code.
"Pledged Shares" means the shares of common stock of
Entertainment which are owned by Holdings I and Holdings II and pledged to
secure the Holdings Notes pursuant to the Indentures and which have not been
distributed to holders of the Holdings Notes pursuant to orders of court dated
March 3, 1998 (as amended and supplemented by orders dated March 17, 1998 and
April 9, 1998) and which are otherwise subject to the lien in favor of LaSalle
pursuant to the terms of the Indentures.
"Plan of Reorganization" means this Fourth Amended Joint Plan
of Reorganization Proposed By the Secured Lenders and Toy Biz, Inc. dated as of
July__, 1998, 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.
"Plan Warrant Agreement" means that certain Warrant Agreement
in the form of Exhibit 15 hereto, subject to non- substantive changes.
"Plan Warrants" means warrants exercisable not later than the
fourth (4th) anniversary of the Consummation Date entitling the holder thereof
to acquire one share of Newco Common Stock, subject to customary anti-dilution
protections, based upon an exercise price of seventeen dollars and twenty-five
cents ($17.25) per share and otherwise upon the terms and conditions contained
in the Plan Warrant Agreement.
"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.
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"Priority Tax Claim" means any Claim of a governmental unit of
the kind specified in section 507(a)(8) of the Bankruptcy Code.
"Professional Fee Reimbursement Notes" means the
Avoidance Professional Fee Reimbursement Note and the MAFCO
Professional Fee Reimbursement Note.
"Proponents" means Toy Biz and the Secured Lenders.
"Qualifying Transaction" means a transaction to be closed not
later than ten (10) days after the Confirmation Date to acquire all or a portion
of the capital stock of Newco which transaction generates Net Cash Proceeds
equal to or greater than the sum of (i) the Toy Biz Cash Distribution, (ii) the
Required Secured Lender Consideration, and (iii) the amounts (other than Excess
Proceeds) due to holders of Allowed Unsecured Claims pursuant to Section
4.4(a)(ii) hereof, provides for the issuance and distribution by the purchaser
of warrants substantially identical to the Stockholder Series A Warrants,
Stockholder Series B Warrants, and Stockholder C Warrants otherwise required to
be distributed pursuant to this Plan of Reorganization, is otherwise consistent
with the terms of this Plan of Reorganization and has been approved as to the
Newco Guaranty by Requisite Panini Lender Consent.
"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(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, as applicable.
"Releasing Party" has the meaning given to it in the
Stipulation and Agreement.
"Reorganization Cases" means the cases commenced under chapter
11 of the Bankruptcy Code by the Debtors.
"Required Secured Lender Consideration" means four hundred and
thirty five million dollars ($435,000,000) in Cash payable in respect of the
Fixed Senior Secured Claims or such other amount which has been approved by
Requisite Secured Lender Consent.
"Requisite Panini Lender Consent" means the written consent of
holders of Designated Contingent Senior Secured Claims holding a majority in
dollar amount of the aggregate Designated Contingent Senior Secured Claims.
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"Requisite Secured Lender Consent" means the written consent
of holders of Designated Fixed Senior Secured Claims holding at least eighty
five percent (85%) in amount of such Designated Fixed Senior Secured Claims.
"Restructured Panini Loan Documents" means loan documents (i)
extending the maturity of the Panini Obligations until thirty-six (36) months
after the earlier of (a) the Consummation Date or (b) March 31, 1998; (ii)
providing that interest in respect of the obligations evidenced by the Existing
Panini Senior Credit Agreements shall be paid monthly at the non-default rate
thereof; (iii) providing that interest in respect of the obligations evidenced
by the Existing Panini Junior Credit Agreements may, at the election of Newco,
be paid in Cash or in kind by the issuance of additional notes on a quarterly
basis on the last day of March, June, September and December until December 31,
1998, in either case at the non-default rate thereof; (iv) containing customary
and reasonable defaults for a transaction of this nature, it being understood
and agreed that all defaults which predate the Consummation Date shall be waived
and that there shall be no events of default which are inconsistent with the
transactions contemplated hereby; (v) requiring Panini to commence paying
interest in respect of the obligations evidenced by the Existing Panini Junior
Credit Agreements, at the non-default rate thereof, in Cash by making one
quarterly Cash interest payment as of January 1, 1999 (on the principal amount
thereof including any capitalized amounts) in advance, and thereafter making
quarterly Cash interest payments (on the principal amount thereof including any
capitalized amounts) in arrears on the last day of March, June, September and
December until maturity, it being understood that the first quarterly interest
payment in arrears will be due on June 30, 1999 and that no payment will be due
on March 31, 1999; (vi) fixing the non-default rate of interest in respect of
the Panini Obligations at the same rate as in the Existing Panini Credit
Agreements; (vii) fixing the default rate of interest in respect of the Panini
Obligations at two hundred (200) basis points above the non-default rate of
interest in the Existing Panini Credit Agreements; (viii) containing cure
periods consistent with those contained in the Existing Panini Credit Agreements
but in no event less than five (5) Business Days; and (ix) which are otherwise
in form and substance reasonably acceptable to Toy Biz and the Panini Lenders.
"Restructured Panini Obligations" means all of the obligations
under the Restructured Panini Loan Documents.
"Resulting Claim" means any Claim arising pursuant to section
502(h) of the Bankruptcy Code from the recovery of property under section 550 of
the Bankruptcy Code.
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"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.
"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.
"Secured Lenders" means those holders of Senior Secured Claims
set forth on Exhibit 16 hereof.
"Securities Act" means the Securities Act of 1933, as amended,
and the rules and regulations promulgated thereunder.
"Senior Secured Claim" means any Contingent Senior
Secured Claim and any Fixed Senior Secured Claim.
"Settlement Amount" means three million five hundred thousand
dollars ($3,500,000) in Cash.
"Shareholder Agreement" means a shareholders' agreement by and
between Isaac Perlmutter, Isaac Perlmutter, T.A., Zib Inc., Avi Arad, the New
Investors and the Secured Lenders in form and substance reasonably acceptable to
each of the foregoing and Toy Biz.
"Standstill Agreements" means the Agreements to be executed
and delivered by High River, Westgate and certain of their Affiliates on the
Consummation Date in the form of Exhibit 17 hereto, subject to non-substantive
changes.
"Stipulation and Agreement" means the Stipulation and
Agreement Effecting Consensual Amendment to the Third Amended
Joint Plan of Reorganization Proposed by the Secured Lenders and
Toy Biz, Inc. dated as of July 30, 1998 by and among Toy Biz,
Isaac Perlmutter, Isaac Perlmutter T.A., Zib Inc., Avi Arad,
Joseph M. Ahearn, James S. Carluccio, Alan Fine, James F. Halpin,
Morton E. Handel, Alfred A. Piergallini, Donald E. Rosenblum,
Paul R. Verkuil, Mark Dickstein, Dickstein & Co. L.P., Dickstein
Focus Fund, L.P., Dickstein International Limited, Dickstein
Partners L.P., DPI, the Trustee, Chase individually and on behalf
of those holders of Senior Secured Claims which authorize Chase
to sign the Stipulation and Agreement on their behalf pursuant to
the Master Agreement Amendment, Chase as a holder of a DIP Claim,
CIBC, Inc. as a holder of a DIP Claim, Goldman Sachs Credit
Partners L.P. as a holder of a DIP Claim, Lehman Commercial Paper
Inc. as a holder of a DIP Claim, The Long Term Credit Bank of
Japan, Ltd., Los Angeles Agency as a holder of a DIP Claim, The
Sumitomo Bank, Limited as a holder of a DIP Claim, High River,
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Carl Icahn, Westgate, Vincent Intrieri, LaSalle, the Creditors
Committee and the Equity Committee.
"Stockholder Series A Warrants" means warrants exercisable on
or before the third (3rd) anniversary of the Consummation Date entitling the
holder thereof to acquire one share of Newco Common Stock, subject to customary
anti-dilution protections, based upon an initial exercise price of twelve
dollars ($12.00) per share and otherwise upon the terms and conditions contained
in the Stockholder Series A Warrant Agreement.
"Stockholder Series B Warrants" means warrants entitling the
holder thereof to acquire one share of Convertible Preferred Stock at an initial
exercise price of ten dollars and sixty-five cents($10.65) per share, subject to
increase as provided in the Stockholder Series B Warrant Agreement and subject
to customary anti-dilution protections, which warrants will be issued in one or
more series, with all such warrants having the same Warrant Distribution Date
constituting the same series and with the warrants in each such series being
exercisable until the first (1st) Business Day occurring more than six months
after the Warrant Distribution Date of such series, and otherwise having the
terms and conditions contained in the Stockholder Series B Warrant Agreement.
"Stockholder Series C Warrants" means warrants exercisable on
or before the fourth (4th) anniversary of the Consummation Date entitling the
holder thereof to acquire one share of Newco Common Stock, subject to customary
anti-dilution protections, based upon an initial exercise price of eighteen
dollars and fifty cents ($18.50) per share and otherwise upon the terms and
conditions contained in the Stockholder Series C Warrant Agreement.
"Stockholder Series A Warrant Agreement" means that certain
Warrant Agreement in the form of Exhibit 18 hereto, subject to non-substantive
changes.
"Stockholder Series B Warrant Agreement" means that certain
Warrant Agreement in the form of Exhibit 19 hereto, subject to non-substantive
changes.
"Stockholder Series C Warrant Agreement" means that certain
Warrant Agreement in the form of Exhibit 20 hereto, subject to non-substantive
changes.
"Subsidiary Equity Interests" means the Equity Interests in
any of the Debtors held by any of the other Debtors.
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"Substantial Contribution Application" means any application
for compensation or reimbursement of expenses pursuant to sections 503(b)(3) or
(4) of the Bankruptcy Code.
"Term Loan Facility" means a term loan facility or other
financing arrangement for Newco and its subsidiaries in the amount of at least
two hundred million dollars ($200,000,000) less any amount by which the Working
Capital Facility exceeds fifty million dollars ($50,000,000) that may be secured
by all or substantially all of the assets of Newco upon market rate terms and
conditions and otherwise in form and substance reasonably acceptable to the
Proponents.
"Toy Biz" means Toy Biz, Inc., a Delaware corporation.
"Toy Biz Cash Distribution" means an amount of Cash equal to
the aggregate of (a) two hundred and eighty million dollars ($280,000,000), (b)
any commitment or facility fees actually paid in connection with obtaining
financing commitments required by this Plan of Reorganization, (c) the fees,
expenses and costs of Toy Biz's attorneys, investment bankers, and other
professionals incurred in connection with the Reorganization Cases and the
transactions contemplated hereby, including, without limitation, 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 in an
amount not to exceed in the aggregate (i) three million five hundred thousand
dollars ($3,500,000) for the period through and including November 30, 1997,
(ii) one million dollars ($1,000,000) for a fairness opinion, (iii) one million,
five hundred thousand dollars ($1,500,000) as a success fee, and (iv) an average
of six hundred and twenty-five thousand dollars ($625,000) per month thereafter
through and including the Consummation Date, and (d) the Breakup Fee.
"Transaction" means the transactions contemplated by the
Merger Agreement, and/or, to the extent applicable, the documents governing any
Qualifying Transaction.
"Transmittal Material" shall mean the materials in the form of
Exhibit 21 hereto, subject to non-substantive changes, which shall be
distributed in connection with all Warrants distributed pursuant to this Plan of
Reorganization.
"Trustee" means John J. Gibbons solely in his capacity
as chapter 11 trustee for the Debtors.
"Unsecured Claim" means any Claim against a Debtor that is not
an Administration Expense Claim, a Priority Non-Tax Claim, a Priority Tax Claim,
a DIP Claim, a Secured Claim, a Class Securities Litigation Claim, the LaSalle
Claim or any deficiency Claim in respect of any Senior Secured Claim.
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"Unsecured Creditor Payment" means Cash in an amount equal to
fifteen percent (15%) of the aggregate amount of Allowed Unsecured Claims plus
two million dollars ($2,000,000), but in no event more than eight million
dollars ($8,000,000) in the aggregate.
"U.S. Trustee" means the United States Trustee
appointed under section 581, title 28, United States Code to
serve in the District of Delaware.
"Warrant Liquidation Agent" means a financial institution to
be selected by Toy Biz no later than the Consummation Date subject to the
approval of the Trustee not to be unreasonably withheld or delayed and retained
by Newco pursuant to the Warrant Liquidation Agency Agreement.
"Warrant Liquidation Agency Agreement" means an agreement in
form and substance reasonably satisfactory to the Proponents and the Trustee.
"Warrant Distribution Date" means the first to occur of (i)
the date on which Newco substantially completes the distribution of a series of
Stockholder Series B Warrants to the record holders of the applicable Claims or
Equity Interest in accordance with this Plan of Reorganization, or (ii) the date
on which such Stockholder Series B Warrants are distributed to the Warrant
Liquidation Agent.
"Warrants" means the Plan Warrants, the Stockholder
Series A Warrants, the Stockholder Series B Warrants and the
Stockholder Series C Warrants.
"Westgate" means Westgate International L.P.
"Working Capital Facility" means a revolving credit loan
facility for Newco and its subsidiaries in an amount of at least fifty million
dollars ($50,000,000) less the amount by which the Term Loan Facility exceeds
two hundred million ($200,000,000) upon market rate terms and conditions and
otherwise in form and substance reasonably acceptable to the Proponents.
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
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Section, subsection or clause contained in this Plan of Reorganization. Except
as otherwise expressly provided herein, 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
----------------------
All Exhibits and Schedules to this Plan of Reorganization are
contained in a supplemental Exhibit filed with the Clerk of the Bankruptcy Court
contemporaneously herewith.
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 (including all DIP Claims) shall be paid by Newco
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 shall be assumed
and paid by Newco 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 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 Date under section 330 or 503(b)(2) of the
Bankruptcy Code (a) shall 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
by Newco in such amounts as are
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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 Proponents or, on and after the Consummation Date, Newco.
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 -- Entertainment
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.
Subclass 3G -- Marvel Characters, Inc.
Subclass 3H -- Marvel Direct Marketing Inc.
Subclass 3I -- SkyBox International Inc.
Class 4 -- Unsecured Claims
Subclass 4A -- Entertainment
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
Subclass 4K -- LaSalle Claim
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Class 5 -- Class Securities Litigation Claims
Class 6 -- Equity Interests
Subclass 6A -- Entertainment
Subclass 6B -- 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 Non-Tax
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 shall be allowed in an amount equal to
the amount owing to such holder under the applicable Existing Credit Agreement
as of the date hereof, together with interest, fees, charges and other amounts
owing under the Existing Credit Agreement through the Consummation Date, but in
no event more than an amount equal to the sum of (i) the value of the Collateral
as of the Consummation Date securing such Senior Secured Claim, and (ii) any
Claim for adequate protection relating to the Collateral, arising out of that
certain Revolving Credit Guaranty Agreement by and among Entertainment, the
other Debtors and Chase dated December 27, 1996, the order entered by the
Bankruptcy Court on January 24, 1997, or any amendments entered into or further
orders entered by the Bankruptcy Court with respect to either of the foregoing.
(b) Treatment of Allowed Fixed Senior Secured
Claims (Subclass 2A).
(i) No Qualifying Transaction.
(A) Distributions. In the event that no Qualifying Transaction
closes, each holder of an Allowed Fixed Senior Secured Claim shall be
distributed, subject to increase or decrease pursuant to Section 9.5 hereof, on
the Consummation Date, in full and complete satisfaction and discharge of its
Fixed Senior Secured Claims, its Ratable Proportion of:
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(1) two hundred thirty one million, seven hundred and fifty thousand
dollars ($231,750,000) in Cash less the sum of (a) the actual amount distributed
to the holders of DIP Claims for permanent application against principal from
the proceeds of the sale of the Confection Business, and (b) all other amounts
paid to satisfy the outstanding principal amount of the DIP Claims (exclusive of
any increase in the amount of the DIP Claims from and after October 7, 1997
including, without limitation, any interest or charges which may accrue and all
amounts advanced under the DIP Credit Agreements);
(2) thirteen million, one hundred thousand (13,100,000)
shares of Newco Common Stock;
(3) seven million nine hundred thousand (7,900,000) shares of
Convertible Preferred Stock;
(4) [intentionally deleted];
(5) one thousand (1,000) shares of new common stock of each of the
Debtors other than Entertainment representing one hundred percent (100%) of the
issued and outstanding stock of such Debtors, which stock shall be transferred
to Newco in accordance with section 6.15 hereof;
(6) the right to purchase up to forty million dollars ($40,000,000) of
Convertible Preferred Stock of Newco as New Investors that would otherwise be
issued to the New Investors set forth on Exhibit 12; and
(7) four and nine tenths percent(4.9%) of the Net Avoidance Litigation
Proceeds to be distributed pursuant to Section 7.4(a) hereof.
Subject to the preceding sentence and without duplication, Chase and the holders
of Senior Secured Claims shall be reimbursed for all of the professional fees,
costs and expenses of professionals engaged by Chase in its capacity as agent or
to act on behalf of all holders of Senior Secured Claims, including, without
limitation, all fees and expenses of counsel and financial advisors incurred in
connection with the Reorganization Cases, provided, however, that in no event
shall the aggregate value (as of the Consummation Date) of the property
distributed to holders of Fixed Senior Secured Claims exceed the amount of such
Fixed Senior Secured Claims or the sum of (i) the value (as of the Consummation
Date), of the collateral securing such Fixed Senior Secured Claims, and (ii) any
Claim for adequate protection relating to the collateral, arising out of that
certain Revolving Credit Guaranty Agreement by and among Entertainment, the
other Debtors and Chase dated December 27, 1996, the order entered by the
Bankruptcy Court on January 24, 1997, or any amendments
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entered into or further orders entered by the Bankruptcy Court with respect to
either of the foregoing.
(B) Intentionally Deleted.
---------------------
(ii) Qualifying Transaction. In the event of a
Qualifying Transaction, each holder of an Allowed Fixed Senior Secured Claim
shall be distributed on the Consummation Date, in full and complete satisfaction
and discharge of its Fixed Senior Secured Claims, its Ratable Proportion of all
consideration received in connection with such transaction other than (i) the
Toy Biz Cash Distribution, and (ii) any property to be distributed pursuant to
Sections 2, 4.1, 4.2(c), 4.3, 4.4, 4.5 and 4.6 hereof; provided, however, that
in no event shall the holders of Allowed Fixed Senior Secured Claims receive
more than payment in full in accordance with the Existing Fleer Credit
Agreements.
(c) Treatment of Allowed Contingent Senior
Secured Claims (Subclass 2B).
(i) No Panini Liquidation Event. If no Panini
Liquidation Event occurs on or prior to Consummation Date, the holders of
Allowed Contingent Senior Secured Claims shall receive, on the Consummation
Date, in full and complete satisfaction and discharge of their Contingent Senior
Secured Claims, the Newco Guaranty of the Restructured Panini
Obligations.
(ii) Panini Liquidation Event. If a Panini
Liquidation Event occurs on or prior to Consummation Date, the holders of
Allowed Contingent Senior Secured Claims shall receive, on the Consummation
Date, in full and complete satisfaction and discharge of their Contingent Senior
Secured Claims, their Ratable Proportion of the New Panini Securities and
thirteen million dollars ($13,000,000) of Cash.
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 in full
and complete satisfaction and discharge of its Other Secured Claim (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
non-bankruptcy law that entitles the holder of an Allowed Other Secured Claim to
demand and receive payment of such Claim prior
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to the stated maturity of such Claim from and after the
occurrence of a default. Such treatment shall be determined by
the Proponents.
4.4 Unsecured Claims (Class 4).
(a) Distributions.
(i) No Qualifying Transaction.
In the event that no Qualifying Transaction
occurs and except as set forth in Sections 4.4(b) and 4.4(c) hereof, in full and
complete satisfaction and discharge of its Allowed Unsecured Claim, each holder
of an Allowed Unsecured Claim in each of Subclass 4A (Entertainment), 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 (Unsecured Claims) shall, to the extent not paid prior to the
Consummation Date, be distributed, subject to increase or decrease pursuant to
Section 9.5 hereof:
(1) its Ratable Proportion of the Unsecured Creditor
Payment;
(2) its Ratable Proportion of one million (1,000,000) Plan Warrants
plus three (3) Plan Warrants for each eighty dollars ($80) of Allowed Unsecured
Claims in excess of twenty million dollars ($20,000,000) but in no event more
than one million seven hundred and fifty thousand (1,750,000) Plan Warrants in
the aggregate;
(3) its Ratable Proportion of the thirty percent (30%) interest in the
Net Avoidance Litigation Proceeds to be distributed pursuant to Section 7.4(b)
hereof;
(4) its Ratable Proportion of the first four million five hundred
thousand dollars ($4,500,000) of Net MAFCO Litigation Proceeds plus a thirty
percent (30%) interest in any Net MAFCO Litigation Proceeds in excess of four
million five hundred thousand dollars ($4,500,000) to be distributed pursuant to
Section 7.4(b) hereof; and
(5) its Ratable Proportion of eight hundred thirty two thousand five
hundred (832,500) Stockholder Series A Warrants, nine hundred thirty six
thousand five hundred sixty three (936,563) Stockholder Series B Warrants, and
one million six hundred eighteen thousand seven hundred fifty (1,618,750)
Stockholder Series C Warrants.
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The number of Warrants to be distributed hereunder is subject to increase or
decrease pursuant to Section 9.5 hereof.
(ii) Qualifying Transaction.
In the event that a Qualifying Transaction
occurs and except as set forth in Sections 4.4(b) and 4.4(c) hereof, in full and
complete satisfaction and discharge of its Allowed Unsecured Claim, each holder
of an Allowed Unsecured Claim in each of Subclass 4A (Entertainment), 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 (Unsecured Claims) shall, to the extent not paid prior to the
Consummation Date, be distributed the same property as set forth in Section
4.4(a)(i) above except that each holder of an Allowed Unsecured Claim shall
receive in lieu of the Plan Warrants to be distributed pursuant to Section
4.4(a)(i)(2) above one dollar and thirty cents ($1.30) for each Plan Warrant
which would have otherwise been distributed to such holder. In addition, holders
of Allowed Unsecured Claims shall receive all Excess Proceeds until all holders
of Allowed Unsecured Claims have received payment in full.
(b) Intercompany Claims. Each holder of an
Allowed Intercompany Claim shall receive, in full and complete satisfaction and
discharge of its Intercompany Claim, its Ratable Proportion of one dollar ($1).
In lieu thereof, at the election of the Proponents, any Intercompany Claims
shall be treated as contributions to the capital of the obligor on such
Intercompany Claims.
(c) LaSalle Claim. LaSalle shall receive the
LaSalle Settlement Amount in full and complete satisfaction and discharge of the
LaSalle Claim; provided, however, that nothing contained herein shall be
construed as a discharge of obligations (other than those of the Debtors and
their subsidiaries) under the Indentures.
4.5 Class Securities Litigation Claims (Class 5).
(a) Distributions. Subject to allocation
between holders of Allowed Class Securities Litigation Claims and holders of
Allowed Equity Interests in Subclass 6A (Entertainment) of Class 6 (Equity
Interests) in accordance with Section 4.5(b) hereof, each holder of an Allowed
Class Securities Litigation Claim shall be distributed, in full and complete
satisfaction and discharge of its Allowed Class Securities Litigation on account
of such Allowed Class Securities Litigation Claim its Ratable Proportion of (i)
two million eight hundred sixty seven thousand
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five hundred (2,867,500) Stockholder Series A Warrants, (ii) one million eight
hundred thirty eight thousand four hundred thirty eight (1,838,438) Stockholder
Series B Warrants, (iii) four million eight hundred fifty six thousand two
hundred fifty (4,856,250) Stockholder Series C Warrants, and (iv) Net MAFCO
Litigation Proceeds in the amounts set forth in Section 7.4 below, and, in the
event a Qualifying Transaction closes pursuant to which holders of Fixed Senior
Secured Claims and holders of Unsecured Claims are paid in full, all Excess
Proceeds not distributed to holders of Unsecured Claims. The number of Warrants
distributed hereunder is subject to increase or decrease pursuant to Section 9.5
hereof.
(b) Calculation of Distribution. For purposes of
effecting distributions hereunder on account of Allowed Class Securities
Litigation Claims and Allowed Equity Interests in Subclass 6A (Entertainment) of
Class 6 (Equity Interests), any judgment evidencing any Allowed Class Securities
Litigation Claim shall be converted into an implied number of shares of common
stock of Entertainment 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 Entertainment 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.
(c) 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 (Entertainment) of Class 6 (Equity Interests)
and subject to the limitation that holders of Allowed Class Securities
Litigation Claims and Equity Interests in Subclass 6A (Entertainment) 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) Entertainment (Subclass 6A).
(i) Distributions. Subject to allocation
between holders of Allowed Class Securities Litigation Claims and holders of
Allowed Equity Interests in Subclass 6A (Entertainment) of Class 6 (Equity
Interests) in accordance with Section 4.5(b) and 4.5(c) hereof, each holder of
record of an Allowed Equity Interest in Subclass 6A (Entertainment) of Class 6
(Equity Interests) as of the Consummation Date shall be distributed, in full and
complete satisfaction and discharge of such Allowed Equity Interest, on account
of such Allowed Equity
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Interest its Ratable Proportion of (i) two million eight hundred sixty seven
thousand five hundred (2,867,500) Stockholder Series A Warrants, (ii) one
million eight hundred thirty eight thousand four hundred thirty eight
(1,838,438) Stockholder Series B Warrants, (iii) four million eight hundred
fifty six thousand two hundred fifty (4,856,250) Stockholder Series C Warrants,
and (iv) Net MAFCO Litigation Proceeds in the amounts set forth in Section 7.4
below, and in the event a Qualifying Transaction closes pursuant to which
holders of Fixed Senior Secured Claims and holders of Unsecured Claims are paid
in full, all Excess Proceeds not distributed to holders of Unsecured Claims. The
number of Warrants distributed hereunder is subject to increase or decrease
pursuant to Section 9.5 hereof.
(ii) Parity of and Limitation on
Distributions. The distributions to be made under this Section 4.6 on account of
Equity Interests in Subclass 6A (Entertainment) 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 (Entertainment)
of Class 6 (Equity Interests) shall only be entitled to a single recovery on
account of such Claims and Equity Interests.
(b) Subsidiary Equity Interest (Subclass 6B). On
the Consummation Date, all Subsidiary Equity Interests shall be canceled, and
the holders of Subsidiary Equity Interests shall not be entitled to, and shall
not, receive or retain any property or interest in property on account of such
Subsidiary Equity Interest.
4.7 Existing Warrants (Class 7).
On the Consummation Date, the Existing Warrants shall be
canceled, 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).
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 (Unsecured Claims),
Class 5 (Class Securities Litigation Claims), Subclass 6A (Marvel Entertainment
Group) of Class 6 (Equity
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Interests), Subclass 6B (Subsidiary Equity Interests) of Class 6 (Equity
Interests) and Class 7 (Existing Warrants) and, as applicable, each subclass
thereof, are impaired hereunder.
5.2 Nonconsensual Confirmation.
The Proponents hereby move to have the Bankruptcy Court
confirm this Plan of Reorganization under section 1129(b) of the Bankruptcy
Code.
5.3 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 without the consent of each
of the Proponents, provided, however, that this Plan of Reorganization may be
confirmed if it can be confirmed for all Debtors other than Immaterial Debtors.
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 Merger Agreement and, in the event of a Qualifying
Transaction, any other applicable document on the terms and subject to the
conditions contained in such Merger Agreement and/or other applicable document,
free and clear of all Liens, claims, encumbrances and interests. In connection
therewith, all outstanding letters of credit or other similar obligations as set
forth on Schedule 6.1 hereto 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 (a) canceled and terminated with Chase
receiving releases reasonably acceptable to Chase from the beneficiaries
thereof, or (b) Newco shall issue a back to back letter of credit in form and
substance reasonably acceptable to Chase. In the event that any of the letters
of credit set forth on Schedule 6.1 hereto are drawn prior to the Consummation
Date, Newco shall reimburse Chase for all amounts (including interest at the
non-default rate provided for in the Existing Credit Agreements, fees and other
charges) incurred solely in respect of any such letters of credit.
6.2 Derivative Securities Litigation Claims.
Any derivative securities litigation claims are property of
the estate of Entertainment under section 541 of the Bankruptcy Code and shall
become the property of Newco.
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6.3 Board of Directors of the Reorganized Debtors.
The Board of Directors of Newco immediately following the
Consummation Date shall consist of six (6) individuals designated by Toy Biz and
the New Investors and five (5) individuals designated by the Secured Lenders.
The members of the Board of Directors of Newco, assuming its formation, are or
shall be stated in a filing to made with the Bankruptcy Court prior to the
Consummation Date. Thereafter, and subject to the Shareholder Agreement, the
Board of Directors of Newco shall be elected in accordance with the Charter and
Bylaws.
6.4 Officers of the Reorganized Debtors.
The initial officers of Newco shall be determined by the
Proponents. The selection of officers of the Reorganized Debtors after the
Consummation Date shall be as provided in the Charter and Bylaws.
6.5 Distribution to New Investors.
In the event that no Qualifying Transaction closes, the New
Investors shall receive nine million (9,000,000) shares of Convertible Preferred
Stock on the Consummation Date in exchange for ninety million dollars
($90,000,000) in Cash.
6.6 Toy Biz Distribution.
(a) No Qualifying Transaction.
In the event that no Qualifying Transaction closes, holders of
Toy Biz common stock (other than the Debtors) shall continue to hold the twenty
million, three hundred and fifty-two thousand, one hundred twenty-seven
(20,352,127) shares of Toy Biz common stock held by them on the Consummation
Date and Characters shall continue to hold the seven million three hundred
ninety four thousand (7,394,000) shares of Toy Biz common stock held by it.
(b) Qualifying Transaction.
In the event that a Qualifying Transaction closes, holders of
Toy Biz common stock (other than the Debtors) shall receive on the Consummation
Date an amount of Cash equal to the Toy Biz Cash Distribution less the Breakup
Fee and certain professional fees which net amount shall be payable in
immediately available funds in accordance with instructions to be provided to
the Debtors by Toy Biz on or before the Consummation Date.
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6.7 Fees to New Investors.
(a) Professional Fees. On the Consummation Date,
DPI as a New Investor committing to purchase Convertible Preferred Stock under
the Convertible Preferred Stock Purchase Agreement shall be reimbursed by Newco
in an amount not to exceed two hundred thousand dollars ($200,000) for all of
the professional fees, costs and expenses incurred solely in connection with the
preparation and negotiation of the Convertible Preferred Stock Purchase
Agreement and related agreements and documentation, it being understood that DPI
shall not be reimbursed for any other professional fees, costs or expenses
relating to these Reorganization Cases paid to its personal counsel including,
without limitation, any litigation relating to the Reorganization Cases, this
Plan of Reorganization, the Convertible Preferred Stock Purchase Agreement or
Toy Biz.
(b) Breakup Fee. In the event that a Qualifying
Transaction closes, the Breakup Fee shall be payable in Cash in immediately
available funds to DPI or its assignees.
6.8 Dissolution of Committees.
On the Consummation Date, all statutory committees (other than
the Creditors Committee to the extent provided in Section 6.16 hereof) appointed
by the U.S. Trustee in the Reorganization Cases shall automatically dissolve and
such committees shall cease to exercise any functions and be divested of all
rights, powers and duties.
6.9 Intentionally deleted.
6.10 Newco Financing.
In the event that no Qualifying Transaction closes, Toy Biz
shall arrange for Newco to obtain the Term Loan Facility, the Working Capital
Facility and investors to purchase ninety million dollars ($90,000,000) of
Convertible Preferred Stock for ninety million dollars ($90,000,000) in Cash.
6.11 Vote of Characters' Toy Biz Stock.
As of the Consummation Date, Characters shall be deemed to
have voted all of its Toy Biz common stock in favor of the Merger Agreement, any
Qualifying Transaction and the transactions contemplated hereby.
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6.12 Forgiveness of Panini Obligations.
On the Consummation Date, each of the Debtors shall forgive
all monetary obligations of Panini to such Debtor due and payable as of December
31, 1997.
6.13 Panini Indemnity.
On the Consummation Date, Newco shall execute and deliver the
Panini Indemnity.
6.14 Outstanding Toy Biz Stock Interests. Any outstanding Toy
Biz preferred stock or stock options shall be eliminated prior to the
Consummation Date or will only dilute the Newco Common Stock to be distributed
pursuant to Section 6.6 hereof.
6.15 Distribution of Subsidiary Equity Interests.
In connection with and in consideration for the
distributions to be made under section 4.2(b)(i) hereof by Entertainment on
account of the Allowed Fixed Senior Secured Claims, each holder of a Fixed
Senior Secured Claim shall transfer to Entertainment, and Entertainment shall
acquire by subrogation, all Fixed Senior Secured Claims against any Debtor other
than Entertainment. The distributions of shares of new common stock of Debtors
other than Entertainment provided for under section 4.2(b)(i)(A)(5) hereof shall
be made directly to Newco.
6.16 Continuation of Creditors Committee.
From and after the Consummation Date, the Creditors Committee
may continue to exist solely for the purposes of monitoring the Claims objection
process and performing the functions set forth in Section 7.9 hereof and in the
Avoidance Litigation Trust Agreement, it being understood that the reasonable
professional fees and expenses of the Creditors Committee and the expenses of
its members shall be paid by the Avoidance Litigation Trust in an amount not to
exceed one hundred thousand dollars ($100,000) and that neither Newco nor any of
its subsidiaries or affiliates shall have any liability therefor.
6.17 Right to Object to Fees.
Nothing contained herein shall be construed as in any way
limiting the right of any party in interest to object to any of the fees and
expenses of any professionals retained pursuant to sections 327, 328 or 1103 of
the Bankruptcy Code.
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6.18 Certain Securities Law Matters.
In the event that the Confirmation Order does not
determine that the issuance of the beneficial interests in the Litigation
Trusts, Newco Common Stock, the Warrants (including the redistribution of the
Warrants by LaSalle to the holders of the Holdings Notes or the sale thereof by
LaSalle), the Newco Common Stock issuable on exercise of the Plan Warrants,
Stockholder Series A Warrants and the Stockholder Series C Warrants, the
Convertible Preferred Stock issuable on exercise of the Stockholder Series B
Warrants and the Newco Common Stock issuable on exercise of that Convertible
Preferred Stock are exempt from the registration requirements of the Securities
Act pursuant to the exemption afforded by Section 1145 of the Bankruptcy Code,
Newco will either obtain a no action letter from the Securities and Exchange
Commission to the effect that the staff of the Securities and Exchange
Commission will not recommend any enforcement action if those issuances are made
without registration under the Securities Act pursuant to the exemption afforded
by Section 1145 of the Bankruptcy Code or it will register the necessary
issuances under the Securities Act reasonably promptly after the Consummation
Date. Newco shall use its reasonable efforts to cause Newco Common Stock, the
New Panini Securities (if applicable), the Convertible Preferred Stock, Plan
Warrants, Stockholder Series A Warrants and Stockholder Series C Warrants to be
listed on the New York Stock Exchange or the American Stock Exchange at the time
of, or as promptly as reasonably practicable after, the Consummation Date. Newco
shall remain subject to the reporting requirements of Section 13(a) of the
Securities Exchange Act of 1934, as amended, and shall file all reports required
to be filed thereunder with the Securities and Exchange Commission until Rule
144(k) under the Securities Act becomes applicable to resales of the Plan
Warrants, Stockholder Series A Warrants, Stockholder Series C Warrants, shares
of Common Stock and Convertible Preferred Stock issued on exercise of Warrants
and shares of Common Stock issuable on exercise of those shares of Convertible
Preferred Stock, other than resales for the account of persons who are at the
time of such resale, or have been within the three months preceding such resale,
affiliates of Newco. Newco shall use its reasonable efforts to have the
Securities and Exchange Commission declare effective, as promptly as reasonably
practicable after the Consummation Date, one or more registration statements
under the Securities Act registering (x) the resale by the New Investors of the
shares of Convertible Preferred Stock acquired by the New Investors, including,
without limitation, shares acquired by holders of Fixed Senior Secured Claims
pursuant to Section 4.2(b)(i)(A)(6) hereof and (y) the resale by affiliates (as
that term is defined in Rule 405 under the Securities Act) of Newco of (i)
shares of Newco Common Stock, (ii) shares of Convertible Preferred Stock, (iii)
Stockholder Series A Warrants,
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(iv) Stockholder Series B Warrants, (v) Stockholder Series C Warrants,(vi) Newco
Common Stock issuable on exercise of the Plan Warrants, Stockholder Series A
Warrants and Stockholder Series C Warrants, (vii) Convertible Preferred Stock
issuable on exercise of the Stockholder Series B Warrants, (viii) Newco Common
Stock, and (ix) Newco Common Stock issuable on conversion of Convertible
Preferred Stock, to the extent that the shares and warrants referred to in (i)
through (v), the warrants referred to (vi) and (vii) and the Convertible
Preferred Stock referred to in (viii) have been issued to those affiliates under
the Plan.
6.19 Settlement Amount. Immediately prior to the Consummation
Date, Toy Biz shall pay the Settlement Amount to Berlack, Israels & Liberman LLP
for the benefit of High River and Westgate.
6.20 Excess Administration Claims Amount Loan. On the
Consummation Date, the New Investors set forth on Exhibit 12 to this Plan of
Reorganization in the proportions there identified shall lend Cash to Newco in
an amount equal to the Excess Administration Claims Amount and Newco shall
execute and deliver the Excess Administration Claims Note to the New Investors.
6.21 Perlmutter Capital Contribution. Isaac Perlmutter or one
of his Affiliates other than Toy Biz or one of its subsidiaries shall contribute
an amount of Cash as equity to Newco equal to the Perlmutter Capital
Contribution.
SECTION 7. LITIGATION TRUST
----------------
7.1 Assignment of Rights.
(a) Avoidance Litigation Trust. On the Consummation Date, (i)
each of the Debtors and the Avoidance Litigation Trustee shall execute and
deliver the Avoidance Litigation Trust Agreement pursuant to which the Debtors
shall grant, assign, transfer, convey and deliver to the Avoidance Litigation
Trust, without representation, warranty or recourse, for the benefit of the
Avoidance Beneficiaries all of the Debtors' right, title and interest in and to
any and all Litigation Claims arising pursuant to sections 510, 544, 545, 547,
548, 549, 550, 551 and 553 of the Bankruptcy Code including the right to
prosecute the motion pursuant to Fed. R. Civ. P. 60(b) filed by the Creditors
Committee in December, 1997, provided, however, that such Litigation Claims
shall not include any Litigation Claim that seeks the recovery of any right,
title or interest of any of the Debtors or their subsidiaries in or to any
right, title or interest in intellectual property, including without limitation,
any right, title or interest in or to Spiderman, X-man or Ironman
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and (ii) pursuant to the Avoidance Litigation Trust Agreement, the Avoidance
Litigation Trustee shall accept the rights and properties assigned and
transferred to it and the trust imposed upon it, agree to retain and enforce
such Litigation Claims for the benefit of the Avoidance Beneficiaries, further
agree to be appointed for such purpose under section 1123(b)(3)(B) of the
Bankruptcy Code and hold the Net Avoidance Litigation Proceeds in trust for the
Avoidance Beneficiaries.
(b) MAFCO Litigation Trust. On the Consummation Date, (i) each
of the Debtors and the MAFCO Litigation Trustees shall execute and deliver the
MAFCO Litigation Trust Agreement pursuant to which the Debtors shall grant,
assign, transfer, convey and deliver to the MAFCO Litigation Trust, without
representation, warranty or recourse, for the benefit of the MAFCO Beneficiaries
(A) all of the Debtors' right, title and interest in and to any and all MAFCO
Causes of Action, and (B) an interest in the Debtors' right to the benefits of
the attorney client privilege, work-product immunity and other similar
privileges to the extent and only to the extent provided in the MAFCO Litigation
Trust Agreement, and (ii) pursuant to the MAFCO Litigation Trust Agreement, the
MAFCO Litigation Trustees shall accept the rights and properties assigned and
transferred to, or otherwise enjoyed by, them and the trust imposed upon them,
agree to retain and enforce such Litigation Claims for the benefit of the MAFCO
Beneficiaries, further agree to be appointed for such purpose under section
1123(b)(3)(B) of the Bankruptcy Code and hold the Net MAFCO Litigation Proceeds
in trust for the MAFCO Beneficiaries.
7.2 Control of Litigation.
Except as set forth in this Section 7.2, the Litigation
Trustees shall have the full power and discretion to select and to hire
professionals, and to initiate, to prosecute, to supervise, to direct, to
compromise and to settle all Litigation Claims. Notwithstanding the foregoing,
Newco may, in its sole and absolute discretion, direct the Avoidance Litigation
Trustee to dismiss with prejudice, to compromise or to settle any Cause of
Action against any person or entity which is a provider of goods or services to
Newco or party to any licensing arrangement with Newco, or, in each case, any of
its direct or indirect subsidiaries, at any time from and after the Consummation
Date which Newco reasonably believes could have an adverse effect on its
business.
7.3 Liability of Trustee.
No Litigation Trustee shall have any liability for any of its
acts or omissions in connection with the selection and hiring of professionals,
or the initiation, prosecution,
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supervision, direction, compromising or settling of any Litigation Claims,
except in the case of its gross negligence or its own intentional and willful
misconduct, and in no event shall be liable for any action taken in reliance
upon the advice of professionals selected with due care in respect of the
subject matter in question. Notwithstanding the foregoing, a Litigation Trustee
may, without liability therefor, retain the services of any professional
services firm with which the Litigation Trustee is affiliated.
7.4 Distribution of Net Avoidance Litigation Proceeds
and Net MAFCO Litigation Proceeds. Net Avoidance Litigation
Proceeds and Net MAFCO Litigation Proceeds shall be distributed
as follows:
(a) four and nine tenths percent (4.9%) of the Net Avoidance
Litigation Proceeds shall be distributed to the holders of Allowed Fixed Senior
Secured Claims pursuant to Section
4.2(b)(i)(7) hereof.
(b) the first four million five hundred thousand dollars
($4,500,000) of Net MAFCO Litigation Proceeds, thirty percent (30%) of any
remaining Net MAFCO Litigation Proceeds and thirty percent (30%) of Net
Avoidance Litigation Proceeds shall be distributed to the holders of Allowed
Unsecured Claims pursuant to Section 4.4 hereof.
(c) seventy percent (70%) of Net MAFCO Litigation Proceeds
after payment of the first four million five hundred thousand dollars
($4,500,000) of Net MAFCO Litigation Proceeds to holders of Allowed Unsecured
Claims in classes 4A through 4I shall be distributed to the holders of Allowed
Class Securities Litigation Claims and Allowed Equity Interests in Entertainment
pursuant to Sections 4.5 and 4.6(a) hereof.
(d) sixty five and one tenth percent (65.1%) of Net Avoidance
Litigation Proceeds shall be distributed to Newco.
7.5 Professional Fees and Expenses.
(a) Avoidance Litigation Trust. On the Consummation Date,
Newco shall execute and deliver to the Avoidance Litigation Trustee the
Avoidance Litigation Trust Loan Agreement pursuant to which it shall agree for a
period of five (5) years from and after the Consummation Date to make loans to
the Avoidance Litigation Trust for the payment of all professional fees and
expenses of the Avoidance Litigation Trustee in an amount not to exceed one
million one hundred thousand dollars ($1,100,000) in the aggregate, it being
understood that one hundred thousand dollars of such amount shall be for the
exclusive purpose of paying fees and expenses of the Creditors Committee which
may
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become due and payable pursuant to Section 6.16 hereof. On the Consummation
Date, the Avoidance Litigation Trustee shall execute and deliver to Newco the
Avoidance Professional Fee Reimbursement Note pursuant to which the Avoidance
Litigation Trust shall be obligated to reimburse Newco for any and all sums
advanced pursuant to the Avoidance Litigation Trust Loan Agreement together with
simple interest at the rate of ten percent (10%) per annum which obligation
shall be secured by a valid, binding, enforceable, perfected, first priority
security interest in and lien against all assets of the Avoidance Litigation
Trust. On the Consummation Date and thereafter whenever reasonably requested to
do so by Newco, the Avoidance Litigation Trustee shall execute and deliver UCC-1
financing statements and any other documents or interests requested by Newco to
evidence a perfected first priority security interest in and lien against all
assets of the Avoidance Litigation Trust to secure repayment of the Avoidance
Professional Fee Reimbursement Note. After payment in full of the Avoidance
Professional Fee Reimbursement Note, the Avoidance Litigation Trustee shall have
the right, but not the obligation, to reserve all or a portion of any recoveries
realized by the Avoidance Litigation Trustee to pay for future professional fees
and expenses.
(b) MAFCO Litigation Trust. On the Consummation Date, Newco
shall execute and deliver to the MAFCO Litigation Trustees the MAFCO Litigation
Trust Loan Agreement pursuant to which it shall agree for a period of five (5)
years from and after the Consummation Date to make loans to the MAFCO Litigation
Trust for the payment of all professional fees and expenses of the MAFCO
Litigation Trustees in an amount not to exceed one million dollars ($1,000,000)
in the aggregate. On the Consummation Date, the MAFCO Litigation Trustee shall
execute and deliver to Newco the MAFCO Professional Fee Reimbursement Note
pursuant to which the MAFCO Litigation Trust shall be obligated to reimburse
Newco for any and all sums advanced pursuant to the MAFCO Litigation Trust Loan
Agreement together with simple interest at the rate of ten percent (10%) per
annum which obligation shall be secured by a valid, binding, enforceable,
perfected, first priority security interest in and lien against all assets of
the MAFCO Litigation Trust. On the Consummation Date and thereafter whenever
reasonably requested to do so by Newco, the MAFCO Litigation Trustees shall
execute and deliver UCC-1 financing statements and any other documents or
interests requested by Newco to evidence a perfected first priority security
interest in and lien against all assets of the MAFCO Litigation Trust to secure
repayment of the MAFCO Professional Fee Reimbursement Note. After payment in
full of the MAFCO Professional Fee Reimbursement Note, the MAFCO Litigation
Trustees shall have the right, but not the obligation, to reserve all or a
portion of any recoveries realized by the MAFCO Litigation Trustees to pay for
future professional fees and expenses.
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7.6 Commencement of Avoidance Actions. Unless otherwise
authorized by the Bankruptcy Court, the Avoidance Litigation Trustee may not
commence actions under sections 510, 544, 545, 547, 548, 549, 550, 551 and 553
of the Bankruptcy Code later than four (4) months after the Consummation Date.
7.7 Reduction of Judgment and Indemnifications. It is
------------------------------------------
the intention of the Proponents, the Creditors Committee, the
Equity Committee, LaSalle, High River, Westgate and the Trustee
that no Exculpated Person shall have any liability to any person
or entity, including without limitation, Contribution Bar
Parties, including, without limitation, any liability with
respect to claims in the nature of contribution or
indemnification, however denominated or described, in connection
with, arising out of or in any way related to Litigation Claims
or Covered Claims and that any such claims-over shall be
satisfied as provided herein.
(a) No Exculpated Person shall have any liability to any
Contribution Bar Party for contribution or indemnification with respect to any
asserted or threatened Litigation Claim or Covered Claim, and the Litigation
Trust or the Covered Person, as applicable, (i) shall reduce and credit against
any judgment it may obtain against any Contribution Bar Party in any action in
connection with, arising out of, or which is in any way related to any
Litigation Claim or Covered Claim, the amount of any claim which any such
Contribution Bar Party is found to have established against any Exculpated
Person on whatsoever theory in any action involving Litigation Claims or Covered
Claims; and (ii) shall be obligated to use good faith efforts to obtain, and in
the context of a settlement shall be deemed to have obtained, from any such
Contribution Bar Party for the benefit of any implicated Exculpated Persons a
satisfaction in full of such Contribution Bar Party's claim against any such
Exculpated Person.
(b) Each Exculpated Person shall provide and cooperate in
discovery in any action involving the Litigation Trust or Covered Person and one
or more of the Contribution Bar Parties, but shall retain all rights to object
to discovery requests under applicable law, as if the Exculpated Person were
named as a party to the action. In addition, neither Litigation Trust nor any
Covered Person shall oppose the standing or right of any Contribution Bar Party
to make any submission or argument to the court or the jury in any action
involving the Litigation Trust or Covered Person and one or more of the
Contribution Bar Parties that seeks to account (in whole or in part) for the
asserted responsibility of the Exculpated Persons just as if they were parties
to the action, including but not limited to the Contribution Bar Parties' right
to assert that any Exculpated Person is fully or partially responsible for any
claims asserted
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or relief sought in any such action; provided, however, that nothing herein
shall preclude the Litigation Trust or Covered Person from contesting on the
merits the asserted responsibility of the Exculpated Person(s).
(c) For good and valuable consideration including the benefits
to be received hereunder by holders of Claims against the Debtors, the
investment by the New Investors and the contribution of all issued and
outstanding common stock of Toy Biz to Newco, the applicable Litigation Trust
primarily and Newco secondarily shall by operation of this Plan of
Reorganization indemnify and hold harmless each Exculpated Person from and
against any and all liability (including fees and expenses of counsel and other
professionals (other than any costs of internal personnel), amounts paid in
judgment, penalty or otherwise) with respect to claims-over on whatsoever theory
(whether by way of third- or subsequent party complaint, cross-claim, separate
action or otherwise) by any person or entity to recover in whole or in part any
liability, direct or indirect, whether by way of judgment, penalty or otherwise
of any person or entity in connection with, arising out of, or which is in any
way related to any Litigation Claim asserted by such applicable Litigation Trust
or any Covered Claim, it being understood that the Avoidance Litigation Trust's
indemnity shall be subordinate to its obligation to pay up to one million one
hundred thousand dollars ($1,100,000) of professional fees and expenses of the
professionals for the Avoidance Litigation Trust and the Creditors Committee or
to repay any loans made by third parties to the Avoidance Litigation Trust and
the MAFCO Litigation Trust's indemnity shall be subordinate to its obligation to
pay up to one million dollars ($1,000,000) of professional fees and expenses of
the professionals for the MAFCO Litigation Trust or to repay any loans made by
third parties to the MAFCO Litigation Trust; provided, however, that such
indemnity shall not apply to any Independent Cause of Action. For the avoidance
of doubt, this Section 7.7(c) is not intended to impose upon either Litigation
Trust any indemnification obligation with respect to Covered Claims that are not
Litigation Claims. Without limitation on any of the foregoing, if separate
counsel is required as to any such claim-over, the applicable Litigation Trust
shall pay for the reasonable fees and expenses of competent counsel selected by
the Exculpated Person, subject to the approval of the applicable Litigation
Trustee(s) which will not be unreasonably withheld or delayed. No settlement of
any such claim-over shall require any financial contribution on the part of any
Exculpated Person.
(d) Subject to all other provisions in this Section 7.7, the
Confirmation Order shall be deemed to constitute a permanent injunction against
all persons and entities, including, but not limited to, defendants or potential
defendants in
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controversies in connection with, arising out of, or which are in any way
related to any Litigation Claim or Covered Claim, either directly,
representatively, or in any other capacity from instituting or prosecuting or
continuing to prosecute, any action, claim or claim-over against any Exculpated
Person on whatsoever theory (whether by way of third or subsequent-party
complaint, cross-claim, separate action or otherwise, and whether under federal
or state law) to recover in whole or in part any liability, direct or indirect,
of such person or entity to any other person or entity in connection with,
arising out of, or which is in any way related to any Litigation Claim or
Covered Claim.
(e) For the avoidance of doubt, nothing contained in this Plan
of Reorganization, either Litigation Trust Agreement, in the Confirmation Order,
or any other order or agreement executed in connection with the Plan shall
preclude any person or entity from prosecuting or continuing to prosecute any
Independent Cause of Action against any Exculpated Person and there shall be no
rights of indemnification arising hereunder in connection with Independent
Causes of Action.
(f) The provisions of this Section 7.7 shall be binding on and
inure to the benefit of all successors and assigns of the Debtors, the
Litigation Trust, Covered Persons, Exculpated
Persons and Contribution Bar Parties.
7.8 Timing of Distributions. Notwithstanding anything
contained herein or in the Litigation Trust Agreement to the contrary, no
distributions may be made to any of the Beneficiaries in their capacity as
Beneficiaries of either Litigation Trust unless and until (a) the applicable
Litigation Trust has paid all sums due and owing pursuant to the applicable
Professional Fee Reimbursement Note, (b) the applicable Litigation Trust has
provided Newco with an instrument in form and substance reasonably satisfactory
to Newco releasing Newco from any further liability pursuant to the applicable
Litigation Trust Loan Agreement; and (c) after consultation with Newco the
applicable Litigation Trust has established a reasonable reserve for all
indemnity claims theretofore asserted pursuant to Section 7.7(c) hereof and
sixty (60) days have elapsed since the applicable Litigation Trust notifies
Newco in writing of the amount of the reserve and that it waives the right to
prosecute any Litigation Claims that it has not already begun to prosecute as of
the date of such notice.
7.9 Objections to Claims.
The Creditors Committee shall have the right to apply to the
Court to direct the Avoidance Litigation Trustee to object to any Claim not
Allowed by this Plan of Reorganization if the
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Creditors Committee believes that Newco has not exercised reasonable business
judgement in failing to prosecute or in settling any specified Claims
objections. In the event that the Creditors Committee is successful in
connection with such application, Newco shall pay the reasonable fees and
expenses of the Avoidance Litigation Trust in connection with the prosecution of
such objection.
7.10 Jurisdiction.
The Bankruptcy Court shall have jurisdiction over the
Litigation Trustees, the Litigation Trusts, the Litigation Claims, the Avoidance
Litigation Trust Assets and the MAFCO Litigation Trust Assets, including,
without limitation, jurisdiction to determine all controversies and disputes
arising under or in connection with the Litigation Trust Agreements and the
Litigation Trust Loan Agreements. Notwithstanding the foregoing, nothing
contained herein shall be construed as limiting the right of the MAFCO
Litigation Trust to assert any Litigation Claim to which it has title in any
court of competent jurisdiction. The Litigation Trustees shall have the power
and authority to bring any action in the Bankruptcy Court to prosecute the
Litigation Claims. The Bankruptcy Court shall have the authority to construe and
interpret the Litigation Trust Agreements and the Litigation Trust Loan
Agreements and to establish, amend and revoke rules and regulations for the
administration of the Litigation Trusts, including, but not limited to,
correcting any defect or supplying any omission, or reconciling any
inconsistency in the Litigation Trust Agreements, in the manner and to the
extent it shall deem necessary or advisable to make the Litigation Trust fully
effective; and all decisions and determinations by the Bankruptcy Court in the
exercise of this power shall be final and binding upon the Litigation Trustees,
Newco and the Beneficiaries.
SECTION 8. PROVISIONS GOVERNING DISTRIBUTIONS
----------------------------------
8.1 Date of Distributions.
Any distributions and deliveries to be made hereunder shall be
made on the Consummation Date or as soon as practicable thereafter and deemed
made on the Consummation Date. 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.
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8.2 Entities to Exercise Function of Disbursing Agent.
All distributions under this Plan of Reorganization shall, at
the election of the Proponents, be made by Newco as Disbursing Agent or such
other entity designated by the Proponents prior to the conclusion of the
Confirmation Hearing as a Disbursing Agent. 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 Newco.
8.3 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
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
to Newco all rights, claims and interests and shall not participate in any
distribution hereunder.
8.4(a) Delivery of Distributions.
Subject to Bankruptcy Rule 9010 and except as set forth in
Section 8.4(b) below, 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
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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 ninety (90) days after the fourth
anniversary of the Consummation Date. After such date, all unclaimed property or
interests in property shall be distributed on a pro rata basis to other holders
of Claims or Equity Interests in the same class or subclass and the Claim or
Equity Interest in respect of which such property or interest in property was
not delivered shall be discharged and forever barred. As promptly as practical
after the first, second, third and fourth anniversaries of the Consummation
Date, the Disbursing Agent shall file with the Bankruptcy Court a list of
holders to whom distributions have not been able to be made as of those
anniversary dates because the current address of each such holder has not been
determined. 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.
(b) LaSalle Distributions.
Provided that LaSalle certifies to the Disbursing Agent that
it has foreclosed upon the Pledged Shares or the Bankruptcy Court has entered a
Final Order declaring that neither Newco nor the Disbursing Agent shall have any
liability to the record holder of the Pledged Shares for having made
distributions in respect of the Pledged Shares directly to LaSalle, all
distributions in respect of the Pledged Shares shall be distributed directly to
LaSalle in consideration of the lien of LaSalle under the Indentures and the
lien of LaSalle on the Pledged Shares and the LaSalle Claim, and LaSalle shall
tender the Pledged Shares under the terms of the Fourth Amended Plan to the
Debtors in exchange therefor. The distributions to be received by LaSalle in
full satisfaction and discharge of the LaSalle Claim shall be distributed
directly to LaSalle.
8.5 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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8.6 Reserves and Distributions.
The Disbursing Agent shall reserve in a trust account for the
benefit of holders of Allowed Unsecured Claims cash, securities or other
property in an amount determined by the Bankruptcy Court on account of (a)
Disputed Claims in Class 4 (Unsecured Claims) and Class 5 (Class Securities
Litigation Claims) and, as applicable, each subclass thereof and (b) Resulting
Claims. Upon the resolution from time to time of Disputed Claims in Class 4
(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.
8.7 Resulting Claims.
In the event that any person or entity becomes entitled to an
Allowed Unsecured Claim in subclasses 4A through 4I and to receive distributions
on account of such Allowed Unsecured Claim as a result of the compromise,
adjustment, arbitration, settlement or enforcement or other resolution of an
action commenced, asserted or which could have been commenced or asserted by the
Avoidance Litigation Trustee and such Allowed Unsecured claim is a Resulting
Claim, such person's or entity's only rights with respect to the Cash portions
of the distributions it would otherwise have been entitled to as a holder of
such Allowed Unsecured Claim is to take a set off equal to the aggregate amount
of all such Cash payments against any liability such person has or may have to
the Avoidance Litigation Trust. Such setoff shall be deemed a distribution under
the Plan on account of such Allowed Claim.
8.8 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.
8.9 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
under 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
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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 Newco.
(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 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.
8.10 Distributions of Certain Warrants.
If on the first (1st) anniversary of the Consummation Date,
any Stockholder Series B Warrants have not been issued, Newco will issue such
Warrants to the Warrant Liquidation Agent which shall sell such Warrants into
the market as promptly as reasonably practical to permit an orderly sale. Newco
will use its reasonable efforts either (i) to obtain a no-action letter from the
staff of the Securities and Exchange Commission to the effect that the staff of
the Securities and Exchange Commission will not recommend any enforcement action
if the distribution of Warrants to the Warrant Liquidation Agent or the resale
of Warrants by the Warrant Liquidation Agent is made without registration under
the Securities Act, or (ii) if it does not obtain such a no-action letter, file
and cause to become effective a registration statement under the Securities Act
registering that issuance or resale or both, as the case may be, in either case
on before the first (1st) anniversary of the Consummation Date. One-half of the
fees and expenses of the Warrant Liquidation Agent shall be paid from the net
proceeds of the sale of those Warrants if those net proceeds are sufficient to
pay the fees and expenses of the Warrant Liquidation Agent. The balance of the
fees and expenses of the Warrant Liquidation
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Agent shall be paid by Newco. Any remaining net proceeds of the sale of such
Warrants shall be delivered to the Disbursing Agent to be held in a trust
account in lieu of the Warrants sold pursuant to this Section 8.10 for the
benefit of holders of Class 5 Claims and Class 6A Equity Interests whose Claims
or Equity Interests become Allowed following the first (1st) anniversary of the
Consummation Date and for all holders of Allowed Class 5 Claims and Allowed
Class 6A Equity Interests following the allowance or disallowance of all Class 5
Claims and Class 6A Interests.
SECTION 9. PROCEDURES FOR TREATING DISPUTED CLAIMS UNDER
THE PLAN OF REORGANIZATION
---------------------------------------------
9.1 Objections to Claims.
Subject to Section 7.9 hereof, Newco shall be the sole party
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 served upon Newco, and (c) such later date as may be
fixed by the Bankruptcy Court.
9.2 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 the disputed portion of such Claim unless and until such
Disputed Claim becomes an Allowed Claim.
9.3 Cash Reserve.
On the Consummation Date, Newco shall deposit the sum of eight
million dollars ($8,000,000) in an interest bearing trust account for the
benefit of holders of Allowed Unsecured Claims under the Plan.
9.4 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,
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the Disbursing Agent shall distribute to the holders of such Claim or Equity
Interest any payment or property that would have been distributed to such holder
if the Claim or Equity Interest had been allowed on the Consummation Date,
together with any interest earned thereon.
9.5 Fractional Securities.
Neither fractional shares of Convertible Preferred Stock, nor
fractional shares of Newco Common Stock, nor Fractional Warrants shall be
distributed pursuant to this Plan of Reorganization. Instead, as of the record
date for distributions to any class of Claims or Interests, holders of Allowed
Claims or Allowed Interests otherwise entitled to receive a fractional share of
Convertible Preferred Stock or Newco Common Stock or a Fractional Warrant shall
receive a whole share of Convertible Preferred Stock or Newco Common Stock or a
whole Warrant if the holder was to receive a fractional share of Convertible
Preferred Stock or Newco Common Stock of 0.5 or more or a Fractional Warrant to
acquire 0.5 shares or more of Convertible Preferred Stock or Newco Common Stock
and no share of Convertible Preferred Stock or Newco Common Stock or no Warrant
if the holder was to receive a fractional share of Convertible Preferred Stock
or Newco Common Stock of less than 0.5 or a Fractional Warrant to acquire shares
of Convertible Preferred Stock or Newco Common Stock of less than 0.5.
SECTION 10. PROVISION GOVERNING EXECUTORY CONTRACTS AND
UNEXPIRED LEASES UNDER THE PLAN
-------------------------------------------
10.1 General Treatment.
Except as set forth in Section 10.4 below, 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 (a) has been assumed or rejected
pursuant to Final Order of the Bankruptcy Court, or (b) is specifically rejected
on Schedule 10.1 hereto filed by the Proponents on or before the commencement of
the Confirmation Hearing or such later date as may be fixed by the Bankruptcy
Court, or (c) 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 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 10.1 hereto that
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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 10.1
hereto and (b) executory contracts or unexpired leases appurtenant to the
premises listed on Schedule 10.1 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 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.
10.2 Amendments to Schedule; Effect of Amendments.
The Debtors shall assume each of the executory contracts and
unexpired leases not listed in Schedule 10.1 hereto; provided, that the
Proponents may on or before the last Business Day before the Confirmation Date
amend Schedule 10.1 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. The Proponents shall provide notice of any amendments to
Schedule 10.1 hereto to the parties to the executory contracts or unexpired
leases affected thereby. The fact that any contract or lease is scheduled on
Schedule 10.1 hereto shall not constitute or be construed to constitute an
admission by any Proponent or any Debtor that any Debtor has any liability
thereunder.
10.3 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 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 each of the Proponents on or before
thirty (30) days after the earlier to occur of (a) the giving of notice to such
party under Section 10.1 or 10.2 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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10.4 Certain Panini Agreements.
(a) Panini Sticker Agreement. Notwithstanding
anything else contained herein to the contrary, the Panini Sticker Agreement
shall be assumed and all amounts owing by any of the Panini Entities to any of
the Debtors on or prior to December 31, 1997 shall be forgiven. In addition,
Newco shall permit the Panini Entities to assign the Panini Sticker Agreement to
any other entity in connection with any subsequent sale of Panini except to a
Designated Competitor.
(b) Panini Comic Distribution Agreement.
Notwithstanding anything else contained herein to the contrary, the Panini Comic
Distribution Agreement shall be assumed and modified as follows: (i) the term
shall be through December 31, 1998, (ii) the royalty rate through December 31,
1998 shall be six percent (6%), (iii) the minimum guaranteed royalty (A) shall
be eliminated for the period from January 1, 1997 through December 31, 1997 and
(B) shall be two million dollars ($2,000,000) for the period from January 1,
1998 through December 31 1998, (iv) the license shall entitle the Panini
Entities to the use of a minimum of fifty (50) titles at all times during 1998,
and (v) any and all amounts owing thereunder to the Debtors on or prior to
December 31, 1997 shall be forgiven. In addition, Newco shall permit the Panini
Entities to assign the Panini Comic Distribution Agreement, as modified, to any
other entity in connection with a sale of the Panini Entities except to a
Designated Competitor. From and after the Consummation Date, any and all
royalties owed to the National Basketball Association in respect of sticker
sales and card sales made by Panini pursuant to the NBA License Agreement shall
be the sole responsibility of Panini.
(c) Other Panini Agreements. All other
agreements, if any, by and between Panini and any of the Debtors shall be
rejected, terminated and of no further force or effect as of the Consummation
Date and neither Panini nor any of the Debtors shall have any liability or Claim
as a result of such rejection or termination.
SECTION 11. CONDITIONS PRECEDENT TO CONFIRMATION DATE
AND CONSUMMATION DATE
-----------------------------------------
11.1 Conditions Precedent to Confirmation of Plan of
Reorganization.
The confirmation of this Plan of Reorganization is subject to
satisfaction of the following conditions precedent:
(a) Confirmation Order. The Confirmation Order to be
entered by the Clerk of the Bankruptcy Court shall be in a
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<PAGE>
form that (i) does not materially and adversely affect the benefits to
be received hereunder by any of (A) the Debtors' estates, (B) Toy Biz,
(C) the holders of Senior Secured Claims, (D) the holders of DIP
Claims, (E) the holders of Unsecured Claims, (F) the holders of Class 5
Claims and Class 6A Equity Interests, (G) High River and Westgate, and
(H) LaSalle; (ii) determines that the Plan satisfies each of the
applicable requirements of section 1129 of the Bankruptcy Code; (iii)
approves the delivery of the Transmittal Materials to all persons
receiving Warrants under the Plan; (iv) approves the releases contained
in the Stipulation and Agreement; (v) includes the contribution bar,
indemnification and judgment reduction provisions set forth in section
7.7 hereof, (vi) determines that the distributions of securities to be
made pursuant to this Plan of Reorganization (other than pursuant to
Section 4.2(b)(i)(A)(6)) are exempt from the Securities Act and state
blue sky laws pursuant to section 1145 of the Bankruptcy Code, (vii)
determines that the succession to an interest in certain privileges and
immunities of the Debtors by the MAFCO Litigation Trust pursuant to
Section 7.1(b) hereof does not constitute a waiver of any such
privilege or immunity and (viii) is otherwise in form and substance
reasonably acceptable to the Proponents, the Creditors Committee, the
Equity Committee, High River, Westgate and the Trustee.
11.2 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) SEC Proxy Statement. The Securities and Exchange
Commission shall have stated that it has no further comments on the
proxy statement filed by Toy Biz with respect to the meeting of the
stockholders of Toy Biz called for the purpose of approving the
transactions contemplated by this Plan of Reorganization, such proxy
statement shall have been delivered to all holders of Toy Biz common
stock in accordance with the rules of the Securities and Exchange
Commission, twenty (20) business days (computed in accordance with
Schedule 14A of the Securities and Exchange Commission) shall have
elapsed since such delivery and Toy Biz shareholders shall have voted
to approve the transactions contemplated hereby;
(b) HSR. All applicable waiting periods (and any
extensions thereof) under the Hart-Scott-Rodino Antitrust
55
<PAGE>
Improvements Act of 1976 shall have expired or been
terminated;
(c) Restructured Panini Loan Documents. The
Restructured Panini Loan Documents shall be in full force
and effect;
(d) Secured Lender Consummation Date. The Consummation
Date shall occur not later than October 15, 1998;
(e) Toy Biz Consummation Date. The Consummation Date
shall occur not later than November 20, 1998;
(f) Standstill Agreements. The Standstill Agreements
shall have been executed and delivered by all of the parties
thereto;
(g) NBA Agreement. The Court shall have entered an order (a)
approving an NBA Settlement Agreement and the NBA Settlement Agreement
shall be in full force and effect, (b) pursuant to which the Bankruptcy
Court determines that such NBA Settlement Agreement is fair and
equitable and in the best interests of the Debtors' estates, and (c)
providing that any reserves required under this Plan of Reorganization
on account of the unsecured component of the NBA's Claim shall be based
on a Claim in an amount not greater than twenty million dollars
($20,000,000);
(h) Receipt of Certain Funds. Newco shall have received
(a) the Perlmutter Capital Contribution, and (b) the
proceeds of the loan described in Section 6.20 hereof;
(i) Receipt of Settlement Amount. Berlack, Israels and
Liberman LLP shall have received the Settlement Amount from
Toy Biz for the benefit of High River and Westgate;
(j) Certain Payments for Contingent Senior Secured Claims.
Chase as agent for the holders of Contingent Senior Secured Claims
shall have received (a) the thirteen million dollar ($13,000,000)
payment provided for in the definition of Newco Guaranty to be paid to
the holders of claims pursuant to the Existing Panini Senior Credit
Agreements in accordance with the terms of the Panini Subordination
Agreement, and (b) the letters of credit provided for by Section 6.1
hereof; and
(k) Shareholders Agreement. The Shareholder Agreement shall
have been executed and delivered by Isaac Perlmutter, Isaac Perlmutter,
T.A., Avi Arad, the New Investors and the Secured Lenders.
56
<PAGE>
11.3 Waiver of Conditions Precedent.
Each of the conditions precedent in Sections 11.1 and 11.2
hereof may only effectively be waived, in whole or in part, if waived, by the
Proponents acting jointly except that the consent of Toy Biz is not required to
waive the condition precedent contained in Section 11.2(d) hereof. Any such
waiver of a condition precedent in Section 11.1 or 11.2 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. Notwithstanding the foregoing, the conditions precedent
contained in Sections 11.1(a)(i)(E) and 11.2(g) may only be waived with the
consent of the Creditors Committee, the condition precedent contained in section
11.1(a)(i)(F) may only be waived with the consent of the Trustee, the Equity
Committee, High River and Westgate, the conditions precedent contained in
sections 11.1(a)(i)(G), (iii), and (iv) may only be waived with the consent of
High River, Westgate, the Creditors Committee and the Equity Committee the
condition precedent contained in section 11.2(h) may only be waived with the
consent of High River and Westgate, the condition precedent contained in section
11.1(a)(viii) may only be waived with the consent of the Trustee, the Creditors
Committee and the Equity Committee and the condition precedent contained in
section 11.1(a)(i)(H) may only be waived with the consent of LaSalle.
SECTION 12. EFFECT OF CONFIRMATION
----------------------
12.1 General Authority.
Until the completion of all transactions contemplated to occur
on 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.
12.2 Discharge of Debtors.
(a) General Discharge. 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 and any 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.
57
<PAGE>
Except as otherwise provided herein, upon the Consummation Date, all Claims
against and Equity Interests in each of the Debtors will be satisfied,
discharged and released in full exchange for the consideration provided
hereunder. All entities shall be enjoined and precluded from asserting against
any Debtor or Newco 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) Exculpations. From and after the
Consummation Date, no Exculpated Person shall have or incur any liability to any
other Exculpated Person or any entity accepting any distribution under this Plan
of Reorganization (i) for any act taken or omission made in connection with or
in any manner related to negotiating, formulating, implementing, confirming or
consummating (x) this Plan of Reorganization (or prior iterations) or the
transactions contemplated hereby, or (y) any agreement, instrument or other
documents created in connection with this Plan of Reorganization, (ii) for the
actions or other participation of such Exculpated Person in respect of any of
the Reorganization Cases (including the negotiation of any other plan of
reorganization, settlement or arrangement), (iii) for any matters that relate,
directly or indirectly, by implication or otherwise, to the Existing Credit
Documents, the DIP Claims, or the Senior Secured Claims, (iv) for any matters
that relate, directly or indirectly, to or were asserted in or could have been
asserted in the District Court Complaint, or (v) for any matters that relate,
directly or indirectly, to or were asserted in or could have been asserted in
the LaSalle Action; provided, however, that such exculpation shall not affect
the rights and obligations of parties to agreements entered into in connection
with the Plan of Reorganization or under the Plan of Reorganization. All
Exculpated Persons as well as all entities receiving any distribution under this
Plan of Reorganization shall be enjoined and precluded from asserting against
the Exculpated Persons or their respective properties or interests in property
any other Claims based upon liability exculpated pursuant to the preceding
sentence.
(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 are released or discharged except as
provided in this Section 12.2(c), and the Confirmation Order shall be deemed an
injunction enforcing such releases and discharge; provided, that: (i) existing
indemnity obligations shall survive to the extent of insurance coverage, but
shall in no event entitle such directors or officers to assert any Claim
(including, without limitation, with respect to any deductible)
58
<PAGE>
against Newco, Toy Biz, Marvel or any of their Affiliates, and (ii) any such
directors or officers shall be entitled to make Claims only against the
insurance and the proceeds thereof. This Section 12.2(c) shall not limit any
right of directors or officers or former directors and officers from asserting
Claims against any Debtor based upon timely filed proofs of claim or requests
for payment of Administration Expense Claims nor shall it limit the right of
Newco to object to any such Claim or request for payment of Administration
Expense Claims. Notwithstanding any provision of the Plan to the contrary,
nothing contained herein, including, but not limited to, Section 12.2(a) hereof,
shall be construed or interpreted in any manner to eliminate, reduce or
otherwise limit in any fashion the availability of insurance coverage for the
benefit of officers and directors, whether for indemnification, liability or
other purposes. Newco shall render reasonable assistance to the officers and
directors in ensuring their access to such insurance coverage, it being
understood that such assistance shall not in any way operate as a waiver of
Newco's right to object to the Allowance of any Administration Expense Claim or
proof of claim. 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 Claims.
12.3 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 through and including the Consummation Date.
SECTION 13. WAIVER OF CLAIMS
----------------
13.1 Avoidance Actions.
Effective as of the Consummation Date, Newco shall have the
right to prosecute and release any actions under sections 510, 544, 545, 547,
548, 549, 550, 551 and 553 of the Bankruptcy Code that are not Litigation Claims
conveyed, granted, assigned, transferred or delivered to the Avoidance
Litigation Trust in accordance with Section 7.1(a) of this Plan of
Reorganization and the applicable Litigation Trust shall have the right to
prosecute and release any actions under sections 510, 544, 545, 547, 548, 549,
550, 551 and 553 of the Bankruptcy Code that are Litigation Claims conveyed,
granted, assigned, transferred or delivered to the Avoidance Litigation Trust in
accordance with Section 7.1(a) of this Plan of Reorganization; provided,
however, that
59
<PAGE>
notwithstanding the foregoing, the applicable Litigation Trust, the Debtors and
Newco will be deemed to have waived the right to assert or pursue any claims,
rights, and causes of action to recover preferences or fraudulent conveyances,
or to pursue similar avoidance actions against any current customers or
suppliers of the Panini Entities (solely in such capacities) or otherwise
relating, directly or indirectly, to any of the Panini Entities.
SECTION 14. RETENTION OF JURISDICTION
-------------------------
14.1 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 proceedings,
applications and contested matters including, without limitation,
proceedings relating to Litigation Claims, matters relating to the
extent, scope and effect of the succession to certain privileges and
immunities by the MAFCO Litigation Trust pursuant to Section 7.1(b) and
the MAFCO Litigation Trust Agreement, matters concerning the Litigation
Trust and actions pursuant to Section 7.9 hereof;
(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;
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<PAGE>
(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
12.2 hereof;
(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;
(n) To hear and determine all disputes regarding the
reasonableness of fees requested pursuant to the Litigation Trust
Professional Fee Guaranty or any other dispute concerning the
administration of the Litigation Trust; and
(o) To enter a final decree closing the Reorganization
Cases.
14.2 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
61
<PAGE>
the Bankruptcy Code, and the Proponents shall have complied with section 1125 of
the Bankruptcy Code. This Plan of Reorganization may be amended only by the
Proponents acting jointly 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. Notwithstanding the foregoing, this Plan of Reorganization may not
be amended in a manner which (a) adversely changes the distributions to holders
of Unsecured Claims or otherwise materially and adversely affects the rights of
holders of Unsecured Claims without the consent of the Creditors Committee, (b)
adversely changes the distributions to the holder of the LaSalle Claim or
otherwise materially and adversely affects the rights of holders of the LaSalle
Claim without the consent of LaSalle, (c) adversely changes the distributions to
holders of Equity Interests in Class 6A or otherwise materially and adversely
affects the rights of holders of Equity Interests in Class 6A without the
consent of the Equity Committee, High River, Westgate, LaSalle, and the Trustee,
or (d) adversely impacts the rights of High River and Westgate with respect to
the Settlement Payment without the consent of High River and Westgate.
Notwithstanding the foregoing, this Plan of Reorganization may not be amended in
a manner which increases the distributions to any class of Claims or Equity
Interests without the consent of the Creditors Committee, the Equity Committee,
LaSalle, High River, Westgate and the Trustee.
SECTION 15. MISCELLANEOUS PROVISIONS
------------------------
15.1 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 Expenses Claim and
be treated in accordance with Section 2.2 hereof.
15.2 Retiree Benefits.
On and after the Consummation Date, pursuant to section
1129(a)(13) of the Bankruptcy Code, the Reorganized Debtors or Newco, as
applicable, shall continue to pay all retiree benefits (within the meaning of
section 1114 of the Bankruptcy Code), at
62
<PAGE>
the 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
and shall assume such obligations.
15.3 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.
15.4 Recognition of Guaranty Rights.
The classification of and manner of satisfying all Claims
hereunder take into account (a) the existence of guaranties 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 guaranties 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.
15.5 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 and the Trustee (which consent shall not be unreasonably withheld
or delayed), 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.
63
<PAGE>
15.6 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.
15.7 Further Assurances. All parties in interest shall execute
and deliver such documents, instruments, certificates, assignments, and other
writings, and do such other acts as may be necessary or desirable to carry out
the intents and purposes of this Plan of Reorganization, including, without
limitation, effecting the Merger Agreement.
15.8 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.
15.9 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.
15.10 Notices.
All notices, requests, and demands, 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:
If to the Debtors:
MARVEL ENTERTAINMENT GROUP, INC.
387 Park Avenue South
12th Floor
New York, New York 10016
Attn: Mr. Joseph Calamari
Telephone: (212) 696-0808
Telecopier: (212) 576-9260
64
<PAGE>
If to Toy Biz:
TOY BIZ, INC.
685 Third Avenue
New York, New York 10017
Attn: Mr. Joseph M. Ahearn
Telephone: (212) 588-5103
Telecopier: (212) 588-5330
-and-
BATTLE FOWLER LLP
75 East 55th Street
New York, New York 10022
Attn: Lawrence Mittman, Esq.
Douglas L. Furth, Esq.
Madlyn Gleich Primoff, Esq.
Telephone: (212) 856-7000
Telecopier: (212) 856-7807
-and-
PEPPER HAMILTON LLP
1201 Market Street, Suite 1600
P.O. Box 1709
Wilmington, Delaware 19899
Attn: David B. Stratton, Esq.
Telephone: (302) 777-6500
Telecopier: (302) 777-8865
If to The Secured Lenders:
THE CHASE MANHATTAN BANK
380 Madison Avenue, 9th Floor
New York, New York 10017
Attn: Ms. Susan E. Atkins
Telephone: (212) 622-4834
Telecopier: (212) 622-4880
-and-
WACHTELL, LIPTON, ROSEN & KATZ
51 West 52nd Street
New York, New York 10019
Attn: Chaim J. Fortgang, Esq.
Telephone: (212) 403-1000
Telecopier: (212) 403-2000
-and-
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<PAGE>
ZALKIN, RODIN & GOODMAN LLP
750 Third Avenue
New York, New York 10017-2771
Attn: Richard S. Toder, Esq.
Telephone: (212) 455-0600
Telecopier: (212) 682-6331
If to The Chapter 11 Trustee:
John J. Gibbons, Esq.
Gibbons, Del Deo, Dolan, Griffinger &
Vecchione
One Riverront Plaza
Newark, New Jersey 07102
Telephone: (973) 596-4521
Telecopier: (973) 639-6250
-and-
Frank J. Vecchione, Esq.
Gibbons, Del Deo, Dolan, Griffinger
& Vecchione
One Riverfront Plaza
Newark, New Jersey 07102
Telephone: (973) 596-4521
Telecopier: (973) 639-6250
If to Creditors Committee:
Tonny K. Ho, Esq.
Willkie Farr & Gallagher
787 Seventh Avenue
New York, New York 10019
Telephone: (212) 728-8000
Telecopier: (212) 728-8111
If to Equity Committee:
Gary Schildhorn, Esq.
Adelman Lavine Gold and Levin
Two Penn Center Plaza, Suite 1900
Philadelphia, PA 19102-1799
Telephone: (215) 569-5082
Telecopier: (215) 557-7922
66
<PAGE>
If to LaSalle:
James Spiotto, Esq.
Chapman & Cutler
111 West Monroe
Chicago, IL 60603
Telephone: (312) 845-3763
Telecopier: (312) 701-6604
If to High River and Westgate:
Edward Weisfelner, Esq.
Berlack, Israels & Liberman LLP
120 West 45th Street
New York, New York 10036
Telephone: (212) 704-0100
Telecopier: (212) 704-0196
67
<PAGE>
Dated: Wilmington, Delaware
July __, 1998
Respectfully submitted,
TOY BIZ, INC.
By:
-------------------------------------
Name: Joseph M. Ahearn
Title: President
BATTLE FOWLER LLP
Attorneys for Toy Biz, Inc.
75 East 55th Street
New York, New York 10022
(212) 856-7000
-and-
PEPPER HAMILTON LLP
1201 Market Street
Wilmington, Delaware 19899
(302) 777-6500
By:
-------------------------------------
<PAGE>
WACHTELL, LIPTON, ROSEN, KATZ
Attorneys for The Secured
Lenders
51 West 52nd Street
New York, New York 10019
(212) 403-1000
-and-
RICHARDS, LAYTON & FINGER, P.A.
Attorneys for The Secured
Lenders
One Rodney Square
Wilmington, Delaware 19899
(302) 658-6541
By:
-------------------------------------
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<PAGE>
--------------------------------------------------------
EXHIBIT 1
AVOIDANCE LITIGATION TRUST AGREEMENT
by and among
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.,
SKYBOX INTERNATIONAL INC.,
John J. Gibbons
(solely in his capacity as chapter 11 trustee),
MARVEL ENTERPRISES, INC.
and
Christopher J. Kearns,
as Avoidance Litigation Trustee
--------------------------------------------------------
Dated as of October 1, 1998
730223.8
<TABLE>
TABLE OF CONTENTS
Page
<S> <C> <C> <C> <C>
DECLARATION OF TRUST..............................................................................................2
DEFINITIONS.......................................................................................................3
1.01 Certain Terms Defined..................................................................3
1.02 Meanings of Other Terms................................................................5
ARTICLE II
LITIGATION TRUSTEE'S ACCEPTANCE..........................................................................5
2.01 Acceptance.............................................................................5
2.02 Purpose of Avoidance Litigation Trust..................................................5
2.03 Incidents of Ownership.................................................................5
ARTICLE III
BENEFICIARIES............................................................................................6
3.01 Beneficial Interests...................................................................6
3.02 Rights of Beneficiaries................................................................6
ARTICLE IV
DURATION AND TERMINATION OF AVOIDANCE LITIGATION TRUST...................................................7
4.01 Duration...............................................................................7
4.02 No Termination by Beneficiaries........................................................7
4.03 Continuance of Avoidance Litigation Trust for Winding Up. ............................7
ARTICLE V
LITIGATION COSTS; REDUCTION OF JUDGMENT; COOPERATION;
INDEPENDENT CAUSES OF ACTION; INDEMNIFICATION COSTS;
DISTRIBUTIONS; ADMINISTRATION OF TRUST ESTATE............................................................8
5.01 Payment of Costs.......................................................................8
5.02 Reduction of Judgment; Cooperation; Independent Causes of Action.......................9
5.03 Indemnification Costs.................................................................10
5.04 Distribution of Distributable Proceeds................................................11
5.05 Distributions Generally; Method of Payment; Undeliverable Property.
..............................................................................................12
ARTICLE VI
TAX MATTERS.............................................................................................13
6.01 Treatment.............................................................................13
6.02 Allocation............................................................................13
</TABLE>
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<TABLE>
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ARTICLE VII
POWERS OF AND LIMITATIONS ON THE LITIGATION TRUSTEE.....................................................13
7.01 Powers of the Litigation Trustee......................................................13
7.02 Limitations on Litigation Trustee's Right to Commence Avoidance
Actions........................................................................................15
7.03 No Operations as an Investment Company, Trade or Business.............................15
7.04 Investment of Litigation Trust Moneys.................................................15
ARTICLE VIII
CONCERNING THE LITIGATION TRUSTEE.......................................................................16
8.01 Generally.............................................................................16
8.02 Reliance by Litigation Trustee........................................................16
8.03 Liability to Third Persons............................................................17
8.04 Nonliability of Litigation Trustee for Acts of Others.................................17
8.05 Indemnity.............................................................................17
8.06 Bond..................................................................................18
ARTICLE IX
COMPENSATION OF LITIGATION TRUSTEE......................................................................18
9.01 Fees and Expenses.....................................................................18
ARTICLE X
LITIGATION TRUSTEE AND SUCCESSOR LITIGATION TRUSTEES....................................................18
10.01 Generally.............................................................................18
10.02 Resignation...........................................................................18
10.03 Removal...............................................................................18
10.04 Appointment of Successor Litigation Trustee; Acceptance of Appointment
by Successor Litigation Trustee................................................................18
ARTICLE XI
CONCERNING THE BENEFICIARIES............................................................................19
11.01 No Suits by Beneficiaries.............................................................19
11.02 Requirement of Undertaking............................................................19
ARTICLE XII
JURISDICTION............................................................................................20
12.01 Jurisdiction..........................................................................20
ARTICLE XIII
ADMINISTRATION OF TRUST ESTATE..........................................................................20
13.01 Reports...............................................................................20
13.02 Fiscal Year...........................................................................20
</TABLE>
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13.03 Books and Records.....................................................................21
13.04 Newco Reports to Litigation Trustee...................................................21
ARTICLE XIV
MISCELLANEOUS PROVISIONS................................................................................21
14.01 Construction..........................................................................21
14.02 Severability..........................................................................21
14.03 Cooperation...........................................................................21
14.04 Notices...............................................................................22
14.05 Headings..............................................................................22
14.06 Counterparts..........................................................................22
</TABLE>
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AVOIDANCE LITIGATION TRUST AGREEMENT
This AVOIDANCE LITIGATION TRUST AGREEMENT, dated as of October 1, 1998,
is by and among 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 Marvel Characters, Inc. and Malibu
Comics Entertainment, Inc.) being Delaware corporations and Marvel Characters,
Inc. and Malibu Comics Entertainment, Inc. being California corporations (the
"Marvel Debtors"), John J. Gibbons, solely in his capacity as chapter 11 trustee
for the Marvel Debtors, Marvel Enterprises, Inc., a Delaware corporation
("Newco"), and Christopher J. Kearns, as trustee (the "Litigation Trustee").
RECITALS
WHEREAS, on or about July 31, 1998, the United States District Court
for the District of Delaware (the "District Court") entered an order confirming
the Fourth Amended Joint Plan of Reorganization Under Chapter 11 of the United
States Bankruptcy Code, dated July 31, 1998 (as such plan may hereafter be
amended, restated or otherwise modified, the "Plan"), filed by certain of the
secured lenders of the Marvel Debtors and by Toy Biz, Inc. (which has since
changed its name to Marvel Enterprises, Inc.);
WHEREAS, pursuant to Section 7.1(a) of the Plan, the Marvel Debtors
have agreed to contribute to the Litigation Trustee in trust (the "Avoidance
Litigation Trust") all of their interests in any Causes of Action arising
pursuant to sections 510, 544, 545, 547, 548, 549, 550, 551 and 553 of the
Bankruptcy Code including the right to prosecute the motion pursuant to Fed. R.
Civ. P. 60(b) filed by the Creditors Committee on December 23, 1997 (exclusive
of any claim that seeks the recovery of any right, title or interest of any of
the Marvel Debtors or their subsidiaries in or to any right, title or interest
in intellectual property, including without limitation, any right, title or
interest in or to Spiderman, X-man or Ironman), but excluding Causes of Action
(x) relating to any tax-sharing or other similar agreement or (y) against any
person or entity released or exculpated under the Plan (the "Avoidance
Litigation Claims");
WHEREAS, the Marvel Debtors have requested that the Litigation Trustee,
and the Litigation Trustee is willing to agree with the Marvel Debtors to,
enforce the Avoidance Litigation Claims, if any, for the benefit of all holders
of Allowed Unsecured Claims (other than Intercompany Claims and the LaSalle
Claim), holders of Allowed Fixed Senior Secured Claims, and Newco (collectively,
the "Beneficiaries"), to prosecute, direct, settle or compromise any Avoidance
Litigation Claims on behalf of and for the benefit of the Beneficiaries, and to
hold the Net Avoidance Litigation Proceeds, if any, in trust for the
Beneficiaries, and distribute the Distributable Proceeds to the Beneficiaries,
all on and subject to the terms set forth herein;
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WHEREAS, pursuant to Section 7.5(a) of the Plan, promptly after the
execution and delivery of this Avoidance Litigation Trust Agreement, (i) the
Litigation Trustee and Newco will enter into that certain Avoidance Litigation
Trust Loan Agreement (together with the promissory note and security agreement
executed and delivered therewith, the "Loan Agreement"), whereby Newco will
agree to make loans to the Litigation Trustee for the benefit of the Avoidance
Litigation Trust in an amount not to exceed, at any given time outstanding, One
Million One Hundred Thousand Dollars ($1,100,000) to be used by the Litigation
Trustee to fund Administrative Costs and Expenses, (ii) the Litigation Trustee
will execute and deliver to Newco a note (the "Note") under which the Avoidance
Litigation Trust will be obligated to reimburse Newco for all sums advanced
under the Loan Agreement, and (iii) the Litigation Trustee and Newco will enter
into a Security Agreement (the "Security Agreement") whereby the Litigation
Trustee will pledge to Newco all of the Litigation Trust Assets as security for
its obligations under the Loan Agreement, the Note and the Security Agreement;
and
WHEREAS, the District Court shall have jurisdiction over the Avoidance
Litigation Trust, the Litigation Trustee and the Avoidance Litigation Claims, as
provided herein and in the Plan.
DECLARATION OF TRUST
NOW THEREFORE, in order to declare the terms and conditions hereof, and
in consideration of the Recitals, and of other good and valuable consideration,
the receipt and sufficiency of which are hereby acknowledged, and subject to the
terms and conditions of the Plan and this Avoidance Litigation Trust Agreement,
the Marvel Debtors and John J. Gibbons (solely in his capacity as chapter 11
trustee for the Marvel Debtors), on behalf of the Marvel Debtors, have executed
this Avoidance Litigation Trust Agreement and absolutely and irrevocably grant,
assign, transfer, convey, and deliver to, and otherwise acknowledge that, the
Litigation Trustee, and its successors and assigns, succeed to, without
representation, warranty or recourse (except the Marvel Debtors represent they
have full rights to make the assignments herein), on behalf of and for the
benefit of the Beneficiaries, all right, title and interest of the Marvel
Debtors in and to any and all Avoidance Litigation Claims and the proceeds
therefrom;
TO HAVE AND TO HOLD unto the Litigation Trustee and its successors in
trust; and
THE LITIGATION TRUSTEE HEREBY ACCEPTS such rights and properties
assigned and transferred to it and the trust imposed upon it, and agrees to
retain and enforce the Avoidance Litigation Claims for the benefit of the
Beneficiaries, and agrees to its appointment as trustee hereunder for such
purpose under section 1123(b)(3)(B) of the Bankruptcy Code and to hold the
Distributable Proceeds in trust for the Beneficiaries;
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PROVIDED, HOWEVER, that upon termination of this Avoidance Litigation
Trust in accordance with Section 4.01 hereof, this Avoidance Litigation Trust
Agreement shall cease, terminate and be of no further force and effect and the
then remaining Distributable Proceeds shall be distributed to the Beneficiaries
in accordance with their interest therein as provided in Section 5.04 hereof.
IT IS HEREBY FURTHER COVENANTED AND DECLARED, that the Litigation
Trust Assets are to be held and applied by the Litigation Trustee solely for the
benefit of the Beneficiaries and for no other party, subject to the further
covenants, conditions and terms hereinafter set forth.
ARTICLE I
DEFINITIONS
1.01 Certain Terms Defined. Terms defined in the Plan, and not
otherwise defined herein, shall have the meanings ascribed to such terms in the
Plan. For purposes of this Litigation Trust Agreement, the following capitalized
terms shall have the following meanings:
"Administrative Costs and Expenses" means the administrative
expenses of the Litigation Trust, including, without limitation, the
Professional Fees, taxes, bank charges, filing and registration fees, postage,
telephone, facsimile, copying and messenger costs, and secretarial and
administrative costs attendant to the maintenance of the Litigation Trust and
the responsibilities of the Litigation Trustee hereunder, the fee of the
Litigation Trustee and any indemnification costs and expenses owing to any
Indemnified Party under Section 8.05 hereof, but excluding any Indemnification
Costs.
"Avoidance Litigation Claims" has the meaning set forth in the
Recitals hereto.
"Avoidance Litigation Trust" has the meaning set forth in the
Recitals hereto.
"Avoidance Litigation Trust Agreement" means this litigation
trust agreement.
"Beneficial Interests" has the meaning set forth in Section
3.01(a) hereof.
"Beneficiaries" has the meaning set forth in the Recitals
hereto.
"Beneficiary List" has the meaning set forth in Section 13.03
hereof.
"Distributable Proceeds" means all Net Avoidance Litigation
Proceeds and any investment income earned on Litigation Trust Assets, net of all
Litigation Trust Costs to the extent not deducted in calculating Net Avoidance
Litigation Proceeds.
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"District Court" has the meaning set forth in the Recitals
hereto.
"Exchange Act" means the Securities Exchange Act of 1934, as
amended.
"Exculpation Amount" has the meaning set forth in Section 5.02
hereof.
"Indemnification Costs" has the meaning set forth in Section
5.03 hereof.
"Indemnified Parties" has the meaning set forth in Section
8.05 hereof.
"Litigation Trust Assets" means the Avoidance Litigation
Claims, the Distributable Proceeds, and all other property held from time to
time by the Litigation Trustee under this Litigation Trust Agreement and any
earnings thereon.
"Litigation Trust Costs" has the meaning set forth in Section
5.01 hereof.
"Litigation Trustee" has the meaning set forth in the first
paragraph of this Litigation Trust Agreement.
"Loan Agreement" has the meaning set forth in the Recitals
hereto.
"Marvel Debtors" has the meaning set forth in the first
paragraph of this Litigation Trust Agreement.
"Net Avoidance Litigation Proceeds" means the gross proceeds
derived from the Avoidance Litigation Claims realized by the Avoidance
Litigation Trust net of payment of all expenses of the Avoidance Litigation
Trust including, without limitation, (i) payment without duplication of all sums
due and owing pursuant to the Note and (ii) any set-off effected by the holders
of Resulting Claims pursuant to Section 8.7 of the Plan.
"Newco" has the meaning set forth in the first paragraph
hereof.
"Note" has the meaning set forth in the Recitals hereto.
"Plan" has the meaning set forth in the Recitals hereto.
"Plan Rate" means simple interest at the rate of seven percent
(7%) per annum.
"Professional Fees" means (i) the fees and expenses of
professionals retained by the Litigation Trustee on behalf of the Litigation
Trust (including, without limitation, attorneys, accountants and expert fees and
expenses) and (ii) up to $100,000 for professional fees and costs incurred by
the Creditors' Committee and the expenses of its members solely for the purposes
set forth in Section 6.16 of the Plan.
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"Security Agreement" has the meaning set forth in the Recitals
hereto.
1.02 Meanings of Other Terms. Except where the context otherwise
requires, words importing the masculine gender include the feminine and the
neuter, if appropriate, words importing the singular number shall include the
plural number and vice versa and words importing persons shall include firms,
associations, corporations and other entities. All references herein to
Articles, Sections and other subdivisions, unless referring specifically to the
Plan or provisions of the Bankruptcy Code, Bankruptcy Rules or other law,
statute or regulation, refer to the corresponding Articles, Sections and other
subdivisions of this Avoidance Litigation Trust Agreement, and the words
"herein," "hereof" and "hereunder" and words of similar import refer to this
Avoidance Litigation Trust Agreement as a whole and not to any particular
Article, Section or subdivisions of this Avoidance Litigation Trust Agreement.
ARTICLE II
LITIGATION TRUSTEE'S ACCEPTANCE
2.01 Acceptance. The Litigation Trustee accepts the Avoidance
Litigation Trust created by this Avoidance Litigation Trust Agreement and the
transfer and assignment of the Avoidance Litigation Claims, on behalf of and for
the benefit of the Beneficiaries, and agrees to observe and perform the trust,
upon and subject to the terms and conditions set forth herein and in the Plan.
2.02 Purpose of Avoidance Litigation Trust. The purpose of this
Avoidance Litigation Trust is to implement part of Section 7 of the Plan by
providing for the vesting in the Litigation Trustee of the ownership of and the
responsibility for the protection and conservation of the Litigation Trust
Assets on behalf of and for the benefit of the Beneficiaries. Such
responsibility shall be limited to the initiation, retention, enforcement and
settlement of any Avoidance Litigation Claims by the Litigation Trustee on
behalf of and for the benefit of the Beneficiaries, the collection of the Net
Avoidance Litigation Proceeds, the execution, delivery of and performance under
the Loan Agreement, Note and Security Agreement, the repayment of the Note as
provided herein and therein, the temporary investment of Distributable Proceeds
and other Avoidance Litigation Trust moneys as provided in Section 7.04 hereof,
the payment of Litigation Trust Costs, the making of any other payments provided
to be made from the Avoidance Litigation Trust as set forth in the Plan and this
Avoidance Litigation Trust Agreement, and the distribution of Distributable
Proceeds to the Beneficiaries in accordance with the provisions of the Plan and
this Avoidance Litigation Trust Agreement, in each case including the powers
with respect thereto set forth in Article VII hereof.
2.03 Incidents of Ownership. The Beneficiaries shall be the sole
beneficiaries of the Avoidance Litigation Trust and the Litigation Trustee shall
retain only such incidents of
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ownership as are necessary to undertake the actions and transactions authorized
herein on behalf of the Beneficiaries.
ARTICLE III
BENEFICIARIES
3.01 Beneficial Interests. (a) The beneficial interests (the
"Beneficial Interests") in this Avoidance Litigation Trust will be beneficially
owned by the Beneficiaries.
(b) The Beneficial Interests of the Beneficiaries in the
Litigation Trust Assets will not be represented by any certificates, and may not
be transferred or assigned except by will, the laws of intestacy or by other
operation of law. Such Beneficial Interests will be evidenced only by this
Avoidance Litigation Trust Agreement. The Beneficiaries will have no voting
rights with respect to their beneficial interests or the management of the
Litigation Trust Assets or otherwise under this Avoidance Litigation Trust
Agreement except as explicitly provided herein. The Beneficiaries shall not have
legal title to any part of the Litigation Trust Assets. The Beneficiaries' sole
right hereunder shall be the contingent right to receive a share of the
Litigation Trust Assets which may be payable to them as provided in Section 5.04
hereof.
3.02 Rights of Beneficiaries. Each Beneficiary shall be entitled to
participation in the rights and benefits due to a Beneficiary hereunder
according to its Beneficial Interest. Each Beneficiary shall take and hold the
same subject to all the terms and provisions of this Avoidance Litigation Trust
Agreement. The interest of a Beneficiary is hereby declared and shall be in all
respects personal property. Upon the death of an individual who is a
Beneficiary, his interest shall pass as personal property to his legal
representative and such death shall in no way terminate or affect the validity
of this Avoidance Litigation Trust Agreement. Upon the merger, consolidation or
other similar transaction involving a Beneficiary that is not an individual,
such Beneficiary's interest shall be transferred by operation of law and such
transaction shall in no way terminate or affect the validity of this Avoidance
Litigation Trust Agreement. Except as expressly provided hereunder, a
Beneficiary shall have no title to, right to, possession of, management of or
control of the Avoidance Litigation Trust. No widower, widow, heir or devisee of
any individual who may be a Beneficiary and no bankruptcy trustee, receiver or
similar person of any Beneficiary shall have any right, statutory or otherwise
(including any right of dower, homestead or inheritance, or of partition, as
applicable), in any property forming a part of the Avoidance Litigation Trust,
but the whole title to all the Avoidance Litigation Trust's assets shall be
vested in the Litigation Trustee and the sole interest of the Beneficiaries
shall be the rights and benefits given to such persons under this Avoidance
Litigation Trust Agreement and the Plan.
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ARTICLE IV
DURATION AND TERMINATION OF AVOIDANCE LITIGATION TRUST
4.01 Duration. The existence of this Avoidance Litigation Trust shall
terminate five (5) years after the date hereof; provided, however, that the
Litigation Trustee may extend the term of this Avoidance Litigation Trust,
provided that the Litigation Trustee receives District Court approval of such
extension for good cause within six (6) months from the beginning of the
extended term. Notwithstanding anything to the contrary in this Avoidance
Litigation Trust Agreement, in no event shall the Litigation Trustee unduly
prolong the duration of the Avoidance Litigation Trust, and the Litigation
Trustee shall at all times endeavor to prosecute, direct, settle or compromise
expeditiously the Avoidance Litigation Claims, so as to distribute the
Distributable Proceeds to the Beneficiaries and terminate the Avoidance
Litigation Trust as soon as practicable in accordance with this Avoidance
Litigation Trust Agreement. Upon the termination of the existence of this
Avoidance Litigation Trust, any Avoidance Litigation Claim which has not been
prosecuted, settled, compromised or adjudicated by the Litigation Trustee will
be extinguished and neither Newco nor any Beneficiary shall have any rights or
interest therein.
4.02 No Termination by Beneficiaries. The Avoidance Litigation Trust
may not be terminated by the Beneficiaries.
4.03 Continuance of Avoidance Litigation Trust for Winding Up. (a)
After the termination of the Avoidance Litigation Trust as provided in Section
4.01 and solely for the purpose of liquidating and winding up the affairs of the
Avoidance Litigation Trust, the Litigation Trustee shall continue to act as such
until its duties have been fully performed. The Litigation Trustee shall, upon
the termination of the Avoidance Litigation Trust, distribute all Distributable
Proceeds as provided in Section 5.04 hereof.
(b) Upon the distribution of the Distributable Proceeds, the
Litigation Trustee shall retain the books, records and files which shall have
been delivered to or created by the Litigation Trustee. At the Litigation
Trustee's discretion, all of such records and documents may be destroyed at any
time after two (2) years from the distribution of all Distributable Proceeds
(unless such records and documents are necessary to fulfill the Litigation
Trustee's obligations pursuant to Section 13.01 hereunder). Except as otherwise
specifically provided herein, upon the distribution of all Distributable
Proceeds, the Litigation Trustee shall be deemed discharged and have no further
duties or obligations hereunder except to account to the Beneficiaries as
provided in Section 13.01 hereof and as may be imposed on the Litigation Trustee
by virtue of Section 13.01 and Article VI hereof.
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ARTICLE V
LITIGATION COSTS; REDUCTION OF JUDGMENT; COOPERATION;
INDEPENDENT CAUSES OF ACTION; INDEMNIFICATION COSTS;
DISTRIBUTIONS; ADMINISTRATION OF TRUST ESTATE
5.01 Payment of Costs. (a) The Litigation Trustee shall pay from the
Litigation Trust Assets all costs, expenses, charges, liabilities and
obligations of the Avoidance Litigation Trust as contemplated by this Avoidance
Litigation Trust Agreement and as required by law, including without limitation
Administrative Costs and Expenses, the amounts due and payable with respect to
the Note and Indemnification Costs.
(b) The Litigation Trustee is hereby authorized and directed
to execute and deliver with respect to the Avoidance Litigation Trust the Loan
Agreement, the Note and the Security Agreement. If the Avoidance Litigation
Trust has no funds to pay any Administrative Costs and Expenses that are then
due and payable, the Litigation Trustee may request a loan under the Loan
Agreement on behalf of the Avoidance Litigation Trust to pay such Administrative
Costs and Expenses on the terms and subject to the conditions set forth in the
Loan Agreement, up to a maximum aggregate amount of borrowings outstanding at
any one time of One Million One Hundred Thousand Dollars ($1,100,000); provided
that One Hundred Thousand Dollars ($100,000) of such amount may only be borrowed
for the purposes set forth in Section 5.01(d) below. Whenever reasonably
requested to do so by Newco, the Litigation Trustee shall execute and deliver
UCC-1 financing statements and any other documents or instruments requested by
Newco to evidence a perfected, first priority security interest in and lien
against all of the Litigation Trust Assets and the proceeds therefrom to secure
repayment of the Note, provided that any cash or other property received by
Newco as a result of that security interest shall be applied or paid over by
Newco in the priority provided in Section 5.01(c) below.
(c) The costs and expenses of the Avoidance Litigation Trust
will be paid out of the Litigation Trust Assets in the following order of
priority:
(i) First, to the Litigation Trustee in payment of the
Administrative Costs and Expenses;
(ii) Second, to the extent that the Litigation Trust Assets
are derived from sources other than advances under the Loan
Agreement, to Newco in reimbursement of any Indemnification
Costs paid by Newco under Section 5.03 hereof;
(iii) Third, to Newco in payment of any amounts advanced under
the Loan Agreement, and any accrued interest thereon, whether
or not due and payable as provided in the Loan Agreement;
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(iv) Fourth, subject to the subordination described in Section
5.03(a) hereof, to the payment of Indemnification Costs;
(v) Fifth, to the payment of any other costs, expenses,
charges, liabilities and obligations of the Avoidance
Litigation Trust; and
(vi) Sixth, in the discretion of the Litigation Trustee, to
the establishment of reasonable reserves for the payment of
future Administrative Costs and Expenses and Indemnification
Costs.
The amounts described in clauses (i) through (vi) above are hereinafter referred
to as the "Litigation Trust Costs." Notwithstanding anything to the contrary
herein, (x) upon any event of default under the Loan Agreement or upon the
maturity of the loan thereunder, the aggregate principal and interest
outstanding under the Loan Agreement shall be paid first out of the Litigation
Trust Assets before the payment of any other Litigation Trust Costs hereunder
and (y) if at any time the aggregate unpaid principal balance of the loans under
the Loan Agreement exceed the amount which Newco is obligated to advance under
the Loan Agreement, then an amount equal to such excess amount shall be paid
first out of the Litigation Trust Assets before the payment of any other
Litigation Trust Costs hereunder.
(d) The Avoidance Litigation Trust shall pay up to $100,000
for reasonable professional fees and costs incurred by the Creditors Committee
and the expenses of its members solely for the purposes set forth in Section
6.16 of the Plan (such amounts being treated herein as Professional Fees of the
Avoidance Litigation Trust). Such amounts shall be payable by the Litigation
Trustee within two weeks after the receipt by the Litigation Trustee and Newco
of an invoice therefor; provided, however, that if either the Litigation Trustee
or Newco objects to such invoice, then such invoice shall be paid either upon
the order of the District Court or upon subsequent agreement of Newco, the
Litigation Trustee, the Creditors Committee and the Creditors Committee's
professionals as to which such fees relate.
5.02 Reduction of Judgment; Cooperation; Independent Causes of Action.
It is the intention of the parties to this Avoidance Litigation Trust Agreement
that no Exculpated Person shall have any liability to any person or entity,
including without limitation, Contribution Bar Parties, including, without
limitation, any liability with respect to claims in the nature of contribution
or indemnification, however denominated or described, in connection with,
arising out of or in any way related to Avoidance Litigation Claims or Covered
Claims and that any such claims-over shall be satisfied as provided herein.
(a) No Exculpated Person shall have any liability to any
Contribution Bar Party for contribution or indemnification with respect to any
asserted or threatened Avoidance Litigation Claim or Covered Claim, and the
Avoidance Litigation Trust or the Covered Person, as applicable, (i) shall
reduce and credit against any judgment it may obtain against any Contribution
Bar Party in any action in connection with, arising out of, or which is in any
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way related to any Avoidance Litigation Claim or Covered Claim, the amount of
any claim which any such Contribution Bar Party is found to have established
against any Exculpated Person on whatsoever theory in any action involving
Avoidance Litigation Claims or Covered Claims; and (ii) shall be obligated to
use good faith efforts to obtain, and in the context of a settlement shall be
deemed to have obtained, from any such Contribution Bar Party, for the benefit
of any implicated Exculpated Persons a satisfaction in full of such Contribution
Bar Party's claim against any such Exculpated Person.
(b) Each Exculpated Person shall provide and cooperate in
discovery in any action involving the Avoidance Litigation Trust or Covered
Person and one or more of the Contribution Bar Parties, but shall retain all
rights to object to discovery requests under applicable law, as if the
Exculpated Person were named as a party to the action. In addition, neither the
Avoidance Litigation Trust nor any Covered Person shall oppose the standing or
right of any Contribution Bar Party to make any submission or argument to the
court or the jury in any action involving the Avoidance Litigation Trust or
Covered Person and one or more of the Contribution Bar Parties that seeks to
account (in whole or in part) for the asserted responsibility of the Exculpated
Persons just as if they were parties to the action, including but not limited to
the Contribution Bar Parties' right to assert that any Exculpated Person is
fully or partially responsible for any claims asserted or relief sought in any
such action; provided, however, that nothing herein shall preclude the Avoidance
Litigation Trust or Covered Person from contesting on the merits the asserted
responsibility of the Exculpated Person(s).
(c) For avoidance of doubt, nothing contained in this
Avoidance Litigation Trust Agreement shall preclude any person or entity from
prosecuting or continuing to prosecute any Independent Cause of Action against
any Exculpated Person and there shall be no rights of indemnification arising
hereunder in connection with Independent Causes of Action.
(d) The provisions of this Section 5.02 and the provisions of
Section 5.03 hereof shall be binding on and inure to the benefit of all
successors and assigns of the Marvel Debtors, the Avoidance Litigation Trust,
Covered Persons, Exculpated Persons and Contribution Bar Parties.
5.03 Indemnification Costs. (a) The Avoidance Litigation Trust agrees
to indemnify and hold harmless each Exculpated Person from and against any and
all liability (including fees and expenses of counsel and other professionals
(other than any costs of internal personnel), amounts paid in judgment, penalty
or otherwise) ("Indemnification Costs") with respect to claims-over on
whatsoever theory (whether by way of third- or subsequent party complaint,
cross-claim, separate action or otherwise) by any person or entity to recover in
whole or in part any liability, direct or indirect, whether by way of judgment,
penalty or otherwise, of any person or entity in connection with, arising out
of, or which is in any way related to any Avoidance Litigation Claim. The
Avoidance Litigation Trust's indemnity obligation under this Section 5.03 shall
be subordinate to its obligation, up to one million one hundred thousand dollars
($1,100,000), to (i) pay Administrative Costs and Expenses, (ii)
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reimburse Newco for any Indemnification Costs paid by it pursuant to this
Section 5.03, (iii) pay Newco any amounts advanced under the Loan Agreement, and
any accrued interest thereon, whether or not due and payable as provided in the
Loan Agreement or in Section 5.01(b) hereof, and (iv) pay obligations pursuant
to Section 8.05 hereof. For avoidance of doubt, nothing herein is intended to
impose upon the Avoidance Litigation Trust any indemnification obligation with
respect to Covered Claims that are not Avoidance Litigation Claims.
(b) Newco hereby guarantees the payment of Indemnification
Costs by the Avoidance Litigation Trust as set forth in Section 5.03(a).
(c) Promptly after receipt by an Exculpated Person of notice
of the commencement of any action referred to in Section 5.03(a), such
Exculpated Person will give written notice to the Litigation Trustee thereof,
but the omission so to notify the Litigation Trustee will not relieve the
Avoidance Litigation Trust from any liability which it may have to any
Exculpated Person otherwise than pursuant to the provisions of this Section 5.03
except to the extent the Avoidance Litigation Trust is materially prejudiced
thereby. The Avoidance Litigation Trust shall have no liability for any cost or
expense incurred by such Exculpated Person prior to the notification to the
Litigation Trustee of such action. In case any such action is brought against an
Exculpated Person, and it notifies the Litigation Trustee of the commencement
thereof, the Litigation Trustee will be entitled to participate in, and to the
extent that it may wish, to assume the defense thereof, with counsel reasonably
satisfactory to the Litigation Trustee, and after notice from the Litigation
Trustee to such Exculpated Person, the Avoidance Litigation Trust and Newco
shall not, except as hereinafter provided, be responsible for any legal or other
expenses subsequently incurred by the Exculpated Person in connection with the
defense thereof. If separate counsel is required as to any such claim-over, the
Avoidance Litigation Trust shall pay for the reasonable fees and expenses of
competent counsel selected by the Exculpated Person, subject to the approval of
the Litigation Trustee which will not be unreasonably withheld or delayed. No
settlement of any such claim-over shall require any financial contribution on
the part of any Exculpated Person. The Avoidance Litigation Trust and Newco
shall not be liable for any settlement of any such action or proceeding effected
without its written consent, but if settled with its written consent, or if
there be a final judgment for the plaintiff in any such action or proceeding,
the Avoidance Litigation Trust agrees to indemnify and hold harmless such
Exculpated Person from and against any loss or liability by reason of such
settlement or judgment.
5.04 Distribution of Distributable Proceeds. Subject to Section 5.05
hereof, following the resolution of all or a portion of any of the Avoidance
Litigation Claims, whether by interim or final award or arbitrators decision,
settlement, judgment, accounting or order (in each case, which is not subject to
appeal or review by any tribunal or court), resulting in the collection of Net
Avoidance Litigation Proceeds, and provided that (x) the Litigation Trustee has
paid all Litigation Trust Costs incurred to date, (y) the Litigation Trustee has
terminated the Loan Agreement with Newco and provided Newco with an instrument
in form and
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substance reasonably satisfactory to Newco releasing Newco from any further
liability to make advances under the Loan Agreement to pay Administrative Costs
and Expenses, and (z) the Avoidance Litigation Trust, after consultation with
Newco, has established a reasonable reserve for all indemnity claims theretofore
asserted pursuant to Section 5.03 hereof and sixty (60) days have elapsed since
the Avoidance Litigation Trust notifies Newco in writing of the amount of the
reserve and that it waives the right to prosecute any Avoidance Litigation
Claims that it has not already begun to prosecute as of the date of such notice,
the Litigation Trustee shall distribute the remaining Distributable Proceeds as
follows:
(i) thirty percent (30%) of such amounts shall be distributed
to the Beneficiaries which are holders of Allowed Unsecured
Claims pursuant to Section 4.4 of the Plan;
(ii) four and nine-tenths percent (4.9%) of such amounts shall
be distributed to the Beneficiaries which are holders of Fixed
Senior Secured Claims pursuant to Section 4.2(b)(i)(7) of the
Plan; and
(iii) sixty-five and one-tenth percent (65.1%) of such amounts
shall be distributed to Newco.
5.05 Distributions Generally; Method of Payment; Undeliverable
Property. (a) The amount of Distributable Proceeds shall be reasonably
determined by the Litigation Trustee prior to December 31st of each year
commencing on the first December 31st following the first anniversary of the
Consummation Date. All distributions of Net Avoidance Litigation Proceeds
pursuant to Section 5.04 shall be made at such times and in such amounts as
shall be determined by the Litigation Trustee. In no event shall any
distribution be made to any Beneficiary unless all Litigation Trust Costs
incurred prior to the date of such distribution and then due and payable have
been paid.
(b) All amounts payable to a Beneficiary pursuant to this
Avoidance Litigation Trust Agreement shall be paid by the Litigation Trustee to
such Beneficiary by check payable to such Beneficiary, mailed first class to the
address of such Beneficiary appearing on the Beneficiary List. All payments
required to be made by the Litigation Trustee to the Beneficiaries shall be made
in Cash denominated in U.S. dollars and, if in check form, drawn on a domestic
bank selected by the Litigation Trustee.
(c) If any distribution to a Beneficiary of Distributable
Proceeds is returned to the Avoidance Litigation Trust as undeliverable, no
further distribution thereof shall be made to such Beneficiary unless and until
the Avoidance Litigation Trust is notified in writing of such Beneficiary's then
current address within the time period specified in Section 5.05(d). For
purposes of this Avoidance Litigation Trust Agreement, undeliverable
distributions shall include checks (as of the date of their issuance) sent to a
Beneficiary, respecting distributions to such Beneficiary, which checks have not
been cashed within six months following the date
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of issuance of such checks. Undeliverable distributions shall remain in the
possession of the Avoidance Litigation Trust until the earlier of (i) such time
as the relevant distribution becomes deliverable and (ii) the time period
specified in Section 5.05(d).
(d) Any Beneficiary that does not assert a claim for an
undeliverable distribution of Distributable Proceeds held by the Avoidance
Litigation Trust within one year after the date such distribution was originally
made (but in no event longer than six months after all of the Distributable
Proceeds have been distributed except for undeliverable distributions), shall no
longer have any claim to or interest in such undeliverable distributions, and
such undeliverable distributions shall revert to or remain in the Avoidance
Litigation Trust and shall be redistributed to the applicable Beneficiaries in
accordance with this Avoidance Litigation Trust Agreement.
ARTICLE VI
TAX MATTERS
6.01 Treatment. For all federal income tax purposes, this Avoidance
Litigation Trust shall be treated as a partnership, and the Beneficiaries shall
be treated as partners. The Litigation Trustee will file such tax returns and
provide Newco and the other Beneficiaries with such information statements as
may be provided by law.
6.02 Allocation. The Litigation Trustee shall cause taxable income and
taxable loss of the Avoidance Litigation Trust to be allocated among the
Beneficiaries in such manner as it determines to equitably reflect such persons'
share of taxable income and taxable loss, which allocations may reflect the
sharing ratios described in Section 5.04.
ARTICLE VII
POWERS OF AND LIMITATIONS ON THE LITIGATION TRUSTEE
7.01 Powers of the Litigation Trustee. Without limitation, but subject
to the remaining provisions herein, the Litigation Trustee shall be expressly
authorized to:
(a) execute any documents and take any other actions related
to, or in connection with, the liquidation of the Litigation
Trust Assets and the exercise of the Litigation Trustee's
powers granted herein;
(b) hold legal title to any and all rights of the
Beneficiaries in or arising from the Litigation Trust Assets;
(c) protect and enforce the rights to the Litigation Trust
Assets vested in the Litigation Trustee by this Avoidance
Litigation Trust Agreement by any method deemed appropriate
including, without limitation, by judicial proceedings or
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pursuant to any applicable bankruptcy, insolvency, moratorium
or similar law and general principles of equity;
(d) deliver the Distributable Proceeds to the Beneficiaries in
accordance with this Avoidance Litigation Trust Agreement;
(e) have exclusive power to initiate, prosecute, supervise and
direct the Avoidance Litigation Claims; provided, however,
that all Avoidance Litigation Claims shall be brought solely
before the District Court, unless the District Court is found
not to have jurisdiction;
(f) have exclusive power to settle or otherwise compromise the
Avoidance Litigation Claims, subject, however, to either (i)
District Court approval or (ii) the direction of Newco to
dismiss with prejudice, to compromise or to settle such
Avoidance Litigation Claim if such Avoidance Litigation Claim
is against any person or entity which is a provider of goods
or services to Newco or party to any licensing arrangement
with Newco, or, in each case, any of its direct or indirect
subsidiaries, at any time from and after the Consummation Date
and if Newco, in its sole discretion, reasonably believes that
such Avoidance Litigation Claim could have an adverse effect
on its business;
(g) file, if necessary, any and all tax information returns
with respect to the Avoidance Litigation Trust and pay taxes
properly payable by the Avoidance Litigation Trust, if any,
and make distributions to the Beneficiaries net of such taxes;
(h) make all necessary filings in accordance with any
applicable law, statute or regulation, including, but not
limited to, the Exchange Act;
(i) determine and satisfy any and all ordinary course
liabilities created, incurred or assumed by the Avoidance
Litigation Trust;
(j) pay all ordinary course expenses and make all other
payment relating to the Avoidance Litigation Trust;
(k) retain and pay professionals, including but not limited to
attorneys, accountants and experts necessary to carry out its
obligations hereunder, including, without limitation, the
members of any professional services firm with which the
Litigation Trustee is affiliated;
(l) invest moneys received by the Avoidance Litigation Trust
or otherwise held by the Avoidance Litigation Trust in
accordance with Section 7.04 hereof;
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(m) execute, deliver and perform its obligations under the
Loan Agreement, the Note and the Security Agreement;
(n) provide the indemnification and exculpation, pay the
Litigation Trust Costs, maintain the books and records of the
Avoidance Litigation Trust and prepare reports each as
provided herein, and engage in such other acts or actions as
otherwise contemplated by this Agreement;
(o) in the event that the Litigation Trustee determines that
the Beneficiaries or the Avoidance Litigation Trust may, will
or have become subject to adverse tax consequences, in its
sole discretion, take such actions that will, or are intended
to, alleviate such adverse tax consequences;
(p) object to any Claim to the extent, and only to the extent,
authorized by Section 7.9 of the Plan; and
(q) establish appropriate reserves for Disputed Claims.
7.02 Limitations on Litigation Trustee's Right to Commence Avoidance
Actions. Unless otherwise authorized by the District Court, the Litigation
Trustee may not commence actions under section 510, 544, 545, 547, 548, 549,
550, 551 and 553 of the Bankruptcy Code later than four (4) months after the
Consummation Date.
7.03 No Operations as an Investment Company, Trade or Business. No part
of the Litigation Trust Assets shall be used or disposed of by the Litigation
Trustee in furtherance of any trade or business. The Litigation Trustee shall,
on behalf of the Avoidance Litigation Trust, hold the Avoidance Litigation Trust
out as a trust in the process of liquidation and not as an investment company.
The Litigation Trustee shall be restricted to the enforcement on behalf of and
for the benefit of the Beneficiaries of the Avoidance Litigation Claims, the
payments and distribution of the Distributable Proceeds for the purpose set
forth in this Avoidance Litigation Trust Agreement and the conservation and
protection of the Litigation Trust Assets and the administration thereof in
accordance with the provisions of this Avoidance Litigation Trust Agreement.
7.04 Investment of Litigation Trust Moneys. The Litigation Trustee
shall invest the moneys received by the Avoidance Litigation Trust or otherwise
held in the Avoidance Litigation Trust Estate in (i) short-term certificates of
deposit or money market accounts maintained by or issued by domestic banks
having in excess of $1 billion in capital and surplus and one of the two highest
ratings given by both Moody's and Standard & Poors, (ii) insured demand deposit
accounts or certificates of deposit maintained by or issued by any savings
institution or commercial bank insured by the United States government or any
agency thereof and (iii) short-term marketable direct obligations of, or
guaranteed as to principal and interest
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by, the United States government or any agency thereof; provided, however, that
the maturities of any of the foregoing shall not exceed 30 days.
ARTICLE VIII
CONCERNING THE LITIGATION TRUSTEE
8.01 Generally. The Litigation Trustee accepts and undertakes to
discharge the Litigation Trust created by this Avoidance Litigation Trust
Agreement upon the terms and conditions hereof. The Litigation Trustee shall not
have any liability for any of its acts or omissions in connection with the
selection and hiring of professionals, or the initiation, prosecution,
supervision, direction, compromising or settling of any Avoidance Litigation
Claims, or the performance of any of its other duties hereunder, except in the
case of its gross negligence or its own intentional and willful misconduct, and
in no event shall the Litigation Trustee be liable for any action taken in
reliance upon the advice of professionals selected with due care in respect of
the subject matter in question. Notwithstanding the foregoing, the Litigation
Trustee may, without liability therefor, retain the services of any professional
services firm with which the Litigation Trustee is affiliated. The Litigation
Trustee shall maintain the chief executive office of the Avoidance Litigation
Trust and the principal office where the records relating to the Avoidance
Litigation Trust are maintained in the county of New York, state of New York.
8.02 Reliance by Litigation Trustee. Except as otherwise provided in
this Avoidance Litigation Trust Agreement:
(a) the Litigation Trustee may rely and shall be protected in
acting upon any resolution, statement, instrument, opinion,
report, notice, request, consent, order or other paper or
document reasonably believed by the Litigation Trustee to be
genuine and to have been signed or presented by the proper
party or parties;
(b) the Litigation Trustee may consult with independent legal
counsel to be selected by it with due care and the advice or
opinion of such counsel shall be full and complete personal
protection to the Litigation Trustee and agents of the
Avoidance Litigation Trust in respect of any action taken or
suffered by it in good faith and in reliance on, or in
accordance with, such advice or opinion, including, without
limitation, the advice or opinion of a member of any law firm
with which the Litigation Trustee is affiliated; and
(c) persons dealing with the Litigation Trustee shall look
only to the Litigation Trust Assets to satisfy any liability
incurred by the Litigation Trustee to such person in carrying
out the terms of this Avoidance Litigation Trust
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Agreement, and the Litigation Trustee shall have no personal
or individual obligation to satisfy any such liability.
8.03 Liability to Third Persons. No Beneficiary shall be subject to any
personal liability whatsoever, in tort, contract or otherwise, to any person in
connection with the Litigation Trust Assets or the affairs of the Avoidance
Litigation Trust, and no Litigation Trustee or agent of the Avoidance Litigation
Trust shall be subject to any personal liability whatsoever, in tort, contract
or otherwise, to any person in connection with the Litigation Trust Assets or
the affairs of this Avoidance Litigation Trust, except for its gross negligence
or its own intentional and willful misconduct; and all such persons shall look
solely to the Litigation Trust Assets for satisfaction of claims of any nature
arising in connection with affairs of the Avoidance Litigation Trust.
8.04 Nonliability of Litigation Trustee for Acts of Others. Nothing
contained in this Avoidance Litigation Trust Agreement shall be deemed to be an
assumption by the Litigation Trustee of any of the liabilities, obligations or
duties of any of the other parties hereto; and shall not be deemed to be or
contain a covenant or agreement by the Litigation Trustee to assume or accept
any such liability, obligation or duty. Any successor Litigation Trustee may
accept and rely upon any accounting made by or on behalf of any predecessor
Litigation Trustee hereunder, and any statement or representation made as to the
assets comprising the Litigation Trust Assets or as to any other fact bearing
upon the prior administration of the Avoidance Litigation Trust. A Litigation
Trustee shall not be liable for having accepted and relied upon such accounting,
statement or representation if it is later proved to be incomplete, inaccurate
or untrue. A Litigation Trustee or successor Litigation Trustee shall not be
liable for any act or omission of any predecessor Litigation Trustee, nor have a
duty to enforce any claims against any predecessor Litigation Trustee on account
of any such act or omission.
8.05 Indemnity. The Litigation Trustee, its employees, officers,
directors and principals (collectively, the "Indemnified Parties") shall be
indemnified by the Avoidance Litigation Trust from any losses, claims, damages,
liabilities or expenses (including, without limitation, reasonable attorneys'
fees, disbursements and related expenses) which the Indemnified Parties may
incur or to which the Indemnified Parties may become subject in connection with
any action, suit, proceeding or investigation brought by or threatened against
the Indemnified Parties other than for its own gross negligence, its
recklessness or its own intentional or willful and wanton misconduct.
Notwithstanding any provision herein to the contrary, the Indemnified Parties
shall be entitled to obtain advances from the Avoidance Litigation Trust to
cover their expenses of defending themselves in any action brought against them
as a result of the acts or omissions of the Litigation Trustee in its capacity
as such, provided, however, that the Indemnified Parties receiving such advances
shall repay the amounts so advanced to the Avoidance Litigation Trust upon the
entry of a final order of any court of competent jurisdiction finding that such
Indemnified Parties were not entitled to any indemnity under the provisions of
this Section 8.05.
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8.06 Bond. The Litigation Trustee shall not be obligated to post a bond
hereunder.
ARTICLE IX
COMPENSATION OF LITIGATION TRUSTEE
9.01 Fees and Expenses. The Litigation Trustee shall be entitled to
reimburse itself from the Avoidance Litigation Trust for all Administrative
Costs and Expenses incurred by it in the performance of its duties in accordance
with this Avoidance Litigation Trust Agreement. The Litigation Trustee shall be
entitled to a fee of $50,000 per annum, plus the reimbursement of its reasonable
out-of-pocket expenses, for its services as Litigation Trustee hereunder.
ARTICLE X
LITIGATION TRUSTEE AND SUCCESSOR LITIGATION TRUSTEES
10.01 Generally. The Litigation Trustee shall initially be Christopher
J. Kearns. If the Litigation Trustee shall ever change its name or reorganize,
reincorporate or merge with or into or consolidate with any other entity, such
Litigation Trustee shall be deemed to be a continuing entity and shall continue
to act as a Litigation Trustee hereunder with the same liabilities, duties,
powers, rights, titles, discretions and privileges as are herein specified for a
Litigation Trustee.
10.02 Resignation. The Litigation Trustee may resign and be discharged
from the trusts hereby created by giving at least thirty (30) days prior written
notice thereof to Newco and each of the other Beneficiaries. Such resignation
shall become effective on the later to occur of (a) the date specified in such
written notice, or (b) the effective date of the appointment of a successor
Litigation Trustee in accordance with Section 10.04 hereof and such successor's
acceptance of such appointment.
10.03 Removal. The Litigation Trustee may be removed, with or without
cause, by Newco with the consent of the Creditors Committee if the Creditors
Committee is still in existence; otherwise, by Newco. Such removal shall become
effective on the later to occur of (a) the date such action is taken by Newco or
(b) the effective date of the appointment of a successor Litigation Trustee in
accordance with Section 10.04 hereof and such successor's acceptance of such
appointment.
10.04 Appointment of Successor Litigation Trustee; Acceptance of
Appointment by Successor Litigation Trustee. The death, resignation, removal,
incompetency, bankruptcy or insolvency of the Litigation Trustee shall not
operate to terminate the Avoidance Litigation Trust created by this Avoidance
Litigation Trust Agreement or to revoke any existing agency created pursuant to
the terms of this Avoidance Litigation Trust Agreement or invalidate any action
theretofore taken by the Litigation Trustee. In any such event, a successor
Litigation
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Trustee shall be promptly selected by the Creditors Committee, subject to the
reasonable consent of Newco, if the Creditors Committee is still in existence;
otherwise by the holders of a majority of the Beneficial Interests in the
Avoidance Litigation Trust, excluding the Beneficial Interest of Newco, subject
to the reasonable consent of Newco. In the event that Newco and such holders are
unable to agree upon a successor Litigation Trustee within sixty (60) days,
either group may apply to the District Court for the appointment of a successor
Litigation Trustee and the District Court shall appoint such successor and make
any amendments to this Avoidance Litigation Trust Agreement as may be required
in connection with the appointment of such successor Litigation Trustee. Any
successor Litigation Trustee appointed hereunder shall execute an instrument
accepting its appointment and shall deliver one counterpart thereof to the
District Court for filing, and, in case of the Litigation Trustee's resignation,
to the retiring Litigation Trustee. Thereupon, such successor shall, without any
further act, become vested with all the obligations, duties, powers, rights,
title, discretion and privileges of its predecessor in the Avoidance Litigation
Trust with like effect as if originally named Litigation Trustee and shall be
deemed appointed pursuant to Section 1123(b)(3)(B) of the Bankruptcy Code to
retain and enforce any Avoidance Litigation Claims for the benefit of the
Beneficiaries. The retiring Litigation Trustee shall duly assign, transfer and
deliver to such successor all property and money held by such retiring
Litigation Trustee hereunder and shall, as directed by the District Court or
reasonably requested by such successor, execute and deliver an instrument or
instruments conveying and transferring to such successor upon the trust herein
expressed, all the obligations, duties, powers, rights, title, discretion and
privileges of such retiring Litigation Trustee.
ARTICLE XI
CONCERNING THE BENEFICIARIES
11.01 No Suits by Beneficiaries. No Beneficiary shall have any right by
virtue of any provision of this Avoidance Litigation Trust Agreement to
institute or participate in any action or proceeding at law or in equity against
any party other than the Litigation Trustee with respect to the Avoidance
Litigation Claims.
11.02 Requirement of Undertaking. The Litigation Trustee may request
the District Court to require, in any suit for the enforcement of any right or
remedy under this Avoidance Litigation Trust Agreement, or in any suit against
the Litigation Trustee for any action taken or omitted by it as Litigation
Trustee, the filing by any party litigant in such suit of an undertaking to pay
the costs of such suit, including reasonable attorneys' fees, against any party
litigant in such suit; provided, however, that the provisions of this Section
11.02 shall not apply to any suit by the Litigation Trustee.
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ARTICLE XII
JURISDICTION
12.01 Jurisdiction. The parties agree that the District Court shall
have jurisdiction over the Avoidance Litigation Trust, the Litigation Trustee,
the Avoidance Litigation Claims and the remaining Litigation Trust Assets,
including, without limitation, jurisdiction to determine all controversies and
disputes arising under or in connection with this Avoidance Litigation Trust
Agreement. The Litigation Trustee shall have the power and authority to bring
any action in the District Court to prosecute the Avoidance Litigation Claims as
provided in Section 7.01. The District Court shall have the authority to
construe and interpret this Avoidance Litigation Trust Agreement and to
establish, amend and revoke rules and regulations for the administration of this
Avoidance Litigation Trust, including, but not limited to, correcting any defect
or supplying any omission, or reconciling any inconsistency in this Avoidance
Litigation Trust Agreement, in the manner and to the extent it shall deem
necessary or advisable to make this Avoidance Litigation Trust fully effective,
and all decisions and determinations by the District Court in the exercise of
this power shall be final and binding upon the Litigation Trustee, Newco and the
other Beneficiaries.
ARTICLE XIII
ADMINISTRATION OF TRUST ESTATE
13.01 Reports. The Litigation Trustee shall file with the District
Court: (a) within 45 days after the end of each first and third fiscal quarter,
an unaudited semi-annual financial report for the previous fiscal half-year
regarding the financial condition and results of operations of the Avoidance
Litigation Trust for such fiscal half-year, (b) within 90 days after the end of
each fiscal year, an unaudited annual financial report regarding the financial
condition and results of operation of the Avoidance Litigation Trust, including
a statement of receipts and disbursements and a report on changes in the
Litigation Trustee, if any, and (c) within 45 days after the end of each first
and third fiscal quarter, a semi-annual report concerning the status of all
Avoidance Litigation Claims which have been filed, including material
developments, such as settlements and other material events. The Litigation
Trustee shall provide a copy of such reports to the Creditors Committee if the
Creditors Committee is still in existence and to any Beneficiary at such
Beneficiary's request and cost. If the Avoidance Litigation Trust becomes
subject to the registration requirements of the Exchange Act, the Litigation
Trustee shall cause the Avoidance Litigation Trust to register pursuant to, and
comply with the applicable reporting requirements of, the Exchange Act and will
issue reports to Beneficiaries in accordance therewith.
13.02 Fiscal Year. The fiscal year of the Avoidance Litigation Trust
shall be the calendar year.
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13.03 Books and Records. The Litigation Trustee shall maintain, in
respect of the Avoidance Litigation Trust and the Beneficiaries, a list of the
names and addresses of the Beneficiaries (the "Beneficiary List"), and books and
records relating to the assets and the income of the Avoidance Litigation Trust
and the payment of expenses of the Avoidance Litigation Trust, in such detail
and for such period of time as may be necessary to enable it to make full and
proper reports in respect thereof in accordance with the provisions of Section
13.01 and Article VI hereof and to comply with applicable provisions of law.
Each Beneficiary shall be responsible for providing the Litigation Trustee with
written notice of any change in address. The Litigation Trustee is not obligated
to make any effort to determine the correct address of a Beneficiary and may,
until otherwise advised in writing by any Beneficiary, rely upon the Beneficiary
List.
13.04 Newco Reports to Litigation Trustee. Newco shall provide the
Litigation Trustee with periodic reports of the status of claims resolutions (no
less frequently than monthly during the first six months after the Consummation
Date and no less frequently than quarterly thereafter until all claims have been
resolved by the District Court) and such other information relating thereto as
the Litigation Trustee shall reasonably request.
ARTICLE XIV
MISCELLANEOUS PROVISIONS
14.01 Construction. This Avoidance Litigation Trust Agreement shall be
governed by and construed in accordance with the laws of the State of Delaware
and the United States of America; provided that the Avoidance Litigation Trust
and any interpretation or enforcement of the provisions of this Avoidance
Litigation Trust Agreement shall be subject to the jurisdiction of the District
Court as contemplated by Article XII hereof. The Litigation Trustee's
interpretation of the provisions of this Avoidance Litigation Trust Agreement
and the provisions of the Plan as they relate to the prosecution of the
Avoidance Litigation Claims shall be deemed conclusive in the absence of a
contrary interpretation of the District Court.
14.02 Severability. In the event any provision of this Avoidance
Litigation Trust Agreement or the application thereof to any person or
circumstances shall be determined by a final order of a court of competent
jurisdiction to be invalid or unenforceable to any extent, the remainder of this
Avoidance Litigation Trust Agreement or the application of such provision to
persons or circumstances or in jurisdictions other than those as to or in which
it is held or unenforceable, shall not be affected thereby, and each provision
of this Avoidance Litigation Trust Agreement shall be valid and enforced to the
fullest permitted by law.
14.03 Cooperation. Newco shall provide the Litigation Trustee, at no
cost to the Litigation Trustee, the Avoidance Litigation Trust or the
Beneficiaries, with such access to its and its subsidiaries' books, records and
employees as the Litigation Trustee may reasonably
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request during regular business hours for the purpose of performing its duties
and exercising its duties hereunder, including, without limitation, by providing
documents and making its officers, directors and employees available to provide
testimony and otherwise to assist the Litigation Trustee in prosecuting the
Avoidance Litigation Claims; provided that copying costs, if any, shall be paid
by the Avoidance Litigation Trust as an Administrative Cost and Expense.
14.04 Notices. Any notice or other communication required or permitted
to be made in accordance with this Avoidance Litigation Trust Agreement shall be
in writing and shall be deemed to have been sufficiently given, for all
purposes, if delivered personally or by telex or other telegraphic means or
mailed by first class mail:
(i) if to the Litigation Trustee, Avoidance Litigation
Trust, c/o Kahn Consulting, Inc., 152 West 57th
Street, New York, New York 10019, attention:
Christopher J. Kearns.
(ii) if to Newco, at 685 Third Avenue, New York, New York
10017, attention: Corporate Secretary, with a copy to
Battle Fowler, LLP, 75 East 55th Street, New York,
New York 10022, attention: Lawrence Mittman, Esq.
(iii) if to any Beneficiary, to such Beneficiary at the
address set forth in the Beneficiary List.
(iv) if to the Creditors Committee, to Willkie, Farr &
Gallagher, 787 Seventh Avenue, New York, New York
10022, attention: Tonny K. Ho.
Any party to this Avoidance Litigation Trust Agreement may change its address
for the above purposes by notifying in writing the other parties of such change
in address.
14.05 Headings. The headings contained in this Avoidance Litigation
Trust Agreement are solely for convenience of reference and shall not affect the
meaning or interpretation of this Avoidance Litigation Trust Agreement or of any
term or provision hereof.
14.06 Counterparts. This Avoidance Litigation Trust Agreement may be
executed in any number of counterparts, each of which shall be an original, but
such counterparts shall together constitute but one and the same instrument.
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IN WITNESS WHEREOF, the parties hereto have executed this
Avoidance Litigation Trust Agreement or caused this Avoidance Litigation Trust
Agreement to be duly executed by their respective officers and the Litigation
Trustee herein has executed this Avoidance Litigation Trust Agreement, as
Litigation Trustee, effective as of the date first above written.
MARVEL ENTERTAINMENT GROUP, INC.
By:_______________________________________
Name: William H. Hardie, III
Title: Vice President and Secretary
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THE ASHER CANDY COMPANY
By:_______________________________________
Name: William H. Hardie, III Title: Vice
President and Secretary
FLEER CORP.
By:_______________________________________
Name: William H. Hardie, III Title: Vice
President and Secretary
FRANK H. FLEER CORP.
By:_______________________________________
Name: William H. Hardie, III Title: Vice
President and Secretary
HEROES WORLD DISTRIBUTION, INC.
By:_______________________________________
Name: William H. Hardie, III Title: Vice
President and Secretary
MALIBU COMICS ENTERTAINMENT, INC.
By:_______________________________________
Name: William H. Hardie, III Title: Vice
President and Secretary
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MARVEL CHARACTERS, INC.
By:_______________________________________
Name: William H. Hardie, III Title: Vice
President and Secretary
MARVEL DIRECT MARKETING, INC.
By:_______________________________________
Name: William H. Hardie, III Title: Vice
President and Secretary
SKYBOX INTERNATIONAL INC.
By:_______________________________________
Name: William H. Hardie, III Title: Vice
President and Secretary
By:_______________________________________
John J. Gibbons, solely in his capacity
as chapter 11 trustee for the Marvel
Debtors
MARVEL ENTERPRISES, INC.
By:_______________________________________
Name: William H. Hardie, III Title: Executive
Vice President, Business Affairs
By:_______________________________________
Christopher J. Kearns, solely as trustee
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EXHIBIT 2
AVOIDANCE LITIGATION TRUST LOAN AGREEMENT
dated as of October 1, 1998
by and between
Christopher J. Kearns,
solely as trustee under that certain
Avoidance Litigation Trust Agreement, dated the date hereof,
establishing a trust for the benefit of the beneficiaries thereunder
and
Marvel Enterprises, Inc.,
a Delaware corporation
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<TABLE>
TABLE OF CONTENTS
Page
<S> <C> <C>
ARTICLE I
DEFINITIONS..............................................................................................2
Section 1.1 Definitions.................................................................................2
Section 1.2 Exhibits....................................................................................4
ARTICLE II
AMOUNT AND TERMS OF LOANS................................................................................5
Section 2.1 Commitment..................................................................................5
Section 2.2 Authorization and Issuance of Note..........................................................5
Section 2.3 Interest Rates; Payment of Principal and Interest on Facility...............................6
Section 2.4 Computation of Interest; Maximum Interest Rate..............................................6
Section 2.5 Voluntary Prepayments.......................................................................7
Section 2.6 Mandatory Prepayments.......................................................................7
Section 2.7 Holidays....................................................................................7
Section 2.8 Time and Place of Payments..................................................................7
ARTICLE III
AFFIRMATIVE COVENANTS OF THE BORROWER....................................................................7
Section 3.1 Notice of Certain Events....................................................................7
Section 3.2 Taxes.......................................................................................8
Section 3.3 Further Assurances..........................................................................8
ARTICLE IV
NEGATIVE COVENANTS OF THE BORROWER.......................................................................8
Section 4.1 Debt........................................................................................8
Section 4.2 Liens.......................................................................................8
Section 4.3 Borrower's Activities.......................................................................8
Section 4.4 Use of Proceeds.............................................................................9
Section 4.5 Restrictions on Fundamental Changes.........................................................9
Section 4.6 Distributions...............................................................................9
ARTICLE V
EVENTS OF DEFAULT........................................................................................9
Section 5.1 Events of Default..........................................................................9
</TABLE>
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<TABLE>
<S> <C> <C> <C>
Section 5.2 Remedies...................................................................................10
ARTICLE VI
MISCELLANEOUS...........................................................................................11
Section 6.1 Waivers; Modifications in Writing..........................................................11
Section 6.2 Failure or Delay; Limitation on Liability..................................................11
Section 6.3 Notices, etc...............................................................................11
Section 6.4 Binding Effect.............................................................................12
Section 6.5 Headings...................................................................................12
Section 6.6 Execution in Counterparts..................................................................13
Section 6.7 Governing Law; Jurisdiction................................................................13
Section 6.8 Severability of Provisions.................................................................13
Section 6.9 Survival of Agreements, Representations and Warranties.....................................13
Section 6.10 Complete Agreement........................................................................13
Exhibits
Exhibit A - Form of Note
Exhibit B - Form of Security Agreement
</TABLE>
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AVOIDANCE LITIGATION TRUST LOAN AGREEMENT
This Avoidance Litigation Trust Loan Agreement is made as of the 1st
day of October, 1998, by and between Marvel Enterprises, Inc., a Delaware
corporation, and Christopher J. Kearns, solely as trustee under that certain
Avoidance Litigation Trust Agreement, dated the date hereof, establishing a
trust for the benefit of the beneficiaries thereunder.
PRELIMINARY STATEMENT
On or about July 31, 1998, the United States District Court for the
District of Delaware (the "District Court") entered an order confirming the
Fourth Amended Joint Plan of Reorganization Under Chapter 11 of the United
States Bankruptcy Code, dated July 31, 1998 (as may thereafter be amended,
restated or otherwise modified, the "Plan"), filed by certain of the secured
creditors 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. (the "Marvel Debtors") and by Toy Biz, Inc. (which has
since changed its name to Marvel Enterprises, Inc.).
Pursuant to the Plan and that certain Avoidance Litigation Trust
Agreement (the "Litigation Trust Agreement"), dated the date hereof, among the
Marvel Debtors, John J. Gibbons (solely in his capacity as chapter 11 trustee
for the Marvel Debtors), the Trustee and the Lender, (i) the Marvel Debtors have
contributed to the Trustee in trust all of their interests in any Causes of
Action arising pursuant to sections 510, 544, 545, 547, 548, 549, 550, 551 and
553 of the Bankruptcy Code including the right to prosecute the motion pursuant
to Fed. R. Civ. P. 60(b) filed by the Creditors Committee on December 23, 1997,
but excluding those (x) relating to any tax-sharing or other similar agreement
or (y) against any person or entity released or exculpated under the Plan (the
"Litigation Claims") and (ii) the Trustee has agreed to enforce the Litigation
Claims, if any, for the benefit of all holders of Allowed Unsecured Claims
(other than Intercompany Claims and the LaSalle Claim), holders of Allowed Fixed
Senior Secured Claims and the Lender (collectively, the "Beneficiaries") and to
hold the Net Avoidance Litigation Proceeds, if any, in trust for the
Beneficiaries; any litigation claims (x) relating to any tax-sharing or other
similar agreement or (y) against any person or entity released or exculpated
under the Plan, will remain the property of the applicable Marvel Debtor.
The Trust has been created pursuant to the Litigation Trust Agreement
for the sole purpose of coordinating the prosecution, direction, settlement or
expeditious compromise of any Litigation Claims on behalf of and for the benefit
of the Beneficiaries and to distribute the proceeds to the Beneficiaries in
accordance therewith.
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Pursuant to Section 7.5 of the Plan and this Agreement, the Lender has
agreed to provide loans to the Trust in an aggregate amount not to exceed, at
any given time, One Million One Hundred Thousand Dollars ($1,100,000), to be
used by the Trustee to pay certain costs of the Trust, on the terms and subject
to the conditions set forth herein.
NOW, THEREFORE, in consideration of the mutual covenants, conditions
and provisions as hereinafter set forth, the parties hereto agree as follows:
ARTICLE I
DEFINITIONS
Section 1.1 Definitions. Terms defined in the Plan, and not
otherwise defined herein, shall have the meanings ascribed to such terms in the
Plan. For purposes of this Agreement, the following capitalized terms shall have
the following meanings:
"Agreement" means this Loan Agreement between the Borrower, on
the one hand, and the Lender, on the other hand, together with all exhibits and
schedules hereto and any and all amendments, extensions or supplements hereto.
"Beneficiaries" has the meaning set forth in the Preliminary
Statement.
"Borrower" means the Trust.
"Borrowing" means a borrowing under this Agreement consisting
of a Loan or Loans made by the Lender to the Borrower.
"Business Day" means a day which is not a Saturday or Sunday
and on which major commercial banks are open for business in New York, New York.
"Collateral" shall have the meaning ascribed thereto under the
Security Agreement.
"Commitment" means the total amount of the Lender's commitment
hereunder to extend credit to the Borrower by means of Loans.
"Commitment Termination Date" means the earlier of (i) October
1, 2003, (ii) the date upon which the Trustee terminates the Commitment by
notice to the Lender and (iii) the date of the first distribution by the Trust
to the Beneficiaries.
"Debt" means (a) all obligations of the Borrower for borrowed
money, (b) all obligations of the Borrower evidenced by bonds, debentures, notes
or other similar
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instruments, and (c) all obligations or liabilities of others secured by a Lien
on any asset owned by the Borrower.
"District Court" has the meaning set forth in the Preliminary
Statement.
"Event of Default" shall have the meaning set forth in Section
5.1 of this Agreement.
"GAAP" means generally accepted accounting principles set
forth in the opinions and pronouncements of the Accounting Principles Board and
the American Institute of Certified Public Accountants and statements and
pronouncements of the Financial Accounting Standards Board or in such other
statements by such other entity as may be approved by a significant segment of
the accounting profession, which are applicable to the circumstances as of the
date of determination.
"Lender" means Marvel Enterprises, Inc., a Delaware
corporation, and its successors and assigns.
"Lien" means any lien, mortgage, pledge, security interest,
charge or encumbrance of any kind (including any conditional sale or other title
retention agreement or any lease in the nature thereof) and any agreement to
give or refrain from giving any lien, mortgage, pledge, security interest,
charge or other encumbrance of any kind.
"Litigation Claims" has the meaning set forth in the
Preliminary Statement.
"Litigation Trust Agreement" has the meaning set forth in the
Preliminary Statement.
"Loan" and "Loans" means the loans to be made by the Lender to
the Borrower pursuant to Article II of this Agreement.
"Loan Documents" means the Security Agreement, the Note and
any and all other documents, agreements or instruments executed or delivered
therewith by the Borrower in connection with the closing of the transactions
contemplated by this Agreement, including Uniform Commercial Code financing
statements.
"Marvel Debtors" has the meaning set forth in the Preliminary
Statement.
"Maturity Date" means the earlier to occur of (i) October 1,
2003 and (ii) the date of the first distribution by the Trust to the
Beneficiaries.
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"Note" means the grid promissory note, substantially in the
form of Exhibit A attached hereto, executed by the Borrower to the order of the
Lender and evidencing the obligation of the Borrower to repay the Loans made by
the Lender hereunder.
"Person" means natural persons, corporations, partnerships,
trusts, associations, estates, organizations, governmental divisions, agencies
or authorities, firms or entities.
"Plan" has the meaning set forth in the Preliminary Statement.
"Professional Fees" means (i) fees and expenses of
professionals retained by the Trustee on behalf of the Trust (including, without
limitation, attorneys, accountants and expert fees and expenses) and (ii) up to
$100,000 for professional fees and costs incurred by the Creditors' Committee
and the expenses of its members solely for the purposes set forth to Section
6.16 of the Plan.
"Security Agreement" means that certain Security Agreement,
dated as of the date hereof, between the Borrower, on the one hand, and the
Lender, on the other hand, substantially in the form of Exhibit B attached
hereto.
"Trust" means the trust established for the Beneficiaries
pursuant to the Litigation Trust Agreement.
"Trust Costs" means the administrative expenses of the Trust,
including, without limitation, Professional Fees, taxes, bank charges, filing
and registration fees, postage, telephone, facsimile, copying and messenger
costs, and secretarial and administrative costs attendant to the maintenance of
the Trust and the responsibilities of the Trustee thereunder, the fee of the
Trustee and any indemnification costs and expenses owing to any indemnified
party under Section 8.05 of the Litigation Trust Agreement, but excluding any
Indemnification Costs (as defined in the Litigation Trust Agreement).
"Trustee" means Christopher J. Kearns, solely as trustee under
the Trust, and its successors appointed pursuant to the Litigation Trust
Agreement.
"Unmatured Event of Default" means an event, act or occurrence
which with the giving of notice or the passage of time (or both) could become an
Event of Default.
Section 1.2 Exhibits. All of the exhibits and schedules
attached to this Agreement shall be deemed incorporated herein by reference.
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ARTICLE II
AMOUNT AND TERMS OF LOANS
Section 2.1 Commitment.
(a) Subject to the terms and conditions hereof, the Lender
agrees, prior to the Commitment Termination Date, to make loans to the Borrower
from time to time in an aggregate principal amount at any time outstanding not
to exceed One Million One Hundred Thousand Dollars ($1,100,000).
(b) Notwithstanding the foregoing, the Lender shall not be
required to make any loan hereunder if:
(i) after giving effect to such loan, the aggregate
outstanding principal amount of all Borrowings hereunder would exceed
One Million One Hundred Thousand Dollars ($1,100,000); or
(ii) an Event of Default exists, or an event has occurred
which, with the giving of notice or the passage of time, or both, would
become an Event of Default.
(c) Borrower shall give the Lender notice of the date of each
requested Borrowing hereunder, which notice shall be irrevocable and effective
upon receipt by the Lender. Each such request for a Borrowing shall be furnished
to the Lender at least five Business Days prior to the requested date of
funding, and must (i) contain a representation by the Borrower that the Borrower
does not have sufficient funds to pay Trust Costs payable within the following
thirty days and has made no distributions to the Beneficiaries, (ii) specify the
amount of such requested Borrowing, (iii) contain a representation by Borrower
that, as of the date thereof, there is no Event of Default nor any event which,
with the giving of notice or the passage of time, or both, would constitute an
Event of Default, and (iv) include a copy of the invoice or invoices to be paid
with such Borrowing or other supporting documentation with respect to such
permitted use. Each Borrowing shall be in an amount of at least $50,000. The
Lender shall make the Borrowing available to Borrower on or prior to the date
specified in the request for Borrowing as the borrowing date in immediately
available funds to the account specified by Borrower. Notwithstanding anything
to the contrary herein, Borrowings shall be used by the Borrower solely to fund
Trust Costs, and $100,000 of the Commitment may only be borrowed to pay up to
$100,000 of professional fees and costs incurred by the Creditors' Committee and
the expenses of its members solely for the purposes set forth to Section 6.16 of
the Plan.
Section 2.2 Authorization and Issuance of Note. The Litigation
Trust Agreement has authorized the issuance by the Borrower of the Note in the
principal amount of One Million One Hundred Thousand Dollars ($1,100,000). On
the date hereof, or, in any
730828.5
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event, no later than the date on which the Lender makes any loan hereunder, the
Borrower shall issue the Note, payable to the order of the Lender, substantially
in the form of Exhibit A attached hereto with appropriate insertions.
Section 2.3 Interest Rates; Payment of Principal and Interest
on Facility.
(a) The obligation of the Borrower to repay the Loan shall be
evidenced by the Note, which shall be payable to the order of the Lender at the
Lender's office located at 685 Third Avenue, New York, New York 10017, or at
such other office of the Lender as may be designated, from time to time, by the
Lender, for the account of the Lender, not later than 12:00 p.m., eastern time,
on the Maturity Date.
(b) Each Loan shall bear simple interest, upon the unpaid
principal balance thereof from the date advanced at 10% per annum. Interest due
on the Loans shall be due and payable on the Maturity Date or early prepayment
date. Unless prepaid in accordance with the terms hereof, the Borrower shall pay
the principal amount of the Loans, without demand, on the Maturity Date.
(c) The Lender shall, and is hereby authorized by the Borrower
to, endorse on the schedule attached to the Note, or otherwise record in the
Lender's internal records, an appropriate notation evidencing the date and
amount of each Loan from the Lender, as well as the date and amount of each
payment and prepayment with respect thereto; provided, however, that the failure
of the Lender to make such a notation or any error in such notation shall not
affect the obligation of the Borrower under the Note. The Lender's internal
records shall be conclusive evidence of the amount of each Loan outstanding
absent manifest error.
Section 2.4 Computation of Interest; Maximum Interest Rate.
(a) All computations of interest with respect to the Loans and
all computations of interest due under Section 2.3 hereof for any period shall
be calculated on the basis of a year of 365 or 366 days for the actual number of
days elapsed in such period. Interest shall accrue from the first day of the
making of a Loan to the date of repayment of such Loan in accordance with the
provisions hereof.
(b) Notwithstanding anything to the contrary contained in this
Agreement, the Borrower shall not be obligated to pay, and the Lender shall not
be entitled to charge, collect or receive, interest in excess of the maximum
rate allowed by applicable law. With respect to the Note, during any period of
time in which the interest rate specified therein exceeds such maximum rate,
interest shall accrue and be payable at such maximum rate.
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Section 2.5 Voluntary Prepayments.
(a) The Borrower shall have the right at any time to prepay
the Loans, in whole or in part, without penalty or premium, subject to the right
to reborrow as provided herein.
(b) Any voluntary prepayments made pursuant to this Section
2.5 and any mandatory prepayments made pursuant to Section 2.6 shall be applied
as follows: first, to accrued and unpaid interest due on the principal amount
being prepaid under the Note, and second, to the principal amount due under the
Note.
Section 2.6 Mandatory Prepayments. The unpaid principal amount
of the Note, together with all accrued but unpaid interest thereon, shall be due
and payable on the Commitment Termination Date.
Section 2.7 Holidays. Any principal or interest in respect of
a Loan which would otherwise become due on a day other than a Business Day shall
instead become due on the next succeeding Business Day and such adjustment shall
be reflected in the computation of interest.
Section 2.8 Time and Place of Payments. The Borrower shall
make each payment on the Note by making, or causing to be made, the amount
thereof available to the Lender in immediately available funds at the Lender's
office at 685 Third Avenue, New York, New York 10017 not later than 12:00 p.m.,
eastern time, on the day of payment.
ARTICLE III
AFFIRMATIVE COVENANTS OF THE BORROWER
The Borrower covenants and agrees that, so long as any portion
of the Commitment under this Agreement shall be in effect and until payment in
full of the Loans and the Note, the Borrower shall perform each and all of the
following:
Section 3.1 Notice of Certain Events. The Borrower shall
furnish or cause to be furnished to the Lender:
(a) notice, as soon as practicable and, in any event, within
five calendar days after the Borrower has knowledge of the occurrence of an
Event of Default or any Unmatured Event of Default; and
(b) with reasonable promptness, such other information and
data with respect to the Borrower as from time to time may be reasonably
requested by the Lender.
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Section 3.2 Taxes. The Borrower agrees to pay promptly when
due all taxes, assessments and governmental charges upon or against the Borrower
or the Collateral in each case before the same become delinquent and before
penalties accrue thereon, unless and to the extent that the same are being
contested in good faith by appropriate proceedings.
Section 3.3 Further Assurances. At any time or from time to
time upon the reasonable request of the Lender, the Borrower shall execute and
deliver such further documents and do such other acts and things as the Lender
may reasonably request in order to effect fully the purposes of this Agreement,
the Note and the other Loan Documents and to provide for repayment of the Loans
made hereunder with interest thereon in accordance with the terms of this
Agreement and the Note.
ARTICLE IV
NEGATIVE COVENANTS OF THE BORROWER
The Borrower covenants and agrees that, so long as any portion
of the Commitment under this Agreement shall be in effect and until payment in
full of the Loans and the Note, the Borrower shall perform each and all of the
following:
Section 4.1 Debt. The Borrower shall not create, incur, assume
or otherwise become liable with respect to any Debt except (i) the Debt
evidenced by the Note and this Agreement and (ii) Debt created, incurred or
assumed, or with respect to which the Borrower otherwise becomes liable, with
the prior written consent of the Lender.
Section 4.2 Liens. The Borrower shall not create or permit to
exist any Lien on or with respect to the Collateral, except:
(a) Liens for taxes, assessments or governmental charges or
claims, the payment of which is not, at such time, required, and provided that
reserves or other appropriate provisions, if any, as shall be required by GAAP
shall have been made therefor;
(b) any attachment or judgment Lien in existence less than 30
calendar days after the entry thereof or with respect to which execution has
been stayed; and
(c) Liens granted by the Borrower in favor of the Lender
pursuant to the Loan Documents.
Section 4.3 Borrower's Activities. The Borrower shall not
engage in any activities other than as provided and permitted by the Litigation
Trust Agreement as in effect on the date hereof.
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Section 4.4 Use of Proceeds. The Borrower shall not use the
proceeds of the Loans for any purposes other than the payment of Trust Costs.
Section 4.5 Restrictions on Fundamental Changes. The Borrower
shall not change the nature of its activities, liquidate, wind up or dissolve
itself (or suffer any liquidation or dissolution), or convey, sell, assign,
lease, transfer or otherwise dispose of, in one transaction or a series of
transactions, all or any substantial part of its property or assets, whether now
owned or hereafter acquired, except as provided in the Litigation Trust
Agreement.
Section 4.6 Distributions. The Borrower shall not make any
distributions to Beneficiaries of the Trust other than as provided in the
Litigation Trust Agreement.
ARTICLE V
EVENTS OF DEFAULT
Section 5.1 Events of Default. The occurrence of any one or
more of the following events, acts or occurrences shall constitute an event of
default (an "Event of Default") hereunder:
(a) Failure to Make Payments when Due. The Borrower shall fail
to pay any amount owing under the Note with respect to principal of or interest
on the Loans when such amount is due, whether at stated maturity, by
acceleration or otherwise, and such failure shall continue for three (3) days
after written notice thereof is delivered to the Borrower by the Lender; or
(b) Breach of Certain Covenants. The Borrower shall fail to
comply with or to perform in accordance with any material representation,
warranty, covenant, term, condition or agreement contained in this Agreement,
the Note or any other Loan Document and the Borrower shall fail to cure such
failure within thirty (30) days after written notice thereof is delivered to the
Borrower by the Lender; or
(c) Insolvency. The Borrower shall be insolvent or unable to
pay any of its debts as they mature; or
(d) Involuntary Bankruptcy; Appointment of Receiver, etc.
(i) If an involuntary case seeking the liquidation or
reorganization of the Borrower under Chapter 7 or Chapter 11 of the Federal
Bankruptcy Code or any similar proceeding shall be commenced against the
Borrower under any other applicable law and any of the following events occur:
(A) the Borrower consents to the institution of the involuntary
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case; (B) the petition commencing the involuntary case is not timely
controverted; (C) the petition commencing the involuntary case is not dismissed
within 60 calendar days of its filing; or (D) an order for relief shall have
been issued or entered therein; or
(ii) A decree or order of a court shall have been
entered for the appointment of a receiver, liquidator, sequestrator, custodian,
trustee or other officer having similar powers to take possession of all or a
substantial portion of the property or to operate all or a substantial portion
of the business of the Borrower; or
(e) Voluntary Bankruptcy; Appointment of Receiver, etc. The
Borrower shall institute a voluntary case seeking liquidation or reorganization
under Chapter 7 or Chapter 11 of the Federal Bankruptcy Code; or the Borrower
shall file a petition, answer or complaint or shall otherwise institute any
similar proceeding under any other applicable law, or shall consent thereto; or
the Borrower shall consent to the conversion of an involuntary case to a
voluntary case; or the Borrower shall consent or acquiesce to the appointment of
a receiver, liquidator, sequestrator, custodian, trustee or other officer with
similar powers to take possession of all or a substantial portion of the
property or to operate all or a substantial portion of the business of the
Borrower; or the Borrower shall make a general assignment for the benefit of
creditors; or the general partner of the Borrower adopts any resolution or
otherwise authorizes action to approve any of the foregoing; or
(f) Judgments and Attachments. The Borrower shall suffer any
judgment, attachment, lien, execution or levy against it or its property in any
material amount which is not paid, discharged, released, bonded, stayed on
appeal or otherwise fully satisfied within thirty days of the Borrower's actual
knowledge thereof; or
(g) Dissolution. Any order, judgment or decree shall be
entered decreeing the dissolution of the Borrower, whether by voluntary or
involuntary action; or
(h) Termination of Loan Documents. Any of the Loan Documents
shall cease to be in full force and effect for any reason other than (i) any act
or omission of the Lender necessary for the perfection of Liens in favor of the
Lender, (ii) a release or termination thereof upon the full payment and
satisfaction of the Note or (iii) upon the written consent of the Lender.
Section 5.2 Remedies. Upon the occurrence of an Event of
Default, the unpaid principal amount of and any accrued interest on the Loans
shall automatically become immediately due and payable, without presentment,
demand, protest, notice or other requirement of any kind, all of which are
hereby expressly waived by the Borrower. Upon acceleration, the Lender, without
notice to or demand upon the Borrower, which are expressly waived by the
Borrower, may proceed to protect, exercise and enforce its rights and remedies
hereunder, under the Note and under the Loan Documents, and any other rights and
remedies as are provided by law or equity. The Lender may determine, in its sole
discretion, the order
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and manner in which the Lender's rights and remedies are to be exercised, and
all payments received by the Lender shall be applied as follows: first, to all
costs and expenses (including, without limitation, reasonable attorneys' fees,
costs of maintaining, preserving or disposing of any of the Collateral and costs
of settlement) incurred by the Lender in enforcing any Debt of, or in collecting
any payments due from, the Borrower under the Note by reason of such Event of
Default; second, to accrued interest on the Loans; and third, to principal
amounts outstanding on the Loans.
ARTICLE VI
MISCELLANEOUS
Section 6.1 Waivers; Modifications in Writing. No failure or
delay on the part of the Lender in exercising any right, power or remedy
hereunder shall operate as a waiver thereof, nor shall any single or partial
exercise of any such right, power or remedy preclude any other or further
exercise thereof or the exercise of any other right, power or remedy. The
remedies provided for under this Agreement, in the Note and in the Loan
Documents are cumulative and are not exclusive of any remedies that may be
available to the Lender at law, in equity or otherwise. No amendment,
modification, supplement, termination, consent or waiver of or to any provision
of this Agreement, the Note and the other Loan Documents, nor consent to any
departure therefrom, shall in any event be effective unless the same shall be in
writing and signed by the Lender and the Borrower. Any waiver of any provision
of this Agreement, the Note and the other Loan Documents, and any consent to any
departure by the Borrower from the terms of any provisions of this Agreement,
shall be effective only in the specific instance and for the specific purpose
for which given. No notice to or demand on the Borrower in any case shall
entitle the Borrower to any other or further notice or demand in similar or
other circumstances.
Section 6.2 Failure or Delay; Limitation on Liability. No
failure or delay on the part of the Lender, in the exercise of any power, right
or privilege under this Agreement, the Note or the other Loan Documents, shall
impair such power, right or privilege or shall operate as a waiver thereof, nor
shall any single or partial exercise of any such power, right or privilege
preclude other or further exercise of any other power, right or privilege.
Lender shall look only to the Borrower and its assets to satisfy any liability
hereunder, and the Trustee shall have no personal or individual liability or
obligation whatsoever hereunder.
Section 6.3 Notices, etc. All notices, demands, instructions
and other communications required or permitted to be given to or made upon any
party hereto shall be in writing delivered to the parties at the addresses set
forth below (or such other address as may be provided by one party in a notice
to the other):
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If to the Lender:
Marvel Enterprises, Inc.
685 Third Avenue
New York, New York 10017
Attention: Corporate Secretary
with a copy to:
Battle Fowler LLP
75 East 55th Street
New York, New York 10022
Attention: Lawrence Mittman, Esq.
If to the Borrower:
Avoidance Litigation Trust
c/o Kahn Consulting, Inc.
152 West 57th Street
New York, New York 10019
Attention: Christopher J. Kearns, Trustee
with a copy to:
Notice delivered in accordance with the foregoing shall be effective (i) when
delivered, if delivered personally or by facsimile transmission, (ii) two days
after being delivered in the United States (properly addressed and all fees
paid) for overnight delivery service to a courier (such as Federal Express)
which regularly provides such service and regularly obtains executed receipts
evidencing delivery or (iii) five days after being deposited (properly addressed
and stamped for first-class delivery) in a daily serviced United States mail
box.
Section 6.4 Binding Effect. This Agreement shall be binding
upon and inure to the benefit of and be enforceable by the respective successors
and assigns of the parties hereto; provided, however, that the Borrower may not
assign or transfer any interest hereunder without the prior written consent of
the Lender.
Section 6.5 Headings. Article and Section headings used in
this Agreement are for convenience of reference only and shall not constitute a
part of this Agreement for any purpose or affect the construction of this
Agreement.
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<PAGE>
Section 6.6 Execution in Counterparts. This Agreement may be
executed in any number of counterparts and by different parties on separate
counterparts, each of which counterparts, when so executed and delivered, shall
be deemed to be an original and all of which counterparts, taken together, shall
constitute one and the same Agreement. This Agreement shall become effective
upon the execution of a counterpart hereof by each of the parties hereto.
Section 6.7 Governing Law; Jurisdiction. This Agreement and
the Note shall be deemed to have been made in the State of Delaware and the
validity of this Agreement, the Note and the other Loan Documents, the
construction, interpretation and enforcement thereof, and the rights of the
parties thereto shall be determined under, governed by and construed in
accordance with the internal laws of the State of Delaware, without regard to
principles of conflicts of law. The Lender and the Borrower hereby agree that
any controversy or claim arising out of or relating to this Agreement, the Note
or the other Loan Documents shall be determined by the United States District
Court for the District of Delaware and expressly submit to the jurisdiction of
such court in any action or proceeding arising out of or relating to this
Agreement, the Note or the other Loan Documents and agree that any process or
notice of motion or other application to any of such courts may be served within
or without such court's jurisdiction by registered mail or by personal service,
provided a reasonable time for appearance is allowed. With respect to such
court, the Lender and the Borrower hereby expressly waive any defense based on
doctrines of venue or inconvenient forum or similar rules or doctrines.
Section 6.8 Severability of Provisions. Whenever possible this
Agreement, the Note and each Loan Document and each provision hereof and thereof
shall be interpreted in such manner as to be effective, valid and enforceable
under applicable law. If and to the extent that any such provision shall be held
invalid and unenforceable by any court of competent jurisdiction, such holding
shall not invalidate or render unenforceable any other provisions hereof or
thereof, and any determination that the application of any provision hereof or
thereof to any person or under any circumstance is illegal and unenforceable
shall not affect the legality, validity and enforceability of such provision as
it may be applied to any other person or in any other circumstance.
Section 6.9 Survival of Agreements, Representations and
Warranties. All agreements, representations and warranties made herein shall
survive the execution and delivery of this Agreement and the Loan Documents, the
making of the Loans hereunder, and the execution and delivery of the Note.
Section 6.10 Complete Agreement. This Agreement, together with
the exhibits and schedules to this Agreement, the Note and the other Loan
Documents is intended by the parties as a final expression of their agreement
and is intended as a complete statement of the terms and conditions of their
agreement with respect to the subject matter hereof.
730828.5
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<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this
Agreement to be executed and delivered as of the date first hereinabove set
forth.
Marvel Enterprises, Inc.
By: /s/ WILLIAM H. HARDIE, III
Name: William H. Hardie
Title: Executive Vice President, Business Affairs
By: /s/ CHRISTOPHER J. KEARNS
Christopher J. Kearns, solely as trustee on behalf
of the beneficiaries of the Trust with respect to the
Trust
730828.5
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<PAGE>
EXHIBIT A
AVOIDANCE PROMISSORY NOTE
$1,100,000 October 1, 1998
New York, New York
FOR VALUE RECEIVED, Christopher J. Kearns, solely as trustee
under that certain Avoidance Litigation Trust Agreement, dated the date hereof,
establishing a trust (the "Trust") for the benefit of the beneficiaries
thereunder (such Trust, the "Borrower"), hereby promises to pay to the order of
MARVEL ENTERPRISES, INC., a Delaware corporation (the "Lender"), at its office
located at 685 Third Avenue, New York, New York 10017, or at such other office
as may be designated, from time to time, by the holder hereof in writing, in
lawful money of the United States of America and in immediately available funds,
the principal sum from time to time outstanding of up to ONE MILLION ONE HUNDRED
THOUSAND DOLLARS ($1,100,000), or so much thereof as may be disbursed by the
Lender to the Borrower or for the Borrower's account from time to time, together
with interest at the rate hereinafter specified on such indebtedness as shall
from time to time remain unpaid, until paid in full. Interest will be calculated
on the basis of a 365 or 366 day year, as the case may be, for the actual number
of days elapsed in such period.
Simple interest on the unpaid principal sum outstanding from
time to time shall accrue at 10% per annum. Notwithstanding anything to the
contrary contained in this Note, the Borrower shall not be obligated to pay, and
the Lender shall not be entitled to charge, collect or receive, interest in
excess of the maximum rate allowed by applicable law. During any period of time
in which the interest rate specified in this Note exceeds such maximum rate,
interest shall accrue and be payable at such maximum rate.
The entire unpaid principal balance, together with accrued
interest thereon, shall be due and payable on the earlier of (i) October 1, 2003
or (ii) the date of the first distribution by the Trust to the Beneficiaries.
The Lender shall, and is hereby authorized by the Borrower to,
endorse on the Schedule annexed to this Note, or otherwise record in the
Lender's internal records, an appropriate notation evidencing the date and
amount of all principal disbursed by the Lender hereunder, as well as the date
and amount of each payment and prepayment hereunder; provided, however, that the
failure of the Lender to make such a notation or any error in such notation
shall not affect the obligation of the Borrower under this Note. The Lender
shall provide to the Borrower on request from time to time copies of the
Schedule annexed to this Note showing all endorsements thereto at the time of
each such request.
730841.4
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<PAGE>
Any payments or prepayments made on this Note shall be applied
as follows: first, to accrued and unpaid interest due on the principal amount
being prepaid under this Note; and second, to the principal amount due under
this Note.
If any payment to be made by the Borrower to the Lender
according to the terms hereof shall be due on a Saturday, Sunday or other day on
which commercial banks in Wilmington, Delaware are authorized or required to
close, the due date for such payment shall be extended to the next business day
and the amount of such payment shall include interest accrued during such
extension.
This Note is the grid promissory note referred to in, and is
entitled to the benefits of, the Avoidance Litigation Trust Loan Agreement,
dated as of the date hereof (the "Loan Agreement"), between the Borrower and the
Lender. The Loan Agreement, among other things, contains provisions for
acceleration of the maturity of this Note upon the happening of an Event of
Default. Notwithstanding anything to the contrary contained herein, the Lender
may, as provided under the Loan Agreement, terminate the line of credit
evidenced hereby and declare all amounts outstanding hereunder immediately due
and payable. This Note is secured by a security agreement (the "Security
Agreement") of even date herewith made by the Borrower in favor of the Lender
encumbering personal property and assets described therein in favor of the
Lender.
It is the purpose of this Note to evidence a line of credit
against which the Borrower may draw and redraw from time to time and from which
the Lender will advance and readvance from time to time until the Commitment
Termination Date.
This Note may be prepaid, in whole or in part, at any time
without penalty.
The Borrower waives presentment, demand, protest, notice of
dishonor, notice of nonpayment, notice of protest and diligence in collection,
and assents to the terms hereof and to any extension or postponement of the time
for payment or any other indulgence.
Upon the occurrence of any Event of Default (as defined in the
Loan Agreement), after any applicable notice and cure period as provided under
the Loan Agreement, the whole of the principal sum remaining unpaid hereunder,
together with all accrued and unpaid interest thereon, shall become due and
payable immediately. The Borrower shall also be obligated to pay as part of the
indebtedness evidenced by this Note, all costs of collection, whether or not a
suit is brought, including any reasonable attorneys' fees and expenses that may
be incurred in the collection or enforcement hereof.
No act or omission of the Lender, including without limitation
any failure to exercise any right, remedy or recourse, shall be deemed to be a
waiver or release of such right, remedy or recourse and any waiver or release
may be effected only through a written document executed by the Lender and then
only to the extent specifically recited therein. A
730841.4
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<PAGE>
waiver or release with respect to any one event shall not be construed as
continuing as a bar to, or as a waiver or release of, any subsequent right,
remedy or recourse as to any subsequent event.
Lender shall look only to the Trust and its assets to satisfy
any liability hereunder, and the trustee of the Trust shall have no personal or
individual liability or obligation whatsoever hereunder.
All of the terms and provisions of this Note inure to and are
binding upon the heirs, executors, administrators, successors, representatives,
receivers, trustees and assigns of the parties; provided, however, that none of
the rights or obligations of the Borrower hereunder may be assigned or otherwise
transferred without the prior written consent of the Lender.
THIS NOTE SHALL BE CONSTRUED AND ENFORCED IN ACCORD
ANCE WITH AND GOVERNED BY THE LAWS OF THE STATE OF DELAWARE. The
Lender, by its acceptance of this Note, and the Borrower hereby agree that any
controversy or claim arising out of or relating to this Note shall be determined
in Delaware and expressly submit to the jurisdiction of the United States
District Court for the District of Delaware in any action or proceeding arising
out of or relating to this Note and agree that any process or notice of motion
or other application to any of such courts may be served within or without such
court's jurisdiction by registered mail or by personal service, provided a
reasonable time for appearance is allowed. With respect to such courts, the
Lender, by its acceptance of this Note, and the Borrower hereby expressly waive
any defense based on doctrines of venue or inconvenient forum or similar rules
or doctrines.
IN WITNESS WHEREOF, the undersigned has executed and delivered
this Note as of the date first written above.
By: ______________________________________
Christopher J. Kearns, solely as
trustee on behalf of the beneficiaries
of the Trust with respect to the
Trust
730841.4
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<PAGE>
SCHEDULE TO GRID NOTE
Date Amount of Amount of Unpaid Name of Person
Loan Principal Principal Making Notation
Prepaid Balance of Note
============ =========== =========== ============== =====================
730841.4
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<PAGE>
EXHIBIT B
AVOIDANCE SECURITY AGREEMENT
SECURITY AGREEMENT, dated as of October 1, 1998, by and among
Christopher J. Kearns, solely as trustee under that certain Avoidance Litigation
Trust Agreement, dated the date hereof, establishing a trust (the "Trust") for
the benefit of the beneficiaries thereunder (such Trust, the "Grantor") and
Marvel Enterprises, Inc., a Delaware corporation (the "Lender").
PRELIMINARY STATEMENT
1. Pursuant to an Avoidance Litigation Trust Loan Agreement,
dated as of the date hereof, by and among the Grantor and the Lender (the "Loan
Agreement"), the Lender agreed to lend the Grantor an aggregate amount of up to
$1,100,000, and the Grantor agreed to issue to the Lender a grid promissory note
in an aggregate principal amount of $1,100,000 (the "Note"). Capitalized terms
not otherwise defined herein shall have the meaning ascribed to them in the Loan
Agreement.
2. As a condition to the Lender's obligation to advance funds
to the Grantor pursuant to the Loan Agreement, Grantor has agreed to, among
other things, grant to Lender a security interest in all of Grantor's assets to
secure the due and punctual payment and performance by the Grantor of (a) all
obligations at any time and from time to time under the Loan Agreement and the
Notes, (b) the principal of and interest on the Loan, when and as due, whether
at maturity, by acceleration, or otherwise, and (c) all obligations of the
Grantor at any time and from time to time under this Agreement (collectively,
the "Secured Obligations").
Accordingly, the Grantor and the Lender hereby agree as
follows:
1. Definitions. As used herein, the following terms shall have
the following meanings:
(a) "Accounts Receivable" shall mean (i) all of the
Grantor's present and future accounts, general intangibles, chattel paper and
instruments, as such terms are defined in the Uniform Commercial Code as in
effect in the State of Delaware ("UCC"), (ii) all moneys, securities and other
property and the proceeds thereof, now or hereafter held or received by, or in
transit to, the Lender from or for Grantor, whether for safekeeping, pledge,
custody, transmission, collection or otherwise, and all of the deposits (general
or special) of the Grantor, balances, sums and credits with, and all of the
Grantor's claims against the Lender at any time existing, (iii) all of the
Grantor's right, title and interest, and all of the Grantor's rights, remedies,
security and liens, in, to and in respect of any accounts receivable, including,
without limitation, rights of stoppage in transit, replevin, repossession and
reclama tion and other rights and remedies of an unpaid vendor, lienor or
secured party, guaranties or other contracts of suretyship with respect to
accounts receivable, deposits or other security for
730843.2
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<PAGE>
the obligation of any account debtor, and credit and other insurance, (iv) all
of the Grantor's right, title and interest in, to and in respect of all goods
relating to, or which by sale have resulted in, accounts receivable, including,
without limitation, all goods described in invoices or other documents or
instruments with respect to, or otherwise representing or evidencing, any
account receivable, and all returned, reclaimed or repossessed goods.
(b) "Collateral" shall mean all (i) Accounts Receivable,
(ii) Documents, (iii) Equipment, (iv) General Intangibles, (v) Investment
Property, (vi) Inventory, and (vii) Proceeds.
(c) "Documents" shall mean all instruments, files, records,
ledger sheets and documents covering or relating to any of the Collateral.
(d) "Equipment" shall mean all of the Grantor's machinery,
equipment, vehicles, furniture and fixtures and all attachments, accessories and
equipment now or hereafter owned or acquired in the Grantor's business or used
in connection therewith, and all substitutions and replacements thereof,
wherever located, whether now owned or hereafter acquired by the Grantor.
(e) "General Intangibles" shall mean all of the Grantor's
present and future general intangibles of every kind and description (as such
term is defined in the UCC), including, without limitation, any causes of
action, obligations, rights, suits, debts, sums of money, damages, judgments,
claims and demands whatsoever, whether known or unknown, in law or in equity or
otherwise (including any avoidance actions pursuant to Section 510, 544, 545,
547, 548, 549, 550, 551 and 553 of title 11, United States Code).
(f) "Inventory" shall mean all of the Grantors' right,
title and interest in and to raw materials, work in process, finished goods and
all other inventory (as such term is defined in the UCC), whether now owned or
hereafter acquired, and any documents relating thereto.
(g) "Investment Property" shall mean all of the Grantor's
right, title and interest in and to all securities (whether certificated or
uncertificated), security entitle ments, security accounts, commodity contracts
and commodity accounts.
(h) "Proceeds" shall mean any consideration received from
the sale, exchange, lease or other disposition of any asset or property which
constitutes Collateral, any other value received as a consequence of the
possession of any Collateral and any payment received from any insurer or other
person or entity as a result of the destruction, loss, theft or other
involuntary conversion of whatever nature of any asset or property that
constitutes Collateral, and shall include, without limitation, all cash and
negotiable instruments received or held by the Lender pursuant to any lockbox or
similar arrangement relating to the payment of Accounts Receivable.
730843.2
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<PAGE>
2. Security Interests. As security for the payment or
performance, as the case may be, of the Secured Obligations, the Grantor hereby
creates and grants to the Lender, its successors and its assigns, a security
interest in the Collateral (the "Security Interest"). Without limiting the
foregoing, the Lender is hereby authorized to file one or more financing
statements, continuation statements or other documents for the purpose of
perfecting, confirming, continuing, enforcing or protecting the Security
Interest, naming the Grantor as debtor and the Lender as secured party.
The Grantor agrees at all times to keep in all material
respects accurate and complete accounting records with respect to the
Collateral, including, but not limited to, a record of all payments and Proceeds
received.
3. Further Assurances. The Grantor agrees, at its expense, to
execute, acknowledge, deliver and cause to be duly filed all such further
instruments and documents and take all such actions as the Lender may from time
to time reasonably request for the assuring and preserving of the Security
Interest and the rights and remedies created hereby, including, without
limitation, the payment of any fees and taxes required in connection with the
execution and delivery of this Agreement, the granting of the Security Interest
and the filing of any financing statements or other documents in connection
herewith. If any amount payable under or in connection with any of the
Collateral shall be or become evidenced by any promissory note or other
instrument, such note or instrument shall be promptly pledged and delivered to
the Lender, duly endorsed in a manner satisfactory to the Lender. The Grantor
agrees to notify the Lender promptly of any change in its name, in the location
of its chief executive office or the principal office where it keeps its records
relating to the Accounts Receivable owned by it and the location of any
Collateral. The Grantor agrees promptly to notify the Lender if any material
portion of the Collateral is damaged or destroyed.
4. Inspection and Verification. The Lender and such persons as
the Lender may designate shall have the right, at any reasonable time or times
during the Grantor's usual business hours, and upon reasonable notice (which may
be telephonic), to inspect the Grantor, all records related thereto (and to make
extracts and copies from such records), and the premises upon which the
Collateral is located, to discuss the Grantor's affairs with the officers of the
Grantor and its independent accountants and to verify under reasonable
procedures the validity, amount, quality, quantity, value, and condition of or
any other matter relating to, the Collateral, including, in the case of Accounts
Receivable or Collateral in the possession of a third person, contacting account
debtors and third persons possessing the Collateral.
5. Taxes; Encumbrances. At its option, the Lender may
discharge past due taxes, liens, security interests or other encumbrances at any
time levied or placed on the Col lateral and not permitted under the Loan
Agreement, and may pay for the maintenance and preservation of the Collateral to
the extent the Grantor fails to do so as required by this Agreement, and the
Grantor agrees to reimburse the Lender on demand for any payment made or any
expense incurred by it pursuant to the foregoing authorization; provided,
however, that nothing in this Section 5 shall be interpreted as excusing the
Grantor from the performance of
730843.2
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<PAGE>
any covenants or other promises with respect to taxes, liens, security interests
or other en cumbrances and maintenances as set forth herein or in the Loan
Agreement.
6. Assignment of Security Interest. If at any time the Grantor
shall take and perfect a security interest in any property of an account debtor
or any other person to secure payment and performance of an Account Receivable,
the Grantor shall promptly assign such security interest to the Lender. Such
assignment need not be filed of public record unless necessary to continue the
perfected status of the security interest against creditors of and transferees
from the account debtor or other person granting the security interest.
7. Representations and Warranties. The Grantor represents and
warrants to the Lender that:
(a) Principal Place of Business, etc. Its chief executive
office, its chief place of business and the office where it keeps its records
relating to the Accounts Receivable owned by it and the location of any
Collateral is located in the county of New York, in the State of New York.
(b) Title and Authority. It has (i) rights in and good
title to the Collateral in which it is granting a security interest hereunder
and (ii) the requisite power and authority to grant to the Lender the Security
Interest in the Collateral pursuant hereto and to execute, deliver and perform
its obligations in accordance with the terms of this Agreement, without the
consent or approval of any other person other than any consent or approval which
has been obtained.
(c) Filing. Fully executed Uniform Commercial Code
financing statements containing a description of the Collateral shall have been,
or shall be delivered to the Lender in a form such that they can be, filed of
record in every governmental, municipal or other office in every jurisdiction in
which any portion of the Collateral is located necessary to publish notice of
and protect the validity of and to establish a valid, legal and perfected
security interest in favor of the Lender in respect of the Collateral in which a
security interest may be perfected by filing in the United States and its
territories and possessions, and no further or subsequent filing, refiling,
recording, rerecording, registration or reregistration is necessary in any such
jurisdiction, except as provided under applicable law with respect to the filing
of Uniform Commercial Code continuation statements.
(d) Validity of Security Interest. The Security Interest
constitutes a valid, legal and perfected first priority security interest in all
of the Collateral for payment and performance of the Secured Obligations.
(e) Absence of Other Liens. The Collateral is owned by it
free and clear of any Lien of any nature whatsoever, except as granted pursuant
to this Agreement and as permitted by the Loan Agreement, and, except as
provided by paragraph (b) of this Section 7, no financing statement has been
filed, under the Uniform Commercial Code as in effect in any state or otherwise,
covering any Collateral.
730843.2
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<PAGE>
(f) Survival of Representations and Warranties. All
representations and warranties of the Grantor contained in this Agreement shall
survive the execution, delivery and performance of this Agreement until the
termination of this Agreement pursuant to Section 23. 8. Protection of Security.
The Grantor shall, at its own cost and expense, take any and all actions
reasonably necessary to defend title to the Collateral against all persons and
to defend the Security Interest of the Lender in the Collateral, and the
priority thereof, against any adverse mortgage, pledge, security interest, lien,
charge or other encumbrance of any nature whatsoever except for liens permitted
pursuant to the Loan Agreement.
9. Use and Disposition of Collateral. The Grantor shall not
make or permit to be made any assignment, pledge or hypothecation of the
Collateral, or grant any security interest in the Collateral except for the
Security Interest. The Grantor shall not make or permit to be made any transfer
of any Collateral, except Inventory in the ordinary course of business and as
otherwise permitted by the Loan Agreement, and the Grantor shall remain at all
times in possession of the Collateral other than transfers to the Lender
pursuant to the provisions hereof and as otherwise provided in this Agreement or
the Loan Agreement.
10. Collections. Unless and until an Event of Default has
occurred and is continuing, the Grantor shall have the right to collect its
Accounts Receivable in the ordinary course of its business. Upon the occurrence
of any Event of Default, the Lender shall have the right, as the true and lawful
agent of the Grantor, with power of substitution for the Grantor and in the
Grantor's name, the Lender's name or otherwise, for the use and benefit of the
Lender, (i) to endorse the Grantor's name upon any notes, acceptances, checks,
drafts, money orders or other evidences of payment or Collateral that may come
into its possession; (ii) to sign the name of the Grantor on any invoice or bill
of lading relating to any of the Collateral, drafts against the Guarantor's
customers, assignments and verifications of Accounts Receivable and notices to
the Grantor's customers; (iii) to send verifications of Accounts Receivable to
any customer of the Grantor; (iv) to receive, endorse, assign and/or deliver any
and all notes, acceptances, checks, drafts, money orders or other evidences or
instruments of payment relating to the Collateral or any part thereof, and the
Grantor hereby waives notice of presentment, protest and non-payment of any
instrument so endorsed; (v) to demand, collect, receive payment of, give receipt
for, extend the time of payment of and give discharges and releases of all or
any of the Collateral and/or release the obligor thereon; (vi) to commence and
prosecute any and all suits, actions or proceedings at law or in equity in any
court of competent jurisdiction to collect or otherwise realize on all or any of
the Collateral or to enforce any rights in respect of any Collateral; (vii) to
settle, compromise, compound, adjust or defend any actions, suits or proceedings
relating to or pertaining to all or any of the Collateral; (viii) to notify, or
to require the Grantor to notify, the account debtors obligated on any or all of
the Accounts Receivable to make payment thereof directly to the Lender; (ix) to
notify the postal service authorities to change the address for delivery of mail
addressed to the Grantor to such address as the Agent may designate; (x) to
accept the return of goods represented by any of the Accounts Receivable; and
(xi) to use, sell, assign, transfer, pledge, make any agreement with respect to
or otherwise deal with all or any of the Collateral, and to
730843.2
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<PAGE>
do all other acts and things necessary to carry out the purposes of this
Agreement, as fully and completely as though the Lender were the absolute owner
of the Collateral for all purposes; provided, however, that nothing herein
contained shall be construed as requiring or obligating the Lender to make any
commitment or to make any inquiry as to the nature or sufficiency of any payment
received by the Lender or to present or file any claim or notice, or to take any
action with respect to the Collateral or any part thereof or the moneys due or
to become due in respect thereof or any property covered thereby, and no action
taken by the Lender or omitted to be taken with respect to the Collateral or any
part thereof shall give rise to any defense, counterclaim or offset in favor of
the Grantor or to any claim or action against the Lender in the absence of the
gross negligence or willful misconduct of the Lender. It is understood and
agreed that the appointment of the Lender as the agent of the Grantor for the
purposes set forth above in this Section 10 is coupled with an interest and is
irrevocable. The provisions of this Section 10 shall in no event relieve the
Grantor of any of its obligations hereunder or under the Loan Agreement with
respect to the Collateral or any part thereof or impose any obligation on the
Lender to proceed in any particular manner with respect to the Collateral or any
part thereof, or in any way limit the exercise by the Lender of any other or
further right which it may have on the date of this Agreement or hereafter,
whether hereunder or by law or otherwise.
11. Remedies upon Default. Upon the occurrence and during the
continuance of an Event of Default, the Grantor agrees to deliver each item of
Collateral to the Lender on demand, and it is agreed that the Lender shall have
the right to take any or all of the following actions at the same or different
times: with or without legal process and with or without previous notice or
demand for performance, to take possession of the Collateral and without
liability for trespass (except for actual damage caused by the Lender's gross
negligence or willful misconduct) to enter any premises where the Collateral may
be located for the purpose of taking possession of or removing the Collateral
and, generally, to exercise any and all rights afforded to a secured party
under, and subject to its obligations contained in, the Uniform Commercial Code
as in effect in any state or other applicable law. Without limiting the
generality of the foregoing, the Grantor agrees that the Lender shall have the
right, subject to the mandatory requirements of applicable law, to sell or
otherwise dispose of all or any part of the Collateral, at public or private
sale or at any broker's board or on any securities exchange, for cash, upon
credit or for future delivery as the Lender shall deem appropriate. Each such
purchaser at any such sale shall hold the property sold absolutely free from any
claim or right on the part of the Grantor, and the Grantor hereby waives (to the
extent permitted by law) all rights of redemption, stay and appraisal which the
Grantor now has or may at any time in the future have under any rule of law or
statute now existing or hereafter enacted.
The Lender shall give the Grantor ten (10) days' written
notice (which the Grantor agrees is reasonable notice within the meaning of
Section 9-504(3) of the UCC) of the Lender's intention to make any sale of
Collateral. Such notice, in the case of a public sale, shall state the time and
place for such sale and, in the case of a sale at a broker's board or on a
securities exchange, shall state the board or exchange at which such sale is to
be made and the day on which the Collateral, or portion thereof, will first be
offered for sale at such board or
730843.2
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<PAGE>
exchange. Any such public sale shall be held at such time or times within
ordinary business hours and at such place or places as the Lender may fix and
state in the notice (if any) of such sale. At any such sale, the Collateral, or
portion thereof, to be sold may be sold in one lot as an entirety or in separate
parcels, as the Lender may (in its sole and absolute discretion) de termine. The
Lender shall not be obligated to make any sale of any Collateral if it shall
determine not to do so, regardless of the fact that notice of sale of such
Collateral shall have been given. The Lender may, without notice or publication,
adjourn any public or private sale or cause the same to be adjourned from time
to time by announcement at the time and place fixed for sale, and such sale may,
without further notice, be made at the time and place to which the same was so
adjourned. In case any sale of all or any part of the Collateral is made on
credit or for future delivery, the Collateral so sold may be retained by the
Lender until the sale price is paid by the purchaser or purchasers thereof, but
the Lender shall not incur any liability in case any such purchaser or
purchasers shall fail to take up and pay for the Collateral so sold and, in case
of any such failure, such Collateral may be sold again upon like notice. At any
public sale made pursuant to this Section 11, the Lender may bid for or
purchase, free (to the extent permitted by law) from any right of redemption,
stay or appraisal on the part of the Grantor (all said rights being also hereby
waived and released to the extent permitted by law), with respect to the
Collateral or any part thereof offered for sale and the Lender may make payment
on account thereof by using any claim then due and payable to the Lender from
the Grantor as a credit against the purchase price, and the Lender may, upon
compliance with the terms of sale, hold, retain and dispose of such property
without further accountability to such Grantor therefor. For purposes hereof, a
written agreement to purchase the Collateral or any portion thereof shall be
treated as a sale thereof; the Lender shall be free to carry out such sale and
purchase pursuant to such agreement, and the Grantor shall not be entitled to
the return of the Collateral or any portion thereof subject thereto,
notwithstanding the fact that after the Lender shall have entered into such an
agreement all Events of Default shall have been remedied and the Secured
Obligations paid in full. As an alternative to exercising the power of sale
herein conferred upon it, the Lender may proceed by a suit or suits at law or in
equity to foreclose this Agreement and to sell the Collateral or any portion
thereof pursuant to a judgment or decree of a court or courts having competent
jurisdiction or pursuant to a proceeding by a court-appointed receiver.
12. Application of Proceeds. The proceeds of any collection or
sale of Collateral, as well as any Collateral consisting of cash, shall be
applied by the Lender first, to the payment of all reasonable costs and expenses
incurred by the Lender in connection with such collection or sale or otherwise
in connection with this Agreement or any of the Secured Obligations, including,
but not limited to, all court costs and the reasonable fees and expenses of its
agents and legal counsel, the repayment of all advances made by the Lender
hereunder on behalf of the Grantor and any other reasonable costs or expenses
incurred in connection with the exercise of any right or remedy hereunder;
second to the payment in full of all Secured Obligations owed to the Lender; and
third, to the Grantor, its successors and assigns, or as a court of competent
jurisdiction may otherwise direct.
Upon any sale of the Collateral by the Lender (including, without limitation,
pursuant to a power of sale granted by statute or under a judicial proceeding),
the receipt of the Lender or of
730843.2
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<PAGE>
the officer making the sale shall be a sufficient discharge to the purchaser or
purchasers of the Collateral so sold and such purchaser or purchasers shall not
be obligated to see to the application of any part of the purchase money paid
over to the Lender or such officer or be answerable in any way for the
misapplication thereof.
13. Security Interest Absolute. All rights of the Lender
hereunder, the Security Interest, and all obligations of the Grantor hereunder,
shall be absolute and unconditional irrespective of (i) any lack of validity or
enforceability of the Loan Agreement, the Note, any other agreement with respect
to any of the Secured Obligations or any other agreement or instrument relating
to any of the foregoing, (ii) any change in the time, manner or place of payment
of, or in any other term of, all or any of the Secured Obligations, or any other
amendment or waiver of or consent to any departure from the Loan Agreement, the
Note or any other agreement or instrument, (iii) any exchange, release or
nonperfection of any other Collateral, or (iv) any other circumstance which
might otherwise constitute a defense available to, or discharge of, the Grantor
in respect of the Secured Obligations or in respect of this Agreement.
14. No Waiver. No failure on the part of the Lender to
exercise, and no delay in exercising, any right, power or remedy hereunder shall
operate as a waiver thereof, nor shall any single or partial exercise of any
such right, power or remedy by the Lender preclude any other or further exercise
thereof or the exercise of any other right, power or remedy. All remedies
hereunder are cumulative and are not exclusive of any other remedies provided by
law. The Lender shall not be deemed to have waived any rights hereunder or under
any other agreement or instrument unless such waiver shall be in writing and
signed by the Lender.
15. Agent Appointed Attorney-in-Fact. The Grantor hereby
appoints the Lender the attorney-in-fact of the Grantor effective upon and
during the continuance of an Event of Default solely for the purpose of carrying
out the provisions of this Agreement and taking any action and executing any
instrument which the Lender may deem necessary or advisable to accomplish the
purposes hereof, which appointment is irrevocable and coupled with an interest.
16. Lender's Fees and Expenses. The Grantor shall be jointly
and severally obligated to, upon demand, pay to the Lender the amount of any and
all reasonable expenses, including the reasonable fees and expenses of its
counsel and of any experts or agents which the Lender may incur in connection
with (i) the administration of this Agreement, (ii) the custody or preservation
of, or the sale of, collection from, or other realization upon, any of the
Collateral, (iii) the exercise or enforcement of any of the rights of the Lender
hereunder, or (iv) the failure of any representation or warranty of the Grantor
hereunder to be true and correct in all material respects or the failure by the
Grantor to perform or observe any of the provisions hereof. Any such amounts
payable as provided hereunder or thereunder shall be additional Secured
Obligations secured hereby.
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17. Binding Agreement; Assignments. This Agreement, and the
terms, covenants and conditions hereof, shall be binding upon and inure to the
benefit of the parties hereto and their respective successors and assigns,
except that the Grantor shall not be permitted to assign this Agreement or any
interest herein or in the Collateral, or any part thereof, or any cash or
property held by the Lender as Collateral under this Agreement, except as
contemplated by this Agreement or the Loan Agreement.
18. Governing Law; Jurisdiction. THIS AGREEMENT SHALL BE
CONSTRUED IN ACCORDANCE WITH AND GOVERNED BY THE LAWS OF THE STATE OF DELAWARE,
EXCEPT TO THE EXTENT THAT THE VALIDITY OR PERFECTION OF THE SECURITY INTEREST
HEREUNDER, OR REMEDIES HEREUNDER, IN RESPECT OF ANY PARTICULAR COLLATERAL ARE
GOVERNED BY THE LAWS OF A JURISDICTION OTHER THAN THE STATE OF DELAWARE. THE
LENDER AND GRANTOR HEREBY AGREE THAT ANY CONTROVERSY OR CLAIM ARISING OUT OF OR
RELATING TO THIS SECURITY AGREEMENT, THE LOAN AGREEMENT OR THE NOTE SHALL BE
DETERMINED IN DELAWARE AND EXPRESSLY SUBMIT TO THE JURISDICTION OF THE UNITED
STATES DISTRICT COURT FOR THE DISTRICT OF DELAWARE IN ANY ACTION OR PROCEEDING
ARISING OUT OF OR RELATING TO THIS SECURITY AGREEMENT, THE LOAN AGREEMENT OR THE
NOTE AND AGREE THAT ANY PROCESS OR NOTICE OF MOTION OR OTHER APPLICATION TO SUCH
COURT MAY BE SERVED WITHIN OR WITHOUT SUCH COURT'S JURISDICTION BY REGISTERED
MAIL OR BY PERSONAL SERVICE, PROVIDED A REASONABLE TIME FOR APPEARANCE IS
ALLOWED. WITH RESPECT TO SUCH COURT, THE LENDER AND THE GRANTOR HEREBY EXPRESSLY
WAIVE ANY DEFENSE BASED ON DOCTRINES OF VENUE OR INCONVENIENT FORUM OR SIMILAR
RULES OR DOCTRINES.
19. Notices. All communications and notices hereunder shall be
in writing and given as provided in the Loan Agreement.
20. Severability. In case any one or more of the provisions
contained in this Agreement should be invalid, illegal or unenforceable the
remaining provisions contained herein shall not in any way be affected or
impaired.
21. Section Headings. Section headings used herein are for
convenience only and are not to affect the construction of, or to be taken into
consideration in interpreting, this Agreement.
22. Counterparts. This Agreement may be executed in two or
more counterparts, each of which shall constitute an original, but all of which,
when taken together, shall constitute but one instrument. This Agreement shall
be effective when a counterpart which bears the signature of the Grantor shall
have been delivered to the Lender.
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23. Termination. This Agreement and the Security Interest
shall terminate when all the Secured Obligations have been fully and
indefeasibly paid in cash, at which time the Lender shall execute and deliver to
the Grantor all Uniform Commercial Code termination statements and similar
documents which the Grantor shall reasonably request to evidence such
termination; provided, however, that all indemnities of the Grantor contained in
this Agreement shall survive, and remain operative and in full force and effect
regardless of, the termination of this Agreement.
24. Limitation on Liability. Lender shall look only to the
Collateral pledged hereunder and the Trustee shall have no personal or
individual liability or obligation whatsoever hereunder.
IN WITNESS WHEREOF, the parties hereto have duly executed this
Security Agreement as of the day and year first above written.
GRANTOR:
By:
Christopher J. Kearns, solely as trustee
on behalf of the beneficiaries of the Trust
with respect to the Trust
LENDER:
MARVEL ENTERPRISES, INC.
By:
Name: William H. Hardie, III
Title: Executive Vice President, Business
Affairs
730843.2
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EXHIBIT 3
For Exhibit 3 ("Avoidance Professional Fee Reimbursement Note"),
see Exhibit A to Exhibit 2 ("Avoidance Litigation Trust Loan Agreement").
739291.1
<PAGE>
EXHIBIT 4
EFFECTIVE
OCTOBER 1, 1998
MARVEL ENTERPRISES, INC.
BY-LAWS
(as restated and amended)
639423.16
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<TABLE>
<CAPTION>
TABLE OF CONTENTS
-----------------
Page
----
<S> <C> <C>
ARTICLE 1. OFFICES......................................................................................1
Section 1.1. Registered Office.............................................................1
Section 1.2. Other Offices.................................................................1
ARTICLE 2. MEETINGS OF STOCKHOLDERS.....................................................................1
Section 2.1. Place of Meetings.............................................................1
Section 2.2. Annual Meetings...............................................................1
Section 2.3. Special Meetings..............................................................2
Section 2.4. Notice of Meetings............................................................2
Section 2.5. Quorum........................................................................2
Section 2.6. Notice of Stockholder Business and
Nominations...................................................................4
Section 2.7. Organization..................................................................6
Section 2.8. Voting........................................................................6
Section 2.9. No Stockholder Action by Written Consent......................................8
Section 2.10. Inspectors....................................................................8
Section 2.11. List of Stockholders..........................................................8
ARTICLE 3. BOARD OF DIRECTORS...........................................................................9
Section 3.1. Number of Directors...........................................................9
Section 3.2. General Powers................................................................9
Section 3.3. Election of Directors........................................................11
Section 3.4. Tenure and Qualifications....................................................11
Section 3.5. Quorum and Manner of Acting..................................................11
Section 3.6. Action by Communications Equipment...........................................11
Section 3.7. Offices, Place of Meeting and Records........................................11
Section 3.8. Annual Meeting...............................................................12
Section 3.9. Regular Meetings.............................................................12
Section 3.10. Special Meetings; Notice.....................................................12
Section 3.11. Organization.................................................................12
Section 3.12. Order of Business............................................................13
Section 3.13. Removal of Directors.........................................................13
Section 3.14. Resignation..................................................................13
Section 3.15. Vacancies....................................................................13
Section 3.16. Compensation.................................................................14
Section 3.17. Interested Directors.........................................................14
ARTICLE 4. ACTION BY CONSENT...........................................................................14
Section 4.1. Consent by Directors.........................................................14
Section 4.2. Consent by Stockholders......................................................15
ARTICLE 5. OFFICERS....................................................................................15
Section 5.1. Number.......................................................................15
Section 5.2. Election, Qualifications and
Term of Office...............................................................15
Section 5.3. Removal......................................................................15
Section 5.4. Resignation..................................................................15
</TABLE>
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<TABLE>
<S> <C> <C> <C>
Section 5.5. Vacancies....................................................................16
Section 5.6. Chairman of the Board........................................................16
Section 5.7. Chief Executive Officer......................................................16
Section 5.8. President....................................................................16
Section 5.9. Chief Financial Officer......................................................16
Section 5.10. Treasurer....................................................................17
Section 5.11. Secretary....................................................................17
Section 5.12. Other Officers...............................................................17
Section 5.13. Salaries.....................................................................18
ARTICLE 6. INDEMNIFICATION, ETC........................................................................18
Section 6.1. Indemnification and Advances of Expenses.....................................18
Section 6.2. Employees and Agents.........................................................19
Section 6.3. Repeal or Modification.......................................................19
Section 6.4. Other Indemnification........................................................19
ARTICLE 7. CONTRACTS, CHECKS, DRAFTS, BANK ACCOUNTS, ETC...............................................20
Section 7.1. Execution of Contracts.......................................................20
Section 7.2. Loans........................................................................20
Section 7.3. Checks, Drafts, etc..........................................................20
Section 7.4. Deposits.....................................................................21
Section 7.5. Proxies in Respect of Securities of
Other Corporations...........................................................21
ARTICLE 8. BOOKS AND RECORDS...........................................................................21
Section 8.1. Place........................................................................21
Section 8.2. Addresses of Stockholders....................................................21
Section 8.3. Record Dates.................................................................22
Section 8.4. Audit of Books and Accounts..................................................22
ARTICLE 9. SHARES AND THEIR TRANSFER...................................................................22
Section 9.1. Certificates of Stock........................................................22
Section 9.2. Record.......................................................................23
Section 9.3. Transfer of Stock............................................................23
Section 9.4. Transfer Agent and Registrar; Regulations....................................23
Section 9.5. Lost, Destroyed or Mutilated Certificates....................................23
ARTICLE 10. SEAL.................................................................................................24
ARTICLE 11. FISCAL YEAR..........................................................................................24
ARTICLE 12. NOTICE...............................................................................................24
Section 12.1. Delivery of Notices..........................................................24
Section 12.2. Waivers of Notice............................................................25
ARTICLE 13. AMENDMENTS...........................................................................................25
Section 13.1. By-Laws......................................................................25
ARTICLE 14. DIVIDENDS............................................................................................25
</TABLE>
639423.16
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MARVEL ENTERPRISES, INC.
By-Laws
(as restated and amended)
ARTICLE 1.
OFFICES
-------
Section 1.1. Registered Office. The registered office and
registered agent of the Corporation in the State of Delaware shall be as set
forth in the Corporation's Certificate of Incorporation.
Section 1.2. Other Offices. The Corporation may also have an
office at such other place or places either within or without the State of
Delaware from time to time as the Board of Directors may determine or the
business of the Corporation may require.
ARTICLE 2.
MEETINGS OF STOCKHOLDERS
------------------------
Section 2.1. Place of Meetings. All meetings of the
stockholders of the Corporation shall be held at such place either within or
without the State of Delaware as may be designated from time to time by the
Board of Directors.
Section 2.2. Annual Meetings.
(a) The annual meeting of the stockholders for the election of
directors and for the transaction of such other business as may properly come
before the meeting shall be held at such date, time and place either within or
without the State of Delaware, as may be designated by the Board of Directors
from time to time.
(b) In respect of the annual meeting for any particular year
the Board of Directors may, by resolution fix a different day, time or place
(either within or without the State of Delaware) for the annual meeting.
(c) If the election of directors shall not be held on the day
fixed by the Board for any annual meeting, or on the day of any adjourned
session thereof, the Board of Directors shall
639423.16
<PAGE>
cause the election to be held at a special meeting as soon thereafter as
conveniently may be. At such special meeting, the stockholders may elect the
directors and transact such other business properly before the meeting with the
same force and effect as at an annual meeting duly called and held.
Section 2.3. Special Meetings. A special meeting of the
stockholders for any purpose or purposes may be called at any time or from time
to time by the Chief Executive Officer or Chairman of the Board, and shall be
called at any time or from time to time at the request in writing of a majority
of the total number of directors in office. A special meeting shall also be
called by the Chief Executive Officer or the Secretary upon the written request
of not less than 15% in interest of the Stockholders entitled to vote thereat.
At any special meeting, no business shall be transacted and no corporate action
shall be taken other than as stated in the notice of the meeting.
Section 2.4. Notice of Meetings.
(a) Except as otherwise required by law or the Certificate of
Incorporation, written notice of each annual or special meeting of the
stockholders shall be given to each stockholder of record entitled to vote at
such meeting not less than ten days nor more than sixty days before the date of
such meeting. Every such notice shall state the date, time and place of the
meeting and, in case of a special meeting, shall state briefly the purposes
thereof.
(b) Attendance of a stockholder at a meeting, in person or by
proxy, shall constitute a waiver of notice of such meeting, except when such
stockholder attends a meeting for the express purpose of objecting, at the
beginning of the meeting, to the transaction of any business on the grounds that
the meeting is not lawfully called or convened. Notice of any adjourned meeting
of the stockholders shall not be required to be given except by announcement at
the meeting so adjourned or when expressly required by law.
Section 2.5. Quorum.
(a) At each meeting of the stockholders, except where
otherwise provided by law, the Certificate of Incorporation or these By-Laws,
the holders of record of a majority in voting power of the issued and
outstanding shares of stock of the Corporation entitled to vote at such meeting,
present in person or represented by proxy, shall be required to constitute a
quorum for the transaction of business. Where a separate vote by class or
classes or one or more series of a class or classes of stock is required by law
or the Certificate of Incorporation for any matter, the holders of a majority in
voting power of the issued
639423.16
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<PAGE>
and outstanding shares of each such class or classes or one or more series of a
class or classes entitled to vote, present in person or represented by proxy,
shall be required to constitute a quorum with respect to a vote on that matter,
except that where the unanimous affirmative vote or written consent of all of
the holders of the outstanding shares of a class or classes of stock is required
by the Certificate of Incorporation with respect to any matter, all of the
holders of the outstanding shares of such class or classes entitled to vote,
present in person or by proxy, shall be required to constitute a quorum with
respect to a vote on that matter. For purposes of these By-Laws, the term "total
voting power" shall mean, (a) in the case of matters which do not require a
separate vote by class or classes or one or more series of a class or classes of
stock, the aggregate number of votes which all of the shares of stock, excluding
the votes of shares of stock having such entitlement only upon the happening of
a contingency, would be entitled to cast in the election of directors to the
Board of Directors, if all such shares of stock were present at a meeting of the
Corporation's stockholders for the purpose of the election of directors, and (b)
in the case of matters which do require a separate vote by class or classes or
one or more series of a class or classes of stock, the aggregate number of votes
which all of the shares of such class or classes or one or more series of a
class or classes of stock, excluding the votes of shares of stock having such
entitlement only upon the happening of a contingency, would be entitled to cast
on any such matter, if all of the shares of such class or classes or one or more
series of a class or classes of stock were present and voted at a meeting of the
Corporation's stockholders for the purpose of stockholder action on such matter.
(b) In the absence of a quorum at any annual or special
meeting of stockholders, a majority in total voting power of the shares of stock
entitled to vote, or in the case of matters requiring a separate vote by any
class or classes or one or more series of a class or classes of stock, a
majority in total voting power of the shares of each such class or classes or
one or more series of a class or classes entitled to vote, present in person or
represented by proxy or, in the absence of all such stockholders, any person
entitled to preside at or act as secretary of such meeting, shall have the power
to adjourn the meeting from time to time, if the date, time and place thereof
are announced at the meeting at which the adjournment is taken. At any such
adjourned meeting at which a quorum shall be present, any business may be
transacted which might have been transacted at the meeting as originally called.
If the adjournment is for more than thirty days, or if after the adjournment a
new record date is fixed for the adjourned meeting, a notice of the adjourned
meeting shall be given to each stockholder of record entitled to vote at the
meeting.
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Section 2.6. Notice of Stockholder Business and Nominations.
(a) Annual Meetings of Stockholders. (i) Nominations of
persons for election to the Board of Directors of the Corporation and the
proposal of business to be considered by the stockholders may be made at an
annual meeting of stockholders (A) pursuant to the Corporation's notice of
meeting, (B) by or at the direction of the Board of Directors or (C) by any
stockholder of the Corporation who was a stockholder of record at the time of
giving of notice provided for in this By-Law, who is entitled to vote at the
meeting and who complies with the notice procedures set forth in this By-Law.
(ii) For nominations or other business to be properly brought
before an annual meeting by a stockholder pursuant to clause (C) of paragraph
(a)(i) of this By-Law, the stockholder must have given timely notice thereof in
writing to the Secretary of the Corporation and such other business must
otherwise be a proper matter for stockholder action. To be timely, a
stockholder's notice shall be delivered to the Secretary at the principal
executive offices of the Corporation not later than the close of business on the
60th day prior to the first anniversary of the preceding year's annual meeting;
provided, however, that in the event that the date of the annual meeting is more
than 30 days before or after such anniversary date, notice by the stockholder to
be timely must be so delivered not later than the close of business on the later
of the 60th day prior to such annual meeting or the 10th day following the day
on which public announcement of the date of such meeting is first made by the
Corporation. In no event shall the public announcement of an adjournment of an
annual meeting commence a new time period for the giving of a stockholder's
notice as described above. Such stockholder's notice shall set forth (A) as to
each person whom the stockholder proposes to nominate for election or
re-election as a director all information relating to such person that is
required to be disclosed in solicitations of proxies for election of directors
in an election contest, or is otherwise required, in each case pursuant to
Regulation 14A under the Securities Exchange Act of 1934, as amended (the
"Exchange Act") and Rule 14a-11 thereunder (including such person's written
consent to being named in the proxy statement as a nominee and to serving as a
director if elected); (B) as to any other business that the stockholder proposes
to bring before the meeting, a brief description of the business desired to be
brought before the meeting, the reasons for conducting such business at the
meeting and any material interest in such business of such stockholder and the
beneficial owner, if any, on whose behalf the proposal is made; and (C) as to
the stockholder giving the notice and the beneficial owner, if any, on whose
behalf the nomination or proposal is made (x) the name and address of such
stockholder, as
639423.16
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<PAGE>
they appear on the Corporation's books, and of such beneficial owner and (y) the
class and number of shares of the Corporation which are owned beneficially and
of record by such stockholder and such beneficial owner.
(iii) Notwithstanding anything in the second sentence of
paragraph (a)(ii) of this By-Law to the contrary, in the event that the number
of directors to be elected to the Board of Directors of the Corporation is
increased and there is no public announcement by the Corporation naming all of
the nominees for director or specifying the size of the increased Board of
Directors at least 70 days prior to the first anniversary of the preceding
year's annual meeting, a stockholder's notice required by this By-Law shall also
be considered timely, but only with respect to nominees for any new positions
created by such increase, if it shall be delivered to the Secretary at the
principal executive offices of the Corporation not later than the close of
business on the 10th day following the day on which such public announcement is
first made by the Corporation.
(b) Special Meetings of Stockholders. Only such business shall
be conducted at a special meeting of stockholders as shall have been brought
before the meeting pursuant to the Corporation's notice of meeting. Nominations
of persons for election to the Board of Directors may be made at a special
meeting of stockholders at which directors are to be elected pursuant to the
Corporation's notice of meeting (i) by or at the direction of the Board of
Directors or (ii) provided that the Board of Directors has determined that
directors shall be elected at such meeting, by any stockholder of the
Corporation who is a stockholder of record at the time of giving of notice
provided for in this By-Law, who shall be entitled to vote at the meeting and
who complies with the notice procedures set forth in this ByLaw. In the event
the Corporation calls a special meeting of stockholders for the purpose of
electing one or more directors to the Board of Directors, any such stockholder
may nominate a person or persons (as the case may be),for election to such
position(s) as specified in the Corporation's notice of meeting, if the
stockholder's notice required by paragraph (a)(ii) of this By-Law shall be
delivered to the Secretary at the principal executive offices of the Corporation
not earlier than the close of business on the 90th day prior to such special
meeting and not later than the close of business on the later of the 60th day
prior to such special meeting or the 10th day following the day on which public
announcement is first made of the date of the special meeting and of the
nominees proposed by the Board of Directors to be elected at such meeting. In no
event shall the public announcement of an adjournment of a special meeting
commence a new time period for the giving of a stockholder's notice as described
above.
639423.16
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(c) General. (i) Only such persons who are nominated in
accordance with the procedures set forth in this By-Law shall be eligible to
serve as directors and only such business shall be conducted at a meeting of
stockholders as shall have been brought before the meeting in accordance with
the procedures set forth in this By-Law. Except as otherwise provided by law,
the Certificate of Incorporation or these By-Laws, the Chairman of the meeting
shall have the power and duty to determine whether a nomination or any business
proposed to be brought before the meeting was made or proposed, as the case may
be, in accordance with the procedures set forth in this By-Law and, if any
proposed nomination or business is not in compliance with this By-Law, to
declare that such defective proposal or nomination shall be disregarded.
(ii) For purposes of this By-Law, "public announcement" shall
mean disclosure in a press release reported by the Dow Jones News Service,
Associated Press or comparable national news service or in a document publicly
filed by the Corporation with the Securities and Exchange Commission pursuant to
Section 13, 14 or 15(d) of the Exchange Act.
(iii) Notwithstanding the foregoing provisions of this By-Law,
a stockholder shall also comply with all applicable requirements of the Exchange
Act and the rules and regulations thereunder with respect to the matters set
forth in this By-Law. Nothing in this By-Law shall be deemed to affect any
rights (i) of stockholders to request inclusion of proposals in the
Corporation's proxy statement pursuant to Rule 14a-8 under the Exchange Act or
(ii) of the holders of any series of Preferred Stock to elect directors under
specified circumstances.
Section 2.7. Organization. At each meeting of the
stockholders, the Chairman of the Board or in his absence, the Chief Executive
Officer, or in his absence, the President or any other officer designated by the
Board, shall act as chairman of and preside over the meeting, and the Secretary
or an Assistant Secretary of the Corporation, or any other person whom the
chairman of such meeting shall appoint, shall act as secretary of the meeting
and keep the minutes thereof.
Section 2.8. Voting.
(a) Except as otherwise provided by law or by the Certificate
of Incorporation or these By-Laws, at every meeting of the stockholders or in
the case of any written consent of stockholders, and for all other purposes,
each holder of record of shares of Common Stock on the relevant record date
shall be entitled to one (1) vote for each share of Common Stock standing in
such person's name on the stock transfer records of the
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Corporation. If no such record date shall have been fixed by the Board, then the
record date shall be as fixed by applicable law.
(b) Persons holding a share or shares of stock in a fiduciary
capacity shall be entitled to vote the share or shares so held and to consent in
writing with respect to such share or shares. If shares of stock stand of record
in the names of two or more persons, or if two or more persons have the same
fiduciary relationship respecting the same shares of stock, such persons may
designate in writing one or more of their number to represent such stock and
vote the shares so held, unless there is a provision to the contrary in the
instrument or order, if any, defining their powers and duties, appointing them,
or creating their relationship, and a copy of such instrument or order is
furnished to the Secretary of the Corporation along with written notice to the
contrary.
(c) Persons whose stock is pledged shall be entitled to vote
the pledged shares, unless in the transfer by the pledgor on the books of the
Corporation the pledgor has expressly empowered the pledgee to vote thereon, in
which case only the pledgee, or his proxy, may represent such stock and vote
thereon.
(d) Any stockholder entitled to vote may do so in person or by
his proxy appointed by an instrument in writing subscribed by such stockholder
or by his attorney thereunto authorized, delivered to the secretary of the
meeting; provided, however, that no proxy shall be voted after three years from
its date, unless said proxy provides for a longer period. The provisions of this
subsection 2.8(d) are not intended to and do not limit the manner in which a
stockholder may authorize another person or persons to act for him as proxy.
(e) At all meetings of the stockholders at which a quorum is
present, except as otherwise provided by law or by the Certificate of
Incorporation or these By-Laws, all matters shall be decided by the affirmative
vote of the holders of a majority in voting power of the shares entitled to vote
thereon and present in person or represented by proxy at such meeting, voting as
a single class. Except as otherwise provided by the Certificate of
Incorporation, where a separate vote by class or classes or one or more series
of a class or classes of stock is required for any matter, such matters shall be
decided by the affirmative vote of the holders of a majority in voting power of
the shares of each such class or classes or one or more series of a class or
classes entitled to vote thereon and present in person or represented by proxy
at such meeting, a quorum being present. Except as otherwise provided by the
Certificate of Incorporation or these By-Laws, directors shall be elected by the
affirmative vote of a plurality in voting power of the shares present in person
or represented by proxy and entitled to vote for the election of directors at a
meeting at which a quorum is present.
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Section 2.9. No Stockholder Action by Written Consent. Subject
to the rights of the holders of any series of Preferred Stock with respect to
such series of Preferred Stock, any action required or permitted to be taken by
the stockholders of the Corporation must be effected at a meeting of
stockholders of the Corporation and may not be effected by any consent in
writing by such stockholder.
Section 2.10. Inspectors. The Corporation shall, in advance of
any meeting of the stockholders, appoint one or more inspector to act at the
meeting of the stockholders and make a written report thereof. Such inspectors,
among other things, shall accept and count the votes for and against the matters
presented for a vote, make a written report of the results of such votes, and
subscribe and deliver to the secretary of the meeting a certificate stating the
number of shares of stock issued and outstanding and entitled to vote thereon
and the number of shares voted for and against the questions presented. If no
inspector or alternate is able to act at a meeting of stockholders, the chairman
of the meeting shall appoint one or more inspectors to act at the meeting. The
inspectors need not be stockholders of the Corporation, and any director or
officer of the Corporation may be an inspector on any matter subject to a vote
other than a vote for or against his election to any position or office on or
with the Board or the Corporation or on any other matter subject to a vote in
which he may be directly interested. Before entering upon the discharge of any
of his duties as such, each inspector shall subscribe an oath faithfully to
execute the duties of an inspector with strict impartiality and according to the
best of his ability.
Section 2.11. List of Stockholders.
(a) It shall be the duty of the Secretary or other officer of
the Corporation who shall have charge of its stock ledger to prepare and make,
or cause to be prepared and made, at least ten days before every meeting of the
stockholders, a complete list of the stockholders entitled to vote thereat,
arranged in alphabetical order and showing the address of each stockholder and
the number of shares registered in the name of each stockholder. Such list shall
be open during ordinary business hours to the examination of any stockholder for
any purpose germane to the meeting for a period of at least ten days prior to
the meeting, either at a place within the city where the meeting is to be held,
which place shall be specified in the notice of the meeting or, if not so
specified, at the place where the meeting is to be held.
(b) Such list shall be produced and kept at the time and place
of the meeting during the whole time thereof and may be inspected by any
stockholder who is present.
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(c) The stock ledger shall be the conclusive evidence as to
who are the stockholders entitled to examine the stock ledger, and the list of
stockholders required by this Section 2.11, or the books of the Corporation, or
to vote in person or by proxy at any meeting of stockholders.
ARTICLE 3.
BOARD OF DIRECTORS
------------------
Section 3.1. Number of Directors. The number of Directors
which shall constitute the entire Board of Directors shall be eleven (11).
Section 3.2. General Powers.
(a) Except as otherwise provided in the Certificate of
Incorporation, the business, property, policies, and affairs of the Corporation
shall be managed by or under the direction of the Board of Directors.
(b) Compensation and Nominating, Audit, Finance and Other
Committees. The Board of Directors may, by resolution adopted by a majority of
the Board (i) designate a Compensation and Nominating Committee to exercise,
subject to applicable provisions of law, the functions regularly administered by
committees of such type including, without limitation, the power to review and
recommend to the Board the compensation and benefit arrangements for the
officers of the Corporation, the administering of the stock option plans and
executive compensation programs of the Corporation, including bonus and
incentive plans applicable to officers and key employees of the Corporation and
to recommend to the Board nominees for election as Directors, (ii) designate an
Audit Committee to exercise, subject to applicable provisions of laws, the
functions regularly administered by committees of such type including, without
limitation, (A) to review the professional services and independence of the
Corporation's independent auditors and the scope of the annual external audit as
recommended by the independent auditors, (B) to ensure that the scope of the
annual external audit by the independent auditors of the Corporation is
sufficiently comprehensive, (C) to review, in consultation with the independent
auditors and the internal auditors, the plan and results of the annual external
audit, the adequacy of the Corporation's internal control systems and the
results of the Corporation's internal audits, (D) to review with management and
the independent auditors, the Corporation's annual financial statements,
financial reporting practices and the results of each external audit, and (E) to
consider the qualification of the
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Corporation's independent auditors, to make recommendations to the Board as to
their selection and to review the relationship between such independent auditors
and management, (iii) designate a Finance Committee to exercise, subject to
applicable provisions of law, the functions regularly administered by committees
of such type including, without limitation, to make recommendations to the Board
with respect to the Corporation's credit arrangements, the issuance of equity
and long term debt instruments and other financial matters, and(iv) by
resolution similarly adopted, designate one or more other committees. The
Compensation and Nominating Committee, the Audit Committee, the Finance
Committee and each such other committee shall consist of five or more directors
of the Corporation. The Board may designate one or more directors as alternate
members of any committee, who may replace any absent or disqualified member at
any meeting of the committee. Any such committee, other than the Compensation
and Nominating Committee, Audit Committee and Finance Committee (the powers of
which are expressly provided for herein), may to the extent permitted by law
exercise such powers and shall have such responsibilities as shall be specified
in the designating resolution. In the absence or disqualification of any member
of such committee or committees, the member or members thereof present at any
meeting and not disqualified from voting, whether or not constituting a quorum,
may unanimously appoint another member of the Board to act at the meeting in the
place of any such absent or disqualified member. Under no circumstances may the
committee members, in their capacities as such, appoint another director to act
in the place of such absent or disqualified member. In the event that, and for
so long as, there are no duly appointed members, no duly designated alternate
members, and no duly appointed replacement members of one (1) or more committees
of the Board, the powers and authority that otherwise would be delegated to and
exercised by such committee shall be reserved to and exercised by the Board.
A majority of any committee may determine its action and fix the time
and place of its meetings, unless the Board shall otherwise provide. Notice of
such meetings shall be given to each member of the committee in the manner
provided for in Section 3.10 of these By-Laws. The Board shall have power at any
time to fill vacancies in, to change the membership of, or to dissolve any such
committee. Nothing herein shall be deemed to prevent the Board from appointing
one or more committees consisting in whole or in part of persons who are not
directors of the Corporation; provided, however, that no such committee shall
have or may exercise any authority of the Board.
Each committee of the Board shall keep regular minutes of its
proceedings and report the same to the Board when so requested by the Board. Any
such committee shall fix its own rules of procedure, subject to the approval of
the Board and the
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provisions of the Certificate of Incorporation and of these By
Laws.
Section 3.3. Election of Directors. Except as otherwise
provided in the Certificate of Incorporation, the directors shall be elected by
the stockholders at the annual meeting of stockholders.
Section 3.4. Tenure and Qualifications. A director need not be
a stockholder. Each director shall hold office until the annual meeting of the
Stockholders next following his election and until his successor shall have been
elected and qualified, or until his death, or until he shall resign, or until he
shall have been removed or disqualified.
Section 3.5. Quorum and Manner of Acting.
(a) Except as otherwise provided by law, the Certificate of
Incorporation or these By-Laws, a majority of the whole Board shall be required
to constitute a quorum for the transaction of business at any meeting of the
Board, and the affirmative vote of a majority of the directors present at any
meeting of the Board at which a quorum is present shall be required for the
taking of any action by the Board. Except as otherwise provided by law, the
Certificate of Incorporation, or By-Laws, a majority of the total number of
members of any committee of the Board shall be required to constitute a quorum
for the transaction of business at any meeting of such committee, and the
affirmative vote of a majority of the members of any committee of the Board
present at any meeting of such committee at which a quorum is present shall be
required for the taking of any action by such committee.
(b) In the absence of a quorum at any meeting of the Board of
Directors or of any committee of the Board, such meeting need not be held; or a
majority of the directors or committee members, as the case may be, present
thereat or, if no director or committee member be present, the Secretary, may
adjourn such meeting from time to time until a quorum shall be present. Notice
of any adjourned meeting need not be given except by announcement at the meeting
at which the adjournment is taken.
Section 3.6. Action by Communications Equipment. The directors
may participate in a meeting of the Board or any committee thereof by means of
conference telephone or similar communications equipment by means of which all
persons participating in the meeting can hear each other, and such participation
shall constitute presence in person at such meeting.
Section 3.7. Offices, Place of Meeting and Records. The Board
and any committee of the Board may hold meetings and
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have an office or offices at such place or places within or without the State of
Delaware as the Board or such committee, as the case may be, may from time to
time determine. The place of meeting shall be as from time to time designated by
the Board or such committee, as the case may be, or as specified or fixed in the
respective notices or waivers of notice thereof, except where no notice of such
meeting is required, and except as otherwise provided by law, by the Certificate
of Incorporation or these ByLaws.
Section 3.8. Annual Meeting. The Board shall meet for the
purpose of organization, the election of principal officers and the transaction
of other business, if a quorum be present, immediately following each annual
election of directors by the stockholders; or the time and place of such meeting
may be fixed by a majority of the total number of directors in office.
Section 3.9. Regular Meetings. Regular meetings of the Board
and committees of the Board shall be held at such places and at such times as
the Board or such committee, as the case may be, shall from time to time
determine. Notice of regular meetings need not be given.
Section 3.10. Special Meetings; Notice. Special meetings of
the Board of Directors shall be held whenever called by the Chief Executive
Officer or Chairman of the Board or by a majority of the total number of
directors in office. Special meetings of committees of the Board shall be held
whenever called by the Chief Executive Officer or Chairman of the Board, a
majority of the total number of directors in office or a majority of the members
of such committee. Notice of each such meeting shall be mailed to each director
or committee member, as the case may be, addressed to him at his usual place of
business at least ten days before the day on which the meeting is to be held, or
shall be sent to him at such place of business by facsimile transmission or
other available means, or delivered personally or by telephone not later than 24
hours before the day on which the meeting is to be held. Each such notice shall
state the time and place of the meeting and the purpose thereof. Notice of any
such meeting need not be given to any director or committee member, as the case
may be, however, if waived by him in writing, whether before or after such
meeting shall be held, or if he shall be present at such meeting other than for
the express purpose of objecting, at the beginning of the meeting, to the
transaction of any business because the meeting is not lawfully called or
convened.
Section 3.11. Organization. At each meeting of the Board of
Directors, the Chairman of the Board or, in his absence, a director chosen by a
majority of the directors present shall act as chairman of and preside over the
meeting. At each meeting of any committee of the Board, the Chairman of the
Board, if he
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be a member of such committee, or in his absence, the member of such committee
designated as chairman of such committee by the Board, or in the absence of such
designation or such designated chairman, a member of such committee chosen by a
majority of the members of such committee present, shall act as chairman of and
preside over the meeting. The Secretary or, in his absence an Assistant
Secretary or, in the absence of the Secretary and all Assistant Secretaries, a
person whom the chairman of such meeting shall appoint, shall act as secretary
of such meeting and keep the minutes thereof.
Section 3.12. Order of Business. At all meetings of the Board
of Directors and committees of the Board, business shall be transacted in the
order determined by the chairman of such meeting.
Section 3.13. Removal of Directors. Except as otherwise
provided by law, the Certificate of Incorporation or these By-Laws, any director
or the entire Board may be removed, either with or without cause, at any time
and from time to time, by the affirmative vote or written consent of a majority
in voting power of the shares of the capital stock of the Corporation then
entitled to vote for the election of directors of the Corporation.
Section 3.14. Resignation. Any director of the Corporation may
resign at any time by giving written notice of his resignation to the Board, the
Chief Executive Officer, President or Chairman of the Board, or the Secretary of
the Corporation. Such resignation shall take effect at the date of receipt of
such notice or at any later time specified therein; and, unless otherwise
specified therein, the acceptance of such resignation shall not be necessary to
make it effective.
Section 3.15. Vacancies. Except as otherwise provided in the
Certificate of Incorporation, vacancies on the Board, caused by death,
resignation, removal, disqualification, or other cause, and newly created
directorships resulting from any increase in the authorized number of directors,
may be filled by a majority action of the remaining directors then in office,
though less than a quorum, or by election upon the vote of the stockholders of
the Corporation at the next annual meeting or any special meeting called for
such purpose or upon action of the stockholders of the Corporation taken by
written consent, and each director so elected to fill any such vacancy or newly
created directorship shall hold office until the next annual election of
directors and until his successor shall be duly elected and qualified or until
his death or until he shall resign or until he shall have been removed or
disqualified.
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Section 3.16. Compensation. Each director, in consideration of
his serving as such, shall be entitled to receive from the Corporation such
amount per annum or such fees for attendance at directors' meetings, or both, as
the Board shall from time to time determine, together with reimbursement for the
reasonable expenses incurred by him in connection with the performance of his
duties; provided that nothing herein contained shall be construed to preclude
any director from serving the Corporation or its subsidiaries in any other
capacity and receiving proper compensation therefor.
Section 3.17. Interested Directors. No contract or transaction
between the Corporation and one or more of its directors or officers, or between
the Corporation and any other corporation, partnership, association or other
organization in which one or more of its directors or officers are directors or
officers, or have a financial interest, that is otherwise duly authorized in
accordance with the provisions of the Certificate of Incorporation, shall be
void or voidable solely for this reason, or solely because the director or
officer is present at or participates in the meeting of the Board or committee
thereof which authorizes the contract or transaction, or solely because his or
their votes are counted for such purpose, if (i) the material facts as to his or
their relationship or interest and as to the contract or transaction are
disclosed or are known to the Board or the committee, and the Board or committee
in good faith authorizes the contract or transaction by the affirmative vote of
a majority of the disinterested directors, even though the dis interested
directors be less than a quorum; or (ii) the material facts as to his or their
relationship or interest and as to the contract or transaction are disclosed or
are known to the stockholders entitled to vote thereon, and the contract or
transaction is specifically approved in good faith by vote of the stockholders;
or (iii) the contract or transaction is fair as to the Corporation as of the
time it is authorized, approved or ratified, by the Board, a committee thereof
or the stockholders. Common or interested directors may be counted in
determining the presence of a quorum at a meeting of the Board or of a committee
which authorizes the contract or transaction.
ARTICLE 4.
ACTION BY CONSENT
-----------------
Section 4.1. Consent by Directors. Unless otherwise provided
in the Certificate of Incorporation or these By-Laws, any action required or
permitted to be taken at any meeting of the Board or of any committee thereof
may be taken without a meeting, without prior notice and without a vote if a
written consent thereto is signed by all members of the Board or of such
committee, as the case may be, and such written consent or
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consents is filed with the minutes of the proceedings of the
Board or such committee.
Section 4.2. Consent by Stockholders. Any action required or
permitted to be taken at any meeting of the stockholders may be taken without a
meeting, without prior notice and without a vote upon the delivery to the
Corporation in accordance with Section 228 of the General Corporation Law of the
State of Delaware, as the same now exists or may hereafter be amended, or the
provisions of a successor statute ("Section 228"), of a written consent or
written consents of the holders of outstanding shares of stock having not less
than the minimum number of votes that would be necessary to authorize or take
such action at a meeting at which all shares entitled to vote thereon were
present and voted. Prompt notice of the taking of any corporate action without a
meeting by less than unanimous written consent shall be given to those
stockholders who have not consented in writing, and any certificate required to
be filed with the office of the Secretary of State of the State of Delaware with
respect to such matter shall state that written consent has been given in
accordance with Section 228 and that such written notice has been given.
ARTICLE 5.
OFFICERS
--------
Section 5.1. Number. The principal officers of the Corporation
shall be a Chairman of the Board, Chief Executive officer, a President, a Chief
Financial Officer, a Treasurer and a Secretary. In addition, there may be such
other or subordinate officers, agents and employees as may be appointed in
accordance with the provisions of Section 5.12. Any two or more offices may be
held by the same person, except that the office of Secretary shall be held by a
person other than the person holding the office of President.
Section 5.2. Election, Qualifications and Term of Office. Each
officer of the Corporation, except such officers as may be appointed in
accordance with the provisions of Section 5.12, shall be elected annually by the
Board of Directors and shall hold office until his successor shall have been
duly elected and qualified, or until his death, or until he shall have resigned
or shall have been removed.
Section 5.3. Removal. Any officer may be removed, either with
or without cause, by the action of the Board of Directors.
Section 5.4. Resignation. Any officer may resign at any time
by giving written notice to the Board of Directors, or
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the Chairman of the Board, the Chief Executive Officer, the President or the
Secretary of the Corporation. Any such resignation shall take effect at the date
of receipt of such notice or at any later time specified therein; and, unless
otherwise specified therein, the acceptance of such resignation shall not be
necessary to make it effective.
Section 5.5. Vacancies. A vacancy in any office under this
Article Five because of death, resignation, removal, disqualification or any
other cause shall be filled for the unexpired portion of the term in the manner
prescribed in this Article Five for regular election or appointment to such
office.
Section 5.6. Chairman of the Board. The directors may elect
one of their members to be Chairman of the Board. The Chairman of the Board, as
such, shall be subject to the control of and may be removed by the Board. The
Chairman of the Board shall be a director and shall preside at all meetings of
the Board and stockholders. The Chairman of the Board shall have general
executive powers and such specific powers and duties as from time to time may be
conferred or assigned by the Board.
Section 5.7. Chief Executive Officer. Subject to the direction
of the Board or the Chairman of the Board, the Chief Executive Officer shall be
the chief executive officer of the Corporation, shall have general charge and
supervision of the business of the Corporation and shall exercise chief
executive powers and such specific powers and shall perform such duties as from
time to time may be conferred upon or assigned to him by the Board, the Chairman
of the Board or any committee thereof designated by it to so act. In the absence
of the Chairman of the Board, the Chief Executive Officer shall preside at all
meetings of the Board and the stockholders.
Section 5.8. President. The President shall have general
executive powers and such specific powers and shall perform such duties as from
time to time may be conferred upon or assigned to him by the Board, the Chairman
of the Board, the Chief Executive Officer, or any committee of the Board
designated by it to so act.
Section 5.9. Chief Financial Officer. The Chief Financial
Officer shall maintain or cause to be maintained adequate records of all assets,
liabilities, and transactions of the Corporation and adequate internal
accounting controls; shall prepare or cause to be prepared such financial
statements or reports on the Corporation's results of operations or financial
condition as required by law or directed by the Board; shall insure that
adequate audits thereof are currently and regularly made; and shall, in
consultation with the Chief Executive Officer or the Chairman of the Board,
undertake measures and implement procedures designed to facilitate or further
the foregoing. His
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duties and powers shall, so far as the Chief Executive Officer or the Chairman
of the Board may deem practicable, extend to all subsidiary corporations.
Section 5.10. Treasurer. The Treasurer shall have charge and
custody of, and be responsible for, all funds and securities of the Corporation,
and shall deposit all such funds to the credit of the Corporation in such banks,
trust companies or other depositories as shall be selected in accordance with
the provisions of these By-Laws. The Treasurer shall disburse the funds of the
Corporation as may be ordered by the Board, making proper vouchers for such
disbursements, and shall render to the Board or the committee of the Board to
which he reports or the stockholders, whenever the Board may require him so to
do, a statement of all his transactions as Treasurer and of the financial
condition of the Corporation; and, in general, he shall perform all the duties
as from time to time may be assigned to him by the Board, or by the Chief
Executive Officer or Chairman of the Board. When required by the Board, the
Treasurer shall give bonds for the faithful discharge of his duties in such sums
and with such sureties as the Board shall approve.
Section 5.11. Secretary. The Secretary shall record or cause
to be recorded in books provided for the purpose the minutes of the meetings of
the stockholders, the Board, and all committees of which a secretary shall not
have been appointed; shall see that all notices are duly given in accordance
with the provisions of the Certificate of Incorporation and these By-Laws and as
required by law; shall be custodian of all corporate records (other than
financial records) and of the seal of the Corporation and see that the seal is
affixed to all documents the execution of which on behalf of the Corporation
under its seal is duly authorized, in accordance with, and required by, the
provisions of these By-Laws; shall keep, or cause to be kept, the list of
stockholders as required by Section 2.11 of Article Two of these By-Laws, which
shall include the post-office addresses of the stockholders and the number of
shares held by them, respectively, and shall make or cause to be made, all
proper changes therein; shall see that the books, reports, statements,
certificates and all other documents and records required by law are properly
kept and filed; and, in general, shall perform all duties incident to the office
of Secretary and such other duties as may from time to time be assigned to him
by the Board, by any committee of the Board designated by it to so act, or by
the Chief Executive Officer or Chairman of the Board. The Secretary shall be
appointed by the Chief Executive Officer or by the Board of Directors.
Section 5.12. Other Officers. The Corporation may have such
other officers, agents, and employees as the Board may designate, including
without limitation, one or more Senior or Executive Vice Presidents, one or more
Vice Presidents, a Chief
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Operating Officer, a Senior Legal Officer, a Controller, one or more Assistant
Controllers, one or more Assistant Treasurers, and one or more Assistant
Secretaries, each of whom shall hold such office, for such period, have such
authority, and perform such duties as the Board, any committee of the Board
designated by it to so act, or the Chief Executive Officer or Chairman of the
Board may from time to time determine. The Board may delegate to any principal
officer the power to appoint or remove any such subordinate officers, agents or
employees.
Section 5.13. Salaries. The salaries of the principal officers
of the Corporation shall be fixed from time to time by the Board or a duly
designated and constituted committee thereof duly empowered and authorized so to
act, and none of such officers shall be prevented from receiving a salary by
reason of the fact that he is a director of the Corporation.
ARTICLE 6.
INDEMNIFICATION, ETC.
---------------------
Section 6.1. Indemnification and Advances of Expenses. To the
fullest extent permitted by the General Corporation Law of the State of Delaware
("GCL"), as the same now exists or may hereafter be amended, and, to the extent
required by the GCL, only as authorized in the specific case upon the making of
a determination that indemnification of the person is proper in the
circumstances because he has met the applicable standard of conduct prescribed
in Sections 145(a) and (b) of the GCL, the Corporation shall indemnify and hold
harmless any person who was or is a director, officer or incorporator of the
Corporation from and against any and all expenses (including counsel fees and
disbursements), judgments, fines (including excise taxes assessed on a person
with respect to an employee benefit plan), and amounts paid in settlement that
may be imposed upon or incurred by him in connection with, or as a result of,
any threatened, pending, or completed proceeding, whether civil, criminal,
administrative or investigative (whether or not by or in the right of the
Corporation), in which he is or may become involved, as a party or otherwise, by
reason of the fact that he is or was such a director, officer or incorporator of
the Corporation or is or was serving at the request of the Corporation as a
director, officer, incorporator, employee, partner, trustee or agent of another
corporation, partnership, joint venture, trust or other enterprise (including an
employee benefit plan), whether or not he continues to be such at the time such
expenses and judgments, fines and amounts paid in settlement shall have been
imposed or incurred. The Corporation shall be required to indemnify such a
person who is or was a director, officer, or incorporator in connection with a
proceeding (or part thereof) initiated by such person, however, only if the
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initiation of such proceeding (or part thereof) by such person was authorized by
the Board. Such right of indemnification shall inure whether or not such
expenses and judgments, fines and amounts paid in settlement are imposed or
incurred based on matters which antedate the adoption of this Article Six. Such
right of indemnification shall continue as to a person who has ceased to be a
director, officer or incorporator of the Corporation, and shall inure to the
benefit of the heirs and personal representatives of such a person.
Expenses incurred by a person who is or was a director,
officer, or incorporator of the Corporation in defending or investigating a
threatened or pending action, suit or proceeding in which such person is or may
become involved, as a party or otherwise, by reason of the fact that he is or
was a director, officer, or incorporator of the Corporation or is or was serving
at the request of the Corporation as a director, officer, incorporator,
employee, partner, trustee, or agent of another corporation, partnership, joint
venture, trust or other enterprise (including an employee benefit plan), shall
be paid by the Corporation in advance of final disposition of such action, suit
or proceeding upon receipt of an undertaking by or on behalf of such person to
repay such amount if it shall ultimately be determined that he is not entitled
to be indemnified by the Corporation under this Article Six or otherwise.
The rights to indemnification and advancement of expenses
provided by this Article Six shall not be deemed exclusive of any other rights
which are or may be provided now or in the future under any provision currently
in effect or hereafter adopted of these By-Laws, by any agreement, by vote of
stockholders, by resolution of directors, by provision of law or otherwise.
Section 6.2. Employees and Agents. The Corporation may, to the
extent authorized from time to time by the Board of Directors, provide to
employees and agents of the Corporation who are not directors, officers or
incorporators rights to indemnification and advancement of expenses similar to
those conferred in this Article Six on directors, officers and incorporators of
the Corporation.
Section 6.3. Repeal or Modification. Any repeal or
modification of this Article Six shall not adversely affect any rights to
indemnification and advancement of expenses of a director, officer or
incorporator of the Corporation existing pursuant to this Article Six with
respect to any acts or omissions occurring prior to such repeal or modification.
Section 6.4. Other Indemnification. The Corporation's
obligation, if any, to indemnify any person who is or was serving at its request
as a director, officer,
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incorporator, employee, partner, trustee, or agent of another corporation,
partnership, joint venture, trust or other enterprise (including an employee
benefit plan), shall be reduced by any amount such person actually receives as
indemnification from such other corporation, partnership, joint venture, trust
or other enterprise.
ARTICLE 7.
CONTRACTS, CHECKS, DRAFTS, BANK ACCOUNTS, ETC.
----------------------------------------------
Section 7.1. Execution of Contracts. Unless the Board shall
otherwise determine, the Chief Executive Officer, President or Chairman of the
Board, any Vice President, the Treasurer or the Secretary may enter into any
contract or execute any contract or other instrument, the execution of which is
not otherwise specifically provided for, in the name and on behalf of the
Corporation. The Board, or any committee designated by it to so act, except as
otherwise provided in these By-Laws, may authorize any other or additional
officer or officers or agent or agents of the Corporation to so act, and such
authority may be general or confined to specific instances. Unless duly
authorized so to do by the Certificate of Incorporation or by these By-Laws or
by the Board or by any such committee, no officer, agent or employee shall have
any power or authority to bind the Corporation by any contract or engagement or
to pledge its credit or to render it liable pecuniarily for any purpose or to
any amount.
Section 7.2. Loans. No loan shall be contracted on behalf of
the Corporation, and no evidence of indebtedness shall be issued, endorsed or
accepted in its name, unless duly authorized by the Board or any committee
designated by it to so act. Such authority may be general or confined to
specific instances. When so authorized, the officer or officers thereunto
authorized may effect loans and advances at any time for the Corporation from
any bank, trust company or other institution, or from any firm, corporation or
individual, and for such loans and advances may make, execute and deliver
promissory notes or other evidences of indebtedness of the Corporation, and,
when authorized as aforesaid, as security for the payment of any and all loans,
advances, indebtedness and liabilities of the Corporation, may mortgage, pledge,
hypothecate or transfer any real or personal property at any time owned or held
by the Corporation, and to that end execute instruments of mortgage or pledge or
otherwise transfer such property.
Section 7.3. Checks, Drafts, etc. All checks, drafts, bills of
exchange or other orders for the payment of money, obligations, notes, or other
evidence of indebtedness, bills of lading, warehouse receipts and insurance
certificates of
639423.16
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<PAGE>
the Corporation, shall be signed or endorsed by such officer or officers, agent
or agents, attorney or attorneys, employee or employees, of the Corporation as
shall from time to time be determined by resolution of the Board or any
committee designated by it to so act.
Section 7.4. Deposits. All funds of the Corporation not
otherwise employed shall be deposited from time to time to the credit of the
Corporation in such banks, trust companies or other depositories as the Board or
any committee designated by it to so act may from time to time designate, or as
may be designated by any officer or officers or agent or agents of the
Corporation to whom such power may be delegated by the Board or any committee
designated by it to so act and, for the purpose of such deposit and for the
purposes of collection for the account of the Corporation may be endorsed,
assigned and delivered by any officer, agent or employee of the Corporation or
in such other manner as may from time to time be designated or determined by
resolution of the Board or any committee designated to so act.
Section 7.5. Proxies in Respect of Securities of Other
Corporations. Unless otherwise provided by resolution adopted by the Board or
any committee designated by it to so act, the Chairman of the Board, Chief
Executive Officer or President or any Vice President may from time to time
appoint an attorney or attorneys or agent or agents of the Corporation, in the
name and on behalf of the Corporation, to cast the votes which the Corporation
may be entitled to cast as the holder of stock or other securities in any other
corporation, association or trust, any of whose stock or other securities may be
held by the Corporation, at meetings of the holders of the stock or other
securities of such other corporation, association or trust, or to consent in
writing, in the name of the Corporation as such holder, to any action by or
respecting such other corporation, association or trust, and may instruct the
person or persons so appointed as to the manner of casting such votes or giving
such consent, and may execute or cause to be executed in the name and on behalf
of the Corporation and under its corporate seal, or otherwise, all such written
proxies or other instruments as he may deem necessary or proper in the premises.
ARTICLE 8.
BOOKS AND RECORDS
-----------------
Section 8.1. Place. The books and records of the Corporation
may be kept at such places within or without the state of Delaware as the Board
may from time to time determine.
Section 8.2. Addresses of Stockholders. Each stockholder shall
furnish to the Secretary of the Corporation or
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<PAGE>
to a transfer agent of the Corporation an address at which notices of meetings
and all other corporate notices and communications may be served upon or mailed
to him, and if any stockholder shall fail to designate such address, corporate
notices and communications may be served upon him by mail, postage prepaid, to
him at his post office address last known to the Secretary or to a transfer
agent of the Corporation or by transmitting a notice thereof to him at such
address by facsimile transmission or other available method.
Section 8.3. Record Dates. Except as otherwise provided by law
or these By-Laws, in order that the Corporation may determine the stockholders
entitled to notice of or to vote at any meeting of stockholders or any
adjournment thereof, or entitled to consent to corporate action in writing
without a meeting, or entitled to receive payment of any dividend or other
distribution or allotment of any rights, or entitled to exercise any rights in
respect of any change, conversion or exchange of stock, or for the purpose of
any other lawful action, the Board may fix, in advance, a record date, which
shall not be more than sixty days nor less than ten days before the date of such
meeting, or more than sixty days prior to any other action. A determination of
stockholders of record entitled to notice of or to vote at a meeting of
stockholders shall apply to any adjournment of the meeting; provided, however,
that the Board may fix a new record date for the adjourned meeting.
Section 8.4. Audit of Books and Accounts. The books and
accounts of the Corporation shall be audited at least once in each fiscal year
by certified public accountants of good standing selected by the Board.
ARTICLE 9.
SHARES AND THEIR TRANSFER
-------------------------
Section 9.1. Certificates of Stock. Every holder of record of
shares of stock of the Corporation shall be entitled to have a certificate
certifying the number of shares owned by him and designating the class of stock
to which such shares belong, which shall otherwise be in such form as the Board
may prescribe. Every such certificate shall be signed by the Chairman of the
Board, President or a Vice President, and the Treasurer or any Assistant
Treasurer or the Secretary or any Assistant Secretary of the Corporation; any
and all signatures may be in facsimile form. In case any officer or officers who
shall have signed, or whose facsimile signature or signatures shall have been
used on, any such certificate or certificates shall cease to be such officer or
officers of the Corporation, whether because of death, resignation or otherwise,
before such certificate or certificates shall have been delivered by the
Corporation, such certificate or
639423.16
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<PAGE>
certificates may nevertheless be issued and delivered by the Corporation as
though the person or persons who signed such certificate or whose facsimile
signature or signatures shall have been used had not ceased to be such officer
or officers of the Corporation.
Section 9.2. Record. A record shall be kept of the name of the
person, firm or corporation owning the shares of stock represented by each
certificate for shares of stock of the Corporation issued, the number of shares
represented by each such certificate, and the date thereof, and, in case of
cancellation, the date of cancellation. The Corporation shall be entitled to
recognize the exclusive right of a person registered on its books as the owner
of shares to receive dividends, and to vote as such owner, and to hold liable
for calls and assessments a person registered on its books as the owner of
shares, and shall not be bound to recognize any equitable or other claim to or
interest in such share or shares on the part of any other person, whether or not
it shall have express or other notice thereof, except as otherwise provided by
the Certificate of Incorporation or law. The stock record books and the blank
stock certificate books shall be kept by the Secretary or by any other officer
or agent designated by the Board.
Section 9.3. Transfer of Stock. Except as otherwise provided
by law or the Certificate of Incorporation, transfers of shares of the stock of
the Corporation shall be made only on the books of the Corporation by the
registered holder thereof, or by his attorney thereunto authorized, and on the
surrender of the certificate or certificates for such shares properly endorsed
or accompanied by proper instruments of transfer; provided, however, that such
transfer is subject to the transfer restrictions contained in the Certificate of
Incorporation.
Section 9.4. Transfer Agent and Registrar; Regulations. The
Corporation shall, if and whenever the Board shall so determine, maintain one or
more transfer offices or agencies, each in charge of a transfer agent designated
by the Board, where the shares of the capital stock of the Corporation shall be
directly transferable, and also if and whenever the Board shall so determine,
maintain one or more registry offices, each in charge of a registrar designated
by the Board, where such shares of stock shall be registered. The Board may make
such rules and regulations as it may deem expedient, not inconsistent with the
Certificate of Incorporation or these By-Laws, concerning the issue, transfer
and registration of certificates for shares of the capital stock of the
Corporation.
Section 9.5. Lost, Destroyed or Mutilated Certificates. The
Board may direct a new certificate representing shares of stock to be issued in
place of any certificate theretofore issued by the Corporation alleged to have
639423.16
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<PAGE>
been lost, stolen or destroyed, upon the making of an affidavit of that fact by
the person claiming the certificate of stock to be lost, stolen or destroyed.
When authorizing such issue of a new certificate, the Board may, in its
discretion and as a condition precedent to the issuance thereof, require the
owner of such lost, stolen or destroyed certificate, or his legal
representative, to advertise the same in such manner as the Board of Directors
shall require and/or give the Corporation a bond in such sum as the Board may
direct to indemnify the Corporation against any claim that may be made against
the Corporation with respect to the certificate alleged to have been lost,
stolen or destroyed.
ARTICLE 10.
SEAL
----
The Board shall adopt and approve a corporate seal, which
shall be in the form of a circle and shall bear the full name of the
Corporation, the year of its incorporation and the words and figures "Corporate
Seal, Delaware." The seal may be used by causing it or a facsimile thereof to be
impressed or affixed or reproduced or otherwise.
ARTICLE 11.
FISCAL YEAR
-----------
The fiscal year of the Corporation shall commence on the first
day of January, except as otherwise provided from time to time by resolution of
the Board of Directors.
ARTICLE 12.
NOTICE
------
Section 12.1. Delivery of Notices. Except as otherwise
provided in these By-Laws, whenever written notice is required by law, the
Certificate of Incorporation or these By Laws, to be given to any director,
member of a committee of the Board or stockholder, such notice may be given by
mail, addressed to such director, member of a committee or stockholder, at his
address as it appears on the records of the Corporation, with postage thereon
prepaid, and such notice shall be deemed to be given at the time when the same
shall be deposited in the United States mail. Written notice may also be given
personally or by facsimile transmission, telegram, telex or cable or other
permissible means.
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<PAGE>
Section 12.2. Waivers of Notice. Whenever any notice is
required by law, the Certificate of Incorporation or these By Laws, to be given
to any director, member of a committee of the Board or stockholder, a waiver
thereof in writing, signed by the person or persons entitled to said notice,
whether before or after the time stated therein, shall be deemed equivalent
thereto.
ARTICLE 13.
AMENDMENTS
----------
Section 13.1. By-Laws. The Board may adopt, amend or repeal
the By-Laws by the affirmative vote of a majority of the Board provided,
however, that Section 2.3 may not be amended or repealed without the affirmative
vote of 85% of the outstanding shares entitled to vote for the election of
directors. No such amendment may be made unless the By-Laws, as amended, are
consistent with the provisions of the General Corporation Law of the State of
Delaware and of the Certificate of Incorporation.
ARTICLE 14.
DIVIDENDS
---------
Dividends upon shares of the capital stock of the Corporation,
subject to the provisions of the Certificate of Incorporation, if any, may be
declared by the Board, only in accordance with these By-Laws and the Certificate
of Incorporation, and may be paid in cash, in property, or in shares of the
capital stock. Before payment of any dividend, there may be set aside out of any
funds of the Corporation available for dividends such sum or sums as the Board
from time to time, in its absolute discretion, deems proper as a reserve or
reserves to meet contingencies, or for equalizing dividends, or for repairing or
maintaining any property of the Corporation, or for any proper purpose, and the
Board may modify or abolish any such reserve.
639423.16
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<PAGE>
EXHIBIT 5
For Exhibit 5 ("Charter for Newco"),
see Exhibit 4.1 ("Restated Certificate of Incorporation of the Registrant").
764485.1
<PAGE>
EXHIBIT 6
DESIGNATED COMPETITORS
Designated Competitors for purposes of Section 10.4 of the Plan includes the
entities identified below and any of their affiliates or associates.
1. Westgate International L.P.
2. Elliott Associates
3. Carl C. Icahn or any entity owned or controlled by him.
4. Vincent J. Intrieri or any entity owned or controlled by him.
5. Warner Communications
6. DC Comics
7. The Walt Disney Company
8. Mattel, Inc.
9. Hasbro, Inc.
10. Lewis Galoob Toys, Inc.
11. Playmates, Inc.
12. Just Toys, Inc.
13. Empire of Carolina
14. Play by Play Toys and Novelties
15. Applause, Inc.
16. Merlin
17. The Topps Company
18. Golden Books
19. Western Publishing
20. Hallmark Cards
21. American Greetings
22. Gibson Greetings
23. Landall Inc.
764318.1
<PAGE>
EXHIBIT 7
THIS NOTE HAS NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED,
AND MAY NOT BE SOLD OR OTHERWISE TRANSFERRED EXCEPT PURSUANT TO A REGISTRATION
UNDER SAID ACT OR AN EXEMPTION THEREFROM AND IN ACCORDANCE WITH ALL APPLICABLE
SECURITIES LAWS OF THE STATES OF THE UNITED STATES AND SUBJECT TO THE PROCEDURES
SET FORTH IN THIS NOTE.
$_____________________* New York, New York
No. __________________ ______________ __, 1998**
Marvel Enterprises, Inc.
Excess Administration Claims Note
FOR VALUE RECEIVED, Marvel Enterprises, Inc. (the "Company"), Marvel
Entertainment Group, Inc. ("Marvel"), The Asher Candy Company, Fleer Corp.
("Fleer"), Frank H. Fleer Corp., Heroes World Distribution, Inc., Malibu Comics
Entertainment, Inc., Marvel Characters, Inc., Marvel Direct Marketing, Inc., and
Skybox International, Inc., (collectively, the "Issuers") hereby unconditionally
promise to pay, jointly and severally, to the order of Zib Inc. (including any
successor or assign, the "Holder") at [_________________], or at such other
place as the Holder may from time to time designate to the Company in writing
not less than ten (10) days prior to any payment date hereunder, the principal
sum of _______________UNITED STATES DOLLARS ($ __________) in immediately
available funds on _________ __, 2003*** (the "Maturity Date") and such other
earlier dates provided for in this note (the "Note") and to pay interest at the
time, in the form and manner, and at the rate set forth herein on the unpaid
principal amount hereof, at the aforementioned address until such principal
amount shall be paid in full. The Issuers shall pay principal, interest and all
other amounts due hereunder in money of the United States that at the time of
payment is legal tender for payment of public and private debts.
- ---------------------
* Amount represents the Excess Administration Claims Amount (as defined in
the Plan).
** Represents Consummation Date of Plan, which is the Issuance Date under
Note.
*** As provided in the Plan, the Maturity Date is the fifth anniversary of the
Consummation Date.
732468.8
<PAGE>
This Note represents the "Excess Administration Claims Note" that was
issued on [________ __, 1998] (the "Issuance Date") pursuant to Section 6.20 of
that certain "Fourth Amended Joint Plan of Reorganization Proposed by the
Secured Lenders and Toy Biz, Inc." dated _________, 1998 (as amended or modified
on or prior to the Issuance Date, the "Plan"). Reference is hereby made to the
Plan for provisions applicable to this Note. This Note and any successor note(s)
issued, in accordance with Section 4.8 hereof, are referred to collectively
herein as the "Notes." Capitalized terms that are defined in this Note shall
have the meanings ascribed to such term. Other Capitalized terms that are used
herein and not otherwise defined herein shall have the meanings ascribed to such
terms in the Plan.
ARTICLE 1
INTEREST
Section 1.1 Interest. Interest shall accrue on the unpaid
principal amount of this Note (including Capitalized Interest (as defined
below)) for the actual number of days elapsed based on a year of three hundred
sixty five days (or three hundred sixty six days in leap years) at a rate per
annum equal to [INSERT A NUMBER EQUAL TO THE ANNUAL INTEREST RATE UNDER THE
"TERM LOAN FACILITY" AS DEFINED IN THE PLAN PLUS TWO (2)] percent until the
principal amount of this Note (including all Capitalized Interest) is paid in
full. At the option of the Company, on each _________ and ________ following the
Issuance Date (each, an "Interest Payment Date"), accrued and unpaid interest
from and after the previous Interest Payment Date (or in the case of the first
Interest Payment Date, the Issuance Date) shall be either (i) payable in cash to
the Holder on such Interest Payment Date or (ii) added to the principal balance
of this Note ("Capitalized Interest"). With respect to each Interest Payment
Date, the Company shall irrevocably select the applicable interest payment
option no earlier than the thirtieth Business Day and no later than tenth
Business Day (as defined in Section 4.2 hereof) prior to such Interest Payment
Date. In the event that the Company fails to select an interest payment option
in accordance with the preceding sentence, accrued and unpaid interest shall
added to the principal balance of this Note and treated as Capitalized Interest.
Interest on all amounts that are not paid when due (whether for principal,
interest, or any other amount, or by acceleration, prepayment, passage of time
or otherwise) shall bear interest for each day that such amounts are overdue at
a rate that is two percent (2%) per annum above the rate set forth in the first
sentence of this Section 1.1, payable on demand.
Section 1.2 Acceleration upon Change in Control. Upon the
occurrence of a Change in Control (as defined in the following sentence) of the
Company, the Required Holders may, by
2
732468.8
<PAGE>
notice in writing to the Company, declare the unpaid principal balance of the
Notes (including Capitalized Interest), together with accrued and unpaid
interest thereon, to be and the Notes and all such amounts shall thereupon be
and become, immediately due and payable, without presentment, diligence, demand,
protest or other notice of any kind. A "Change in Control" shall have occurred:
(i) if any entity, person or group (other than the Company or any savings,
pension or other benefit plan for the benefit of employees of the Company)
acquires shares of the Company's stock in a transaction or series of
transactions that results in such entity, person or group directly or indirectly
owning fifty (50%) percent or more of the outstanding common stock of the
Company (on a converted basis), (ii) if there are elected or appointed, within a
twelve (12) month period, persons to the Board who are not Board members at the
beginning of such twelve (12) month period, whose election or appointment was
not approved by a majority of those persons who were Board members at the
beginning of such period, and which newly elected or appointed Board members
shall constitute a majority of the Board or (iii) if the Company sells all or
substantially all of its assets to any other person, or merges or consolidates
with any other person or effects any other similar reorganization, if as a
result of such sale, merger, reorganization or consolidation the persons who
immediately prior thereto owned fifty (50%) percent or more of the outstanding
common stock of the Company (on a converted basis) cease to own securities
representing more than 50% of the aggregate voting power and 50% of the common
equity of the surviving entity.
Section 1.3 Payments Pro Rata. No payment of principal of,
or interest on, any of the Notes may be made unless, at the same time, a pro
rata payment of principal of, or interest on (as the case may be), this Note is
also made.
ARTICLE 2
PREPAYMENT OF NOTE
Section 2. Prepayment.
(a) Prepayment. The aggregate principal amount (including any
Capitalized Interest) of all (but not fewer than all) of the Notes may
be prepaid by the Issuers in whole or in part, at any time or from time
to time prior to the Maturity Date, at a redemption price (the
"Redemption Price") equal to a percentage of the principal amount so
prepaid, as follows:
3
732468.8
<PAGE>
If the
prepayment is
made Percentage
-------- --------
Less than one
year after the
Issuance Date .................... 106%
At least one
year but less
than two years .................... 104%
after the
Issuance Date
At least two
years but less
than three years .................... 102%
after the
Issuance Date
At least three
years after the .................... 100%
Issuance Date
The Redemption Price minus the amount of principal prepaid is referred
to herein as the "Prepayment Premium." In the event that the Issuers
elect to make a prepayment, the Issuers shall provide notice of such
election (including the amount to be prepaid and the date of prepayment
("Prepayment Date")) to each of the Holders no earlier than the
thirtieth Business Day and no later than tenth Business Day prior to
such Prepayment Date, whereupon the election shall be irrevocable and
such amount shall thereupon be due and payable on such Prepayment Date.
(b) Payments Pro Rata; Prepayment to Include Accrued Interest.
All prepayments of the Notes shall be applied to each of the Notes in
proportion to the respective outstanding principal amounts thereof. All
prepayments of principal on the Notes shall include a payment of the
accrued and unpaid interest in respect of such principal amount.
ARTICLE 3
EVENTS OF DEFAULT
Section 3.1 Events of Default. If any one of the following
events (each an "Event of Default") occurs and is continuing:
(a) the Issuers fail to make any payment of principal
on this Note when due; or
4
732468.8
<PAGE>
(b) the Issuers fail to make any payment of interest on this
Note when due; which failure shall continue without cure for five (5)
days after such payment is due; or
(c) the Issuers fail to comply with any other agreement
contained in this Note and such failure shall continue for a period of
thirty (30) days following notice of such failure by the Required
Holders; or
(d) any Issuer shall default in the payment when due (after
expiration of any applicable grace period) of any principal of,
interest on or other amount in respect of Indebtedness under the Term
Loan Facility (or any replacement facility thereof), the Working
Capital Facility (or any replacement facility thereof) or any other
Indebtedness having an aggregate outstanding principal amount of at
least $5,000,000; or any event or condition shall occur which permits
the holder of such Indebtedness at its option to accelerate the
maturity of such Indebtedness (after giving effect to any applicable
grace periods); or
(e) any Issuer shall enter into any merger, consolidation,
reorganization or recapitalization, or reclassification of its capital
stock that has the effect of any of the foregoing events, or liquidate,
wind up, or dissolve itself (or suffer any liquidation or dissolution),
or convey, sell, assign, lease, transfer, exchange or otherwise dispose
of, in one transaction or a series of transactions, all or
substantially all of its property or assets (other than (x) any merger
or consolidation of such Issuer into another Issuer and (y) any such
conveyance, sale, assignment, lease, transfer, exchange or other
disposition by such Issuer to another Issuer and (z) the corporate
dissolution by the Company of any Issuer that is not a Material
Issuer); or
(f) any Material Issuer, pursuant to or within the meaning of
any Bankruptcy Law: (i) commences a voluntary case, (ii) consents to
the entry of an order for relief against it in an involuntary case,
(iii) consents to the appointment of a Custodian of it or for all or
substantially all of its property, (iv) makes a general assignment for
the benefit of its creditors, or (v) generally is unable to pay its
debts as the same become due; or
(g) with respect to any Material Issuer, (A) any person
commences an involuntary case and such case is not dismissed within
sixty (60) days after the commencement thereof; provided that if the
case is stayed during such sixty day period, then the passage of days
during said period shall be tolled during (and only during) the
pendency
5
732468.8
<PAGE>
of the stay and shall resume at the time any such stay is lifted, or
(B) a court of competent jurisdiction enters an order or decree under
any Bankruptcy Law that: (i) is for relief against such Issuer in an
involuntary case, (ii) appoints a Custodian of such Issuer for all or
substantially all of its property, or (iii) orders the liquidation of
such Issuer, and the order or decree referred to in clauses (i) through
(iii) hereof remains undismissed or unstayed for a period of thirty
(30) days;
then, if such event is an Event of Default specified in paragraph (f) or (g)
above with respect to any Issuer, the unpaid principal amount of the Notes
(including all Capitalized Interest), together with accrued but unpaid interest
thereon, shall automatically become immediately due and payable, without
presentment, diligence, demand, protest or other notice of any kind. If such
event is any other Event of Default, the Required Holders may, at their option,
by notice in writing to the Company or any other Issuer, declare the unpaid
principal amount of the Notes (including all Capitalized Interest), together
with accrued but unpaid interest thereon, to be and the Notes and all such
amounts shall thereupon be and become, immediately due and payable, without
presentment, diligence, demand, protest or other notice of any kind.
At any time after all of the Notes become immediately due and
payable as the result of the occurrence of an event described in this section,
the Required Holders may, at the Required Holders' option, by notice in writing
to the Company, rescind and annul the consequences of such event and cause the
Notes to no longer be immediately due and payable if (i) the Issuers have paid
all overdue interest on the Notes and the principal thereof which has become due
otherwise than by reason of such event and interest on such overdue interest and
principal, (ii) all Events of Default, other than nonpayment of amounts which
have become due solely by reason of such event, have been cured or waived by the
Required Holders, and (iii) no judgment or decree has been entered for the
payment of any monies due pursuant to the Notes. No such rescission or annulment
shall extend to or affect any subsequent Event of Default or impair any right
arising therefrom. Notwithstanding any other provision of this Note, the right
of the Holder to receive payment of principal of and interest on this Note, on
and after the respective due dates expressed or provided in this Note (other
than the nonpayment of amounts which have become due solely by reason of such
event), or to bring suit for the enforcement of any such payment on and after
such respective dates, is absolute and unconditional and shall not be impaired
or affected without the consent of the Holders.
For purposes of this Note, the following terms shall have the
following meanings:
6
732468.8
<PAGE>
"Bankruptcy Law" means title 11, United States Code or any
similar federal or state law for the relief of debtors.
"Custodian" means any receiver, trustee,, assignee, liquidator
or similar official under any Bankruptcy Law.
"Indebtedness" shall mean (a) indebtedness for borrowed money
whether short-term or long-term and whether secured or unsecured, (b)
indebtedness for the deferred purchase price of services or property, which
purchase price (i) is due twelve months or more from the date of incurrence of
the obligation in respect thereof or (ii) customarily or actually is evidenced
by a note or other written instrument (including, without limitation, any such
indebtedness which is non-recourse to the credit of such person or entity but is
secured by assets of such person or entity), (c) capitalized lease obligations,
(d) obligations of such Person arising under acceptance facilities, (e) all
obligations of such Person evidenced by bonds, debentures, notes or other
similar instruments, (f) all obligations upon which interest charges are
customarily paid, (g) all obligations under conditional sale or other title
retention agreements relating to property purchased by such Person (even though
the rights and remedies of the seller or lender under such agreement in the
event of default are limited to repossession or sale of such property), (h)
obligations to purchase, redeem, retire, defease or otherwise acquire for value
any capital stock or any warrants, rights or options to acquire such capital
stock (with redeemable preferred stock being valued at the greater of its
voluntary or involuntary liquidation preference plus accrued and unpaid
dividends), (i) all executory obligations in respect of interest rate agreements
and foreign exchange and other financial hedge contracts (including, without
limitation, equity hedge contracts), (j) with respect to any person or entity,
all Indebtedness of the types referred to in clauses (a) through (i) above for
which such person or entity is obligated under a guaranty, make-well, capital
support, or other contingent obligation and (k) renewals, extensions,
refundings, deferrals, restructurings, amendments and modifications of any such
indebtedness, obligation or contingent obligations.
"Material Issuer" means the Company, Marvel, Fleer, Marvel
Characters, Inc. and any other Issuer which would qualify as a "significant
subsidiary" of the Company under Regulation S-X as promulgated by the Securities
and Exchange Commission (17 CFR 210) or any successor regulation.
"Notes" has the meaning set forth in the preamble
hereto.
"Required Holders" means, at any time, the holder(s) of Notes
having an aggregate principal amount in excess of fifty percent (50%) of the
aggregate principal amount (including any
7
732468.8
<PAGE>
Capitalized Interest) of all of the Notes issued and outstanding at such time.
ARTICLE 4
MISCELLANEOUS
Section 4.1 Defenses. The Issuers hereby waive pre sentment,
diligence, demand, protest, notice of dishonor and all other demands and notices
of any kind. No delay or failure by the Holder in the exercise of any right or
remedy shall consti tute a waiver thereof, and no single or partial exercise by
the Holder hereof of any right or remedy shall preclude other or future exercise
thereof or the exercise or any other right or remedy.
Section 4.2 Payments Due on Non-Business Days. Anything in this
Note to the contrary notwithstanding, any payment of principal of or interest on
this Note that is due on a date other than a Business Day shall be made on the
next succeeding Business Day. If the date for any payment is extended to the
next succeeding Business Day by reason of the preceding sentence, the period of
such extension shall be included in the computation of the interest payable on
such Business Day. "Business Day" shall mean any day other than a Saturday,
Sunday, or other day on which commercial banks in New York, New York are
authorized or required by law to close.
Section 4.3 Notices. Any notice or communication to the Holder
shall be sent by hand delivery, first class registered mail, or nationwide
reliable overnight delivery service (with charges prepaid) to the address shown
on the face hereof, or as otherwise indicated in the Register provided for in
Section 4.8 hereof, or such other place as the Holder may designate in writing
to the Company in accordance herewith. Any notice or communication to the
Issuers shall be mailed by first-class registered mail or delivered by hand to
Marvel Enterprises, Inc., 685 Third Avenue, New York, New York 10017, Attn:
President (with a courtesy copy to Battle Fowler LLP, Park Avenue Tower, 75 East
55th Street, New York, New York 10022, Attn: Lawrence Mittman) or such other
place as the Company may designate in writing to the Holder. All notices shall
be effective when actually delivered to the required addresses unless such
delivery does not take place on a Business Day, in which case such delivery
shall be deemed to have taken place on the immediately next Business Day
following the actual delivery.
All notices or communications shall be in writing.
Section 4.4 Amendment. The provisions of this Note may not be
amended, modified or waived except by an instrument in writing signed by the
Issuers and the Holder.
8
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Section 4.5 Governing Law and Jurisdiction. This Note is governed
by and shall be construed in accordance with the internal laws of the State of
New York, United States of America, without regard to the conflicts of laws
provisions thereof. Each of the Issuers and the Holder by accepting this Note
agree that any legal action, suit or proceeding arising out of or relating to
this Note may be brought in the Courts of the State of New York or of the United
States of America located in the Southern District of New York. By the execution
and delivery of this Note, each of the Issuers and the Holder, as the case may
be, submit to the non-exclusive jurisdiction of any such court in any such
action, suit or proceeding. The Issuers and the Holder further agree to service
of process by mailing copies of the process by registered mail to the address
specified herein, and the Issuers and the Holder consent that the mailing of
process in such manner will be deemed personal service and accepted as such, and
will be valid and binding for all purposes of any such action, suit or
proceeding.
Section 4.6 No Adverse Interpretation of Other Agree ments. This
Note may not be used to interpret another indenture, loan or debt agreement of
the Issuers. Any such indenture, loan or debt agreement may not be used to
interpret this Note.
Section 4.7 Enforcement Expenses. The Issuers agree to pay to any
Holder the reasonable costs and expenses incurred by such Holder in the
enforcement of any provision in this Note, or the collection hereof (including
costs and expenses incurred following the commencement of, and in connection
with, any proceeding under any Bankruptcy Law), including reasonable fees and
disbursements of counsel for such Holder.
Section 4.8 Successors and Assigns; Registered Notes. All
agreements of the Issuers in this Note shall bind their respective successors.
The obligations of the Issuers under this Note may not be assigned without the
prior written consent of the Holder.
The Issuers shall maintain at the principal office of the
Company a register (the "Register") in which the Issuers shall provide for the
registration of Notes and of transfers of Notes. The Issuers shall be entitled
to treat the person designated as such in the Register as the Holder. Upon
surrender for registration of transfer of any Note at the principal office of
the Company, the Issuers shall, at their expense, execute and deliver one or
more new Notes of like tenor, of denominations of one million dollars
($1,000,000) or integral multiples thereof, and of a like aggregate principal
amount, registered in the name of such transferee or transferees. At the option
of the Holder of any Note, such Note may be exchanged for other Notes of like
tenor, of denominations of one million dollars ($1,000,000) or integral
multiples thereof, and of a like aggregate principal
9
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amount, upon surrender of the Note to be exchanged at the principal office of
the Company. Whenever any Notes are so surrendered for exchange, the Issuers
shall, at their expense, execute and deliver the Notes which the Holder making
the exchange is entitled to receive. Every Note surrendered for registration of
transfer or exchange shall be duly endorsed, or be accompanied by a written
instrument of transfer duly executed, by the Holder or such Holder's attorney
duly authorized in writing. Any Note or Notes issued in exchange for any Note or
upon transfer thereof shall carry the rights to unpaid interest and interest to
accrue which were carried by the Note so exchanged or transferred, so that
neither gain nor loss of interest shall result from any such transfer or
exchange. Upon receipt of written notice from the holder of any Note of the
loss, theft, destruction or mutilation of such Note and, in the case of any such
loss, theft or destruction, upon receipt of such holder's unsecured indemnity
agreement, or in the case of any such mutilation upon surrender and cancellation
of such Note, the Issuers will make and deliver a new Note, of like tenor, in
lieu of the lost, stolen, destroyed or mutilated Note.
The Notes have not been registered under the Securities Act
and, notwithstanding the preceding paragraph, neither the Notes nor any interest
therein may be sold or otherwise trans ferred except pursuant to a registration
under said Act or either (i) to a person the transferor reasonably believes is a
"qualified institutional buyer" as defined in Rule 144A under the Securities Act
of 1933 (the "Securities Act"), in accordance with Rule 144A, or (ii) pursuant
to another exemption from registra tion under the Securities Act (with a written
opinion of counsel reasonably acceptable to the Company as to such exemption
having been delivered to the Company prior to such transfer) and, in each case,
in accordance with all applicable securities laws of the states of the United
States. At the request of the Issuers, the Notes may bear a legend thereon to
the following effect: "This Note has not been registered under the Securities
Act of 1933, as amended, and may not be sold or otherwise transferred except
pursuant to a registration under said Act or an exemption therefrom and in
accordance with all applicable securities laws of the states of the United
States and subject to the procedures set forth in this Note." Each initial
Holder and each subsequent transferee, or any transferee of an interest in any
Note, by accepting any Note or interest therein, acknowledges the restric tions
on transfer thereof set forth in this Note and agrees that it will transfer this
Note or any interest therein only as provided in this Note.
Section 4.9 Information Required by Rule 144A. Upon the request of
the Holder, each Issuer shall provide such Holder, and any qualified
institutional buyer designated by such Holder, such financial and other
information as such Holder may reasonably determine to be necessary in order to
permit compliance with the
10
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information requirements of Rule 144A under the Securities Act in connection
with the resale of this Note, except at such times as such Issuer is subject to
the reporting requirements of sections 13 or 15(d) of the Securities Exchange
Act of 1934. For the purpose of this Section 4.9, the term "qualified
institutional buyer" shall have the meaning specified in Rule 144A under the
Securities Act.
Section 4.10 Persons Deemed Owners; Participations. Prior to due
presentment for registration of transfer, the Issuers may treat the person or
entity in whose name any Note is registered as the owner and Holder of such Note
for the purpose of receiving payment of principal of and interest on such Note
and for all other purposes whatsoever, whether or not such Note shall be
overdue, and the Issuers shall not be affected by notice to the contrary.
Subject to the preceding sentence, the Holder of any Note may from time to time
grant participations in all or any part of such Note to any person or entity on
such terms and conditions as may be determined by such Holder in its sole and
absolute discretion.
Section 4.11 Setoff. Each Issuer acknowledges that the Holder has
all rights of setoff and bankers' lien provided by applicable law.
Section 4.12 Joint and Several. The obligations of each of the
Issuers under this Note is joint and several.
Section 4.13 Severability. In case any provision in this Note shall
be invalid, illegal or unenforceable, the validity, legality and enforceability
of the remaining provisions shall not in any way be affected or impaired
thereby.
Section 4.14 Headings, etc. The headings of the Articles and
Sections of this Note have been inserted for convenience of reference only, are
not to be considered a part hereof, and shall in no way modify or restrict any
of the terms or provisions hereof.
11
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IN WITNESS WHEREOF, the Issuers have duly executed and delivered this
Note on the date first above written.
MARVEL ENTERPRISES, INC.
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.,
SKYBOX INTERNATIONAL, INC.
By:_________________________
Name:
Title:
12
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EXHIBIT 8
--------------------------------------------------------
MAFCO LITIGATION TRUST AGREEMENT
by and among
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.,
SKYBOX INTERNATIONAL INC.,
John J. Gibbons
(solely in his capacity as chapter 11 trustee),
MARVEL ENTERPRISES, INC.
and
Ronald Cantor as MAFCO Litigation Trustee,
Ivan Snyder as MAFCO Litigation Trustee, and
James A. Scarpone as MAFCO Litigation Trustee
--------------------------------------------------------
Dated as of October 1, 1998
TABLE OF CONTENTS
<TABLE>
<CAPTION>
<S> <C>
Page
____
DECLARATION OF TRUST..............................................................................................2
ARTICLE I
DEFINITIONS..............................................................................................3
1.01 Certain Terms Defined..................................................................3
1.02 Meanings of Other Terms................................................................6
ARTICLE II
MAFCO LITIGATION TRUSTEES' ACCEPTANCE....................................................................6
2.01 Acceptance.............................................................................6
2.02 Purpose of MAFCO Litigation Trust......................................................6
2.03 Incidents of Ownership.................................................................7
2.04 The Shared Privileges..................................................................7
ARTICLE III
BENEFICIARIES............................................................................................8
3.01 Beneficial Interests...................................................................8
3.02 Rights of Beneficiaries................................................................9
ARTICLE IV
DURATION AND TERMINATION OF MAFCO LITIGATION TRUST.......................................................9
4.01 Duration...............................................................................9
4.02 No Termination by Beneficiaries.......................................................10
4.03 Continuance of MAFCO Litigation Trust for Winding Up. ...............................10
ARTICLE V
LITIGATION COSTS; REDUCTION OF JUDGMENT; COOPERATION;
INDEPENDENT CAUSES OF ACTION; INDEMNIFICATION COSTS;
DISTRIBUTIONS; ADMINISTRATION OF TRUST ESTATE...........................................................10
5.01 Payment of Costs......................................................................10
5.02 Reduction of Judgment; Cooperation....................................................12
5.03 Indemnification Costs.................................................................13
5.04 Distribution of Distributable Proceeds................................................14
5.05 Distributions Generally; Method of Payment; Undeliverable Property....................14
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ARTICLE VI
TAX MATTERS.............................................................................................15
6.01 Treatment.............................................................................15
6.02 Allocation............................................................................15
ARTICLE VII
POWERS OF AND LIMITATIONS ON THE MAFCO LITIGATION TRUSTEES..............................................16
7.01 Powers of the MAFCO Litigation Trustees...............................................16
7.02 Action by Majority....................................................................17
7.03 No Operations as an Investment Company, Trade or Business.............................17
7.04 Investment of MAFCO Litigation Trust Moneys...........................................18
ARTICLE VIII
CONCERNING THE MAFCO LITIGATION TRUSTEES................................................................18
8.01 Generally.............................................................................18
8.02 Reliance by MAFCO Litigation Trustee..................................................18
8.03 Liability to Third Persons............................................................19
8.04 Nonliability of MAFCO Litigation Trustees for Acts of Others..........................19
8.05 Indemnity.............................................................................20
8.06 Bond..................................................................................20
ARTICLE IX
COMPENSATION OF MAFCO LITIGATION TRUSTEES...............................................................20
9.01 Fees and Expenses.....................................................................20
ARTICLE X
MAFCO LITIGATION TRUSTEES AND SUCCESSOR MAFCO LITIGATION
TRUSTEES................................................................................................21
10.01 Generally.............................................................................21
10.02 Resignation...........................................................................21
10.03 Removal...............................................................................21
10.04 Appointment of Successor MAFCO Litigation Trustee; Acceptance of Appointment by
Successor MAFCO Litigation Trustee..................................................21
ARTICLE XI
CONCERNING THE BENEFICIARIES............................................................................22
11.01 No Suits by Beneficiaries.............................................................22
11.02 Requirement of Undertaking............................................................22
ARTICLE XII
JURISDICTION............................................................................................22
12.01 Jurisdiction..........................................................................22
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ARTICLE XIII
ADMINISTRATION OF TRUST ESTATE..........................................................................23
13.01 Reports...............................................................................23
13.02 Fiscal Year...........................................................................23
13.03 Books and Records.....................................................................23
13.04 Newco Reports to MAFCO Litigation Trustee.............................................24
ARTICLE XIV
MISCELLANEOUS PROVISIONS................................................................................24
14.01 Construction..........................................................................24
14.02 Severability..........................................................................24
14.03 Cooperation...........................................................................24
14.04 Notices...............................................................................24
14.05 Headings..............................................................................25
14.06 Counterparts..........................................................................25
</TABLE>
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<PAGE>
MAFCO LITIGATION TRUST AGREEMENT
This MAFCO LITIGATION TRUST AGREEMENT, dated as of October 1, 1998, is
by and among 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 Marvel Characters, Inc. and Malibu
Comics Entertainment, Inc.) being Delaware corporations and Marvel Characters,
Inc. and Malibu Comics Entertainment, Inc. being California corporations (the
"Marvel Debtors"), John J. Gibbons, solely in his capacity as chapter 11 trustee
for the Marvel Debtors, Marvel Enterprises, Inc., a Delaware corporation
("Newco"), and Ronald Cantor, Ivan Snyder, and James A. Scarpone, as trustees
(the "MAFCO Litigation Trustees").
RECITALS
WHEREAS, on or about July 31, 1998, the United States District Court
for the District of Delaware (the "District Court") entered an order confirming
the Fourth Amended Joint Plan of Reorganization Under Chapter 11 of the United
States Bankruptcy Code, dated July 31, 1998 (as such plan may hereafter be
amended, restated or otherwise modified, the "Plan"), filed by certain of the
secured lenders of the Marvel Debtors and by Toy Biz, Inc. (which has since
changed its name to Marvel Enterprises, Inc.);
WHEREAS, pursuant to Section 7.1(b) of the Plan, the Marvel Debtors
have agreed to contribute to the MAFCO Litigation Trustees in trust (the "MAFCO
Litigation Trust") (A) all of their interests in any Causes of Action against
any of the MAFCO Defendants asserted in the District Court Complaint or which
could have been asserted in the District Court Complaint (exclusive of all
Causes of Action (x) pursuant to sections 510, 544, 545, 547, 548, 549, 550, 551
and 553 of the Bankruptcy Code, (y) relating to any tax-sharing or other similar
agreement or (z) against any person or entity released or exculpated under the
Plan) (the "MAFCO Litigation Claims") and (B) an interest, to be jointly shared
by the MAFCO Litigation Trust with Newco, in the Marvel Debtors' right to the
benefits of the attorney-client privilege, work-product immunity or other
protection from disclosure with respect to the Shared Privilege Matters (as
defined herein) (the "Shared Privileges");
WHEREAS, the Marvel Debtors, Newco and the MAFCO Litigation Trustees
collectively acknowledge that, except as otherwise specifically provided or
conditioned herein, the MAFCO Litigation Trust shall succeed to all rights and
privileges heretofore enjoyed and preserved by the Marvel Debtors in connection
with the MAFCO Litigation Claims;
WHEREAS, the MAFCO Litigation Trustees and Newco have a joint interest
in preserving and enhancing Newco's unfettered ability to defend and/or
prosecute claims, in a manner so as to preserve and/or enhance Newco's going
concern values;
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WHEREAS, the Marvel Debtors have requested that the MAFCO Litigation
Trustees, and the MAFCO Litigation Trustees are willing to agree with the Marvel
Debtors to, enforce the MAFCO Litigation Claims, if any, for the benefit of all
holders of Allowed Unsecured Claims (other than Intercompany Claims and the
LaSalle Claim), holders of Allowed Class Securities Litigation Claims, and
holders of Allowed Equity Interests in Entertainment (collectively, the
"Beneficiaries"), to prosecute, direct, settle or compromise any MAFCO
Litigation Claims on behalf of and for the benefit of the Beneficiaries, and to
hold the Net MAFCO Litigation Proceeds, if any, in trust for the Beneficiaries,
and distribute the Distributable Proceeds to the Beneficiaries, all on and
subject to the terms set forth herein;
WHEREAS, pursuant to Section 7.5(b) of the Plan, promptly after the
execution and delivery of this MAFCO Litigation Trust Agreement, (i) the MAFCO
Litigation Trustees and Newco will enter into that certain MAFCO Litigation
Trust Loan Agreement (together with the promissory note and security agreement
executed and delivered therewith, the "MAFCO Loan Agreement"), whereby Newco
will agree to make loans to the MAFCO Litigation Trustees for the benefit of the
MAFCO Litigation Trust in an amount not to exceed, at any given time
outstanding, One Million Dollars ($1,000,000) to be used by the MAFCO Litigation
Trustees to fund Administrative Costs and Expenses, (ii) the MAFCO Litigation
Trustees will execute and deliver to Newco a note (the "MAFCO Note") under which
the MAFCO Litigation Trust will be obligated to reimburse Newco for all sums
advanced under the MAFCO Loan Agreement, and (iii) the MAFCO Litigation Trustees
and Newco will enter into a Security Agreement (the "MAFCO Security Agreement")
whereby the MAFCO Litigation Trustees will pledge to Newco all of the MAFCO
Litigation Trust Assets as security for the MAFCO Litigation Trust's obligations
under the MAFCO Loan Agreement, the MAFCO Note and the MAFCO Security Agreement;
and
WHEREAS, the District Court shall have jurisdiction over the MAFCO
Litigation Trust, the MAFCO Litigation Trustees and the MAFCO Litigation Claims,
as provided herein and in the Plan.
DECLARATION OF TRUST
NOW THEREFORE, in order to declare the terms and conditions hereof, and
in consideration of the Recitals, and of other good and valuable consideration,
the receipt and sufficiency of which are hereby acknowledged, and subject to the
terms and conditions of the Plan and this MAFCO Litigation Trust Agreement, the
Marvel Debtors and John J. Gibbons (solely in his capacity as chapter 11 trustee
for the Marvel Debtors), on behalf of the Marvel Debtors, have executed this
MAFCO Litigation Trust Agreement and absolutely and irrevocably grant, assign,
transfer, convey, and deliver to, and otherwise acknowledge that, the MAFCO
Litigation Trustees, and their successors and assigns, succeed to, without
representation, warranty or recourse (except the Marvel Debtors represent they
have full rights to make the assignments herein), on behalf of and for the
benefit of the Beneficiaries, (A) all
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right, title and interest of the Marvel Debtors in and to any and all MAFCO
Litigation Claims and the proceeds therefrom and (B) the jointly shared interest
in the Shared Privileges;
TO HAVE AND TO HOLD unto the MAFCO Litigation Trustees and their
successors in trust; and
THE MAFCO LITIGATION TRUSTEES HEREBY ACCEPT such rights,
properties and privileges assigned or transferred to them or otherwise realized
by them, and the trust imposed upon them, and agree to retain and enforce the
MAFCO Litigation Claims for the benefit of the Beneficiaries, and agree to their
appointment as trustees hereunder for such purpose under section 1123(b)(3)(B)
of the Bankruptcy Code and to hold the Distributable Proceeds in trust for the
Beneficiaries;
PROVIDED, HOWEVER, that upon termination of this MAFCO Litigation Trust
in accordance with Section 4.01 hereof, this MAFCO Litigation Trust Agreement
shall cease, terminate and be of no further force and effect and the then
remaining Distributable Proceeds shall be distributed to the Beneficiaries in
accordance with their interest therein as provided in Section 5.04 hereof.
IT IS HEREBY FURTHER COVENANTED AND DECLARED, that the MAFCO
Litigation Trust Assets are to be held and applied by the MAFCO Litigation
Trustees solely for the benefit of the Beneficiaries and for no other party,
subject to the further covenants, conditions and terms hereinafter set forth.
ARTICLE I
DEFINITIONS
1.01 Certain Terms Defined. Terms defined in the Plan, and not
otherwise defined herein, shall have the meanings ascribed to such terms in the
Plan. For purposes of this MAFCO Litigation Trust Agreement, the following
capitalized terms shall have the following meanings:
"Administrative Costs and Expenses" means the administrative
expenses of the MAFCO Litigation Trust, including, without limitation, the
Professional Fees, taxes, bank charges, filing and registration fees, postage,
telephone, facsimile, copying and messenger costs, and secretarial and
administrative costs attendant to the maintenance of the MAFCO Litigation Trust
and the responsibilities of the MAFCO Litigation Trustees hereunder, the fees of
the MAFCO Litigation Trustees and any indemnification costs and expenses owing
to any Indemnified Party under Section 8.05 hereof, but excluding any
Indemnification Costs.
"Beneficial Interests" has the meaning set forth in Section
3.01(a) hereof.
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<PAGE>
"Beneficiaries" has the meaning set forth in the Recitals
hereto.
"Beneficiary List" has the meaning set forth in Section 13.03
hereof.
"Communication" has the meaning applied thereto in Rule 26.3
of the Joint Civil Rules of the United States District Courts for the Southern
and Eastern Districts of New York.
"Designor" has the meaning set forth in Section 10.01 hereof.
"Distributable Proceeds" means all Net MAFCO Litigation
Proceeds and any investment income earned on MAFCO Litigation Trust Assets, net
of all MAFCO Litigation Trust Costs to the extent not deducted in calculating
Net MAFCO Litigation Proceeds.
"District Court" has the meaning set forth in the Recitals
hereto.
"District Court Complaint" means the complaint in Case No.
97-586 (RRM) filed on October 30, 1997 in the District Court.
"Document" has the meaning applied thereto in Rule 26.3 of the
Joint Civil Rules of the United States District Courts for the Southern and
Eastern Districts of New York, and also includes any tape recording, electronic
data, electronic mail message or other exchange of information between
computers, and all information stored in an electronic form or computer data
base.
"Exchange Act" means the Securities Exchange Act of 1934, as
amended.
"Exculpation Amount" has the meaning set forth in Section 5.02
hereof.
"Indemnification Costs" has the meaning set forth in Section
5.03 hereof.
"Indemnified Parties" has the meaning set forth in Section
8.05 hereof.
"MAFCO Defendants" means (i) Ronald O. Perelman, (ii) Mafco
Holdings, Inc., (iii) MacAndrews & Forbes Holdings, Inc., (iv) the Andrews
Group, Inc., (v) Marvel IV Holdings, Inc., (vi) Marvel V Holdings, Inc., (vii)
Four Star Holdings, Inc., (viii) William C. Bevins, (ix) Donald G. Drapkin, (x)
Holdings I, (xi) Holdings II, (xii) Holdings III, (xiii) any individual who
served prior to June 20, 1997 as a director of Entertainment, (xiv) any
individual who served on or prior to April 24, 1997 as to Holdings I and
Holdings II, or is presently serving or has ever served as to Holdings III, as a
director, and (xv) any insider (other than a Releasing Party), Affiliate (other
than a Releasing Party or an officer or director of Holdings I or Holdings II
serving from and after April 24, 1997), director, employee, attorney (other than
a Releasing Party), investment banker (other than a Releasing Party), or
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<PAGE>
agent of any party identified in clauses (i) through (xiv) of this definition
acting in such capacity in connection with the MAFCO Causes of Action and the
LaSalle Action.
"MAFCO Litigation Claims" has the meaning set forth in the
Recitals hereto.
"MAFCO Litigation Trust" has the meaning set forth in the
Recitals hereto.
"MAFCO Litigation Trust Agreement" means this litigation trust
agreement.
"MAFCO Litigation Trust Assets" means the MAFCO Litigation
Claims, the Shared Privileges, the Distributable Proceeds, and all other
property held from time to time by the MAFCO Litigation Trustees under this
MAFCO Litigation Trust Agreement and any earnings thereon.
"MAFCO Litigation Trust Costs" has the meaning set forth in
Section 5.01 ---------------------------- hereof.
"MAFCO Litigation Trustee" has the meaning set forth in the
first paragraph of this MAFCO Litigation Trust Agreement.
"MAFCO Loan Agreement" has the meaning set forth in the
Recitals hereto.
"MAFCO Note" has the meaning set forth in the Recitals hereto.
"MAFCO Security Agreement" has the meaning set forth in the
Recitals hereto.
"Marvel Debtors" has the meaning set forth in the first
paragraph of this MAFCO Litigation Trust Agreement.
"Net MAFCO Litigation Proceeds" means the gross proceeds
derived from the MAFCO Litigation Claims realized by the MAFCO Litigation Trust
net of payment of all expenses of the MAFCO Litigation Trust including, without
limitation, payment without duplication of all sums due and owing pursuant to
the MAFCO Note.
"Newco" has the meaning set forth in the first paragraph
hereof.
"Plan" has the meaning set forth in the Recitals hereto.
"Plan Rate" means simple interest at the rate of seven percent
(7%) per annum.
"Professional Fees" means the fees and expenses of
professionals retained by the MAFCO Litigation Trustees on behalf of the MAFCO
Litigation Trust (including, without limitation, attorneys, accountants and
expert fees and expenses).
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<PAGE>
"Shared Privileges" has the meaning set forth in the Recitals
hereto.
"Shared Privilege Matters" means Documents, information and
Communications, the disclosure of which is protected under the attorney-client
privilege, work product immunity or other protection from disclosure of the
Marvel Debtors (or any of them) immediately prior to the consummation of the
Plan, relating to the allegations in the District Court Complaint insofar as
they relate to a claim or claims raised against the MAFCO Defendants in the
District Court Complaint or any amendment thereof arising out of the same
historical facts.
1.02 Meanings of Other Terms. Except where the context otherwise
requires, words importing the masculine gender include the feminine and the
neuter, if appropriate, words importing the singular number shall include the
plural number and vice versa and words importing persons shall include firms,
associations, corporations and other entities. All references herein to
Articles, Sections and other subdivisions, unless referring specifically to the
Plan or provisions of the Bankruptcy Code, Bankruptcy Rules or other law,
statute or regulation, refer to the corresponding Articles, Sections and other
subdivisions of this MAFCO Litigation Trust Agreement, and the words "herein,"
"hereof" and "hereunder" and words of similar import refer to this MAFCO
Litigation Trust Agreement as a whole and not to any particular Article, Section
or subdivisions of this MAFCO Litigation Trust Agreement.
ARTICLE II
MAFCO LITIGATION TRUSTEES' ACCEPTANCE
2.01 Acceptance. The MAFCO Litigation Trustees accept the MAFCO
Litigation Trust created by this MAFCO Litigation Trust Agreement and the
transfer and assignment of the MAFCO Litigation Claims and the succession to the
Shared Privileges, on behalf of and for the benefit of the Beneficiaries, and
agree to observe and perform the trust, upon and subject to the terms and
conditions set forth herein and in the Plan.
2.02 Purpose of MAFCO Litigation Trust. The purpose of this MAFCO
Litigation Trust is to implement part of Section 7 of the Plan by providing for
the vesting in the MAFCO Litigation Trustees of the ownership of and the
responsibility for the protection and conservation of the MAFCO Litigation Trust
Assets on behalf of and for the benefit of the Beneficiaries. Such
responsibility shall be limited to the initiation, retention, enforcement and
settlement of any MAFCO Litigation Claims by the MAFCO Litigation Trustees on
behalf of and for the benefit of the Beneficiaries, the collection of the Net
MAFCO Litigation Proceeds, the execution, delivery of and performance under the
MAFCO Loan Agreement, MAFCO Note and MAFCO Security Agreement, the repayment of
the MAFCO Note as provided herein and therein, the repayment of any borrowings
under Section 7.01(p) hereof, the temporary investment of Distributable Proceeds
and other MAFCO Litigation Trust moneys as provided in Section 7.04 hereof, the
payment of MAFCO Litigation Trust Costs, the making
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of any other payments provided to be made from the MAFCO Litigation Trust as set
forth in the Plan and this MAFCO Litigation Trust Agreement, and the
distribution of Distributable Proceeds to the Beneficiaries in accordance with
the provisions of the Plan and this MAFCO Litigation Trust Agreement, in each
case including the powers with respect thereto set forth in Article VII hereof.
2.03 Incidents of Ownership. The Beneficiaries shall be the sole
beneficiaries of the MAFCO Litigation Trust and the MAFCO Litigation Trustees
shall retain only such incidents of ownership as are necessary to undertake the
actions and transactions authorized herein on behalf of the Beneficiaries.
2.04 The Shared Privileges. The MAFCO Litigation Trustees shall not
obtain or disclose any Shared Privilege Matters except as set forth in this
Section 2.04.
(a) If the MAFCO Litigation Trustees desire access to Shared
Privilege Matters, they shall request such matters from Newco in writing in a
manner that identifies with reasonable specificity the particular Shared
Privilege Matters sought (such as a request for the production of documents).
Newco shall have no obligation to disclose or provide the MAFCO Litigation
Trustees with access to the requested Shared Privilege Matters if Newco, in
Newco's sole discretion, exercised in good faith, determines that the substance
of the Shared Privilege Matters, if disclosed, could have an adverse economic
effect (whether or not quantifiable) on Newco or its subsidiaries or on the
business conducted by Newco or its subsidiaries. Within thirty (30) days of the
later of the MAFCO Litigation Trustees' request or Newco's access to the
documents requested, and subject to Section 2.04(b) below, Newco shall (a)
provide the MAFCO Litigation Trustees with access to any Shared Privilege
Matters requested by the MAFCO Litigation Trustees as to which Newco has not
made the determination referred to in the preceding sentence and/or (b) notify
the MAFCO Litigation Trustees, in writing, that it is denying access to some or
all of the requested Shared Privilege Matters (the "Denial Notice"). Any
requested Shared Privilege Matter to which the MAFCO Litigation Trustees are
denied access under this Section 2.04(a) shall be identified by Newco in writing
with reasonable specificity (such as a privilege log in response to a request
for the production of documents), which shall be provided to the MAFCO
Litigation Trustees within thirty (30) days of the delivery of the Denial
Notice. The MAFCO Litigation Trustees shall grant any reasonable request by
Newco for an extension of the deadlines set forth in this paragraph.
(b) If the custodian of any Shared Privilege Matter requested
by the MAFCO Litigation Trustees under this Section 2.04 denies Newco access to
that matter, the MAFCO Litigation Trustees may undertake, by application to a
court of competent jurisdiction or otherwise, to arrange for Newco to be granted
access to that matter. Newco shall have no further obligations (such as seeking
an order compelling delivery) under this Section 2.04 with respect to Shared
Privilege Matters to which it has been denied access, unless and until Newco is
granted access to such Shared Privilege Matters. The MAFCO Litigation Trustees
shall
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have no authority to undertake to gain direct access to Shared Privilege Matters
to which Newco has been denied access. Any access of the MAFCO Litigation
Trustees to those matters shall be gained only in accordance with Section
2.04(a) above.
(c) Any out-of-pocket costs of producing or duplicating the
Shared Privilege Matters requested under this Section 2.04 shall be paid by the
MAFCO Litigation Trust as and when due, and Newco shall have no responsibility
therefor.
(d) The MAFCO Litigation Trustees will not have authority,
without the written consent of Newco, to waive any Shared Privilege except to
the extent that documents, information and communications have been specifically
provided to the MAFCO Litigation Trustees by Newco. As to any documents,
information and communications that Newco provides to the MAFCO Litigation
Trustees under this Section 2.04, Newco may not waive any Shared Privilege
without the consent of the MAFCO Litigation Trustees.
(e) Any controversies that may arise concerning Shared
Privilege Matters or under this Section 2.04, including without limitation any
dispute as to whether the exercise of Newco's discretion not to disclose any
Shared Privilege Matters under Section 2.04(a) was in good faith, shall be
resolved by the District Court. The parties hereto hereby submit to the District
Court's jurisdiction to resolve all controversies under this Section 2.04. The
parties further agree that the Shared Privilege Matters which are the subject of
the dispute will be held privileged until the District Court has ruled.
(f) No party hereto will argue, permit any person or entity
under their control to argue or encourage any person or entity to argue in any
forum that any waiver of any evidentiary privilege or immunity relating to the
Shared Privilege Matters has heretofore occurred in connection with the
Reorganization Cases or will occur by virtue of the implementation of the Plan,
including the execution of this MAFCO Litigation Trust Agreement, and the
parties shall not argue that any such waiver has occurred hereafter, except as
such waiver may hereafter be made in accordance with the terms of this Section
2.04.
ARTICLE III
BENEFICIARIES
3.01 Beneficial Interests. (a) The beneficial interests (the
"Beneficial Interests") in this MAFCO Litigation Trust will be beneficially
owned by the Beneficiaries.
(b) The Beneficial Interests of the Beneficiaries in the MAFCO
Litigation Trust Assets will not be represented by any certificates, and may not
be transferred or assigned except by will, the laws of intestacy or by other
operation of law. Such Beneficial Interests will be evidenced only by this MAFCO
Litigation Trust Agreement. The Beneficiaries will have no voting rights with
respect to their beneficial interests or the management of the
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MAFCO Litigation Trust Assets or otherwise under this MAFCO Litigation Trust
Agreement except as explicitly provided herein. The Beneficiaries shall not have
legal title to any part of the MAFCO Litigation Trust Assets. The Beneficiaries'
sole right hereunder shall be the contingent right to receive a share of the
MAFCO Litigation Trust Assets which may be payable to them as provided in
Section 5.04 hereof.
3.02 Rights of Beneficiaries. Each Beneficiary shall be entitled to
participation in the rights and benefits due to a Beneficiary hereunder
according to its Beneficial Interest. Each Beneficiary shall take and hold the
same subject to all the terms and provisions of this MAFCO Litigation Trust
Agreement. The interest of a Beneficiary is hereby declared and shall be in all
respects personal property. Upon the death of an individual who is a
Beneficiary, his interest shall pass as personal property to his legal
representative and such death shall in no way terminate or affect the validity
of this MAFCO Litigation Trust Agreement. Upon the merger, consolidation or
other similar transaction involving a Beneficiary that is not an individual,
such Beneficiary's interest shall be transferred by operation of law and such
transaction shall in no way terminate or affect the validity of this MAFCO
Litigation Trust Agreement. Except as expressly provided hereunder, a
Beneficiary shall have no title to, right to, possession of, management of or
control of the MAFCO Litigation Trust. No widower, widow, heir or devisee of any
individual who may be a Beneficiary and no bankruptcy trustee, receiver or
similar person of any Beneficiary shall have any right, statutory or otherwise
(including any right of dower, homestead or inheritance, or of partition, as
applicable), in any property forming a part of the MAFCO Litigation Trust, but
the whole title to all the MAFCO Litigation Trust's assets shall be vested in
the MAFCO Litigation Trustees and the sole interest of the Beneficiaries shall
be the rights and benefits given to such persons under this MAFCO Litigation
Trust Agreement and the Plan.
ARTICLE IV
DURATION AND TERMINATION OF MAFCO LITIGATION TRUST
4.01 Duration. The existence of this MAFCO Litigation Trust shall
terminate five (5) years after the date hereof; provided, however, that the
MAFCO Litigation Trustees may extend the term of this MAFCO Litigation Trust,
provided that they receive District Court approval of such extension for good
cause within six (6) months from the beginning of the extended term.
Notwithstanding anything to the contrary in this MAFCO Litigation Trust
Agreement, in no event shall the MAFCO Litigation Trustees unduly prolong the
duration of the MAFCO Litigation Trust, and the MAFCO Litigation Trustees shall
at all times endeavor to prosecute, direct, settle or compromise expeditiously
the MAFCO Litigation Claims, so as to distribute the Distributable Proceeds to
the Beneficiaries and terminate the MAFCO Litigation Trust as soon as
practicable in accordance with this MAFCO Litigation Trust Agreement. Upon the
termination of the existence of this MAFCO Litigation Trust, any MAFCO
Litigation Claim which has not been prosecuted, settled, compromised or
adjudicated
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by the MAFCO Litigation Trustees will be extinguished and neither Newco nor any
Beneficiary shall have any rights or interest therein.
4.02 No Termination by Beneficiaries. The MAFCO Litigation Trust may
not be terminated by the Beneficiaries.
4.03 Continuance of MAFCO Litigation Trust for Winding Up. (a) After
the termination of the MAFCO Litigation Trust as provided in Section 4.01 and
solely for the purpose of liquidating and winding up the affairs of the MAFCO
Litigation Trust, the MAFCO Litigation Trustees shall continue to act as such
until their duties have been fully performed. The MAFCO Litigation Trustees
shall, upon the termination of the MAFCO Litigation Trust, distribute all
Distributable Proceeds as provided in Section 5.04 hereof.
(b) Upon the distribution of the Distributable Proceeds, the
MAFCO Litigation Trustees shall retain the books, records and files which shall
have been delivered to or created by the MAFCO Litigation Trustees. At the MAFCO
Litigation Trustees' discretion, all of such records and documents may be
destroyed at any time after two (2) years from the distribution of all
Distributable Proceeds (unless such records and documents are necessary to
fulfill the MAFCO Litigation Trustees' obligations pursuant to Section 13.01
hereunder). Except as otherwise specifically provided herein, upon the
distribution of all Distributable Proceeds, the MAFCO Litigation Trustees shall
be deemed discharged and have no further duties or obligations hereunder except
to account to the Beneficiaries as provided in Section 13.01 hereof and as may
be imposed on the MAFCO Litigation Trustees by virtue of Section 13.01 and
Article VI hereof.
ARTICLE V
LITIGATION COSTS; REDUCTION OF JUDGMENT; COOPERATION;
INDEPENDENT CAUSES OF ACTION; INDEMNIFICATION COSTS;
DISTRIBUTIONS; ADMINISTRATION OF TRUST ESTATE
5.01 Payment of Costs. (a) The MAFCO Litigation Trustees shall pay from
the MAFCO Litigation Trust Assets all costs, expenses, charges, liabilities and
obligations of the MAFCO Litigation Trust as contemplated by this MAFCO
Litigation Trust Agreement and as required by law, including without limitation
Administrative Costs and Expenses, the amounts due and payable with respect to
the MAFCO Note and Indemnification Costs.
(b) The MAFCO Litigation Trustees are hereby authorized and
directed to execute and deliver with respect to the MAFCO Litigation Trust the
MAFCO Loan Agreement, the MAFCO Note and the MAFCO Security Agreement. If the
MAFCO Litigation Trust has inadequate funds to pay any Administrative Costs and
Expenses that are then due and payable, the MAFCO Litigation Trustees may
request a loan under the MAFCO Loan Agreement on behalf of the MAFCO Litigation
Trust to pay such Administrative Costs
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and Expenses on the terms and subject to the conditions set forth in the MAFCO
Loan Agreement, up to a maximum aggregate amount of borrowings outstanding at
any one time of One Million Dollars ($1,000,000). Whenever reasonably requested
to do so by Newco, the MAFCO Litigation Trustees shall execute and deliver UCC-1
financing statements and any other documents or instruments requested by Newco
to evidence a perfected, first priority security interest in and lien against
all of the MAFCO Litigation Trust Assets and the proceeds therefrom to secure
repayment of the MAFCO Note, provided that any cash or other property received
by Newco as a result of that security interest shall be applied or paid over by
Newco in the priority provided in Section 5.01(c) below.
(c) The costs and expenses of the MAFCO Litigation Trust will
be paid out of the MAFCO Litigation Trust Assets in the following order of
priority:
(i) First, to the MAFCO Litigation Trustees in payment of the
Administrative Costs and Expenses;
(ii) Second, to the extent that the MAFCO Litigation Trust
Assets are derived from sources other than advances under the
MAFCO Loan Agreement, to Newco in reimbursement of any
Indemnification Costs paid by Newco under Section 5.03 hereof;
(iii) Third, to Newco in payment of any amounts advanced under
the MAFCO Loan Agreement, and any accrued interest thereon,
whether or not due and payable as provided in the MAFCO Loan
Agreement;
(iv) Fourth, subject to the subordination described in Section
5.03(a) hereof, to the payment of Indemnification Costs;
(v) Fifth, to the payment of any other costs, expenses,
charges, liabilities and obligations of the MAFCO Litigation
Trust; and
(vi) Sixth, in the discretion of the MAFCO Litigation
Trustees, to the establishment of reasonable reserves for the
payment of future Administrative Costs and Expenses and
Indemnification Costs.
The amounts described in clauses (i) through (vi) above are hereinafter referred
to as the "MAFCO Litigation Trust Costs." Notwithstanding anything to the
contrary herein, (x) upon any event of default under the MAFCO Loan Agreement or
upon the maturity of the loan thereunder, the aggregate principal and interest
outstanding under the MAFCO Loan Agreement shall be paid first out of the MAFCO
Litigation Trust Assets before the payment of any other MAFCO Litigation Trust
Costs hereunder and (y) if at any time the aggregate unpaid principal balance of
the loans under the MAFCO Loan Agreement exceed the amount which Newco is
obligated to advance under the MAFCO Loan Agreement, then an amount equal to
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such excess amount shall be paid first out of the MAFCO Litigation Trust Assets
before the payment of any other MAFCO Litigation Trust Costs hereunder.
5.02 Reduction of Judgment; Cooperation; Independent Causes of Action.
It is the intention of the parties to this MAFCO Litigation Trust Agreement that
no Exculpated Person shall have any liability to any person or entity, including
without limitation, Contribution Bar Parties, including, without limitation, any
liability with respect to claims in the nature of contribution or
indemnification, however denominated or described, in connection with, arising
out of or in any way related to MAFCO Litigation Claims or Covered Claims and
that any such claims-over shall be satisfied as provided herein.
(a) No Exculpated Person shall have any liability to any
Contribution Bar Party for contribution or indemnification with respect to any
asserted or threatened MAFCO Litigation Claim or Covered Claim, and the MAFCO
Litigation Trust or the Covered Person, as applicable, (i) shall reduce and
credit against any judgment it may obtain against any Contribution Bar Party in
any action in connection with, arising out of, or which is in any way related to
any MAFCO Litigation Claim or Covered Claim, the amount of any claim which any
such Contribution Bar Party is found to have established against any Exculpated
Person on whatsoever theory in any action involving MAFCO Litigation Claims or
Covered Claims; and (ii) shall be obligated to use good faith efforts to obtain,
and in the context of a settlement shall be deemed to have obtained, from any
such Contribution Bar Party, for the benefit of any implicated Exculpated
Persons a satisfaction in full of such Contribution Bar Party's claim against
any such Exculpated Person.
(b) Each Exculpated Person shall provide and cooperate in
discovery in any action involving the MAFCO Litigation Trust or Covered Person
and one or more of the Contribution Bar Parties, but shall retain all rights to
object to discovery requests under applicable law, as if the Exculpated Person
were named as a party to the action. In addition, neither the MAFCO Litigation
Trust nor any Covered Person shall oppose the standing or right of any
Contribution Bar Party to make any submission or argument to the court or the
jury in any action involving the MAFCO Litigation Trust or Covered Person and
one or more of the Contribution Bar Parties that seeks to account (in whole or
in part) for the asserted responsibility of the Exculpated Persons just as if
they were parties to the action, including but not limited to the Contribution
Bar Parties' right to assert that any Exculpated Person is fully or partially
responsible for any claims asserted or relief sought in any such action;
provided, however, that nothing herein shall preclude the MAFCO Litigation Trust
or Covered Person from contesting on the merits the asserted responsibility of
the Exculpated Person(s).
(c) For avoidance of doubt, nothing contained in this MAFCO
Litigation Trust Agreement shall preclude any person or entity from prosecuting
or continuing to prosecute any Independent Cause of Action against any
Exculpated Person and there shall be no rights of indemnification arising
hereunder in connection with Independent Causes of Action.
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(d) The provisions of this Section 5.02 and the provisions of
Section 5.03 hereof shall be binding on and inure to the benefit of all
successors and assigns of the Marvel Debtors, the MAFCO Litigation Trust,
Covered Persons, Exculpated Persons and Contribution Bar Parties.
5.03 Indemnification Costs. (a) The MAFCO Litigation Trust agrees to
indemnify and hold harmless each Exculpated Person from and against any and all
liability (including fees and expenses of counsel and other professionals (other
than any costs of internal personnel), amounts paid in judgment, penalty or
otherwise) ("Indemnification Costs") with respect to claims-over on whatsoever
theory (whether by way of third- or subsequent party complaint, cross-claim,
separate action or otherwise) by any person or entity to recover in whole or in
part any liability, direct or indirect, whether by way of judgment, penalty or
otherwise, of any person or entity in connection with, arising out of, or which
is in any way related to any MAFCO Litigation Claim. The MAFCO Litigation
Trust's indemnity obligation under this Section 5.03 shall be subordinate to its
obligation, up to one million dollars ($1,000,000), to (i) pay Administrative
Costs and Expenses, (ii) reimburse Newco for any Indemnification Costs paid by
it pursuant to this Section 5.03, (iii) pay Newco any amounts advanced under the
MAFCO Loan Agreement, and any accrued interest thereon, whether or not due and
payable as provided in the MAFCO Loan Agreement or in Section 5.01(b) hereof,
(iv) repay any additional borrowings as contemplated by Section 7.01(p) hereof,
and (v) pay obligations pursuant to Section 8.05 hereof. For avoidance of doubt,
nothing herein is intended to impose upon the MAFCO Litigation Trust any
indemnification obligation with respect to Covered Claims that are not MAFCO
Litigation Claims.
(b) Newco hereby guarantees the payment of Indemnification
Costs by the MAFCO Litigation Trust as set forth in Section 5.03(a).
(c) Promptly after receipt by an Exculpated Person of notice
of the commencement of any action referred to in Section 5.03(a), such
Exculpated Person will give written notice to the MAFCO Litigation Trustees
thereof, but the omission so to notify the MAFCO Litigation Trustees will not
relieve the MAFCO Litigation Trust from any liability which it may have to any
Exculpated Person otherwise than pursuant to the provisions of this Section 5.03
except to the extent the MAFCO Litigation Trust is materially prejudiced
thereby. The MAFCO Litigation Trust shall have no liability for any cost or
expense incurred by such Exculpated Person prior to the notification to the
MAFCO Litigation Trustees of such action. In case any such action is brought
against an Exculpated Person, and it notifies the MAFCO Litigation Trustees of
the commencement thereof, the MAFCO Litigation Trustees will be entitled to
participate in, and to the extent that it may wish, to assume the defense
thereof, with counsel reasonably satisfactory to the MAFCO Litigation Trustees,
and after notice from the MAFCO Litigation Trustees to such Exculpated Person,
the MAFCO Litigation Trust and Newco shall not, except as hereinafter provided,
be responsible for any legal or other expenses subsequently incurred by the
Exculpated Person in connection with the defense thereof. If separate counsel is
required as to any such claim-over, the MAFCO
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Litigation Trust shall pay for the reasonable fees and expenses of competent
counsel selected by the Exculpated Person, subject to the approval of the MAFCO
Litigation Trustees which will not be unreasonably withheld or delayed. No
settlement of any such claim-over shall require any financial contribution on
the part of any Exculpated Person. The MAFCO Litigation Trust and Newco shall
not be liable for any settlement of any such action or proceeding effected
without its written consent, but if settled with its written consent, or if
there be a final judgment for the plaintiff in any such action or proceeding,
the MAFCO Litigation Trust agrees to indemnify and hold harmless such Exculpated
Person from and against any loss or liability by reason of such settlement or
judgment.
5.04 Distribution of Distributable Proceeds. Subject to Section 5.05
hereof, following the resolution of all or a portion of any of the MAFCO
Litigation Claims, whether by interim or final award or arbitrators decision,
settlement, judgment, accounting or order (in each case, which is not subject to
appeal or review by any tribunal or court), resulting in the collection of Net
MAFCO Litigation Proceeds, and provided that (x) the MAFCO Litigation Trustees
have paid all MAFCO Litigation Trust Costs incurred to date, (y) the MAFCO
Litigation Trustees have terminated the MAFCO Loan Agreement with Newco and
provided Newco with an instrument in form and substance reasonably satisfactory
to Newco releasing Newco from any further liability to make advances under the
MAFCO Loan Agreement to pay Administrative Costs and Expenses, and (z) the MAFCO
Litigation Trust, after consultation with Newco, has established a reasonable
reserve for all indemnity claims theretofore asserted pursuant to Section 5.03
hereof and sixty (60) days have elapsed since the MAFCO Litigation Trust
notifies Newco in writing of the amount of the reserve and that it waives the
right to prosecute any MAFCO Litigation Claims that it has not already begun to
prosecute as of the date of such notice, the MAFCO Litigation Trustees shall
distribute the remaining Distributable Proceeds as follows:
(i) First, one hundred percent (100%) of such amounts shall be
distributed to the Beneficiaries which are holders of Allowed
Unsecured Claims pursuant to Section 4.4 of the Plan, until
holders of Allowed Unsecured Claims have received four million
five hundred thousand dollars ($4,500,000); and
(ii) Thereafter, (A) thirty percent (30%) of such amounts
shall be distributed to the Beneficiaries which are holders of
Allowed Unsecured Claims pursuant to Section 4.4 of the Plan
and (B) seventy percent (70%) of such amounts shall be
distributed to the Beneficiaries which are holders of Allowed
Class Securities Litigation Claims and Allowed Equity
Interests in Entertainment pursuant to Sections 4.5 and 4.6(a)
of the Plan.
5.05 Distributions Generally; Method of Payment; Undeliverable
Property. (a) The amount of Distributable Proceeds shall be reasonably
determined by the MAFCO Litigation Trustees prior to December 31st of each year
commencing on the first December 31st following the first anniversary of the
Consummation Date. All distributions of Net MAFCO
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Litigation Proceeds pursuant to Section 5.04 shall be made at such times and in
such amounts as shall be determined by the MAFCO Litigation Trustees. In no
event shall any distribution be made to any Beneficiary unless all MAFCO
Litigation Trust Costs incurred prior to the date of such distribution and then
due and payable have been paid.
(b) All amounts payable to a Beneficiary pursuant to this
MAFCO Litigation Trust Agreement shall be paid by the MAFCO Litigation Trustees
to such Beneficiary by check payable to such Beneficiary, mailed first class to
the address of such Beneficiary appearing on the Beneficiary List. All payments
required to be made by the MAFCO Litigation Trustees to the Beneficiaries shall
be made in Cash denominated in U.S. dollars and, if in check form, drawn on a
domestic bank selected by the MAFCO Litigation Trustees.
(c) If any distribution to a Beneficiary of Distributable
Proceeds is returned to the MAFCO Litigation Trust as undeliverable, no further
distribution thereof shall be made to such Beneficiary unless and until the
MAFCO Litigation Trust is notified in writing of such Beneficiary's then current
address within the time period specified in Section 5.05(d). For purposes of
this MAFCO Litigation Trust Agreement, undeliverable distributions shall include
checks (as of the date of their issuance) sent to a Beneficiary, respecting
distributions to such Beneficiary, which checks have not been cashed within six
months following the date of issuance of such checks. Undeliverable
distributions shall remain in the possession of the MAFCO Litigation Trust until
the earlier of (i) such time as the relevant distribution becomes deliverable
and (ii) the time period specified in Section 5.05(d).
(d) Any Beneficiary that does not assert a claim for an
undeliverable distribution of Distributable Proceeds held by the MAFCO
Litigation Trust within one year after the date such distribution was originally
made (but in no event longer than six months after all of the Distributable
Proceeds have been distributed except for undeliverable distributions), shall no
longer have any claim to or interest in such undeliverable distributions, and
such undeliverable distributions shall revert to or remain in the MAFCO
Litigation Trust and shall be redistributed to the applicable Beneficiaries in
accordance with this MAFCO Litigation Trust Agreement.
ARTICLE VI
TAX MATTERS
6.01 Treatment. For all federal income tax purposes, this MAFCO
Litigation Trust shall be treated as a partnership, and the Beneficiaries shall
be treated as partners. The MAFCO Litigation Trustees will file such tax returns
and provide the Beneficiaries with such information statements as may be
provided by law.
6.02 Allocation. The MAFCO Litigation Trustees shall cause taxable
income and taxable loss of the MAFCO Litigation Trust to be allocated among the
Beneficiaries in such
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manner as it determines to equitably reflect such persons' share of taxable
income and taxable loss, which allocations may reflect the sharing ratios
described in Section 5.04.
ARTICLE VII
POWERS OF AND LIMITATIONS ON THE MAFCO LITIGATION TRUSTEES
7.01 Powers of the MAFCO Litigation Trustees. Without limitation, but
subject to the remaining provisions herein, the MAFCO Litigation Trustees shall
be expressly authorized to:
(a) execute any documents and take any other actions related
to, or in connection with, the liquidation of the MAFCO
Litigation Trust Assets and the exercise of the MAFCO
Litigation Trustees' powers granted herein;
(b) hold legal title to any and all rights of the
Beneficiaries in or arising from the MAFCO Litigation Trust
Assets;
(c) protect and enforce the rights to the MAFCO Litigation
Trust Assets vested in the MAFCO Litigation Trustees by this
MAFCO Litigation Trust Agreement by any method deemed
appropriate including, without limitation, by judicial
proceedings or pursuant to any applicable bankruptcy,
insolvency, moratorium or similar law and general principles
of equity;
(d) deliver the Distributable Proceeds to the Beneficiaries in
accordance with this MAFCO Litigation Trust Agreement;
(e) have exclusive power to initiate, prosecute, supervise and
direct the MAFCO Litigation Claims; provided, however, that
all MAFCO Litigation Claims shall be brought solely before the
District Court, unless the District Court is found not to have
jurisdiction;
(f) have exclusive power to settle or otherwise compromise the
MAFCO Litigation Claims, subject, however, to District Court
approval;
(g) file, if necessary, any and all tax information returns
with respect to the MAFCO Litigation Trust and pay taxes
properly payable by the MAFCO Litigation Trust, if any, and
make distributions to the Beneficiaries net of such taxes;
(h) make all necessary filings in accordance with any
applicable law, statute or regulation, including, but not
limited to, the Exchange Act;
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(i) determine and satisfy any and all ordinary course
liabilities created, incurred or assumed by the MAFCO
Litigation Trust;
(j) pay all ordinary course expenses and make all other
payment relating to the MAFCO Litigation Trust;
(k) retain and pay professionals, including but not limited to
attorneys, accountants and experts necessary to carry out its
obligations hereunder, including, without limitation, the
members of any professional services firm with which the MAFCO
Litigation Trustees are affiliated;
(l) invest moneys received by the MAFCO Litigation Trust or
otherwise held by the MAFCO Litigation Trust in accordance
with Section 7.04 hereof;
(m) execute, deliver and perform its obligations under the
MAFCO Loan Agreement, the MAFCO Note and the MAFCO Security
Agreement;
(n) provide the indemnification and exculpation, pay the MAFCO
Litigation Trust Costs, maintain the books and records of the
MAFCO Litigation Trust and prepare reports each as provided in
herein, and engage in such other acts or actions as otherwise
contemplated by this Agreement;
(o) in the event that the MAFCO Litigation Trustee determine
that the Beneficiaries or the MAFCO Litigation Trust may, will
or have become subject to adverse tax consequences, in its
sole discretion, take such actions that will, or are intended
to, alleviate such adverse tax consequences;
(p) borrow monies on terms and conditions reasonably
acceptable to them provided that any obligation to repay such
borrowings shall be junior to the MAFCO Note and unsecured;
and
(q) establish appropriate reserves for Disputed Claims.
7.02 Action by Majority. The MAFCO Litigation Trustees shall govern the
MAFCO Litigation Trust by majority, and the signature of at least two of the
MAFCO Litigation Trustees shall be required to bind the MAFCO Litigation Trust.
7.03 No Operations as an Investment Company, Trade or Business. No part
of the MAFCO Litigation Trust Assets shall be used or disposed of by the MAFCO
Litigation Trustees in furtherance of any trade or business. The MAFCO
Litigation Trustees shall, on behalf of the MAFCO Litigation Trust, hold the
MAFCO Litigation Trust out as a trust in the process of liquidation and not as
an investment company. The MAFCO Litigation Trustees shall be restricted to the
enforcement on behalf of and for the benefit of the Beneficiaries of
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the MAFCO Litigation Claims, the payments and distribution of the Distributable
Proceeds for the purpose set forth in this MAFCO Litigation Trust Agreement and
the conservation and protection of the MAFCO Litigation Trust Assets and the
administration thereof in accordance with the provisions of this MAFCO
Litigation Trust Agreement.
7.04 Investment of MAFCO Litigation Trust Moneys. The MAFCO Litigation
Trustees shall invest the moneys received by the MAFCO Litigation Trust or
otherwise held in the MAFCO Litigation Trust Estate in (i) short-term
certificates of deposit or money market accounts maintained by or issued by
domestic banks having in excess of $1 billion in capital and surplus and one of
the two highest ratings given by both Moody's and Standard & Poors, (ii) insured
demand deposit accounts or certificates of deposit maintained by or issued by
any savings institution or commercial bank insured by the United States
government or any agency thereof and (iii) short-term marketable direct
obligations of, or guaranteed as to principal and interest by, the United States
government or any agency thereof; provided, however, that the maturities of any
of the foregoing shall not exceed 30 days.
ARTICLE VIII
CONCERNING THE MAFCO LITIGATION TRUSTEES
8.01 Generally. Each of the MAFCO Litigation Trustees accepts and
undertakes to discharge the MAFCO Litigation Trust created by this MAFCO
Litigation Trust Agreement upon the terms and conditions hereof including,
without limitation, the provisions of Section 2.04 hereof. Each of the MAFCO
Litigation Trustees shall not have any liability for any of its acts or
omissions in connection with the selection and hiring of professionals, or the
initiation, prosecution, supervision, direction, compromising or settling of any
MAFCO Litigation Claims, or the performance of any of its other duties
hereunder, except in the case of its gross negligence or its own intentional and
willful misconduct, and in no event shall a MAFCO Litigation Trustee be liable
for any action taken in reliance upon the advice of professionals selected with
due care in respect of the subject matter in question. Notwithstanding the
foregoing, the MAFCO Litigation Trustees may, without liability to any MAFCO
Litigation Trustee therefor, retain the services of any professional services
firm with which a MAFCO Litigation Trustee is affiliated. The MAFCO Litigation
Trustees shall maintain the chief executive office of the MAFCO Litigation Trust
and the principal office where the records relating to the MAFCO Litigation
Trust are maintained in the county of Essex, state of New Jersey, or, upon
notice to Newco, in such other location as to which the MAFCO Litigation
Trustees agree in accordance with Section 7.02 hereof.
8.02 Reliance by MAFCO Litigation Trustee. Except as otherwise provided
in this MAFCO Litigation Trust Agreement:
(a) each MAFCO Litigation Trustee and the MAFCO Litigation
Trustees collectively may rely and shall be protected in
acting upon any resolution,
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statement, instrument, opinion, report, notice, request,
consent, order or other paper or document reasonably believed
by it or them to be genuine and to have been signed or
presented by the proper party or parties;
(b) each MAFCO Litigation Trustee and the MAFCO Litigation
Trustees collectively may consult with independent legal
counsel to be selected by it or them with due care and the
advice or opinion of such counsel shall be full and complete
personal protection to each MAFCO Litigation Trustee, the
MAFCO Litigation Trustees collectively and agents of the MAFCO
Litigation Trust in respect of any action taken or suffered by
it or them in good faith and in reliance on, or in accordance
with, such advice or opinion, including, without limitation,
the advice or opinion of a member of any law firm with which
any MAFCO Litigation Trustee is affiliated; and
(c) persons dealing with the any MAFCO Litigation Trustee or
the MAFCO Litigation Trustees collectively shall look only to
the MAFCO Litigation Trust Assets to satisfy any liability
incurred by each MAFCO Litigation Trustee or the MAFCO
Litigation Trustees collectively to such person in carrying
out the terms of this MAFCO Litigation Trust Agreement, and no
MAFCO Litigation Trustee shall have any personal or individual
obligation to satisfy any such liability.
8.03 Liability to Third Persons. No Beneficiary shall be subject to any
personal liability whatsoever, in tort, contract or otherwise, to any person in
connection with the MAFCO Litigation Trust Assets or the affairs of the MAFCO
Litigation Trust, and no MAFCO Litigation Trustee or agent of the MAFCO
Litigation Trust shall be subject to any personal liability whatsoever, in tort,
contract or otherwise, to any person in connection with the MAFCO Litigation
Trust Assets or the affairs of this MAFCO Litigation Trust, except for its gross
negligence or its own intentional and willful misconduct; and all such persons
shall look solely to the MAFCO Litigation Trust Assets for satisfaction of
claims of any nature arising in connection with affairs of the MAFCO Litigation
Trust.
8.04 Nonliability of MAFCO Litigation Trustees for Acts of Others.
Nothing contained in this MAFCO Litigation Trust Agreement shall be deemed to be
an assumption by any MAFCO Litigation Trustee of any of the liabilities,
obligations or duties of any of the other parties hereto; and shall not be
deemed to be or contain a covenant or agreement by any MAFCO Litigation Trustee
to assume or accept any such liability, obligation or duty. Any successor MAFCO
Litigation Trustee may accept and rely upon any accounting made by or on behalf
of any predecessor MAFCO Litigation Trustee hereunder, and any statement or
representation made as to the assets comprising the MAFCO Litigation Trust
Assets or as to any other fact bearing upon the prior administration of the
MAFCO Litigation Trust. A MAFCO Litigation Trustee shall not be liable for
having accepted and relied upon such accounting, statement or representation if
it is later proved to be incomplete, inaccurate or
730835.9
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untrue. A MAFCO Litigation Trustee or successor MAFCO Litigation Trustee shall
not be liable for any act or omission of any predecessor MAFCO Litigation
Trustee, nor have a duty to enforce any claims against any predecessor MAFCO
Litigation Trustee on account of any such act or omission.
8.05 Indemnity. Each MAFCO Litigation Trustee and all MAFCO Litigation
Trustees and its or their employees, officers, directors and principals
(collectively, the "Indemnified Parties") shall be indemnified by the MAFCO
Litigation Trust from any losses, claims, damages, liabilities or expenses
(including, without limitation, reasonable attorneys' fees, disbursements and
related expenses) which the Indemnified Parties may incur or to which the
Indemnified Parties may become subject in connection with any action, suit,
proceeding or investigation brought by or threatened against the Indemnified
Parties other than for its own gross negligence, its recklessness or its own
intentional or willful and wanton misconduct. Notwithstanding any provision
herein to the contrary, the Indemnified Parties shall be entitled to obtain
advances from the MAFCO Litigation Trust to cover their expenses of defending
themselves in any action brought against them as a result of the acts or
omissions of the MAFCO Litigation Trustee in its capacity as such, provided,
however, that the Indemnified Parties receiving such advances shall repay the
amounts so advanced to the MAFCO Litigation Trust upon the entry of a final
order of any court of competent jurisdiction finding that such Indemnified
Parties were not entitled to any indemnity under the provisions of this Section
8.05.
8.06 Bond. No MAFCO Litigation Trustee shall be obligated to post a
bond hereunder.
ARTICLE IX
COMPENSATION OF MAFCO LITIGATION TRUSTEES
9.01 Fees and Expenses. Each and all MAFCO Litigation Trustees shall be
entitled to reimburse itself or themselves from the MAFCO Litigation Trust for
all Administrative Costs and Expenses incurred by it or them in the performance
of its or their duties in accordance with this MAFCO Litigation Trust Agreement.
Each MAFCO Litigation Trustee shall be entitled to a fee of $15,000 per annum
plus $1,000 for each meeting of the MAFCO Litigation Trust attended (but in no
event to exceed, for each MAFCO Litigation Trustee, $35,000 in the aggregate in
any one calendar year), plus the reimbursement of its reasonable out-of-pocket
expenses, for its services as MAFCO Litigation Trustee hereunder.
730835.9
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ARTICLE X
MAFCO LITIGATION TRUSTEES AND SUCCESSOR MAFCO LITIGATION
TRUSTEES
10.01 Generally. The Equity Committee, the Creditors Committee, and the
Trustee (each a "Designor") shall designate the MAFCO Litigation Trustees, as
follows: one of the MAFCO Litigation Trustees shall be designated by the Equity
Committee, one of the MAFCO Litigation Trustees shall be designated by the
Creditors Committee, and one of the MAFCO Litigation Trustees shall be
designated by the Trustee. The MAFCO Litigation Trustees shall initially be
Ronald Cantor (designee of the Equity Committee), Ivan Snyder (designee of the
Creditors Committee), and James A. Scarpone (designee of the Trustee). If a
MAFCO Litigation Trustee shall ever change its name or reorganize, reincorporate
or merge with or into or consolidate with any other entity, such MAFCO
Litigation Trustee shall be deemed to be a continuing entity and shall continue
to act as a MAFCO Litigation Trustee hereunder with the same liabilities,
duties, powers, rights, titles, discretions and privileges as are herein
specified for a MAFCO Litigation Trustee.
10.02 Resignation. Each MAFCO Litigation Trustee may resign and be
discharged from the trusts hereby created by giving at least thirty (30) days
prior written notice thereof to each of the other MAFCO Litigation Trustees, the
Beneficiaries and Newco. Such resignation shall become effective on the later to
occur of (a) the date specified in such written notice, or (b) the effective
date of the appointment of a successor MAFCO Litigation Trustee in accordance
with Section 10.04 hereof and such successor's acceptance of such appointment.
10.03 Removal. Any MAFCO Litigation Trustee may be removed, with or
without cause, by its Designor. Such removal shall become effective on the later
to occur of (a) the date such action is taken by the Designor or (b) the
effective date of the appointment of a successor MAFCO Litigation Trustee in
accordance with Section 10.04 hereof and such successor's acceptance of such
appointment.
10.04 Appointment of Successor MAFCO Litigation Trustee; Acceptance of
Appointment by Successor MAFCO Litigation Trustee. The death, resignation,
removal, incompetency, bankruptcy or insolvency of a MAFCO Litigation Trustee
shall not operate to terminate the MAFCO Litigation Trust created by this MAFCO
Litigation Trust Agreement or to revoke any existing agency created pursuant to
the terms of this MAFCO Litigation Trust Agreement or invalidate any action
theretofore taken by any or all MAFCO Litigation Trustees. In any such event, a
successor MAFCO Litigation Trustee shall be promptly selected by the Designor
whose designee as MAFCO Litigation Trustee is the party to be succeeded, if that
Designor is still in existence; otherwise, by the two remaining MAFCO Litigation
Trustees. Any successor MAFCO Litigation Trustee appointed hereunder shall
execute an instrument accepting its appointment and shall deliver one
counterpart thereof to the District Court for filing, and, in case of a MAFCO
Litigation Trustee's resignation, to the
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retiring MAFCO Litigation Trustee. Thereupon, such successor shall, without any
further act, become vested with all the obligations, duties, powers, rights,
title, discretion and privileges of its predecessor in the MAFCO Litigation
Trust with like effect as if originally named MAFCO Litigation Trustee and shall
be deemed appointed pursuant to Section 1123(b)(3)(B) of the Bankruptcy Code to
retain and enforce any MAFCO Litigation Claims for the benefit of the
Beneficiaries. The retiring MAFCO Litigation Trustee shall duly assign, transfer
and deliver to such successor all property and money held by such retiring MAFCO
Litigation Trustee hereunder and shall, as directed by the District Court or
reasonably requested by such successor, execute and deliver an instrument or
instruments conveying and transferring to such successor upon the trust herein
expressed, all the obligations, duties, powers, rights, title, discretion and
privileges of such retiring MAFCO Litigation Trustee.
ARTICLE XI
CONCERNING THE BENEFICIARIES
11.01 No Suits by Beneficiaries. No Beneficiary shall have any right by
virtue of any provision of this MAFCO Litigation Trust Agreement to institute or
participate in any action or proceeding at law or in equity against any party
other than the MAFCO Litigation Trustee with respect to the MAFCO Litigation
Claims.
11.02 Requirement of Undertaking. The MAFCO Litigation Trustees, singly
or collectively, may request the District Court to require, in any suit for the
enforcement of any right or remedy under this MAFCO Litigation Trust Agreement,
or in any suit against a MAFCO Litigation Trustee or MAFCO Litigation Trustees
for any action taken or omitted by it or them as MAFCO Litigation Trustee(s),
the filing by any party litigant in such suit of an undertaking to pay the costs
of such suit, including reasonable attorneys' fees, against any party litigant
in such suit; provided, however, that the provisions of this Section 11.02 shall
not apply to any suit by a MAFCO Litigation Trustee or MAFCO Litigation
Trustees.
ARTICLE XII
JURISDICTION
12.01 Jurisdiction. The parties agree that the District Court shall
have jurisdiction over the MAFCO Litigation Trust, the MAFCO Litigation
Trustees, the MAFCO Litigation Claims and the remaining MAFCO Litigation Trust
Assets, including, without limitation, jurisdiction to determine all
controversies and disputes arising under or in connection with this MAFCO
Litigation Trust Agreement. Notwithstanding the foregoing, nothing contained
herein shall be construed as limiting the right of the MAFCO Litigation Trust to
assert any MAFCO Litigation Claim to which it has title in any court of
competent jurisdiction. The MAFCO Litigation Trustees shall have the power and
authority to bring any action in the District Court to prosecute the MAFCO
Litigation Claims as provided in Section 7.01. The
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District Court shall have the authority to construe and interpret this MAFCO
Litigation Trust Agreement and to establish, amend and revoke rules and
regulations for the administration of this MAFCO Litigation Trust, including,
but not limited to, correcting any defect or supplying any omission, or
reconciling any inconsistency in this MAFCO Litigation Trust Agreement, in the
manner and to the extent it shall deem necessary or advisable to make this MAFCO
Litigation Trust fully effective, and all decisions and determinations by the
District Court in the exercise of this power shall be final and binding upon the
MAFCO Litigation Trustees, Newco and the Beneficiaries.
ARTICLE XIII
ADMINISTRATION OF TRUST ESTATE
13.01 Reports. The MAFCO Litigation Trustees shall file with the
District Court: (a) within 45 days after the end of each first and third fiscal
quarter, an unaudited semi-annual financial report for the previous fiscal
half-year regarding the financial condition and results of operations of the
MAFCO Litigation Trust for such fiscal half-year, (b) within 90 days after the
end of each fiscal year, an unaudited annual financial report regarding the
financial condition and results of operation of the MAFCO Litigation Trust,
including a statement of receipts and disbursements and a report on changes in
the MAFCO Litigation Trustees, if any, and (c) within 45 days after the end of
each first and third fiscal quarter, a semi-annual report concerning the status
of all MAFCO Litigation Claims which have been filed, including material
developments, such as settlements and other material events. The MAFCO
Litigation Trustee shall provide a copy of such reports to the Equity Committee
if the Equity Committee is still in existence, to the Creditors Committee if the
Creditors Committee is still in existence, and to any Beneficiary at such
Beneficiary's request and cost. If the MAFCO Litigation Trust becomes subject to
the registration requirements of the Exchange Act, the MAFCO Litigation Trustees
shall cause the MAFCO Litigation Trust to register pursuant to, and comply with
the applicable reporting requirements of, the Exchange Act and will issue
reports to Beneficiaries in accordance therewith.
13.02 Fiscal Year. The fiscal year of the MAFCO Litigation Trust shall
be the calendar year.
13.03 Books and Records. The MAFCO Litigation Trustees shall maintain,
in respect of the MAFCO Litigation Trust and the Beneficiaries, a list of the
names and addresses of the Beneficiaries (the "Beneficiary List"), and books and
records relating to the assets and the income of the MAFCO Litigation Trust and
the payment of expenses of the MAFCO Litigation Trust, in such detail and for
such period of time as may be necessary to enable it to make full and proper
reports in respect thereof in accordance with the provisions of Section 13.01
and Article VI hereof and to comply with applicable provisions of law. Each
Beneficiary shall be responsible for providing the MAFCO Litigation Trustees
with written notice of any change in address. The MAFCO Litigation Trustees are
not obligated to make
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any effort to determine the correct address of a Beneficiary and may, until
otherwise advised in writing by any Beneficiary, rely upon the Beneficiary List.
13.04 Newco Reports to MAFCO Litigation Trustee. Newco shall provide
the MAFCO Litigation Trustees with periodic reports of the status of claims
resolutions (no less frequently than monthly during the first six months after
the Consummation Date and no less frequently than quarterly thereafter until all
claims have been resolved by the District Court) and such other information
relating thereto as the MAFCO Litigation Trustees shall reasonably request.
ARTICLE XIV
MISCELLANEOUS PROVISIONS
14.01 Construction. This MAFCO Litigation Trust Agreement shall be
governed by and construed in accordance with the laws of the State of Delaware
and the United States of America; provided that the MAFCO Litigation Trust and
any interpretation or enforcement of the provisions of this MAFCO Litigation
Trust Agreement shall be subject to the jurisdiction of the District Court as
contemplated by Article XII hereof. The MAFCO Litigation Trustees'
interpretation of the provisions of this MAFCO Litigation Trust Agreement and
the provisions of the Plan as they relate to the prosecution of the MAFCO
Litigation Claims shall be deemed conclusive in the absence of a contrary
interpretation of the District Court.
14.02 Severability. In the event any provision of this MAFCO Litigation
Trust Agreement or the application thereof to any person or circumstances shall
be determined by a final order of a court of competent jurisdiction to be
invalid or unenforceable to any extent, the remainder of this MAFCO Litigation
Trust Agreement or the application of such provision to persons or circumstances
or in jurisdictions other than those as to or in which it is held or
unenforceable, shall not be affected thereby, and each provision of this MAFCO
Litigation Trust Agreement shall be valid and enforced to the fullest permitted
by law.
14.03 Cooperation. Newco shall provide the MAFCO Litigation Trustees,
at no cost to the MAFCO Litigation Trustees, the MAFCO Litigation Trust or the
Beneficiaries, with such access to its and its subsidiaries' books, records and
employees as the MAFCO Litigation Trustees may reasonably request during regular
business hours for the purpose of performing its duties and exercising its
duties hereunder, including, without limitation, by providing documents and
making its officers, directors and employees available to provide testimony and
otherwise to assist the MAFCO Litigation Trustees in prosecuting the MAFCO
Litigation Claims; provided that copying costs, if any, shall be paid by the
MAFCO Litigation Trust as an Administrative Cost and Expense.
14.04 Notices. Any notice or other communication required or permitted
to be made in accordance with this MAFCO Litigation Trust Agreement shall be in
writing and shall be
730835.9
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deemed to have been sufficiently given, for all purposes, if delivered
personally or by telex or other telegraphic means or mailed by first class mail:
(i) if to the MAFCO Litigation Trustees, to the MAFCO
Litigation Trustees, c/o James A. Scarpone, Hellring
Lindeman Goldstein & Siegal, One Gateway Center,
Newark, New Jersey 07102.
(ii) if to Newco, at 685 Third Avenue, New York, New York
10017, attention: Corporate Secretary, with a copy to
Battle Fowler, LLP, 75 East 55th Street, New York,
New York, 10022, attention: Lawrence
Mittman, Esq.
(iii) if to any Beneficiary, to such Beneficiary at the
address set forth in the Beneficiary List.
(iv) if to the Creditors Committee, to Willkie, Farr &
Gallagher, 787 Seventh Avenue, New York, New York
10022, attention: Tonny K.
Ho.
Any party to this MAFCO Litigation Trust Agreement may change its address for
the above purposes by notifying in writing the other parties of such change in
address.
14.05 Headings. The headings contained in this MAFCO Litigation Trust
Agreement are solely for convenience of reference and shall not affect the
meaning or interpretation of this MAFCO Litigation Trust Agreement or of any
term or provision hereof.
14.06 Counterparts. This MAFCO Litigation Trust Agreement may be
executed in any number of counterparts, each of which shall be an original, but
such counterparts shall together constitute but one and the same instrument.
IN WITNESS WHEREOF, the parties hereto have executed this MAFCO
Litigation Trust Agreement or caused this MAFCO Litigation Trust Agreement to be
duly executed by their respective officers and the MAFCO Litigation Trustees
herein have executed this MAFCO Litigation Trust Agreement, as MAFCO Litigation
Trustees, effective as of the date first above written.
MARVEL ENTERTAINMENT GROUP, INC.
By:/s/ William H. Hardie, III
_______________________________________
Name: William H. Hardie, III
Title: Vice President and Secretary
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THE ASHER CANDY COMPANY
By:/s/ William H. Hardie, III
_______________________________________
Name: William H. Hardie, III
Title: Vice President and Secretary
FLEER CORP.
By:/s/ William H. Hardie, III
_______________________________________
Name: William H. Hardie, III
Title: Vice President and Secretary
FRANK H. FLEER CORP.
By:/s/ William H. Hardie, III
_______________________________________
Name: William H. Hardie, III
Title: Vice President and Secretary
HEROES WORLD DISTRIBUTION, INC.
By:/s/ William H. Hardie, III
_______________________________________
Name: William H. Hardie, III
Title: Vice President and Secretary
MALIBU COMICS ENTERTAINMENT, INC.
By:/s/ William H. Hardie, III
_______________________________________
Name: William H. Hardie, III
Title: Vice President and Secretary
730835.9
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MARVEL CHARACTERS, INC.
By:/s/ William H. Hardie, III
_______________________________________
Name: William H. Hardie, III
Title: Vice President and Secretary
MARVEL DIRECT MARKETING, INC.
By:/s/ William H. Hardie, III
_______________________________________
Name: William H. Hardie, III
Title: Vice President and Secretary
SKYBOX INTERNATIONAL INC.
By:/s/ William H. Hardie, III
_______________________________________
Name: William H. Hardie, III
Title: Vice President and Secretary
By:/s/ John J. Gibbons
_______________________________________
John J. Gibbons, solely in his capacity
as chapter 11 trustee for the Marvel
Debtors
MARVEL ENTERPRISES, INC.
By:/s/ William H. Hardie, III
_______________________________________
Name: William H. Hardie, III
Title: Vice President and Secretary
730835.9
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By:/s/ Ronald Cantor
_______________________________________
Ronald Cantor, solely as trustee
By:/s/ Ivan Snyder
_______________________________________
Ivan Snyder, solely as trustee
By:/s/ James A Scarpone
_______________________________________
James A. Scarpone, solely as trustee
730835.9
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EXHIBIT 9
MAFCO LITIGATION TRUST LOAN AGREEMENT
dated as of October 1, 1998
by and between
Ronald Cantor,
Ivan Snyder,
and
James A. Scarpone,
solely as trustees under that certain
MAFCO Litigation Trust Agreement, dated the date
hereof, establishing a trust for the benefit of the
beneficiaries thereunder
and
Marvel Enterprises, Inc.,
a Delaware corporation
730826.6
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TABLE OF CONTENTS
Page
ARTICLE I
DEFINITIONS...............................................................2
Section 1.1 Definitions..................................................2
Section 1.2 Exhibits.....................................................4
ARTICLE II
AMOUNT AND TERMS OF LOANS..................................................5
Section 2.1 Commitment....................................................5
Section 2.2 Authorization and Issuance of Note............................5
Section 2.3 Interest Rates; Payment of Principal
and Interest on Facility...................................6
Section 2.4 Computation of Interest; Maximum Interest Rate................6
Section 2.5 Voluntary Prepayments.........................................6
Section 2.6 Mandatory Prepayments.........................................7
Section 2.7 Holidays......................................................7
Section 2.8 Time and Place of Payments....................................7
ARTICLE III
AFFIRMATIVE COVENANTS OF THE BORROWER......................................7
Section 3.1 Notice of Certain Events......................................7
Section 3.2 Taxes.........................................................7
Section 3.3 Further Assurances............................................7
ARTICLE IV
NEGATIVE COVENANTS OF THE BORROWER.........................................8
Section 4.1 Debt..........................................................8
Section 4.2 Liens.........................................................8
Section 4.3 Borrower's Activities.........................................8
Section 4.4 Use of Proceeds...............................................9
Section 4.5 Restrictions on Fundamental Changes...........................9
Section 4.6 Distributions.................................................9
ARTICLE V
EVENTS OF DEFAULT..........................................................9
Section 5.1 Events of Default.............................................9
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Section 5.2 Remedies.....................................................10
ARTICLE VI
MISCELLANEOUS.............................................................11
Section 6.1 Waivers; Modifications in Writing............................11
Section 6.2 Failure or Delay; Limitation on Liability....................11
Section 6.3 Notices, etc.................................................11
Section 6.4 Binding Effect...............................................12
Section 6.5 Headings.....................................................13
Section 6.6 Execution in Counterparts....................................13
Section 6.7 Governing Law; Jurisdiction..................................13
Section 6.8 Severability of Provisions...................................13
Section 6.9 Survival of Agreements, Representations and Warranties.......13
Section 6.10 Complete Agreement..........................................14
Exhibits
Exhibit A - Form of Note
Exhibit B - Form of Security Agreement
730826.6
<PAGE>
MAFCO LITIGATION TRUST LOAN AGREEMENT
This MAFCO Litigation Trust Loan Agreement is made as of the 1st day of
October, 1998, by and between Marvel Enterprises, Inc., a Delaware corporation,
and Ronald Cantor, Ivan Snyder, and James A. Scarpone, solely as trustees under
that certain MAFCO Litigation Trust Agreement, dated the date hereof,
establishing a trust for the benefit of the beneficiaries thereunder.
PRELIMINARY STATEMENT
On or about July 31, 1998, the United States District Court for the
District of Delaware (the "District Court") entered an order confirming the
Fourth Amended Joint Plan of Reorganization Under Chapter 11 of the United
States Bankruptcy Code, dated July 31, 1998 (as may thereafter be amended,
restated or otherwise modified, the "Plan"), filed by certain of the secured
creditors 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. (the "Marvel Debtors") and by Toy Biz, Inc. (which has
since changed its name to Marvel Enterprises, Inc.).
Pursuant to the Plan and that certain MAFCO Litigation Trust Agreement (the
"Litigation Trust Agreement"), dated the date hereof, among the Marvel Debtors,
John J. Gibbons (solely in his capacity as chapter 11 trustee for the Marvel
Debtors), the Trustees and the Lender, (i) the Marvel Debtors have contributed
to the Trustees in trust all of their interests in any Causes of Action derived
from claims against any of the MAFCO Defendants asserted in the District Court
Complaint or which could have been asserted in the District Court Complaint
(exclusive of all Causes of Action (x) pursuant to sections 510, 544, 545, 547,
548, 549, 550, 551 and 553 of the Bankruptcy Code, (y) relating to any
tax-sharing or other similar agreement or (z) against any person or entity
released or exculpated under the Plan) (the "Litigation Claims") and (ii) the
Trustees have agreed to enforce the Litigation Claims, if any, for the benefit
of all holders of Allowed Unsecured Claims (other than Intercompany Claims and
the LaSalle Claim), holders of Allowed Class Securities Litigation Claims and
holders of Allowed Equity Interests in Entertainment (collectively, the
"Beneficiaries") and to hold the Net MAFCO Litigation Proceeds, if any, in trust
for the Beneficiaries; any litigation claims (x) relating to any tax-sharing or
other similar agreement or (y) against any person or entity released or
exculpated under the Plan, will remain the property of the applicable Marvel
Debtor.
The Trust has been created pursuant to the Litigation Trust Agreement for
the sole purpose of coordinating the prosecution, direction, settlement or
expeditious compromise of any Litigation Claims on behalf of and for the benefit
of the Beneficiaries and to distribute the proceeds to the Beneficiaries in
accordance therewith.
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Pursuant to Section 7.5(b) of the Plan and this Agreement, the Lender has
agreed to provide loans to the Trust in an aggregate amount not to exceed, at
any given time, One Million Dollars ($1,000,000), to be used by the Trustees to
pay certain costs of the Trust, on the terms and subject to the conditions set
forth herein.
NOW, THEREFORE, in consideration of the mutual covenants, conditions and
provisions as hereinafter set forth, the parties hereto agree as follows:
ARTICLE I
DEFINITIONS
Section 1.1 Definitions. Terms defined in the Plan, and not otherwise
defined herein, shall have the meanings ascribed to such terms in the Plan. For
purposes of this Agreement, the following capitalized terms shall have the
following meanings:
"Agreement" means this Loan Agreement between the Borrower, on the one
hand, and the Lender, on the other hand, together with all exhibits and
schedules hereto and any and all amendments, extensions or supplements hereto.
"Beneficiaries" has the meaning set forth in the Preliminary
Statement.
"Borrower" means the Trust.
"Borrowing" means a borrowing under this Agreement consisting of a
Loan or Loans made by the Lender to the Borrower.
"Business Day" means a day which is not a Saturday or Sunday and on
which major commercial banks are open for business in New York, New York.
"Collateral" shall have the meaning ascribed thereto under the
Security Agreement.
"Commitment" means the total amount of the Lender's commitment
hereunder to extend credit to the Borrower by means of Loans.
"Commitment Termination Date" means the earlier of (i) October 1,
2003, (ii) the date upon which the Trustees terminate the Commitment by notice
to the Lender and (iii) the date of the first distribution by the Trust to the
Beneficiaries.
"Debt" means (a) all obligations of the Borrower for borrowed money,
(b) all obligations of the Borrower evidenced by bonds, debentures, notes or
other similar
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instruments, and (c) all obligations or liabilities of others secured by a Lien
on any asset owned by the Borrower.
"District Court" has the meaning set forth in the Preliminary
Statement.
"Event of Default" shall have the meaning set forth in Section 5.1 of
this Agreement.
"GAAP" means generally accepted accounting principles set forth in the
opinions and pronouncements of the Accounting Principles Board and the American
Institute of Certified Public Accountants and statements and pronouncements of
the Financial Accounting Standards Board or in such other statements by such
other entity as may be approved by a significant segment of the accounting
profession, which are applicable to the circumstances as of the date of
determination.
"Lender" means Marvel Enterprises, Inc., a Delaware corporation, and
its successors and assigns.
"Lien" means any lien, mortgage, pledge, security interest, charge or
encumbrance of any kind (including any conditional sale or other title retention
agreement or any lease in the nature thereof) and any agreement to give or
refrain from giving any lien, mortgage, pledge, security interest, charge or
other encumbrance of any kind.
"Litigation Claims" has the meaning set forth in the Preliminary
Statement.
"Litigation Trust Agreement" has the meaning set forth in the
Preliminary Statement.
"Loan" and "Loans" means the loans to be made by the Lender to the
Borrower pursuant to Article II of this Agreement.
"Loan Documents" means the Security Agreement, the Note and any and
all other documents, agreements or instruments executed or delivered therewith
by the Borrower in connection with the closing of the transactions contemplated
by this Agreement, including Uniform Commercial Code financing statements.
"Marvel Debtors" has the meaning set forth in the Preliminary
Statement.
"Maturity Date" means the earlier to occur of (i) October 1, 2003 and
(ii) the date of the first distribution by the Trust to the Beneficiaries.
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"Note" means the grid promissory note, substantially in the form of
Exhibit A attached hereto, executed by the Borrower to the order of the Lender
and evidencing the obligation of the Borrower to repay the Loans made by the
Lender hereunder.
"Person" means natural persons, corporations, partnerships, trusts,
associations, estates, organizations, governmental divisions, agencies or
authorities, firms or entities.
"Plan" has the meaning set forth in the Preliminary Statement.
"Professional Fees" means fees and expenses of professionals retained
by the Trustees on behalf of the Trust (including, without limitation,
attorneys, accountants and expert fees and expenses).
"Security Agreement" means that certain Security Agreement, dated as
of the date hereof, between the Borrower, on the one hand, and the Lender, on
the other hand, substantially in the form of Exhibit B attached hereto.
"Trust" means the trust established for the Beneficiaries pursuant to
the Litigation Trust Agreement.
"Trust Costs" means the administrative expenses of the Trust,
including, without limitation, Professional Fees, taxes, bank charges, filing
and registration fees, postage, telephone, facsimile, copying and messenger
costs, and secretarial and administrative costs attendant to the maintenance of
the Trust and the responsibilities of the Trustees thereunder, the fees of the
Trustees and any indemnification costs and expenses owing to any indemnified
party under Section 8.05 of the Litigation Trust Agreement, but excluding any
Indemnification Costs (as defined in the Litigation Trust Agreement).
"Trustees" means Ronald Cantor, Ivan Snyder, and James A. Scarpone,
solely as trustees under the Trust, and their successors appointed pursuant to
the Litigation Trust Agreement.
"Unmatured Event of Default" means an event, act or occurrence which
with the giving of notice or the passage of time (or both) could become an Event
of Default.
Section 1.2 Exhibits. All of the exhibits and schedules attached to
this Agreement shall be deemed incorporated herein by reference.
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ARTICLE II
AMOUNT AND TERMS OF LOANS
Section 2.1 Commitment.
(a) Subject to the terms and conditions hereof, the Lender agrees,
prior to the Commitment Termination Date, to make loans to the Borrower from
time to time in an aggregate principal amount at any time outstanding not to
exceed One Million Dollars ($1,000,000).
(b) Notwithstanding the foregoing, the Lender shall not be required to
make any loan hereunder if:
(i) after giving effect to such loan, the aggregate outstanding
principal amount of all Borrowings hereunder would exceed One Million
Dollars ($1,000,000); or
(ii) an Event of Default exists, or an event has occurred which, with
the giving of notice or the passage of time, or both, would become an Event
of Default.
(c) Borrower shall give the Lender notice of the date of each
requested Borrowing hereunder, which notice shall be irrevocable and effective
upon receipt by the Lender. Each such request for a Borrowing shall be furnished
to the Lender at least five Business Days prior to the requested date of
funding, and must (i) contain a representation by the Borrower that the Borrower
does not have sufficient funds to pay Trust Costs payable within the next thirty
days and has made no distributions to the Beneficiaries, (ii) specify the amount
of such requested Borrowing, (iii) contain a representation by Borrower that, as
of the date thereof, there is no Event of Default nor any event which, with the
giving of notice or the passage of time, or both, would constitute an Event of
Default, and (iv) include a copy of the invoice or invoices to be paid with such
Borrowing or other supporting documentation with respect to such permitted use.
Each Borrowing shall be in an amount of at least $50,000. The Lender shall make
the Borrowing available to Borrower on or prior to the date specified in the
request for Borrowing as the borrowing date in immediately available funds to
the account specified by Borrower. Notwithstanding anything to the contrary
herein, Borrowings shall be used by the Borrower solely to fund Trust Costs.
Section 2.2 Authorization and Issuance of Note. The Litigation Trust
Agreement has authorized the issuance by the Borrower of the Note in the
principal amount of One Million Dollars ($1,000,000). On the date hereof, or, in
any event, no later than the date on which the Lender makes any loan hereunder,
the Borrower shall issue the Note, payable to the order of the Lender,
substantially in the form of Exhibit A attached hereto with appropriate
insertions.
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Section 2.3 Interest Rates; Payment of Principal and Interest on
Facility.
(a) The obligation of the Borrower to repay the Loan shall be
evidenced by the Note, which shall be payable to the order of the Lender at the
Lender's office located at 685 Third Avenue, New York, New York 10017, or at
such other office of the Lender as may be designated, from time to time, by the
Lender, for the account of the Lender, not later than 12:00 p.m., eastern time,
on the Maturity Date.
(b) Each Loan shall bear simple interest, upon the unpaid principal
balance thereof from the date advanced at 10% per annum. Interest due on the
Loans shall be due and payable on the Maturity Date or early prepayment date.
Unless prepaid in accordance with the terms hereof, the Borrower shall pay the
principal amount of the Loans, without demand, on the Maturity Date.
(c) The Lender shall, and is hereby authorized by the Borrower to,
endorse on the schedule attached to the Note, or otherwise record in the
Lender's internal records, an appropriate notation evidencing the date and
amount of each Loan from the Lender, as well as the date and amount of each
payment and prepayment with respect thereto; provided, however, that the failure
of the Lender to make such a notation or any error in such notation shall not
affect the obligation of the Borrower under the Note. The Lender's internal
records shall be conclusive evidence of the amount of each Loan outstanding
absent manifest error.
Section 2.4 Computation of Interest; Maximum Interest Rate.
(a) All computations of interest with respect to the Loans and all
computations of interest due under Section 2.3 hereof for any period shall be
calculated on the basis of a year of 365 or 366 days for the actual number of
days elapsed in such period. Interest shall accrue from the first day of the
making of a Loan to the date of repayment of such Loan in accordance with the
provisions hereof.
(b) Notwithstanding anything to the contrary contained in this
Agreement, the Borrower shall not be obligated to pay, and the Lender shall not
be entitled to charge, collect or receive, interest in excess of the maximum
rate allowed by applicable law. With respect to the Note, during any period of
time in which the interest rate specified therein exceeds such maximum rate,
interest shall accrue and be payable at such maximum rate.
Section 2.5 Voluntary Prepayments.
(a) The Borrower shall have the right at any time to prepay the Loans,
in whole or in part, without penalty or premium, subject to the right to
reborrow as provided herein.
(b) Any voluntary prepayments made pursuant to this Section 2.5 and
any mandatory prepayments made pursuant to Section 2.6 shall be applied as
follows: first, to
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accrued and unpaid interest due on the principal amount being prepaid under the
Note, and second, to the principal amount due under the Note.
Section 2.6 Mandatory Prepayments. The unpaid principal amount of the
Note, together with all accrued but unpaid interest thereon, shall be due and
payable on the Commitment Termination Date.
Section 2.7 Holidays. Any principal or interest in respect of a Loan
which would otherwise become due on a day other than a Business Day shall
instead become due on the next succeeding Business Day and such adjustment shall
be reflected in the computation of interest.
Section 2.8 Time and Place of Payments. The Borrower shall make each
payment on the Note by making, or causing to be made, the amount thereof
available to the Lender in immediately available funds at the Lender's office at
685 Third Avenue, New York, New York 10017 not later than 12:00 p.m., eastern
time, on the day of payment.
ARTICLE III
AFFIRMATIVE COVENANTS OF THE BORROWER
The Borrower covenants and agrees that, so long as any portion of the
Commitment under this Agreement shall be in effect and until payment in full of
the Loans and the Note, the Borrower shall perform each and all of the
following:
Section 3.1 Notice of Certain Events. The Borrower shall furnish or
cause to be furnished to the Lender:
(a) notice, as soon as practicable and, in any event, within five
calendar days after the Borrower has knowledge of the occurrence of an Event of
Default or any Unmatured Event of Default; and
(b) with reasonable promptness, such other information and data with
respect to the Borrower as from time to time may be reasonably requested by the
Lender.
Section 3.2 Taxes. The Borrower agrees to pay promptly when due all
taxes, assessments and governmental charges upon or against the Borrower or the
Collateral in each case before the same become delinquent and before penalties
accrue thereon, unless and to the extent that the same are being contested in
good faith by appropriate proceedings.
Section 3.3 Further Assurances. At any time or from time to time upon
the reasonable request of the Lender, the Borrower shall execute and deliver
such further
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documents and do such other acts and things as the Lender may reasonably request
in order to effect fully the purposes of this Agreement, the Note and the other
Loan Documents and to provide for repayment of the Loans made hereunder with
interest thereon in accordance with the terms of this Agreement and the Note.
ARTICLE IV
NEGATIVE COVENANTS OF THE BORROWER
The Borrower covenants and agrees that, so long as any portion of the
Commitment under this Agreement shall be in effect and until payment in full of
the Loans and the Note, the Borrower shall perform each and all of the
following:
Section 4.1 Debt. The Borrower shall not create, incur, assume or
otherwise become liable with respect to any Debt except (i) the Debt evidenced
by the Note and this Agreement and (ii) Debt created, incurred or assumed, or
with respect to which the Borrower otherwise becomes liable, with the prior
written consent of the Lender.
Section 4.2 Liens. The Borrower shall not create or permit to exist
any Lien on or with respect to the Collateral, except:
(a) Liens for taxes, assessments or governmental charges or claims,
the payment of which is not, at such time, required, and provided that reserves
or other appropriate provisions, if any, as shall be required by GAAP shall have
been made therefor;
(b) any attachment or judgment Lien in existence less than 30 calendar
days after the entry thereof or with respect to which execution has been stayed;
and
(c) Liens granted by the Borrower in favor of the Lender pursuant to
the Loan Documents.
Section 4.3 Borrower's Activities. The Borrower shall not engage in
any activities other than as provided and permitted by the Litigation Trust
Agreement as in effect on the date hereof.
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Section 4.4 Use of Proceeds. The Borrower shall not use the proceeds
of the Loans for any purposes other than the payment of Trust Costs.
Section 4.5 Restrictions on Fundamental Changes. The Borrower shall
not change the nature of its activities, liquidate, wind up or dissolve itself
(or suffer any liquidation or dissolution), or convey, sell, assign, lease,
transfer or otherwise dispose of, in one transaction or a series of
transactions, all or any substantial part of its property or assets, whether now
owned or hereafter acquired, except as provided in the Litigation Trust
Agreement.
Section 4.6 Distributions. The Borrower shall not make any
distributions to Beneficiaries of the Trust other than as provided in the
Litigation Trust Agreement.
ARTICLE V
EVENTS OF DEFAULT
Section 5.1 Events of Default. The occurrence of any one or more of
the following events, acts or occurrences shall constitute an event of default
(an "Event of Default") hereunder:
(a) Failure to Make Payments when Due. The Borrower shall fail to pay
any amount owing under the Note with respect to principal of or interest on the
Loans when such amount is due, whether at stated maturity, by acceleration or
otherwise, and such failure shall continue for three (3) days after written
notice thereof is delivered to the Borrower by the Lender; or
(b) Breach of Certain Covenants. The Borrower shall fail to comply
with or to perform in accordance with any material representation, warranty,
covenant, term, condition or agreement contained in this Agreement, the Note or
any other Loan Document and the Borrower shall fail to cure such failure within
thirty (30) days after written notice thereof is delivered to the Borrower by
the Lender; or
(c) Insolvency. The Borrower shall be insolvent or unable to pay any
of its debts as they mature; or
(d) Involuntary Bankruptcy; Appointment of Receiver, etc.
(i) If an involuntary case seeking the liquidation or
reorganization of the Borrower under Chapter 7 or Chapter 11 of the Federal
Bankruptcy Code or any similar proceeding shall be commenced against the
Borrower under any other applicable law and any of the following events occur:
(A) the Borrower consents to the institution of the involuntary
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case; (B) the petition commencing the involuntary case is not timely
controverted; (C) the petition commencing the involuntary case is not dismissed
within 60 calendar days of its filing; or (D) an order for relief shall have
been issued or entered therein; or
(ii) A decree or order of a court shall have been entered for the
appointment of a receiver, liquidator, sequestrator, custodian, trustee or other
officer having similar powers to take possession of all or a substantial portion
of the property or to operate all or a substantial portion of the business of
the Borrower; or
(e) Voluntary Bankruptcy; Appointment of Receiver, etc. The Borrower
shall institute a voluntary case seeking liquidation or reorganization under
Chapter 7 or Chapter 11 of the Federal Bankruptcy Code; or the Borrower shall
file a petition, answer or complaint or shall otherwise institute any similar
proceeding under any other applicable law, or shall consent thereto; or the
Borrower shall consent to the conversion of an involuntary case to a voluntary
case; or the Borrower shall consent or acquiesce to the appointment of a
receiver, liquidator, sequestrator, custodian, trustee or other officer with
similar powers to take possession of all or a substantial portion of the
property or to operate all or a substantial portion of the business of the
Borrower; or the Borrower shall make a general assignment for the benefit of
creditors; or the general partner of the Borrower adopts any resolution or
otherwise authorizes action to approve any of the foregoing; or
(f) Judgments and Attachments. The Borrower shall suffer any judgment,
attachment, lien, execution or levy against it or its property in any material
amount which is not paid, discharged, released, bonded, stayed on appeal or
otherwise fully satisfied within thirty days of the Borrower's actual knowledge
thereof; or
(g) Dissolution. Any order, judgment or decree shall be entered
decreeing the dissolution of the Borrower, whether by voluntary or involuntary
action; or
(h) Termination of Loan Documents. Any of the Loan Documents shall
cease to be in full force and effect for any reason other than (i) any act or
omission of the Lender necessary for the perfection of Liens in favor of the
Lender, (ii) a release or termination thereof upon the full payment and
satisfaction of the Note or (iii) upon the written consent of the Lender.
Section 5.2 Remedies. Upon the occurrence of an Event of Default, the
unpaid principal amount of and any accrued interest on the Loans shall
automatically become immediately due and payable, without presentment, demand,
protest, notice or other requirement of any kind, all of which are hereby
expressly waived by the Borrower. Upon acceleration, the Lender, without notice
to or demand upon the Borrower, which are expressly waived by the Borrower, may
proceed to protect, exercise and enforce its rights and remedies hereunder,
under the Note and under the Loan Documents, and any other rights and remedies
as are provided by law or equity. The Lender may determine, in its sole
discretion, the order
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and manner in which the Lender's rights and remedies are to be exercised, and
all payments received by the Lender shall be applied as follows: first, to all
costs and expenses (including, without limitation, reasonable attorneys' fees,
costs of maintaining, preserving or disposing of any of the Collateral and costs
of settlement) incurred by the Lender in enforcing any Debt of, or in collecting
any payments due from, the Borrower under the Note by reason of such Event of
Default; second, to accrued interest on the Loans; and third, to principal
amounts outstanding on the Loans.
ARTICLE VI
MISCELLANEOUS
Section 6.1 Waivers; Modifications in Writing. No failure or delay on
the part of the Lender in exercising any right, power or remedy hereunder shall
operate as a waiver thereof, nor shall any single or partial exercise of any
such right, power or remedy preclude any other or further exercise thereof or
the exercise of any other right, power or remedy. The remedies provided for
under this Agreement, in the Note and in the Loan Documents are cumulative and
are not exclusive of any remedies that may be available to the Lender at law, in
equity or otherwise. No amendment, modification, supplement, termination,
consent or waiver of or to any provision of this Agreement, the Note and the
other Loan Documents, nor consent to any departure therefrom, shall in any event
be effective unless the same shall be in writing and signed by the Lender and
the Borrower. Any waiver of any provision of this Agreement, the Note and the
other Loan Documents, and any consent to any departure by the Borrower from the
terms of any provisions of this Agreement, shall be effective only in the
specific instance and for the specific purpose for which given. No notice to or
demand on the Borrower in any case shall entitle the Borrower to any other or
further notice or demand in similar or other circumstances.
Section 6.2 Failure or Delay; Limitation on Liability. No failure or
delay on the part of the Lender, in the exercise of any power, right or
privilege under this Agreement, the Note or the other Loan Documents, shall
impair such power, right or privilege or shall operate as a waiver thereof, nor
shall any single or partial exercise of any such power, right or privilege
preclude other or further exercise of any other power, right or privilege.
Lender shall look only to the Borrower and its assets to satisfy any liability
hereunder, and no Trustee shall have personal or individual liability or
obligation whatsoever hereunder.
Section 6.3 Notices, etc. All notices, demands, instructions and other
communications required or permitted to be given to or made upon any party
hereto shall be in writing delivered to the parties at the addresses set forth
below (or such other address as may be provided by one party in a notice to the
other):
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If to the Lender:
Marvel Enterprises, Inc.
685 Third Avenue
New York, New York 10017
Attention: Corporate Secretary
with a copy to:
Battle Fowler LLP
75 East 55th Street
New York, New York 10022
Attention: Lawrence Mittman, Esq.
If to the Borrower:
MAFCO Litigation Trust
c/o James A. Scarpone
Hellring Lindeman Goldstein & Siegal
One Gateway Center
Newark, New Jersey 07102
with a copy to:
Notice delivered in accordance with the foregoing shall be effective (i) when
delivered, if delivered personally or by facsimile transmission, (ii) two days
after being delivered in the United States (properly addressed and all fees
paid) for overnight delivery service to a courier (such as Federal Express)
which regularly provides such service and regularly obtains executed receipts
evidencing delivery or (iii) five days after being deposited (properly addressed
and stamped for first-class delivery) in a daily serviced United States mail
box.
Section 6.4 Binding Effect. This Agreement shall be binding upon and
inure to the benefit of and be enforceable by the respective successors and
assigns of the parties hereto; provided, however, that the Borrower may not
assign or transfer any interest hereunder without the prior written consent of
the Lender.
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Section 6.5 Headings. Article and Section headings used in this
Agreement are for convenience of reference only and shall not constitute a part
of this Agreement for any purpose or affect the construction of this Agreement.
Section 6.6 Execution in Counterparts. This Agreement may be executed
in any number of counterparts and by different parties on separate counterparts,
each of which counterparts, when so executed and delivered, shall be deemed to
be an original and all of which counterparts, taken together, shall constitute
one and the same Agreement. This Agreement shall become effective upon the
execution of a counterpart hereof by each of the parties hereto.
Section 6.7 Governing Law; Jurisdiction. This Agreement and the Note
shall be deemed to have been made in the State of Delaware and the validity of
this Agreement, the Note and the other Loan Documents, the construction,
interpretation and enforcement thereof, and the rights of the parties thereto
shall be determined under, governed by and construed in accordance with the
internal laws of the State of Delaware, without regard to principles of
conflicts of law. The Lender and the Borrower hereby agree that any controversy
or claim arising out of or relating to this Agreement, the Note or the other
Loan Documents shall be determined by the United States District Court for the
District of Delaware and expressly submit to the jurisdiction of such court in
any action or proceeding arising out of or relating to this Agreement, the Note
or the other Loan Documents and agree that any process or notice of motion or
other application to any of such courts may be served within or without such
court's jurisdiction by registered mail or by personal service, provided a
reasonable time for appearance is allowed. With respect to such court, the
Lender and the Borrower hereby expressly waive any defense based on doctrines of
venue or inconvenient forum or similar rules or doctrines.
Section 6.8 Severability of Provisions. Whenever possible this
Agreement, the Note and each Loan Document and each provision hereof and thereof
shall be interpreted in such manner as to be effective, valid and enforceable
under applicable law. If and to the extent that any such provision shall be held
invalid and unenforceable by any court of competent jurisdiction, such holding
shall not invalidate or render unenforceable any other provisions hereof or
thereof, and any determination that the application of any provision hereof or
thereof to any person or under any circumstance is illegal and unenforceable
shall not affect the legality, validity and enforceability of such provision as
it may be applied to any other person or in any other circumstance.
Section 6.9 Survival of Agreements, Representations and Warranties.
All agreements, representations and warranties made herein shall survive the
execution and delivery of this Agreement and the Loan Documents, the making of
the Loans hereunder, and the execution and delivery of the Note.
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Section 6.10 Complete Agreement. This Agreement, together with the
exhibits and schedules to this Agreement, the Note and the other Loan Documents
is intended by the parties as a final expression of their agreement and is
intended as a complete statement of the terms and conditions of their agreement
with respect to the subject matter hereof.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to
be executed and delivered as of the date first hereinabove set forth.
MARVEL ENTERPRISES, INC.
By: /S/ WILLIAM H. HARDIE, III
-----------------------------
Name: William H. Hardie, III
Title: Executive Vice President,
Business Affairs
/s/RONALD CANTOR
-----------------------------------,
Ronald Cantor
/S/ IVAN SNYDER
___________________________________, and
Ivan Snyder
/S/ JAMES A. SCARPONE
-----------------------------------,
James A. Scarpone
solely as trustees on behalf of
the beneficiaries of the Trust with
respect to the Trust
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EXHIBIT A
MAFCO PROMISSORY NOTE
1,000,000 October 1, 1998
Newark, New Jersey
FOR VALUE RECEIVED, Ronald Cantor, Ivan Snyder, and James A. Scarpone,
solely as trustees under that certain MAFCO Litigation Trust Agreement, dated
the date hereof, establishing a trust (the "Trust") for the benefit of the
beneficiaries thereunder (such Trust, the "Borrower"), hereby promises to pay to
the order of MARVEL ENTERPRISES, INC., a Delaware corporation (the "Lender"), at
its office located at 685 Third Avenue, New York, New York 10017, or at such
other office as may be designated, from time to time, by the holder hereof in
writing, in lawful money of the United States of America and in immediately
available funds, the principal sum from time to time outstanding of up to ONE
MILLION DOLLARS ($1,000,000), or so much thereof as may be disbursed by the
Lender to the Borrower or for the Borrower's account from time to time, together
with interest at the rate hereinafter specified on such indebtedness as shall
from time to time remain unpaid, until paid in full. Interest will be calculated
on the basis of a 365 or 366 day year, as the case may be, for the actual number
of days elapsed in such period.
Simple interest on the unpaid principal sum outstanding from time to
time shall accrue at 10% per annum. Notwithstanding anything to the contrary
contained in this Note, the Borrower shall not be obligated to pay, and the
Lender shall not be entitled to charge, collect or receive, interest in excess
of the maximum rate allowed by applicable law. During any period of time in
which the interest rate specified in this Note exceeds such maximum rate,
interest shall accrue and be payable at such maximum rate.
The entire unpaid principal balance, together with accrued interest
thereon, shall be due and payable on the earlier of (i) October 1, 2003 or (ii)
the date of the first distribution by the Trust to the Beneficiaries.
The Lender shall, and is hereby authorized by the Borrower to, endorse
on the Schedule annexed to this Note, or otherwise record in the Lender's
internal records, an appropriate notation evidencing the date and amount of all
principal disbursed by the Lender hereunder, as well as the date and amount of
each payment and prepayment hereunder; provided, however, that the failure of
the Lender to make such a notation or any error in such notation shall not
affect the obligation of the Borrower under this Note. The Lender shall provide
to the Borrower on request from time to time copies of the Schedule annexed to
this Note showing all endorsements thereto at the time of each such request.
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Any payments or prepayments made on this Note shall be applied as
follows: first, to accrued and unpaid interest due on the principal amount being
prepaid under this Note; and second, to the principal amount due under this
Note.
If any payment to be made by the Borrower to the Lender according to
the terms hereof shall be due on a Saturday, Sunday or other day on which
commercial banks in Wilmington, Delaware are authorized or required to close,
the due date for such payment shall be extended to the next business day and the
amount of such payment shall include interest accrued during such extension.
This Note is the grid promissory note referred to in, and is entitled
to the benefits of, the MAFCO Litigation Trust Loan Agreement, dated as of the
date hereof (the "Loan Agreement"), between the Borrower and the Lender. The
Loan Agreement, among other things, contains provisions for acceleration of the
maturity of this Note upon the happening of an Event of Default. Notwithstanding
anything to the contrary contained herein, the Lender may, as provided under the
Loan Agreement, terminate the line of credit evidenced hereby and declare all
amounts outstanding hereunder immediately due and payable. This Note is secured
by a security agreement (the "Security Agreement") of even date herewith made by
the Borrower in favor of the Lender encumbering personal property and assets
described therein in favor of the Lender.
It is the purpose of this Note to evidence a line of credit against
which the Borrower may draw and redraw from time to time and from which the
Lender will advance and readvance from time to time until the Commitment
Termination Date.
This Note may be prepaid, in whole or in part, at any time without
penalty.
The Borrower waives presentment, demand, protest, notice of dishonor,
notice of nonpayment, notice of protest and diligence in collection, and assents
to the terms hereof and to any extension or postponement of the time for payment
or any other indulgence.
Upon the occurrence of any Event of Default (as defined in the Loan
Agreement), after any applicable notice and cure period as provided under the
Loan Agreement, the whole of the principal sum remaining unpaid hereunder,
together with all accrued and unpaid interest thereon, shall become due and
payable immediately. The Borrower shall also be obligated to pay as part of the
indebtedness evidenced by this Note, all costs of collection, whether or not a
suit is brought, including any reasonable attorneys' fees and expenses that may
be incurred in the collection or enforcement hereof.
No act or omission of the Lender, including without limitation any
failure to exercise any right, remedy or recourse, shall be deemed to be a
waiver or release of such right, remedy or recourse and any waiver or release
may be effected only through a written document executed by the Lender and then
only to the extent specifically recited therein. A
730840.4
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<PAGE>
waiver or release with respect to any one event shall not be construed as
continuing as a bar to, or as a waiver or release of, any subsequent right,
remedy or recourse as to any subsequent event.
Lender shall look only to the Trust and its assets to satisfy any
liability hereunder, and no trustee of the Trust shall have any personal or
individual liability or obligation whatsoever hereunder.
All of the terms and provisions of this Note inure to and are binding
upon the heirs, executors, administrators, successors, representatives,
receivers, trustees and assigns of the parties; provided, however, that none of
the rights or obligations of the Borrower hereunder may be assigned or otherwise
transferred without the prior written consent of the Lender.
THIS NOTE SHALL BE CONSTRUED AND ENFORCED IN ACCORD ANCE WITH AND
GOVERNED BY THE LAWS OF THE STATE OF DELAWARE. The Lender, by its acceptance of
this Note, and the Borrower hereby agree that any controversy or claim arising
out of or relating to this Note shall be determined in Delaware and expressly
submit to the jurisdiction of the United States District Court for the District
of Delaware in any action or proceeding arising out of or relating to this Note
and agree that any process or notice of motion or other application to any of
such courts may be served within or without such court's jurisdiction by
registered mail or by personal service, provided a reasonable time for
appearance is allowed. With respect to such courts, the Lender, by its
acceptance of this Note, and the Borrower hereby expressly waive any defense
based on doctrines of venue or inconvenient forum or similar rules or doctrines.
IN WITNESS WHEREOF, the undersigned has executed and delivered this
Note as of the date first written above.
-----------------------------------,
Ronald Cantor
___________________________________, and
Ivan Snyder
-----------------------------------,
James A. Scarpone
solely as trustees on behalf of
the beneficiaries of the Trust with
respect to the Trust
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<PAGE>
SCHEDULE TO GRID NOTE
Date Amount of Amount of Unpaid Name of Person
Loan Principal Principal Making Notation
Prepaid Balance of Note
=========== ============== ============= ============ ===============
730840.4
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<PAGE>
EXHIBIT B
MAFCO SECURITY AGREEMENT
SECURITY AGREEMENT, dated as of October 1, 1998, by and among Ronald
Cantor, Ivan Snyder, and James A. Scarpone, solely as trustees under that
certain MAFCO Litigation Trust Agreement, dated the date hereof, establishing a
trust (the "Trust") for the benefit of the beneficiaries thereunder (such Trust,
the "Grantor") and Marvel Enterprises, Inc., a Delaware corporation (the
"Lender").
PRELIMINARY STATEMENT
1. Pursuant to a MAFCO Litigation Trust Loan Agreement, dated as of
the date hereof, by and among the Grantor and the Lender (the "Loan Agreement"),
the Lender agreed to lend the Grantor an aggregate amount of up to $1,000,000,
and the Grantor agreed to issue to the Lender a grid promissory note in an
aggregate principal amount of $1,000,000 (the "Note"). Capitalized terms not
otherwise defined herein shall have the meaning ascribed to them in the Loan
Agreement.
2. As a condition to the Lender's obligation to advance funds to the
Grantor pursuant to the Loan Agreement, Grantor has agreed to, among other
things, grant to Lender a security interest in all of Grantor's assets to secure
the due and punctual payment and performance by the Grantor of (a) all
obligations at any time and from time to time under the Loan Agreement and the
Notes, (b) the principal of and interest on the Loan, when and as due, whether
at maturity, by acceleration, or otherwise, and (c) all obligations of the
Grantor at any time and from time to time under this Agreement (collectively,
the "Secured Obligations").
Accordingly, the Grantor and the Lender hereby agree as follows:
1. Definitions. As used herein, the following terms shall have the
following meanings:
(a) "Accounts Receivable" shall mean (i) all of the Grantor's
present and future accounts, general intangibles, chattel paper and instruments,
as such terms are defined in the Uniform Commercial Code as in effect in the
State of Delaware ("UCC"), (ii) all moneys, securities and other property and
the proceeds thereof, now or hereafter held or received by, or in transit to,
the Lender from or for Grantor, whether for safekeeping, pledge, custody,
transmission, collection or otherwise, and all of the deposits (general or
special) of the Grantor, balances, sums and credits with, and all of the
Grantor's claims against the Lender at any time existing, (iii) all of the
Grantor's right, title and interest, and all of the Grantor's rights, remedies,
security and liens, in, to and in respect of any accounts receivable, including,
without limitation, rights of stoppage in transit, replevin, repossession and
reclama tion and other rights and remedies of an unpaid vendor, lienor or
secured party, guaranties or other contracts of suretyship with respect to
accounts receivable, deposits or other security for
730842.3
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<PAGE>
the obligation of any account debtor, and credit and other insurance, (iv) all
of the Grantor's right, title and interest in, to and in respect of all goods
relating to, or which by sale have resulted in, accounts receivable, including,
without limitation, all goods described in invoices or other documents or
instruments with respect to, or otherwise representing or evidencing, any
account receivable, and all returned, reclaimed or repossessed goods.
(b) "Collateral" shall mean all (i) Accounts Receivable, (ii)
Documents, (iii) Equipment, (iv) General Intangibles, (v) Investment Property,
(vi) Inventory, and (vii) Proceeds.
(c) "Documents" shall mean all instruments, files, records,
ledger sheets and documents covering or relating to any of the Collateral.
(d) "Equipment" shall mean all of the Grantor's machinery,
equipment, vehicles, furniture and fixtures and all attachments, accessories and
equipment now or hereafter owned or acquired in the Grantor's business or used
in connection therewith, and all substitutions and replacements thereof,
wherever located, whether now owned or hereafter acquired by the Grantor.
(e) "General Intangibles" shall mean all of the Grantor's present
and future general intangibles of every kind and description (as such term is
defined in the UCC), including, without limitation, any causes of action,
obligations, rights, suits, debts, sums of money, damages, judgments, claims and
demands whatsoever, whether known or unknown, in law or in equity or otherwise.
(f) "Inventory" shall mean all of the Grantors' right, title
and interest in and to raw materials, work in process, finished goods and all
other inventory (as such term is defined in the UCC), whether now owned or
hereafter acquired, and any documents relating thereto.
(g) "Investment Property" shall mean all of the Grantor's
right, title and interest in and to all securities (whether certificated or
uncertificated), security entitle ments, security accounts, commodity contracts
and commodity accounts.
(h) "Proceeds" shall mean any consideration received from the
sale, exchange, lease or other disposition of any asset or property which
constitutes Collateral, any other value received as a consequence of the
possession of any Collateral and any payment received from any insurer or other
person or entity as a result of the destruction, loss, theft or other
involuntary conversion of whatever nature of any asset or property that
constitutes Collateral, and shall include, without limitation, all cash and
negotiable instruments received or held by the Lender pursuant to any lockbox or
similar arrangement relating to the payment of Accounts Receivable.
2. Security Interests. As security for the payment or performance,
as the case may be, of the Secured Obligations, the Grantor hereby creates and
grants to the Lender,
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<PAGE>
its successors and its assigns, a security interest in the Collateral (the
"Security Interest"). Without limiting the foregoing, the Lender is hereby
authorized to file one or more financing statements, continuation statements or
other documents for the purpose of perfecting, confirming, continuing, enforcing
or protecting the Security Interest, naming the Grantor as debtor and the Lender
as secured party.
The Grantor agrees at all times to keep in all material respects
accurate and complete accounting records with respect to the Collateral,
including, but not limited to, a record of all payments and Proceeds received.
3. Further Assurances. The Grantor agrees, at its expense, to
execute, acknowledge, deliver and cause to be duly filed all such further
instruments and documents and take all such actions as the Lender may from time
to time reasonably request for the assuring and preserving of the Security
Interest and the rights and remedies created hereby, including, without
limitation, the payment of any fees and taxes required in connection with the
execution and delivery of this Agreement, the granting of the Security Interest
and the filing of any financing statements or other documents in connection
herewith. If any amount payable under or in connection with any of the
Collateral shall be or become evidenced by any promissory note or other
instrument, such note or instrument shall be promptly pledged and delivered to
the Lender, duly endorsed in a manner satisfactory to the Lender. The Grantor
agrees to notify the Lender promptly of any change in its name, in the location
of its chief executive office or the principal office where it keeps its records
relating to the Accounts Receivable owned by it and the location of any
Collateral. The Grantor agrees promptly to notify the Lender if any material
portion of the Collateral is damaged or destroyed.
4. Inspection and Verification. The Lender and such persons as
the Lender may designate shall have the right, at any reasonable time or times
during the Grantor's usual business hours, and upon reasonable notice (which may
be telephonic), to inspect the Grantor, all records related thereto (and to make
extracts and copies from such records), and the premises upon which the
Collateral is located, to discuss the Grantor's affairs with the officers of the
Grantor and its independent accountants and to verify under reasonable
procedures the validity, amount, quality, quantity, value, and condition of or
any other matter relating to, the Collateral, including, in the case of Accounts
Receivable or Collateral in the possession of a third person, contacting account
debtors and third persons possessing the Collateral.
5. Taxes; Encumbrances. At its option, the Lender may discharge past
due taxes, liens, security interests or other encumbrances at any time levied or
placed on the Col lateral and not permitted under the Loan Agreement, and may
pay for the maintenance and preservation of the Collateral to the extent the
Grantor fails to do so as required by this Agreement, and the Grantor agrees to
reimburse the Lender on demand for any payment made or any expense incurred by
it pursuant to the foregoing authorization; provided, however, that nothing in
this Section 5 shall be interpreted as excusing the Grantor from the performance
of any covenants or other promises with respect to taxes, liens, security
interests or other en cumbrances and maintenances as set forth herein or in the
Loan Agreement.
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<PAGE>
6. Assignment of Security Interest. If at any time the Grantor shall
take and perfect a security interest in any property of an account debtor or any
other person to secure payment and performance of an Account Receivable, the
Grantor shall promptly assign such security interest to the Lender. Such
assignment need not be filed of public record unless necessary to continue the
perfected status of the security interest against creditors of and transferees
from the account debtor or other person granting the security interest.
7. Representations and Warranties. The Grantor represents and
warrants to the Lender that:
(a) Principal Place of Business, etc. Its chief executive
office, its chief place of business and the office where it keeps its records
relating to the Accounts Receivable owned by it and the location of any
Collateral is located in the county of Essex, in the State of New Jersey.
(b) Title and Authority. It has (i) rights in and good title
to the Collateral in which it is granting a security interest hereunder and (ii)
the requisite power and authority to grant to the Lender the Security Interest
in the Collateral pursuant hereto and to execute, deliver and perform its
obligations in accordance with the terms of this Agreement, without the consent
or approval of any other person other than any consent or approval which has
been obtained.
(c) Filing. Fully executed Uniform Commercial Code financing
statements containing a description of the Collateral shall have been, or shall
be delivered to the Lender in a form such that they can be, filed of record in
every governmental, municipal or other office in every jurisdiction in which any
portion of the Collateral is located necessary to publish notice of and protect
the validity of and to establish a valid, legal and perfected security interest
in favor of the Lender in respect of the Collateral in which a security interest
may be perfected by filing in the United States and its territories and
possessions, and no further or subsequent filing, refiling, recording,
rerecording, registration or reregistration is necessary in any such
jurisdiction, except as provided under applicable law with respect to the filing
of Uniform Commercial Code continuation statements.
(d) Validity of Security Interest. The Security Interest
constitutes a valid, legal and perfected first priority security interest in all
of the Collateral for payment and performance of the Secured Obligations.
(e) Absence of Other Liens. The Collateral is owned by it free
and clear of any Lien of any nature whatsoever, except as granted pursuant to
this Agreement and as permitted by the Loan Agreement, and, except as provided
by paragraph (b) of this Section 7, no financing statement has been filed, under
the Uniform Commercial Code as in effect in any state or otherwise, covering any
Collateral.
(f) Survival of Representations and Warranties. All
representations and warranties of the Grantor contained in this Agreement shall
survive the execution, delivery
730842.3
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<PAGE>
and performance of this Agreement until the termination of this Agreement
pursuant to Section 23.
8. Protection of Security. The Grantor shall, at its own cost and
expense, take any and all actions reasonably necessary to defend title to the
Collateral against all persons and to defend the Security Interest of the Lender
in the Collateral, and the priority thereof, against any adverse mortgage,
pledge, security interest, lien, charge or other encumbrance of any nature
whatsoever except for liens permitted pursuant to the Loan Agreement.
9. Use and Disposition of Collateral. The Grantor shall not make or
permit to be made any assignment, pledge or hypothecation of the Collateral, or
grant any security interest in the Collateral except for the Security Interest.
The Grantor shall not make or permit to be made any transfer of any Collateral,
except Inventory in the ordinary course of business and as otherwise permitted
by the Loan Agreement, and the Grantor shall remain at all times in possession
of the Collateral other than transfers to the Lender pursuant to the provisions
hereof and as otherwise provided in this Agreement or the Loan Agreement.
10. Collections. Unless and until an Event of Default has occurred
and is continuing, the Grantor shall have the right to collect its Accounts
Receivable in the ordinary course of its business. Upon the occurrence of any
Event of Default, the Lender shall have the right, as the true and lawful agent
of the Grantor, with power of substitution for the Grantor and in the Grantor's
name, the Lender's name or otherwise, for the use and benefit of the Lender, (i)
to endorse the Grantor's name upon any notes, acceptances, checks, drafts, money
orders or other evidences of payment or Collateral that may come into its
possession; (ii) to sign the name of the Grantor on any invoice or bill of
lading relating to any of the Collateral, drafts against the Guarantor's
customers, assignments and verifications of Accounts Receivable and notices to
the Grantor's customers; (iii) to send verifications of Accounts Receivable to
any customer of the Grantor; (iv) to receive, endorse, assign and/or deliver any
and all notes, acceptances, checks, drafts, money orders or other evidences or
instruments of payment relating to the Collateral or any part thereof, and the
Grantor hereby waives notice of presentment, protest and non-payment of any
instrument so endorsed; (v) to demand, collect, receive payment of, give receipt
for, extend the time of payment of and give discharges and releases of all or
any of the Collateral and/or release the obligor thereon; (vi) to commence and
prosecute any and all suits, actions or proceedings at law or in equity in any
court of competent jurisdiction to collect or otherwise realize on all or any of
the Collateral or to enforce any rights in respect of any Collateral; (vii) to
settle, compromise, compound, adjust or defend any actions, suits or proceedings
relating to or pertaining to all or any of the Collateral; (viii) to notify, or
to require the Grantor to notify, the account debtors obligated on any or all of
the Accounts Receivable to make payment thereof directly to the Lender; (ix) to
notify the postal service authorities to change the address for delivery of mail
addressed to the Grantor to such address as the Agent may designate; (x) to
accept the return of goods represented by any of the Accounts Receivable; and
(xi) to use, sell, assign, transfer, pledge, make any agreement with respect to
or otherwise deal with all or any of the Collateral, and to do all other acts
and things necessary to carry out the purposes of this Agreement, as fully and
completely as though the Lender were the absolute owner of the Collateral for
all purposes;
730842.3
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<PAGE>
provided, however, that nothing herein contained shall be construed as requiring
or obligating the Lender to make any commitment or to make any inquiry as to the
nature or sufficiency of any payment received by the Lender or to present or
file any claim or notice, or to take any action with respect to the Collateral
or any part thereof or the moneys due or to become due in respect thereof or any
property covered thereby, and no action taken by the Lender or omitted to be
taken with respect to the Collateral or any part thereof shall give rise to any
defense, counterclaim or offset in favor of the Grantor or to any claim or
action against the Lender in the absence of the gross negligence or willful
misconduct of the Lender. It is understood and agreed that the appointment of
the Lender as the agent of the Grantor for the purposes set forth above in this
Section 10 is coupled with an interest and is irrevocable. The provisions of
this Section 10 shall in no event relieve the Grantor of any of its obligations
hereunder or under the Loan Agreement with respect to the Collateral or any part
thereof or impose any obligation on the Lender to proceed in any particular
manner with respect to the Collateral or any part thereof, or in any way limit
the exercise by the Lender of any other or further right which it may have on
the date of this Agreement or hereafter, whether hereunder or by law or
otherwise.
11. Remedies upon Default. Upon the occurrence and during the
continuance of an Event of Default, the Grantor agrees to deliver each item of
Collateral to the Lender on demand, and it is agreed that the Lender shall have
the right to take any or all of the following actions at the same or different
times: with or without legal process and with or without previous notice or
demand for performance, to take possession of the Collateral and without
liability for trespass (except for actual damage caused by the Lender's gross
negligence or willful misconduct) to enter any premises where the Collateral may
be located for the purpose of taking possession of or removing the Collateral
and, generally, to exercise any and all rights afforded to a secured party
under, and subject to its obligations contained in, the Uniform Commercial Code
as in effect in any state or other applicable law. Without limiting the
generality of the foregoing, the Grantor agrees that the Lender shall have the
right, subject to the mandatory requirements of applicable law, to sell or
otherwise dispose of all or any part of the Collateral, at public or private
sale or at any broker's board or on any securities exchange, for cash, upon
credit or for future delivery as the Lender shall deem appropriate. Each such
purchaser at any such sale shall hold the property sold absolutely free from any
claim or right on the part of the Grantor, and the Grantor hereby waives (to the
extent permitted by law) all rights of redemption, stay and appraisal which the
Grantor now has or may at any time in the future have under any rule of law or
statute now existing or hereafter enacted.
The Lender shall give the Grantor ten (10) days' written notice (which
the Grantor agrees is reasonable notice within the meaning of Section 9-504(3)
of the UCC) of the Lender's intention to make any sale of Collateral. Such
notice, in the case of a public sale, shall state the time and place for such
sale and, in the case of a sale at a broker's board or on a securities exchange,
shall state the board or exchange at which such sale is to be made and the day
on which the Collateral, or portion thereof, will first be offered for sale at
such board or exchange. Any such public sale shall be held at such time or times
within ordinary business hours and at such place or places as the Lender may fix
and state in the notice (if any) of such
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sale. At any such sale, the Collateral, or portion thereof, to be sold may be
sold in one lot as an entirety or in separate parcels, as the Lender may (in its
sole and absolute discretion) de termine. The Lender shall not be obligated to
make any sale of any Collateral if it shall determine not to do so, regardless
of the fact that notice of sale of such Collateral shall have been given. The
Lender may, without notice or publication, adjourn any public or private sale or
cause the same to be adjourned from time to time by announcement at the time and
place fixed for sale, and such sale may, without further notice, be made at the
time and place to which the same was so adjourned. In case any sale of all or
any part of the Collateral is made on credit or for future delivery, the
Collateral so sold may be retained by the Lender until the sale price is paid by
the purchaser or purchasers thereof, but the Lender shall not incur any
liability in case any such purchaser or purchasers shall fail to take up and pay
for the Collateral so sold and, in case of any such failure, such Collateral may
be sold again upon like notice. At any public sale made pursuant to this Section
11, the Lender may bid for or purchase, free (to the extent permitted by law)
from any right of redemption, stay or appraisal on the part of the Grantor (all
said rights being also hereby waived and released to the extent permitted by
law), with respect to the Collateral or any part thereof offered for sale and
the Lender may make payment on account thereof by using any claim then due and
payable to the Lender from the Grantor as a credit against the purchase price,
and the Lender may, upon compliance with the terms of sale, hold, retain and
dispose of such property without further accountability to such Grantor
therefor. For purposes hereof, a written agreement to purchase the Collateral or
any portion thereof shall be treated as a sale thereof; the Lender shall be free
to carry out such sale and purchase pursuant to such agreement, and the Grantor
shall not be entitled to the return of the Collateral or any portion thereof
subject thereto, notwithstanding the fact that after the Lender shall have
entered into such an agreement all Events of Default shall have been remedied
and the Secured Obligations paid in full. As an alternative to exercising the
power of sale herein conferred upon it, the Lender may proceed by a suit or
suits at law or in equity to foreclose this Agreement and to sell the Collateral
or any portion thereof pursuant to a judgment or decree of a court or courts
having competent jurisdiction or pursuant to a proceeding by a court-appointed
receiver.
12. Application of Proceeds. The proceeds of any collection or sale
of Collateral, as well as any Collateral consisting of cash, shall be applied by
the Lender first, to the payment of all reasonable costs and expenses incurred
by the Lender in connection with such collection or sale or otherwise in
connection with this Agreement or any of the Secured Obligations, including, but
not limited to, all court costs and the reasonable fees and expenses of its
agents and legal counsel, the repayment of all advances made by the Lender
hereunder on behalf of the Grantor and any other reasonable costs or expenses
incurred in connection with the exercise of any right or remedy hereunder;
second to the payment in full of all Secured Obligations owed to the Lender; and
third, to the Grantor, its successors and assigns, or as a court of competent
jurisdiction may otherwise direct.
Upon any sale of the Collateral by the Lender (including, without limitation,
pursuant to a power of sale granted by statute or under a judicial proceeding),
the receipt of the Lender or of the officer making the sale shall be a
sufficient discharge to the purchaser or purchasers of the Collateral so sold
and such purchaser or purchasers shall not be obligated to see to the
730842.3
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<PAGE>
application of any part of the purchase money paid over to the Lender or such
officer or be answerable in any way for the misapplication thereof.
13. Security Interest Absolute. All rights of the Lender hereunder,
the Security Interest, and all obligations of the Grantor hereunder, shall be
absolute and unconditional irrespective of (i) any lack of validity or
enforceability of the Loan Agreement, the Note, any other agreement with respect
to any of the Secured Obligations or any other agreement or instrument relating
to any of the foregoing, (ii) any change in the time, manner or place of payment
of, or in any other term of, all or any of the Secured Obligations, or any other
amendment or waiver of or consent to any departure from the Loan Agreement, the
Note or any other agreement or instrument, (iii) any exchange, release or
nonperfection of any other Collateral, or (iv) any other circumstance which
might otherwise constitute a defense available to, or discharge of, the Grantor
in respect of the Secured Obligations or in respect of this Agreement.
14. No Waiver. No failure on the part of the Lender to exercise,
and no delay in exercising, any right, power or remedy hereunder shall operate
as a waiver thereof, nor shall any single or partial exercise of any such right,
power or remedy by the Lender preclude any other or further exercise thereof or
the exercise of any other right, power or remedy. All remedies hereunder are
cumulative and are not exclusive of any other remedies provided by law. The
Lender shall not be deemed to have waived any rights hereunder or under any
other agreement or instrument unless such waiver shall be in writing and signed
by the Lender.
15. Agent Appointed Attorney-in-Fact. The Grantor hereby appoints
the Lender the attorney-in-fact of the Grantor effective upon and during the
continuance of an Event of Default solely for the purpose of carrying out the
provisions of this Agreement and taking any action and executing any instrument
which the Lender may deem necessary or advisable to accomplish the purposes
hereof, which appointment is irrevocable and coupled with an interest.
16. Lender's Fees and Expenses. The Grantor shall be jointly and
severally obligated to, upon demand, pay to the Lender the amount of any and all
reasonable expenses, including the reasonable fees and expenses of its counsel
and of any experts or agents which the Lender may incur in connection with (i)
the administration of this Agreement, (ii) the custody or preservation of, or
the sale of, collection from, or other realization upon, any of the Collateral,
(iii) the exercise or enforcement of any of the rights of the Lender hereunder,
or (iv) the failure of any representation or warranty of the Grantor hereunder
to be true and correct in all material respects or the failure by the Grantor to
perform or observe any of the provisions hereof. Any such amounts payable as
provided hereunder or thereunder shall be additional Secured Obligations secured
hereby.
17. Binding Agreement; Assignments. This Agreement, and the terms,
covenants and conditions hereof, shall be binding upon and inure to the benefit
of the parties hereto and their respective successors and assigns, except that
the Grantor shall not be
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permitted to assign this Agreement or any interest herein or in the Collateral,
or any part thereof, or any cash or property held by the Lender as Collateral
under this Agreement, except as contemplated by this Agreement or the Loan
Agreement.
18. Governing Law; Jurisdiction. THIS AGREEMENT SHALL BE CONSTRUED
IN ACCORDANCE WITH AND GOVERNED BY THE LAWS OF THE STATE OF DELAWARE, EXCEPT TO
THE EXTENT THAT THE VALIDITY OR PERFECTION OF THE SECURITY INTEREST HEREUNDER,
OR REMEDIES HEREUNDER, IN RESPECT OF ANY PARTICULAR COLLATERAL ARE GOVERNED BY
THE LAWS OF A JURISDICTION OTHER THAN THE STATE OF DELAWARE. THE LENDER AND
GRANTOR HEREBY AGREE THAT ANY CONTROVERSY OR CLAIM ARISING OUT OF OR RELATING TO
THIS SECURITY AGREEMENT, THE LOAN AGREEMENT OR THE NOTE SHALL BE DETERMINED IN
DELAWARE AND EXPRESSLY SUBMIT TO THE JURISDICTION OF THE UNITED STATES DISTRICT
COURT FOR THE DISTRICT OF DELAWARE IN ANY ACTION OR PROCEEDING ARISING OUT OF OR
RELATING TO THIS SECURITY AGREEMENT, THE LOAN AGREEMENT OR THE NOTE AND AGREE
THAT ANY PROCESS OR NOTICE OF MOTION OR OTHER APPLICATION TO SUCH COURT MAY BE
SERVED WITHIN OR WITHOUT SUCH COURT'S JURISDICTION BY REGISTERED MAIL OR BY
PERSONAL SERVICE, PROVIDED A REASONABLE TIME FOR APPEARANCE IS ALLOWED. WITH
RESPECT TO SUCH COURT, THE LENDER AND THE GRANTOR HEREBY EXPRESSLY WAIVE ANY
DEFENSE BASED ON DOCTRINES OF VENUE OR INCONVENIENT FORUM OR SIMILAR RULES OR
DOCTRINES.
19. Notices. All communications and notices hereunder shall be in
writing and given as provided in the Loan Agreement.
20. Severability. In case any one or more of the provisions
contained in this Agreement should be invalid, illegal or unenforceable the
remaining provisions contained herein shall not in any way be affected or
impaired.
21. Section Headings. Section headings used herein are for
convenience only and are not to affect the construction of, or to be taken into
consideration in interpreting, this Agreement.
22. Counterparts. This Agreement may be executed in two or more
counterparts, each of which shall constitute an original, but all of which, when
taken together, shall constitute but one instrument. This Agreement shall be
effective when a counterpart which bears the signature of the Grantor shall have
been delivered to the Lender.
23. Termination. This Agreement and the Security Interest shall
terminate when all the Secured Obligations have been fully and indefeasibly paid
in cash, at which time the Lender shall execute and deliver to the Grantor all
Uniform Commercial Code termination statements and similar documents which the
Grantor shall reasonably request to evidence such
730842.3
-9-
<PAGE>
termination; provided, however, that all indemnities of the Grantor contained in
this Agreement shall survive, and remain operative and in full force and effect
regardless of, the termination of this Agreement.
24. Limitation on Liability. Lender shall look only to the
Collateral pledged hereunder and the Trustee shall have no personal or
individual liability or obligation whatsoever hereunder.
IN WITNESS WHEREOF, the parties hereto have duly executed this
Security Agreement as of the day and year first above written.
GRANTOR:
-----------------------------------,
Ronald Cantor
___________________________________, and
Ivan Snyder
-----------------------------------,
James A. Scarpone
solely as trustees on behalf of the
beneficiaries of the Trust with respect to
the Trust
LENDER:
MARVEL ENTERPRISES, INC.
By: ________________________________
Name: William H. Hardie, III
Title: Executive Vice President, Business
Affairs
730842.3
<PAGE>
EXHIBIT 10
For Exhibit 10 ("MAFCO Professional Fee Reimbursement Note"),
see Exhibit A to Exhibit 9 ("MAFCO Litigation Trust Loan Agreement").
766446.1
<PAGE>
EXHIBIT 11
For Exhibit 11 ("Merger Agreement"),
see Exhibit 2.2 ("Agreement and Plan of Merger, dated as of August 12, 1998, by
and among the Registrant, Marvel Entertainment Group, Inc., and MEG
Acquisition Corp.").
766473.1
<PAGE>
EXHIBIT 12
AMOUNT OF AMOUNT OF EXCESS
CONVERTIBLE ADMINISTRATION
PREFERRED STOK CLAIMS NOTE
NEW INVESTORS TO BE PURCHASED TO BE FUNDED
Dickstein Partners Inc. (or $30,000,000 0%
permitted assigns)
Zib Inc. (or permitted $60,000,000* 100%
assigns)
- --------
* Less up to forty million dollars ($40,000,000) in aggregate liquidation
value of Convertible Preferred Stock acquired by holders of Fixed Senior
Secured Claims on the Consummation Date pursuant to Section 4.2(b)(i)(A)
(6)of the Plan of Reorganization.
764363.1
<PAGE>
EXHIBIT 13
GUARANTY AGREEMENT
THIS GUARANTY AGREEMENT, dated as of September 28, 1998 (this
"Guaranty" or this "Agreement"), is made by Toy Biz, Inc., a Delaware
corporation (the "Company"), Marvel Entertainment Group, Inc. ("Marvel"), Fleer
Corp. ("Fleer"), The Asher Candy Company, Frank H. Fleer Corp., Heroes World
Distribution, Inc., Malibu Comics Entertainment, Inc., Marvel Characters, Inc.,
Marvel Direct Marketing, Inc., Skybox International, Inc., Marvel Restaurant
Venture Corp. and MRV, Inc.(collectively, the "Guarantors"), in favor of The
Chase Manhattan Bank, as agent (in such capacity, and including any successor
agents, the "Agent") for itself and the Holders (as defined below) and in favor
of the Holders.
BACKGROUND
(i) Pursuant to and in connection with the Existing Panini
Credit Agreements, Panini S.p.A., an Italian Corporation ("Panini") is indebted
to the Initial Holders in the principal amount of approximately Italian Lire
232,123,350,001, plus accrued and unpaid interest (including default interest),
fees and other charges due and owing in connection therewith and under the
Existing Panini Credit Agreements (referred to herein as the "Outstanding Panini
Obligations").
(ii) Panini is a wholly-owned direct subsidiary of Marvel and
a wholly-owned indirect subsidiary of the Company. Pursuant to guaranty
provisions contained in the Existing Panini Credit Agreements, certain of the
Guarantors have unconditionally guaranteed the payment in full of the
Outstanding Panini Obligations.
(iii) Pursuant to the Plan (as defined below), (i) the
Outstanding Panini Obligations are being restructured in accordance with the
Panini Loan Documents, (ii) the Guarantors have agreed to guarantee the payment
of the Guaranteed Obligations (as defined below) pursuant to the terms hereof,
and (iii) on the effective date of the Plan, the Company shall make the
Effective Date Payment (as defined below) by payment to the Holders of
$13,000,000 in cash in reduction of the Guarantors' obligations hereunder, which
payment shall be treated in accordance with the existing subordination agreement
between the holders of the obligations under Existing Panini Credit Agreements.
(iv) The Guaranteed Obligations are secured or otherwise
supported pursuant to the Security Documents.
764332.1
<PAGE>
(v) All subrogation and similar rights arising in favor of the
Guarantors (including as a result of the Effective Date Payment) shall be
subordinated in all respects to the payment in full to the Holders of the
remaining Guaranteed Obligations.
(vi) It is a condition to the occurrence of the Con summation
Date under the Plan that this Guaranty shall be executed and delivered by each
Guarantor and shall be in full force and effect. The Guarantors shall benefit
substantially from the occurrence of the Consummation Date and other
transactions occurring concurrently with the issuance of this Guaranty.
NOW, THEREFORE, in order to induce, and in consider ation of,
the execution and delivery of the Panini Loan Documents and the occurrence of
the Consummation Date, and for ten dollars and other good and valuable
consideration, the receipt and sufficiency of which is hereby acknowledged by
each Guarantor, each Guarantor hereby covenants and agrees with, and represents
and warrants to, the Agent and to each Holder as follows:
Section 1. Definitions. Capitalized terms that are used herein
and not otherwise defined herein shall have the meanings ascribed to such terms
in the Plan. All definitions shall be equally applicable to the singular and
plural forms of the terms defined. The use of the word "including" shall be
deemed to mean "including, without limitation". In addition to the terms defined
in the introductory and background paragraphs of this Agreement, the following
terms shall have the meanings indicated below:
"Bankruptcy Court" shall mean the United States Dis trict
Court for the District of Delaware and any other court having jurisdiction over
the Entertainment Cases.
"Bankruptcy Law" shall mean title 11, United States Code or
any similar federal or state law for the relief of debtors.
"Capitalized Lease Obligations" shall mean, in relation to any
Person, obligations for the payment of rent on any real or personal property
under leases or agreements to lease that, in accordance with generally accepted
accounting principles, have been or should be capitalized on the books of the
lessee and, for purposes hereof, the amount of any such obligation shall be the
capitalized amount thereof determined in accordance with generally accepted
accounting principles.
"Consummation Date" shall have the meaning ascribed to
such term in the Plan.
-2-
764332.1
<PAGE>
"Contingent Obligations" as to any Person shall mean any
obligation of such Person guaranteeing or in effect guaranteeing any
Indebtedness, leases, dividends, letters of credit or other obligations
("primary obligations") of any other Person (the "primary obligor") in any
manner, whether directly or indirectly, including, without limitation, any
"keep-well" or "make-well" agreement, guarantee of return on equity or other
obligation of such Person, whether or not contingent, (a) to purchase any such
primary obligation or any property constituting direct or indirect security
therefor, (b) to advance or supply funds (i) for the purchase or payment of any
such primary obligation or (ii) to maintain working capital or equity capital of
the primary obligor or otherwise to maintain the net worth or solvency of the
primary obligor, (c) to purchase property, securities or services primarily for
the purpose of assuring the obligee under any such primary obligation of the
ability of the primary obligor to make payment of such primary obligation or (d)
otherwise to assure or hold harmless the obligee under such primary obligation
against loss in respect thereof.
"Custodian" shall mean any receiver, trustee, assignee,
liquidator or similar official under any Bankruptcy Law.
"Defeasance Debt Securities" shall have the meaning ascribed
to such term in Section 24.
"Defeasance Letter of Credit" shall have the meaning ascribed
to such term in Section 24.
"Defeasance Property" shall mean, collectively, any
Defeasance Debt Securities and/or any Defeasance Letter of
Credit.
"Dollars" or "$" means United States dollars.
"Effective Date Payment" means the payment of thirteen million
Dollars ($13,000,000) Cash by the Guarantors on the Consummation Date, in
respect of the Guaranteed Obligations.
"Entertainment Cases" shall mean the chapter 11 cases pending
in the Bankruptcy Court on the Consummation Date as chapter 11 case number
97-638 (RRM).
"Existing Panini Credit Agreements" shall mean the
Existing Panini Junior Credit Agreements and the Existing Panini
Senior Credit Agreements.
"Existing Panini Junior Credit Agreements" shall mean (a) that
certain Term Loan and Guarantee Agreement dated as of August 30, 1994, as
amended, supplemented or otherwise modified from time to time prior to the
Consummation Date, among Entertainment,
-3-
764332.1
<PAGE>
Panini, S.p.A. (formerly named Marvel Comics Italia S.r.l.), and Istituto
Bancario San Paolo di Torino, S.p.A.; (b) the Participation Agreement dated as
of August 30, 1994 among Istituto 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;
(c)(i)(A) any letter of credit issued for the account of any of the Panini
Entities by a bank or other financial institution pursuant to any of the
agreements referred to in clauses (a) or (b), and (B) any related letter of
credit applications and any agreements governing or evidencing reimbursement
obligations relating to any letters of credit referred to in clause (c)(i)(A),
or (ii) any interest rate agreement between any of the Panini Entities and a
bank or other financial institution pursuant to any of the agreements referred
to in clauses (a) and (b); and (d) any guarantees and security documents,
including, without limitation, mortgages, pledge agreements, security agreements
and trademark security agreements, executed and delivered in connection with any
of the foregoing agreements, together in each case with all related documents,
instruments, consents, amendments, modifications and waivers entered into prior
to the Consummation Date.
"Existing Panini Senior Credit Agreements" shall mean (a) that
certain Italian Lire 27,000,000,000 Term Loan and Guaranty Agreement dated as of
August 5, 1997 as amended, supplemented or otherwise modified from time to time
prior to the Consummation Date, among Entertainment, Panini, the lenders listed
on Schedule 1 thereto as lenders, and The Chase Manhattan Bank as agent, and the
related Panini financing order entered by the Bankruptcy Court, (b) the
Participation Agreement dated as of August 5, 1997 among The Chase Manhattan
Bank as Lender, The Chase Manhattan Bank, as Administrative Agent, and the
financial institutions signatory thereto, as participants, and (c) any
guarantees and security documents, including, without limitation, mortgages,
pledge agreements, security agreements and trademark security agreements,
executed and delivered in connection with any of the foregoing agreements,
together in each case with all related documents, instruments, consents,
amendments, modifications and waivers entered into prior to the Consummation
Date.
"Fleer" shall mean Fleer Corp., a Delaware corporation
and one of the Guarantors.
"Guaranteed Obligations" shall have the meaning set
forth in Section 2 hereof.
"Guarantor Events of Default" shall mean any one or
more of the following events:
-4-
764332.1
<PAGE>
.1) any Guarantor shall fail to make any payment required
hereunder (whether in cash or by the issuance of
securities in accordance with this Guaranty) within five
(5) days after such payment is due or shall fail to
perform, keep or observe any term, provision, condition,
covenant or agreement contained in this Agreement or the
Panini Pledge Agreement and such failure continues for a
period of 15 days after such Guarantor receives notice
from the Agent or the Required Holders;
.2) any Guarantor or any Material Subsidiary shall default
in the payment when due (after expiration of any
applicable grace period) of any principal of, interest on,
or other amount in respect of, Indebtedness under the Term
Loan Facility (or any replacement facility thereof), the
Working Capital Facility (or any replacement facility
thereof) or any other Indebtedness having an aggregate
outstanding principal amount of at least $5,000,000; or
any event or condition shall occur which results in the
acceleration of the maturity of any such Indebtedness or
enables (or, with the giving of notice, would enable),
following the actual passage of any required grace period,
the holder(s) of any such Indebtedness or any Person
acting on such holder's behalf to accelerate the maturity
thereof, without giving effect to any waiver, amendment,
supplement or other modification in respect of any such
Indebtedness other than waivers, amendments, supplements
or other modifications from or by the requisite holders of
such Indebtedness in connection with which none of the
holders thereof received, directly or indirectly, any
economic consideration (including, without limitation, any
fees, increases in interest rates or margins, grant of
collateral security, issuance of guarantees or provision
of other credit support for such Indebtedness or other
Indebtedness) or any beneficial modifications with respect
to the terms of such Indebtedness or other Indebtedness
(including, without limitation, any additional covenants
or covenants that are more burdensome to obligor of such
Indebtedness, any acceleration of maturities or agreements
to effect any actions that could reasonably be expected to
cause prepayments);
.3) any Material Guarantor or Material Subsidiary,
pursuant to or within the meaning of any Bankruptcy
Law: (i) commences a voluntary case, (ii) consents
to the entry of an order for relief against it in an
-5-
764332.1
<PAGE>
involuntary case, (iii) consents to the appointment of a
Custodian of it or for all or substantially all of its
property, (iv) makes a general assignment for the benefit
of its creditors, or (v) generally is unable to pay its
debts as the same become due; and
.4) with respect to any Material Guarantor or any Material
Subsidiary, (A) any person commences an involuntary case
and such case is not dismissed within sixty (60) days
after the commencement thereof; provided that if the case
is stayed during such sixty day period, then the passage
of days during said period shall be tolled during (and
only during) the pendency of the stay and shall resume at
the time any such stay is lifted, or (B) a court of
competent jurisdiction enters an order or decree under any
Bankruptcy Law that: (i) is for relief against such
Material Guarantor in an involuntary case, (ii) appoints a
Custodian of such Material Guarantor for all or
substantially all of its property, or (iii) orders the
liquidation of such Material Guarantor, and the order or
decree referred to in clauses (i) through (iii) hereof
remains undismissed or unstayed for a period of thirty
(30) days.
"Guarantor Payments" shall mean the aggregate amount of all
payments of principal in respect of the Guaranteed Obligations made directly by
the Guarantors (and not by means, direct or indirect, of any dividend, payment
or other contribution or otherwise from the Panini Entities) to the Agent, on
behalf of the Holders, including, without limitation, the Effective Date
Payment. For the avoidance of doubt, any payment by the Guarantors of any
interest or other amounts (other than principal) payable by Panini under the
Panini Loan Documents after the Consummation Date shall not be deemed Guarantor
Payments.
"Guarantors" shall mean the Company, Marvel, Fleer, The
Asher Candy Company, Frank H. Fleer Corp., Heroes World Distri
bution, Inc., Malibu Comics Entertainment, Inc., Marvel Charac
ters, Inc., Marvel Direct Marketing, Inc. and Skybox Interna
tional, Inc.
"Guaranty Limit" shall mean the Guaranty Limit Amount in the
form of Cash and/or, at the option of the Company, debt securities issued by the
Company having a then-present value (taking into account, among other things,
the liquidity of such securities) at the time of issuance, together with any
Cash contemplated by this definition, equal to the Guaranty Limit Amount, as
determined by a Qualified Fairness Opinion.
-6-
764332.1
<PAGE>
"Guaranty Limit Amount" shall mean, at any time, the lesser of
(i) the difference between (A) forty million Dollars ($40,000,000) and (B) the
aggregate amount of all Guarantor Payments actually made as of such time and
(ii) the aggregate unpaid amount of the Guaranteed Obligations at such time.
"Holders" shall mean the holders from time to time of the
Restructured Panini Notes. For the avoidance of doubt, the term Holders shall
not include the Guarantors or any other holders from time to time of any Junior
Subrogation Claims.
"Indebtedness" shall mean (a) indebtedness of such Person for
borrowed money whether short-term or long-term and whether secured or unsecured,
(b) indebtedness of such Person for the deferred purchase price of services or
property, which purchase price (i) is due twelve months or more from the date of
incurrence of the obligation in respect thereof or (ii) customarily or actually
is evidenced by a note or other written instrument (including, without
limitation, any such indebtedness which is non-recourse to the credit of such
Person but is secured by assets of such Person), (c) Capitalized Lease
Obligations of such Person, (d) obligations of such Person arising under
acceptance facilities, (e) all obligations of such Person evidenced by bonds,
debentures, notes or other similar instruments, (f) all obligations of such
Person upon which interest charges are customarily paid, (g) all obligations of
such Person under conditional sale or other title retention agreements relating
to property purchased by such Person (even though the rights and remedies of the
seller or lender under such agreement in the event of default are limited to
repossession or sale of such property), (h) obligations of such Person to
purchase, redeem, retire, defease or otherwise acquire for value any capital
stock of such Person or any warrants, rights or options to acquire such capital
stock (with redeemable preferred stock being valued at the greater of its
voluntary or involuntary liquidation preference plus accrued and unpaid
dividends), (i) all executory obligations of such Person in respect of interest
rate agreements and foreign exchange and other financial hedge contracts
(including, without limitation, equity hedge contracts), (j) all Indebtedness of
the types referred to in clauses (a) through (i) above for which such Person is
obligated under a Contingent Obligation, and (k) renewals, extensions,
refundings, deferrals, restructurings, amendments and modifications of any such
indebtedness, obligation or guarantee.
"Initial Holders" shall mean the holders of Allowed
Contingent Senior Secured Claims on the Consummation Date.
"Junior Subrogation Claims" shall mean, at any time, (a) all
Guaranteed Obligations at such time owing to a Guarantor (whether on account of
interest, principal or otherwise) pursuant to rights of subrogation,
contribution, indemnity or similar
-7-
764332.1
<PAGE>
rights arising in favor of the Guarantors from the satisfaction by the
Guarantors of obligations under this Guaranty by means of (i) Guarantor
Payments, (ii) the distribution of Defeasance Property in accordance with
Section 24 and/or the (iii) enforcement of remedies or other realization under
the Panini Pledge Agreement and (b) all other claims of any of the Guarantors
against any of the Panini Entities.
"Material Guarantor" means the Company, Marvel, Fleer
Corp., Marvel Characters, Inc. and any other Guarantor which
would be a Material Subsidiary.
"Material Subsidiary" means any Person who would be designated
as a "significant subsidiary" with respect to the Company under Regulation S-X
as promulgated by the Securities and Exchange Commission (17 CFR 210) or any
successor regulation.
"Outstanding Panini Obligations" shall have the meaning
ascribed to such term in the Background section hereof.
"Panini Entities" shall mean, collectively, Panini and
each of its subsidiaries.
"Panini Insolvency Proceeding" means any insolvency,
liquidation or other creditors' rights proceeding in respect of any of the
Panini Entities under the laws of the Republic of Italy or other applicable law.
"Panini Loan Documents" shall mean the Restructured Panini
Notes, the Restructured Panini Junior Credit Agreement, the Restructured Panini
Senior Credit Agreement and the Security Documents, in each case as from time to
time amended, modified, or supplemented.
"Panini Pledge Agreement" shall mean that certain Pledge
Agreement dated as of the Consummation Date pursuant to which the Company has
pledged to the Agent 65% of the issued and outstanding stock of Panini, as from
time to time amended, supplemented or otherwise modified.
"Person" shall mean an individual, a partnership, a
corporation, a business trust, a joint stock company, a trust, an unincorporated
association, a joint venture, a governmental authority or any other entity of
whatever nature.
"Plan" shall mean that certain "Fourth Amended Joint Plan of
Reorganization Proposed by the Secured Lenders and Toy Biz, Inc.", which was
confirmed by the Bankruptcy Court on July 31, 1998, as amended, supplemented or
otherwise modified from time to time.
-8-
764332.1
<PAGE>
"Qualified Fairness Opinion" shall mean a fairness opinion of
a nationally recognized investment bank reasonably acceptable to the Agent and
the Required Holders.
"Required Holders" shall mean, at any time, both (i) Holders
holding 66-2/3% of the Restructured Panini Senior Notes outstanding at such time
(if any) and (ii) Holders holding 66- 2/3% of the Restructured Panini Junior
Notes outstanding at such
time.
"Restructured Panini Junior Credit Agreement" shall mean the
Existing Panini Junior Credit Agreements, as amended, restated and restructured
as of the Consummation Date, including pursuant to that certain "Amended and
Restated Junior Term Loan Agreement" dated as of the Consummation Date, as from
time to time amended, supplemented or otherwise modified.
"Restructured Panini Junior Notes" shall mean the promissory
notes issued from time to time under the Restructured Panini Junior Credit
Agreement.
"Restructured Panini Notes" shall mean the Restructured
Panini Senior Notes and the Restructured Panini Junior Notes.
"Restructured Panini Credit Agreements" shall mean the
Restructured Panini Senior Credit Agreement and the Restructured
Panini Junior Credit Agreement.
"Restructured Panini Senior Credit Agreement" shall mean the
Existing Panini Senior Credit Agreements, as amended, restated and restructured
as of the Consummation Date, including pursuant to that certain "Amended and
Restated Senior Term Loan Agreement" dated as of the Consummation Date, as from
time to time amended, supplemented or otherwise modified.
"Restructured Panini Senior Notes" shall mean the promissory
notes issued from time to time under the Restructured Panini Senior Credit
Agreement.
"Security Documents" shall mean the Panini Pledge Agreement
and any other security agreement, mortgage, filing or other agreement or
instrument relating to the Panini Pledge Agreement.
"Senior Guaranteed Obligations" shall mean, at any time, all
Guaranteed Obligations at such time owing by any of the Panini Entities to the
Holders (whether on account of interest, principal or otherwise and whether
under the Restructured Panini Junior Credit Agreement or the Restructured Panini
Senior Credit Agreement) to the extent not satisfied by (i) the Panini Entities
by means of a direct or indirect payment in cash or (ii) by the
-9-
764332.1
<PAGE>
Guarantors by means of (x) Guarantor Payments, (y) the distribution of
Defeasance Property in accordance with Section 24 or (z) the enforcement of
remedies or other realization under the Panini Pledge Agreement.
"Significant Holder" shall mean any Holder which, at the time
of reference, holds Restructured Panini Notes in an aggregate principal amount
of at least $7,500,000 (or the Italian Lire equivalent thereof).
"Subsidiary" shall mean, with respect to any Person, a
corporation or other entity of which shares of stock or other ownership
interests having ordinary voting power (other than stock or other ownership
interests having such power only by reason of the happening of a contingency) to
elect a majority of the directors of such corporation, or other Persons
performing similar functions for such entity, are owned, directly or indirectly,
by such Person.
Section 1. The Guaranty. Subject to Section 22, each Guarantor
hereby absolutely, irrevocably and unconditionally guarantees to the Agent and
each Holder the due and punctual payment in full in cash (or, subject to Section
24, Defeasance Property) of (i) the principal of, premium, if any, and interest
on (including interest that, but for the occurrence of a Panini Insolvency
Proceeding or other insolvency proceeding involving, or the filing of a petition
in bankruptcy by, any Panini Entity or any Guarantor, would accrue, whether or
not such interest is allowed in such insolvency or bankruptcy proceeding), and
any other amounts due under, the Restructured Panini Notes or the Restructured
Panini Credit Agreements when and as the same shall become due and payable
(whether at stated maturity, by required prepayment or by acceleration or
otherwise) and (ii) any other sums or amounts which may become due under, or in
connection with, the terms and provisions of this Guaranty, the Restructured
Panini Notes or any other Panini Loan Document (all such obligations described
in clauses (i) and (ii) above, together with any liability for damage, loss,
cost or expense referred to in clauses (i), (ii) or (iii) of the following
paragraph, all other obligations of the Guarantors hereunder and any claims for
damages for any breach by any Guarantors of any representation or covenant
herein or in any Panini Loan Documents are herein called the "Guaranteed
Obligations"). The guaranty in the preceding sentence is an absolute, present,
unconditional and continuing guaranty of payment and not of collectability and
is in no way conditional or contingent upon any attempt to collect from any
Panini Entity or any other guarantor in respect of the Guaranteed Obligations,
including any other Guarantor under this Guaranty, or any security given
therefor, if any, or upon any other action, occurrence or circumstance
whatsoever. In the event that Panini or any other Person liable in respect of
the Guaranteed
-10-
764332.1
<PAGE>
Obligations shall fail to pay any of such Guaranteed Obligations as they become
due, each Guarantor agrees to pay the same when due to the Agent, or to each
Holder or its designee, without demand, presentment, protest or notice of any
kind, in lawful money of the Republic of Italy or the equivalent thereof (as
determined by the Administrative Agent) in Dollars, at the place for payment
specified in the Panini Loan Documents or at the office of the Administrative
Agent. Each default in payment of principal of, premium, if any, or interest on
any Guaranteed Obligation shall give rise to a separate cause of action
hereunder and separate suits may be brought hereunder as each cause of action
arises. Each Guarantor hereby agrees that the Restructured Panini Notes issued
in connection with the Restructured Panini Senior Credit Agreement and the
Restructured Panini Junior Credit Agreement may make reference to this Guaranty.
Each Guarantor hereby agrees to pay and reimburse and to
indemnify and save the Agent and the Holders harmless from and against any
damage, loss, liabilities, cost or expense (including reasonable fees and
expenses of attorneys and other professionals) which the Agent or such Holder
may incur or be subject to as a consequence, direct or indirect, of (i) the
enforcement of this Guaranty or any Security Document (including enforcement
costs and expenses after the commencement of any bankruptcy or similar
proceeding), (ii) any breach by any Guar antor or by any Panini Entity of any
warranty, covenant, term or condition in, or the occurrence of any default
under, this Guaranty, the Restructured Panini Notes or any other Panini Loan
Document, together with all expenses resulting from the compromise or defense of
any claims or liabilities arising as a result of any such breach or default, and
(iii) any legal action commenced to challenge the validity of this Guaranty, the
Restructured Panini Notes or any other Panini Loan Document or any of the
Guaranteed Obligations.
Section 2. Obligations Absolute. The obligations of each
Guarantor hereunder shall be primary, absolute, irrevocable and unconditional,
irrespective of the validity, regularity or enforceability of the Outstanding
Panini Obligations, the Existing Panini Credit Agreements, the Restructured
Panini Notes, any other Panini Loan Document or any of the Guaranteed
Obligations; shall not be subject to any counterclaim, setoff, deduction or
defense based upon any claim such Guarantor may have against any Panini Entity,
the Agent, any Holder, any other Person or otherwise; and shall remain in full
force and effect without regard to, and shall not be released, discharged or in
any way affected by, any circumstance or condition whatsoever (whether or not
such Guarantor shall have any knowledge or notice thereof), including, without
limitation: (a) any payment of any of the Guaranteed Obligations by any of the
Panini Entities or
-11-
764332.1
<PAGE>
any of the Guarantors; (b) any amendment, modification of or supplement to the
Restructured Panini Notes, the Panini Loan Documents or any other instrument
referred to therein or any assignment or transfer of any thereof or of any
interest therein, or any furnishing, acceptance or release of any security for
any of the Guaranteed Obligations; (c) any waiver, consent, extension,
indulgence or other action or inaction under or in respect of any Restructured
Panini Note, the Panini Loan Documents or any of the Guaranteed Obligations; (d)
any bankruptcy, insolvency, readjustment, composition, liquidation or similar
proceeding with respect to any Guarantor, any Panini Entity or any of their
respective subsidiaries or their properties; (e) any merger, amalgamation or
consolidation of such Guarantor or of any Panini Entity into or with any other
corporation or any sale, lease or transfer of any or all of the assets of such
Guarantor or of any Panini Entity to any Person; (f) any failure on the part of
any Panini Entity or any other Person for any reason to comply with or perform
any of the terms of any other agreement with such Guarantor; or (g) any other
circumstance which might otherwise constitute a legal or equitable discharge or
defense of a guarantor. Each Guarantor covenants that its obligations hereunder
will not be discharged except by the payment in full in cash (or, subject to
Section 24, Defeasance Property) of all of the Guaranteed Obligations.
Section 3. Waiver. Each Guarantor unconditionally waives to
the fullest extent permitted by law (a) notice of acceptance hereof, of any
action taken or omitted in reliance hereon and of any defaults by Panini or any
other Person in the payment of any amounts due in respect of any of the
Guaranteed Obligations, and of any of the matters referred to in Section 5
hereof, (b) all notices which may be required by statute, rule of law or
otherwise to preserve any of the rights of the Agent or any Holder against such
Guarantor, including, without limitation, presentment to or demand for payment
from Panini or such Guarantor with respect to any Guaranteed Obligation, notice
to Panini or to such Guarantor of default or protest for nonpayment or dishonor
and the filing of claims with a court in the event of the bankruptcy or
insolvency with respect to Panini, (c) any right to the enforcement, assertion
or exercise by the Agent or any Holder of any right, power or remedy conferred
in this Guar anty, the Restructured Panini Notes or any other Panini Loan
Document, (d) any requirement of diligence on the part of the Agent or any
Holder, and (e) any other act or omission or thing or delay to do any other act
or thing which might in any manner or to any extent vary the risk of such
Guarantor or which might otherwise operate as a discharge of such Guarantor.
Each Guaran tor hereby waives all suretyship defenses and all defenses based
upon impairment of suretyship status.
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Section 4. Obligations Unimpaired. Each Guarantor authorizes
the Agent and any Holder, without notice or demand to such Guarantor and without
affecting its obligations hereunder, from time to time to (a) renew, compromise,
extend, accelerate or otherwise change the time for payment of, or otherwise
change the terms of, all or any part of any Guaranteed Obligation, (b) take and
hold security for the payment of any Guaranteed Obligation or the performance of
this Guaranty and to exchange, enforce, waive and release any such security, (c)
apply any such security and direct the order or manner of sale thereof as the
Agent or any Holder in its sole discretion may determine, (d) obtain additional
or substitute endorsers or guarantors, (e) exercise or refrain from exercising
any rights against any Panini Entity and others, and (f) apply any sums, by
whomsoever paid or however realized, to the payment of any Guaranteed
Obligation. Each Guarantor waives any right to require the Agent or any Holder
to proceed against any additional or substitute endorsers or guarantors
(including the other Guarantors under this Guaranty) or to pursue or exhaust any
security provided by any Panini Entity, such Guarantor or any other Person or to
pursue any other remedy available to the Agent or such Holder.
Section 5. Subordination of Subrogation Claims to Payment in
full of all Guaranteed Obligations.
(a) Each of the Guarantors hereby expressly acknowledges and
agrees that any and all Junior Subrogation Claims are subordinated in all
respects, including with respect to the right of payment, to the prior payment
in full in cash of all Senior Guaranteed Obligations, that the subordination is
for the benefit of all present and future Holders, and that the subordination is
an inducement for the Holders to execute and deliver the Panini Loan Documents
and support the Plan and the provisions thereof.
(b) No payment on account of Junior Subrogation Claims
(whether on account of interest, principal or otherwise) shall be made by or on
behalf of any Panini Entity prior to the indefeasible payment in full in cash of
all Senior Guaranteed Obligations. Any payment on account of any Junior
Subrogation Claims made by or on behalf of any Panini Entity shall instead be
paid to the Agent, on behalf of the Holders, until the Senior Guaranteed
Obligations have been indefeasibly paid in full in cash. Until the indefeasible
payment in full of all Senior Guaranteed Obligations in cash, no Guarantor or
any Person acting on behalf thereof may, without the written consent of the
Required Holders, take any of the following actions: (a) accelerate any part of
the Junior Subrogation Claims, (b) commence, prosecute, or participate in any
administrative, legal, or equitable action to enforce its Junior Subrogation
Claims or any other action that might reasonably be expected to adversely
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affect the Holders or their collective interests in respect of the Senior
Guaranteed Obligations, (c) otherwise assert, collect or enforce the Junior
Subrogation Claims or any part thereof or take any action to foreclose or
realize upon the Junior Subrogation Claims or any part thereof, (d) enforce any
term or provision of any of the Panini Loan Documents to the extent of any
Junior Subrogation Claims, or (e) join in the commencement of any Panini
Insolvency Proceeding or any other enforcement proceeding against a Panini
Entity; provided that (i) nothing in this sentence shall prevent any Guarantor
from filing or asserting a claim in any Panini Insolvency Proceeding relating to
the Panini Entities on account of such Junior Subrogation Claim or defending
against challenges to such claim in any such proceeding and (ii) the Guarantors
agree to so file or assert any and all such claims against the Panini Entities,
for the benefit of the Holders. If any of the Guarantors, or any Person on their
behalf, in contravention of the terms of this Agreement, shall attempt to
collect or enforce any of the Junior Subrogation Claims, enforce any term or
provision of any of the Panini Loan Documents or otherwise undertake any
collection or enforcement action against the Panini Entities in connection with
a Junior Subrogation Claim, then the Agent or any Holder may, in the name of all
Holders, by virtue of this Agreement, restrain such attempt to collect or
enforce.
(c) Upon (i) any acceleration of the principal amount or any
other amounts due in respect of the Senior Guaranteed Obligations or (ii) any
payment or distribution of assets of or in respect of any Panini Entity, of any
kind or character, whether in cash, property, or securities, following
commencement of a Panini Insolvency Proceeding, then, all amounts due or to
become due on all Senior Guaranteed Obligations shall first be paid in full in
cash before any payment or distribution may be made on account of any of the
Junior Subrogation Claims; and following commencement of a Panini Insolvency
Proceeding, any payment or distribution of assets of any Panini Entity of any
kind or character, whether in cash, property or securities, to which the holders
of Junior Subrogation Claims would be entitled, except for the provisions
hereof, shall be paid by such Panini Entity or any other Person making such
payment or distribution, or by the Guarantors or other holders of the Junior
Subrogation Claims if received by them, directly to the Agent to the extent
necessary to pay all Senior Guaranteed Obligations in full in cash before any
payment or distribution is made in respect of the Junior Subrogation Claims.
(d) In the event that, notwithstanding the foregoing, any
payment or distribution of assets of a Panini Entity, whether in cash, property
or securities shall be received by a Guarantor or other holder of Junior
Subrogation Claims before all Senior Guaranteed Obligations have been paid in
full
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in cash, such payment or distribution shall be held in trust for the benefit of
the Holders and shall be paid over or delivered to the Agent, on behalf of the
Holders.
(e) Each Guarantor waives any right to compel the Agent or the
Holders to marshal any collateral for the Senior Guaranteed Obligations or to
seek payment in respect of Senior Guaranteed Obligations from any particular
Panini Entity, any other obligor, any third party or any other source of payment
in respect of the Senior Guaranteed Obligations.
Section 6. Enforcement of Junior Subrogation Claims.
(a) Subject to the following subsection 7(b), after all Senior
Guaranteed Obligations have been indefeasibly paid in full in cash, each
Guarantor may enforce its Junior Subrogation Claims to the full extent that such
Guarantor has satisfied Guaranteed Obligations, whether by means of Guarantor
Payments, defeasance pursuant to Section 24 or otherwise.
(b) Each of the Guarantors hereby grants, assigns and pledges to
the Agent, for the benefit of the Holders, a security interest in any
distributions that the Guarantors receive in respect of or on account of Junior
Subrogation Claims following a defeasance pursuant to Section 24 hereof through
the distribution of Defeasance Securities, as security for the payment in full
in cash of all obligations in respect of the Defeasance Securities.
(b) Until the indefeasible payment in full in cash of all
Senior Guaranteed Obligations, the Guarantors agree that they shall not be
deemed a party to, and shall not have any rights under, any of the Panini Loan
Documents and the Holders shall have absolute power and discretion, without
notice to the Guarantors or any other Person or any consent of the Guarantors,
to deal in any manner with the Guaranteed Obligations or the Panini Loan
Documents, including, but not by way of limitation, the power and discretion to
do any of the following: (i) consent (or not consent) to any waiver,
modification, or amendment to any of the Panini Loan Documents, (ii) accelerate
or rescind any acceleration or demand for payment under the Panini Loan
Documents, (iii) commence any enforcement with respect to the Guaranteed
Obligations, including the commencement of a Panini Insolvency Proceeding, and
(iv) deal in any manner whatsoever with any collateral or other credit support
in respect of the Panini Obligations; provided that the Holders may not
voluntarily and explicitly extinguish the obligations of any Panini Entity in
respect of Guaranteed Obligations that constitute Junior Subrogation Claims.
Section 7. Reinstatement of Guaranty. This Guaranty
shall continue to be effective, or be reinstated, as the case may
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<PAGE>
be, if and to the extent at any time payment, in whole or in part, of any of the
sums due to the Agent or any Holder for principal of, premium, if any, or
interest thereon or on any of the other Guaranteed Obligations is rescinded or
must otherwise be restored or returned by the Agent or a Holder upon, or in
connection with, the insolvency, bankruptcy, dissolution, liq uidation or
reorganization of any of the Panini Entities, any Guarantor or any other obligor
in respect of a Guaranteed Obli gation, or upon or as a result of, or in
connection with, the appointment of a custodian, receiver, trustee or other
officer with similar powers with respect to any of the Panini Entities or any of
the Guarantors or any substantial part of their respective properties, or
otherwise, all as though such payments had not been made. If an event permitting
the acceleration of the maturity of any Guaranteed Obligation shall at any time
have occurred and be continuing, and such acceleration shall at such time be
prevented or the right of the Agent or any Holder to receive any payment
thereunder shall at such time be delayed or otherwise affected by reason of the
pendency against any of the Panini Entities, any Guarantors or any other obligor
in respect of the Guaranteed Obligations of a case or proceeding under a
bankruptcy or insolvency law, each Guarantor agrees that, for purposes of this
Guaranty and its obligations hereunder, the maturity of such Guaranteed
Obligation shall be deemed to have been accelerated with the same effect as if
the Holder had ac celerated the same in accordance with the terms of the Panini
Loan Documents, and each Guarantor shall, subject to Section 22 hereof,
forthwith pay such accelerated Guaranteed Obligation.
Section 8. Covenants of Each Guarantor. Each Guar antor agrees
to comply with each of the following covenants, unless the Required Holders
otherwise consent in writing:
(a) Maintenance of Corporate Existence, Etc. Each Guarantor
(other than a Guarantor that is not a Material Guarantor) will, and will cause
all of its Subsidiaries (other than any Subsidiary that is not a Material
Subsidiary) to, pre serve and keep in full force and effect at all times its re
spective corporate existence, and maintain, preserve and renew its and their
licenses, permits, patents and franchises material to its business; provided
that the Guarantor may dissolve or cause the dissolution with respect to any
Guarantor which is not a Material Guarantor and any Subsidiary that is not a
Material Subsidiary.
(b) Furnishing of Information. Each Guarantor will furnish to
the Agent or any Significant Holder, reasonably promptly after such Person's
request, such financial and other information relating to such Guarantor and its
Subsidiaries as such Person may reasonably request from time to time. If
requested by the Company, any such Significant Holder receiving
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<PAGE>
such information will execute and deliver a confidentiality agreement containing
terms and conditions substantially similar to any similar confidentiality
provisions contained in the Working Capital Facility (as in effect on the
Consummation Date).
(c) Inspections, Etc. Each Guarantor will permit any
authorized representative of the Agent and any Significant Holder, upon
reasonable prior notice, to visit and discuss with such Guarantor's officers the
financial and other condition of such Guarantor and its Subsidiaries and such
Guarantor's ability to comply with its obligations hereunder, all at such
reasonable times and intervals as such Person may reasonably request. If
requested by the Company, any such Significant Holder so undertaking an
inspection will execute and deliver a confidentiality agreement containing terms
and conditions substantially similar to any similar confidentiality provisions
contained in the Working Capital Facility (as in effect on the Consummation
Date).
(d) [RESERVED]
(e) Restrictions on Fundamental Changes. No Material Guarantor
shall enter into any merger, consolidation, reorganization or recapitalization,
or reclassification of its capital stock that has the effect of any of the
foregoing events, or liquidate, wind up, or dissolve itself (or suffer any
liquidation or dissolution), or convey, sell, assign, lease, transfer, exchange
or otherwise dispose of, in one transaction or a series of transactions, all or
substantially all of its property or assets (other than (x) any merger or
consolidation of such Guarantor into another Guarantor, (y) any such conveyance,
sale, assignment, lease, transfer, exchange or other disposition by such
Guarantor to another Guarantor and (z) the corporate dissolution by the Company
of any Guarantor that is not a Material Guarantor).
(f) Disposal of Stock in Panini Entities. The Guarantors shall
not, and shall not permit any Subsidiary to, sell, lease, assign, transfer,
pledge, exchange or otherwise dispose of any of the capital stock of Panini
(other than pledges under the Panini Pledge Agreement).
(g) [RESERVED]
(h) Nature of Business. No Material Guarantor shall make any
change in the principal nature of any such Guarantor's business.
Section 9. Representations and Warranties of Each
Guarantor. Each Guarantor (other than any Guarantor which is not
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<PAGE>
a Material Guarantor) represents and warrants, as of the Consummation Date, as
follows:
(a) Due Organization, Qualification and Authorization. Each
such Guarantor (i) is duly organized, validly existing and in good standing
under the laws of the jurisdiction of its incorporation and qualified and
licensed to do business in, and in good standing in, any state where the failure
to be so licensed or qualified reasonably could be expected to cause a material
adverse effect on the Guarantors, taken as a whole, and (ii) has all requisite
corporate power and authority, and all governmental licenses and permits, to own
and operate its properties and to carry on its businesses as presently conducted
in all material respects, except where any such failure to have such power and
authority, to possess such governmental licenses and permits, or to own and
operate such properties or carry on such businesses, could reasonably be
expected to have a material adverse effect on the Guarantors, taken as a whole.
Each such Guarantor has the requisite corporate power to enter into and perform
its obligations under this Guaranty.
(b) Approval and Enforceability of Guaranty. The execution,
delivery and performance by each such Guarantor of this Guaranty have been duly
authorized by all necessary corporate action on the part of each Guarantor. This
Guaranty has been duly and validly executed and delivered and constitutes the
legal, valid and binding obligation of each Guarantor, enforceable against such
Guarantor in accordance with its terms except as enforcement may be limited by
equitable principles or by bankruptcy, insolvency, moratorium, reorganization,
receiver ship and similar laws relating to or limiting creditors' rights
generally.
(c) Non-Contravention. The execution, delivery and performance
by each such Guarantor of this Guaranty do not and will not (i) violate any
provision of Federal, state or local law or regulation (including Regulations G,
T, U, and X of the Federal Reserve Board) applicable to such Guarantor, the
Governing Documents of such Guarantor or any order, judgment or decree of any
court or other governmental authority binding on such Guarantor, (ii) conflict
with, result in a breach of or constitute (with due notice or lapse of time or
both) a default under any contractual obligation or lease that is material to
the businesses of the Guarantors, taken as a whole, (iii) result in or require
the creation or imposition of any Lien of any nature whatsoever upon any
properties or assets of such Guarantor, other than liens under the Security
Documents, or (iv) require any approval of stockholders (other than stockholder
approvals as have been obtained) or any approval or consent of any Person under
any material contractual obligation of such Guarantor.
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Section 10. Joint and Several Liability. The li
ability and obligations of each Guarantor hereunder shall be
joint and several.
Section 11. Notices. All written communications provided for
hereunder shall be sent by hand delivery, first class registered mail, or
nationwide reliable overnight delivery service (with charges prepaid) and (i) if
to the Agent, addressed to it at 380 Madison Avenue, New York, New York 10017,
Attn: Susan Atkins, or at such other address as the Agent shall have specified
to the Company in writing, (ii) if to a Holder, at the address specified for
communications in the Restructured Panini Senior Credit Agreement or the
Restructured Panini Junior Credit Agreement, as applicable, or at such other
address as any Holder shall have specified to the Company in writing, and (iii)
if to the Guarantors, or any Guarantor, addressed, care of the Company, to it at
685 Third Avenue, New York, New York 10017, Attn: President (with a courtesy
copy to Battle Fowler LLP, Park Avenue Tower, 75 East 55th Street, New York, New
York 10022, Attn: Lawrence Mittman), or at such other address as the Company
shall have specified to the Agent and the holder of each Restructured Panini
Note in writing; provided, however, that any such com munication to the
Guarantors may also, at the option of the holder of any Restructured Panini
Note, be delivered by any other means either to the Company at its address
specified above. All notices shall be effective when actually delivered to the
required addresses unless such delivery does not take place on a Business Day,
in which case such delivery shall be deemed to have taken place on the Business
Day immediately following the actual delivery. All notices or communications
shall be in writing.
Section 12. Construction; Counterparts. The section and
subsection headings in this Guaranty are for convenience of reference only and
shall neither be deemed to be a part of this Guaranty nor modify, define, expand
or limit any of the terms or provisions hereof. All references herein to
numbered sections, unless otherwise indicated, are to sections of this Guaranty.
Words and definitions in the singular shall be read and construed as though in
the plural and vice versa, and words in the masculine, neuter or feminine gender
shall be read and construed as though in either of the other genders where the
context so requires. This Guaranty may be executed in any number of
counterparts, which shall individually and collectively constitute one
agreement.
Section 13. Severability. If any provision of this Guaranty,
or the application thereof to any person or circum stances, shall, for any
reason or to any extent, be invalid or unenforceable, such invalidity or
unenforceability shall not in any manner affect or render invalid or
unenforceable the re mainder of this Guaranty, and the application of that
provision
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<PAGE>
to other persons or circumstances shall not be affected but rather shall be
enforced to the extent permitted by applicable law.
Section 14. Successors. The terms and provisions of this
Guaranty shall be binding upon and inure to the benefit of each Guarantor, the
Agent and each Holder from time to time and their respective successors,
permitted transferees and assigns; provided that the Guarantors may not assign
their respective obligations hereunder to any Person without the written consent
of each Holder.
Section 15. Entire Agreement; Amendment. This Guar anty
expresses the entire understanding of the subject matter hereof; and all other
understandings, written or oral, are hereby merged herein and superseded. No
amendment of or supplement to this Guaranty, or waiver or modification of, or
consent under, the terms hereof shall be effective unless in writing and signed
by each of the Guarantors and the Agent (with the consent of the Required
Holders).
Section 16. Term of Guaranty. It is expressly agreed and
acknowledged that this Guaranty is intended to support the payment in full by
the Panini Entities of all of the Guaranteed Obligations. Therefore, with
respect to each Guarantor, except in the event of a defeasance of this Guaranty
in the manner contemplated by Section 24 hereof, this Guaranty and all
guarantees, covenants and agreements of such Guarantor contained herein shall
continue in full force and effect and shall not be discharged until such time as
all Guaranteed Obligations shall have been indefeasibly paid in full in cash.
Following a defeasance of this Guaranty in the manner contemplated by Section 24
hereof, the Security Documents and the provisions of Sections 2, 3, 4, 5 and 9
of this Guaranty shall, subject in all respects to the provisions of Section 8
hereof, no longer be of any force and effect, it being understood that the
provisions of Section 6, 7 and 8 shall survive in all respects following any
such defeasance.
Section 17. Survival. All warranties, representations and
covenants made by each Guarantor herein or in any certificate or other
instrument delivered by it or on its behalf under this Guaranty shall be
considered to have been relied upon by the Agent and each Holder and shall
survive the execution and delivery of this Guaranty, regardless of any
investigation made by the Agent or any Holder or on its behalf.
Section 18. Further Assurances. Each Guarantor hereby
agrees to execute and deliver all such instruments and take all
such actions as the Agent or any Holder may from time to time
reasonably request in order to effectuate fully the purposes of
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<PAGE>
this Guaranty, including the provisions of Section 6 and 7
hereof.
Section 19. Governing Law. This Guaranty has been executed and
delivered in the State of New York and shall be governed by, construed and
enforced in all respects in accordance with the laws of the State of New York
applicable to contracts made and to be performed entirely therein, without
regard to principles of conflicts of laws.
Section 20. Submission to Jurisdiction. Each Guar antor hereby
irrevocably submits itself to the jurisdiction of the Supreme Court of the State
of New York, New York County, of the United States of America and to the
jurisdiction of the United States District Court for the Southern District of
New York, for the purpose of any suit, action or other proceeding arising out of
or relating to this Guaranty or the subject matter hereof, and hereby waives and
agrees not to assert by way of motion, as a defense or otherwise, in any such
suit, action or proceeding (i) any claim that it is not personally subject to
the jurisdiction of the abovenamed courts for any reason whatsoever, that such
suit, action or proceeding is brought in an inconvenient forum or that the venue
of such suit, action or proceeding is improper, and (ii) any right which it may
have to a trial by a jury. Each Guarantor hereby agrees that process may be
served at the offices of [Prentice Hall Corporation at 1633 Broadway, New York,
New York 10019] (the "Registered Agent"). Any and all service of process and any
other notice in any such action, suit or proceeding shall be effective against
such par ties if given by registered or certified mail, return receipt
requested, or by any other means of mail which requires a signed receipt,
postage prepaid, mailed to the Registered Agent as provided in this Section 21.
During the term of this Guaranty, in the event the Registered Agent shall not be
able to accept service of process as aforesaid and if any Guarantor shall not
maintain an office in New York City, each such Guarantor not maintaining such
office shall promptly appoint and maintain an agent qualified to act as an agent
for service of process with respect to all courts in and of New York City, and
acceptable to the Required Holders, as such Guarantor's authorized agent to
accept and acknowledge on such Guarantor's behalf service of any and all process
which may be served in any such action, suit or proceeding.
Each Guarantor hereby agrees that the submission to
jurisdiction referred to in this Section 21 shall not limit in any manner the
rights of the Agent or any Holder to take proceedings against such Guarantor in
some other court of competent jurisdiction whether within or outside the United
States.
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Section 21. Limitation on Enforceability of Guaranteed
Obligations.
(a) The Agent and the Holders, by acceptance of this Guaranty,
agree that any judgment or decree entered in any action brought from time to
time to enforce the obligation of any Guarantor to pay the Guaranteed
Obligations, or to enforce the obligations of any Guarantor created or arising
under this Guaranty (other than for any expenses incurred by the Agent or a
Holder in the enforcement of its rights under this Guaranty (including fees and
disbursements of counsel), it being understood that such expenses shall not be
limited by this Section 22 and shall be incremental to the Guarantee Limit
Amount), shall be enforceable against any Guarantor, and such Guarantor shall be
required to pay (and the Agent and the Holders shall have recourse against the
Guarantors for payment of) Guaranteed Obligations, only to the extent of the
Guaranty Limit Amount and in the consideration in the form of the Guaranty
Limit. The preceding sentence shall not constitute a waiver, release or
discharge of any indebtedness evidenced by the Restructured Panini Notes or
otherwise constituting a part of the Guaranteed Obligations, which shall
continue as obligations of Panini until paid in full in cash, and shall not
limit the right of the Agent or any of the Holders to name any Guarantor as
party defendant in any action or suit for the exercise of any remedy under this
Guaranty or any other Panini Loan Document so long as no deficiency judgment or
personal money judgment shall be asked for, obtained or enforced against any
Guarantor for payment of the Guaranteed Obligations except to the extent of the
Guaranty Limit Amount and in the consideration contemplated by the Guaranty
Limit. For the avoidance of doubt, it is the intention of this Section 22 that,
except for any expenses (including fees and disbursements of counsel) incurred
by the Agent or a Holder in the enforcement of its rights under this Guaranty or
any Security Document, the maximum aggregate liability of the Guarantors under
this Guaranty is the Guaranty Limit.
The provisions of this Section 22 shall not limit the rights
and remedies of the Agent or the Holders against the Guarantors for injunctive
relief to prevent any breach of any provisions of this Agreement or any other
Panini Loan Document (other than any provision requiring payment of Guaranteed
Obli gations) or for relief in specific performance to compel compliance with
any provision of this Agreement or any other Panini Loan Document (other than
any provision requiring payment of Guaranteed Obligations). In addition, the
provisions of this Section 22 shall not waive any and all rights of the Agent
and the Holders to assert and collect upon against any Guarantor for the full
amount of the Guaranteed Obligations in the event of any bankruptcy or
insolvency proceeding involving such Guarantor and shall not impair the rights
of the Agent and the Holders under
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section 1111(b) of the United States Bankruptcy Code or any
successor provision.
For the avoidance of doubt, it is expressly agreed and
acknowledged that, although the ability to enforce payment of the Guaranteed
Obligations, as against the Guarantors, is limited as aforesaid, this Guaranty
is intended, as provided in Section 17 hereof, to support the payment in full by
the Panini Entities of all of the Guaranteed Obligations. Therefore, the
Guarantee Limit Amount and the aggregate consideration contemplated by the
Guarantee Limit shall not be reduced in any matter by any payment by any of the
Panini Entities in respect of the Guaranteed Obligations.
Section 22. Limitation on Liability. Each Guarantor shall be
liable under this Agreement for the maximum amount of such liability that can be
effective without rendering this Agreement voidable under applicable laws
relating to fraudulent conveyance or fraudulent transfer, after giving effect to
any all rights of contribution and similar rights among the Guarantors and also
taking into account the fact that the rights of the Agent and the Holders to
enforce the Guaranteed Obligations is limited to the extent set forth in Section
22 hereof.
Section 23. Guarantee Defeasance. The Guarantors may, at their
option, on not less than thirty days' written notice to the Agent and each
Holder, elect to terminate the provisions of Section 2, 3, 4, 5 and 9 of this
Guaranty and the Security Documents by delivering to the Agent either (i) one or
more irrevocable standby letters of credit (collectively, the "Defeasance Letter
of Credit") in the aggregate face amount at the time of issuance equal to the
Guaranty Limit Amount at such time, in form and substance (including
satisfactory "evergreen" and renewal provisions) satisfactory to the Agent and
the Required Holders, and issued by a United States Bank reasonably acceptable
to the Agent and the Required Holders, or (ii) debt securities issued by the
Company ("Defeasance Debt Securities") having a then-present value (taking into
account, among other things, the liquidity of such securities and rights to
collateral security therefor pursuant to Section 7(a) hereof), at the time of
issuance, equal to the Guaranty Limit Amount at such time, as determined by a
Qualified Fairness Opinion. Notwithstanding the aforesaid termination of the
Guaranty and the Security Documents, the Guarantors agree that, until one
hundred (100) days following the payment in full of all of the Guaranteed
Obligations, the Guarantors shall take all actions to cause any Defeasance
Letter of Credit to remain outstanding (with a face amount at least equal to the
Guaranty Limit Amount) and in full force and effect without lapse for the
benefit of the Agent.
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Section 24. Acceleration. Upon the occurrence and during the
continuance of any Guarantor Event of Default described in clauses (iii) or (iv)
of the definition thereof, all of the Guaranteed Obligations, and all other
amounts payable under this Guaranty, shall automatically become immediately due
and payable, without presentment, diligence, demand, protest or notice of any
kind. Upon the occurrence of any other Guarantor Event of Default, the Agent may
(and at the direction of the Required Holders, shall), by notice in writing to
the Company or any other Guarantor, subject to Section 22, declare all of the
Guaranteed Obligations and all other amounts payable under this Guaranty to be
immediately due and payable (whereupon such Guaranteed Obligations and all such
other amounts shall immediately be so due and payable), without presentment,
diligence, demand, protest or notice of any kind. Upon any such acceleration or
declaration, the Agent and the Holders, in addition to all other rights under
applicable law, may exercise all rights and remedies under any of the Security
Documents.
Section 25. Bankruptcy. This Guaranty and each of the
provisions hereof (including Section 7 and 8) shall continue in full force and
effect during and following any case under any Bankruptcy Law for any of the
Guarantors or any Panini Insolvency Proceeding. All references in this Guaranty
to any Guarantor or any other Person shall be deemed to apply to such Person as
debtorinpossession and to a trustee or similar person in any proceeding
involving such Person.
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IN WITNESS WHEREOF, each Guarantor has caused this Guaranty to
be duly executed and delivered as of the date and year first above written.
TOY BIZ, INC.
MARVEL ENTERTAINMENT GROUP, INC.
FLEER CORP.
THE ASHER CANDY COMPANY
FRANK H. FLEER CORP.
HEROES WORLD DISTRIBUTION, INC.
MALIBU COMICS ENTERTAINMENT, INC.
MARVEL CHARACTERS, INC.
MARVEL DIRECT MARKETING, INC.
SKYBOX INTERNATIONAL, INC.
MARVEL RESTAURANT VENTURE CORP.
MRV, INC.
By:/s/ WILLIAM H. HARDIE, III
Name: William H. Hardie, III
Title: Executive Vice President
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<PAGE>
EXHIBIT 14
INDEMNIFICATION AGREEMENT
This INDEMNIFICATION AGREEMENT, dated as of September
28, 1998 (this "Agreement") is made by Toy Biz, Inc., a Delaware
Corporation (the "Company"), Marvel Entertainment Group, Inc.
("Marvel"), Fleer Corp. ("Fleer"), The Asher Candy Company, Frank
H. Fleer Corp., Heroes World Distribution, Inc., Malibu Comics
Entertainment, Inc., Marvel Characters, Inc., Marvel Direct
Marketing, Inc., Skybox International, Inc., Marvel Restaurant
Venture Corp. and MRV, Inc. (collectively, the "Indemnifying
Parties"), in favor of the Panini Entities (as defined below) and
the other Panini Indemnified Parties (as defined below).
BACKGROUND
(i) Panini (as defined below) is a wholly-owned direct
subsidiary of Marvel. The other Panini Entities are wholly-owned direct and
indirect subsidiaries of Panini.
(ii) The Indemnifying Parties currently have substantial
direct and contingent obligations in respect of the Panini Entities including
guaranties of the Panini Obligations (as defined below).
(iii) Pursuant to and in connection with the Plan (as defined
below), and with the consent of the Panini Lenders (as defined below), inter
alia,(i) Panini shall remain a wholly-owned direct subsidiary of Marvel, and
Marvel shall become a wholly-owned direct subsidiary of the Company, (ii) the
Panini Obligations are being restructured into the Restructured Panini
Obligations (as defined below) in accordance with the Restructured Panini Loan
Documents (as defined below), (iii) certain guaranty and other obligations of
the Indemnifying Parties in respect of the Panini Obligations and the Panini
Entities are being reduced, compromised and otherwise restructured and (iv) a
portion of the Restructured Panini Obligations is being guaranteed by the
Indemnifying Parties pursuant to and, subject to the terms of, the Newco
Guaranty (as defined below).
(iv) It is a condition to the occurrence of the Consummation
Date under the Plan that this Agreement shall be executed and delivered by the
Indemnifying Parties and shall be in full force and effect. The Indemnifying
Parties shall benefit substantially from the occurrence of the Consummation Date
and the other transactions occurring concurrently with the issuance of this
Agreement, including the restructuring of their obligations in respect of the
Panini Obligations.
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<PAGE>
NOW, THEREFORE, in order to induce, and in consideration of
the occurrence of the Consummation Date, and for ten dollars and other good and
valuable consideration, the receipt and sufficiency of which is hereby
acknowledged, each Indemnifying Party hereby covenants and agrees for the
benefit of each of the Panini Indemnified Parties, and also for the benefit of
the Panini Lenders, as follows:
1. Definitions. Capitalized terms used but not otherwise
defined herein shall have the meanings ascribed to such terms in the Plan. All
definitions shall be equally applicable to the singular and plural forms of the
terms defined. The use of the word "including" shall be deemed to mean
"including, without limitation". In addition to the terms defined in the
introductory and background paragraphs of this Agreement, the following terms
shall have the meanings indicated below:
"Business Day" shall mean any day other than a Saturday,
Sunday or other day on which commercial banks in New York, New York are
authorized or required by law to close.
"Material Indemnifying Party" shall mean the Company, Marvel,
Fleer, Marvel Characters, Inc. and any other Indemnifying Party which would be a
"significant subsidiary" with respect to the Company under Regulation S-X as
promulgated by the Securities and Exchange Commission (17 CFR 210) or any
successor regulation.
"NBA License Agreement" means that certain Retail Product
License Agreement dated July 21, 1995 between Marvel and NBA Properties, Inc.,
as amended, supplemented or otherwise modified from time to time prior to the
Consummation Date.
"Panini" means Panini S.p.A., an Italian corporation.
"Panini Entities" means, collectively, Panini and its direct
and indirect subsidiaries from time to time.
"Panini Indemnified Liabilities" means any and all claims,
liabilities, obligations, losses, damages, distributions, recoveries, penalties,
actions, judgments, suits, costs, expenses (including reasonable fees and
expenses of counsel and other professionals) and disbursements of any kind
whatsoever which may at any time be imposed on, incurred by or asserted against
any Panini Entity in any way relating to, or arising out of, directly or
indirectly, any contracts or other agreement to which any of the Debtors are or
have been party at any time, including, without limitation, the NBA License
Agreement; provided, however that Panini Idemnified Liabilities shall not
include any such claims, liabilities, obligations, losses, damages,
distributions, recoveries, penalties, actions, judgments, suits, costs, expenses
and disbursements incurred by or asserted against any Panini
-2-
764354.1
<PAGE>
Entity solely and directly as a result of such Panini Entities' own direct
obligations to NBA Properties, Inc. under any amendment to the NBA License
Agreement to which Panini is a signatory party and which becomes effective on or
after the Consummation Date.
"Panini Indemnified Parties" means the Panini Entities and
each of their respective successors and assigns.
"Panini Lenders" means the holders from time to time of
Restructured Panini Obligations, including any holder by way of a participation
under the Restructured Panini Loan Documents.
"Plan" mean that certain "Fourth Amended Joint Plan of
Reorganization Proposed by the Secured Lenders and Toy Biz, Inc.", which was
confirmed by the Bankruptcy Court on July 31, 1998, as amended, supplemented or
otherwise modified from time to time.
"Required Panini Lenders" means, at any time, Panini Lenders
holding 66-2/3% of the aggregate principal amount of the Restructured Panini
Obligations.
2. Indemnification.
(a) Subject to Section 2(b) and 2(c) below and the other
provisions of this Agreement, the Indemnifying Parties hereby indemnify and hold
harmless, jointly and severally, each of the Panini Indemnified Parties from,
against and in respect of any Panini Indemnified Liabilities.
(b) No Panini Indemnified Party shall be entitled to make any
claim for indemnification pursuant to Section 2(a) with respect to any Panini
Indemnified Liability that represents a claim asserted by a third party against
a Panini Entity after the expiration date of any applicable statute of
limitations period; provided that the Indemnifying Parties shall be responsible
for the defense of any such asserted claim.
(c) Notwithstanding the indemnification obligations set forth
in Section 2(a) above, the Indemnifying Parties shall not be responsible for
making any royalty payments owed to or for the benefit of the National
Basketball Association under the NBA License Agreement solely in respect of
sticker sales or card sales made by the Panini Entities from and after the
Consummation Date. In addition, for the avoidance of doubt, it is expressly
agreed and acknowledged that, from and after the Consummation Date, any and all
obligations to repay the Panini Lenders pursuant to the Existing Credit
Agreements (as such agreements are restructured pursuant to the Restructured
Panini Loan Documents) shall not constitute Panini Indemnified Liabilities
-3-
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<PAGE>
(it being understood that nothing in this Section 2(c) will derogate from the
obligations of the Indemnifying Parties pursuant to the Newco Guaranty).
(d Except as specifically set forth herein, the obligations of
each of the Indemnifying Parties hereunder shall be absolute, irrevocable and
unconditional, irrespective of the validity, regularity or enforceability of any
claim underlying a Panini Indemnified Liability and shall not be subject to any
counterclaim, setoff, deduction or defense based upon any claim such
Indemnifying Party may have against any Panini Indemnified Party; and shall
remain in full force and effect without regard to, and shall not be released,
discharged or in any way affected by, any circumstance or condition whatsoever.
Each Indemnifying Party covenants that its obligations hereunder will not be
discharged except by the payment in full in cash of all of the Panini
Indemnified Liabilities. Each Indemnifying Party hereby waives any and all
suretyship or similar defenses and all defenses based upon impairment of
suretyship status.
3. Indemnification Procedures - Third Party Actions;
Other Requests for Indemnification.
(a) Promptly after receipt by a Panini Indemnified Party of
notice by a third party of any complaint or the commencement of any action or
proceeding with respect to which indemnification is being sought hereunder, such
Panini Indemnified Party will promptly notify the Company, on behalf of itself
and the other Indemnifying Parties, of such complaint or of the commencement of
such action or proceeding; provided, however, that any failure or delay to so
notify the Company will not relieve the Indemnifying Parties from any liability
they may have to the Panini Indemnified Parties hereunder with respect to any
such claim except to the extent, and only to the extent, that such failure to
notify the Company materially impairs substantial rights and defenses otherwise
available to the Indemnifying Parties with respect to any such claim. If they so
desire, the Indemnifying Parties may assume the defense of any such action,
including the employment of counsel reasonably satisfactory to such Panini
Indemnified Party and payment of all reasonable fees and expenses by notifying
the Panini Indemnified Parties of such assumption within ten (10) days after
receiving notice of the claim. If the Indemnifying parties do not assume the
defense of any such action in accordance with the preceding sentence, then the
Panini Indemnified Parties shall have the right to proceed with the defense,
with counsel of its choosing, and the fees and expenses of such counsel shall be
at the expense of the Indemnifying Parties. Each Panini Indemnified Party shall
have the right to employ separate counsel in such action and participate in the
defense thereof, but the fees and expenses of such counsel shall be at the
expense of the Panini Indemnified Party unless, either (i) the Indemnifying
Party has agreed in
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764354.1
<PAGE>
writing to pay such expenses; (ii) the Indemnifying Party has failed to assume
the defense and employ counsel in accordance with the first two sentences of
this Section 3(a); or (iii) the named parties to any such action (including any
impleaded parties) include any Panini Indemnified Party and any Indemnifying
Party, and such Panini Indemnified Party shall have been advised by outside
counsel that there may be one or more legal defenses available to it which are
inconsistent with those available to the Indemnifying Parties, provided that, if
such Panini Indemnified Party notifies an Indemnifying Party in writing that it
elects to employ separate counsel in one or more of the circumstances described
in clauses (i), (ii) or (iii) above, the Indemnifying Party shall not have the
right to assume the defense of such action or proceeding; provided, however,
that the Indemnifying Parties shall not, in connection with any one such action
or proceeding or separate but substantially similar or related actions or
proceedings in the same jurisdiction arising out of the same general allegations
or circumstances, be responsible hereunder for the fees and expenses of more
than one such firm of separate counsel (in addition to any necessary local
counsel), which counsel shall be designated by such Panini Indemnified Party and
shall be reasonably satisfactory to the Indemnifying Parties. The Panini
Indemnified Parties or the Indemnifying Parties, as the case may be, shall at
all times use reasonable efforts to keep the Indemnifying Parties or the Panini
Indemnified Parties, as the case may be, reasonably apprised of the status of
the defense of any claim the defense of which they are maintaining pursuant to
this Section 2(a).
(b) No Panini Indemnified Party may settle or compromise any
claim with respect to which indemnification is being sought hereunder without
the prior written consent of the Company, such consent not to be unreasonably
withheld; it being understood that the Company shall be required to grant such
consent with respect to a bona fide offer of settlement or compromise which
includes an unconditional release of all Indemnifying Parties from all liability
arising out of such claim with respect to claims against the Panini Indemnified
Party. No Indemnifying Party may, without the prior written consent of the
Panini Entities, settle or compromise or consent to the entry of any judgment in
any claim with respect to which indemnification is being sought hereunder unless
such settlement, compromise or consent includes an unconditional release of all
Panini Entities and any Panini Indemnified Party with respect to such claim from
all liability arising out of such claim and does not contain any equitable
order, judgment or term which in any material manner affects, restrains or
interferes with the business of any of the Panini Entities.
(c) Each Panini Indemnified Party shall promptly notify the
Company, on behalf of itself and the other
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764354.1
<PAGE>
Indemnifying Parties, with respect to any matter for which indemnification is
sought under this Agreement other than the matters covered by Section 3(a)
above; provided, that any failure or delay so to notify the Company will not
relieve the Indemnifying Parties from any liability they may have to the Panini
Indemnified Parties hereunder with respect to any such claim except to the
extent, and only to the extent, that such failure to notify the Company
materially impairs substantial rights and defenses otherwise available to the
Indemnifying Parties with respect to any such claim. Each Indemnifying Party
shall promptly after receiving notice provide payment or otherwise comply with
its obligations under this Agreement with respect to any claim for
indemnification under this Section 3(c).
4. Representations and Warranties of Each Indemnifying Party.
Each Indemnifying Party (other than any Indemnifying Party that is not a
Material Indemnifying Party) represents and warrants, as of the Plan
Consummation Date, for the benefit of each of the Panini Indemnified Parties and
each of the Panini Lenders, as follows:
(a) Due Organization, Qualification and Authorization. Each
such Indemnifying Party (i) is duly organized, validly existing and in good
standing under the laws of the jurisdiction of its incorporation and qualified
and licensed to do business in, and in good standing in, any state where the
failure to be so licensed or qualified reasonably could be expected to cause a
material adverse effect on the Indemnifying Parties taken as a whole and (ii)
has all requisite corporate power and authority, and all governmental licenses
and permits, to own and operate its properties and to carry on its businesses as
presently conducted in all material respects, except where any such failure to
have such power and authority, to possess such governmental licenses and
permits, or to own and operate such properties or carry on such businesses could
reasonably be expected to have a material adverse effect on the Indemnifying
Parties taken as a whole. Each such Indemnifying Party has the requisite
corporate power to enter into and perform its obligations under this Agreement.
(b) Approval and Enforceability of Agreement. The
----------------------------------------
execution, delivery and performance by each Indemnifying Party of
this Agreement have been duly authorized by all necessary
corporate and other action on the part of each such Indemnifying
Party. This Agreement has been duly and validly executed and
delivered and constitutes the legal, valid and binding obligation
of each Indemnifying Party, enforceable against such Indemnifying
Party in accordance with its terms except as enforcement may be
limited by equitable principles or by bankruptcy, insolvency,
moratorium, reorganization, receivership and similar laws
relating to or limiting creditors' rights generally.
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<PAGE>
5. Non-Contravention. The execution, delivery and performance
by each Indemnifying Party of this Agreement do not and will not (i) violate any
provision of state or local law or regulation applicable to such Indemnifying
Party, the governing documents of such Indemnifying Party or any order, judgment
or decree of any court or other governmental authority binding on such
Indemnifying Party, (ii) conflict with, result in a breach of or constitute
(with due notice or lapse of time or both) a default under any material
contractual obligation or material lease of such Indemnifying Party, (iii)
result in or require the creation or imposition of any lien of any nature
whatsoever upon any properties or assets of such Indemnifying Party, or (iv)
require any approval of stockholders (other than stockholder approvals as have
been obtained) or any approval or consent of any Person under any material
contractual obligation of such Indemnifying Party.
6. Joint and Several Liability. The liability and
obligations of each Indemnifying Party hereunder shall be joint
and several.
7. Notices. All written communications provided for hereunder
shall be sent by hand delivery, first class registered mail, or nationwide
reliable overnight delivery service (with charges prepaid) and if to any
Indemnifying Party, addressed, care of the Company, to it at 685 Third Avenue,
New York, New York 10017, Attn: President (with a courtesy copy to Battle Fowler
LLP, Park Avenue Tower, 75 East 55th Street, New York, New York 10022, Attn:
Lawrence Mittman) or at such other address for the Company as the Company shall
have specified to Panini in accordance with this Section 7. All notices shall be
effective when actually delivered to the required addresses unless such delivery
does not take place on a Business Day, in which case such delivery shall be
deemed to have taken place on the immediately next Business Day following the
actual delivery. All notices or communications shall be in writing.
8. Construction; Counterparts. The section and subsection
headings in this Agreement are for convenience of reference only and shall
neither be deemed to be a part of this Agreement nor modify, define, expand or
limit any of the terms or provisions hereof. All references herein to numbered
sections, unless otherwise indicated, are to sections of this Agreement. Words
and definitions in the singular shall be read and construed as though in the
plural and vice versa, and words in the masculine, neuter or feminine gender
shall be read and construed as though in either of the other genders where the
context so requires. This Agreement may be executed in any number of
counterparts, which shall individually and collectively constitute one
agreement.
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<PAGE>
9. Severability. If any provision of this Agreement, or the
application thereof to any person or circumstances, shall, for any reason or to
any extent, be invalid or unenforceable, such invalidity or unenforceability
shall not in any manner affect or render invalid or unenforceable the remainder
of this Agreement, and the application of that provision to other persons or
circumstances shall not be affected but rather shall be enforced to the extent
permitted by applicable law.
(a) Successors; Third Party Beneficiaries; Restrictions on
Fundamental Changes. The terms and provisions of this Agreement shall be binding
upon and inure to the benefit of each Indemnifying Party, each Panini
Indemnified Party and each Panini Lender and their respective successors and
assigns; provided that no Indemnifying Party may assign its respective
obligations hereunder without the written consent of Panini and the Required
Holders. Except for the Panini Lenders and any Panini Indemnified Party, there
are no third party beneficiaries to this Agreement. The Panini Lenders from time
to time are intended third party beneficiaries of this Agreement. No
Indemnifying Party that is a Material Indemnifying Party shall enter into any
merger, consolidation, reorganization or recapitalization, or reclassification
of its capital stock that has the effect of any of the foregoing events, or
liquidate, wind up, or dissolve itself (or suffer any liquidation or
dissolution), or convey, sell, assign, lease, transfer, exchange or otherwise
dispose of, in one transaction or a series of transactions, all or substantially
all of its property or assets (other than (x) any merger or consolidation of
such Material Indemnifying Party into another Material Indemnifying Party, (y)
any such conveyance, sale, assignment, lease, transfer, exchange or other
disposition by such Material Indemnifying Party to another Material Indemnifying
Party and (z) the corporate dissolution by the Company of any Indemnifying Party
that is not a Material Indemnifying Party).
10. Entire Agreement; Amendment. This Agreement expresses the
entire understanding of the subject matter hereof; and all other understandings,
written or oral, are hereby merged herein and superseded. No amendment of or
supplement to this Agreement, or waiver or modification of, or consent under,
the terms hereof shall be effective unless in writing and signed by each of the
Indemnifying Parties, Panini and the Required Panini Lenders.
11. Survival. All warranties, representations and covenants
made by each Indemnifying Party herein or in any certificate or other instrument
delivered by it or on its behalf under this Agreement shall be considered to
have been relied upon by the the Panini Indemnified Parties and each of the
Panini Lenders and shall survive the execution and delivery of this Agreement,
regardless of any investigation made by any Panini Holder or on its behalf.
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<PAGE>
12. Termination. This Agreement shall terminate
following the indefeasible payment in full in cash of all of the
Restructured Panini Obligation.
13. Further Assurances. Each Indemnifying Party hereby agrees
to execute and deliver all such instruments and take all such actions as any
Panini Indemnified Party or any Panini Lender may from time to time reasonably
request in order to effectuate fully the purposes of this Agreement.
14. Governing Law. This Agreement has been executed and
delivered in the State of New York and shall be governed by, construed and
enforced in all respects in accordance with the laws of the State of New York
applicable to contracts made and to be performed entirely therein, without
regard to principles of conflicts of laws.
15. Submission to Jurisdiction. Each Indemnifying Party hereby
irrevocably submits itself to the jurisdiction of the Supreme Court of the State
of New York, New York County, of the United States of America and to the
jurisdiction of the United States District Court for the Southern District of
New York, for the purpose of any suit, action or other proceeding arising out of
or relating to this Agreement or the subject matter hereof, and hereby waives
and agrees not to assert by way of motion, as a defense or otherwise, in any
such suit, action or proceeding (i) any claim that it is not personally subject
to the jurisdiction of the above-named courts for any reason whatsoever, that
such suit, action or proceeding is brought in an inconvenient forum or that the
venue of such suit, action or proceeding is improper, and (ii) any right which
it may have to a trial by a jury. Each Indemnifying Party hereby agrees that
process may be served at the offices of [Prentice Hall Corporation System at
1633 Broadway, New York, New York 10019] (the "Registered Agent"). Any and all
service of process and any other notice in any such action, suit or proceeding
shall be effective against such parties if given by registered or certified
mail, return receipt requested, or by any other means of mail which requires a
signed receipt, postage prepaid, mailed to the Registered Agent as provided in
this Section 16. During the term of this Agreement, in the event the Registered
Agent shall not be able to accept service of process as aforesaid and if any
Indemnifying Party shall not maintain an office in New York City, each such
Indemnifying Party not maintaining such office shall promptly appoint and
maintain an agent qualified to act as an agent for service of process with
respect to all courts in and of New York City, as such Indemnifying Party's
authorized agent to accept and acknowledge on such Indemnifying Party's behalf
service of any and all process which may be served in any such action, suit or
proceeding.
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<PAGE>
Each Indemnifying Party hereby agrees that the submission to jurisdiction
referred to in this Section 15 shall not limit in any manner the rights of any
person or entity to take proceedings against such Indemnifying Party in some
other court of competent jurisdiction whether within or outside the United
States.
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<PAGE>
IN WITNESS WHEREOF, the Indemnifying Parties have caused this
Agreement to be executed as of the date first above written.
TOY BIZ, INC.
MARVEL ENTERTAINMENT GROUP,INC.
FLEER CORP.
THE ASHER CANDY COMPANY
FRANK H. FLEER CORP.
HEROES WORLD DISTRIBUTION, INC.
MALIBU COMICS ENTERTAINMENT, INC.
MARVEL CHARACTERS, INC.
MARVEL DIRECT MARKETING, INC.,
SKYBOX INTERNATIONAL, INC.
MARVEL RESTAURANT VENTURE CORP.
MRV, INC.
By:/s/ WILLIAM H. HARDIE, III
Name: William H. Hardie, III
Title: Executive Vice President
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<PAGE>
EXHIBIT 15
For Exhibit 15 ("Plan Warrant Agreement"),
see Exhibit 4.2 ("Plan Warrant Agreement, dated as of October 1, 1998, between
the Registrant and American Stock Transfer and Trust Company, as warrant
agent").
764450.1
<PAGE>
EXHIBIT 16
MARVEL ENTERTAINMENT GROUP, INC.
SECURED LENDERS' PLAN PROPONENTS
The Chase Manhattan Bank
Long Term Credit Bank of Japan
Morgan Stanley (Emerging Markets)
Whippoorwill
Goldman Sachs Credit Partners
\
Bankers Trust Company
Dickstein & Co., L.P.
Sumitomo Bank, Ltd.
IBJ Schroder Bank
Paresco
Foothill
Instituto Bancario San Paolo
Stanfield Partners
Value Partners
BIII Capital Partners
764397.1
<PAGE>
EXHIBIT 17
STANDSTILL AGREEMENT dated October 1, 1998 between Toy Biz,
Inc., a Delaware corporation (the "Company"), Carl C. Icahn ("Icahn"), and High
River Limited Partnership ("High River", and together with Icahn, the "Icahn
Group").
For good and valuable consideration, the receipt and
sufficiency of which is hereby acknowledged, the parties hereto agree as
follows:
ARTICLE I
Representations
Section 1.01 Representations of the Company. The Company
represents to the Icahn Group that it has full legal right, power and authority
to enter into and perform this Agreement, and the execution and delivery of this
Agreement by it and the consummation by it of the transactions contemplated by
this Agreement have been duly authorized by it. This Agreement constitutes a
valid, binding and enforceable agreement of the Company.
Section 1.02 Representations of the Icahn Group.
(a) Each member of the Icahn Group represents to the
Company that it has full legal right, power and authority to enter into and
perform this Agreement, and the execution and delivery of this Agreement by it
and the consummation by it of the transactions contemplated by this Agreement
have been duly authorized by it. This Agreement constitutes a valid, binding and
enforceable agreement of each member of the Icahn Group.
730868.15
1
<PAGE>
(b) The Icahn Group is the Beneficial Owner (as defined below)
of an aggregate of 100 shares of common stock, par value .01 per share (the
"Marvel Common Stock"), of Marvel Entertainment Group, Inc. ("Marvel")and an
aggregate of $48,131,669.72 of Fixed Senior Secured Claims (as defined in the
Fourth Amended Plan of Reorganization of Marvel and certain sub sidiaries
thereof, filed by Toy Biz and certain secured creditors of Marvel in the
District Court for the District of Delaware (the "Plan"))(the "Fixed Senior
Secured Claims", and together with the Marvel Common Stock, the "Marvel
Interests") and neither the Icahn Group nor any affiliate or "associate" (as
defined below), thereof Beneficially Owns any Unsecured Claims (as defined in
the Plan) or any other Equity Interests (as defined in the Plan) or Claims (as
defined in the Plan). "Beneficial Owner" shall have the meaning set forth in
Rule 13d-3 of the Securities Exchange Act of 1934, as amended (the "Exchange
Act"), and any successor regulation thereto. For the purposes of this
definition, "Beneficial Ownership" and "Beneficially Own" shall refer to the
ownership interest of a Beneficial Owner. The term "affiliate" as used in this
Agreement shall have the meaning set forth in Rule 12b-2 under the Exchange Act,
or any successor regulation thereto. The term "associate" as used in this
Agreement shall have the meaning set forth in Rule 12b-2 under the Exchange Act,
or any successor regulation thereto, except that the term "associate" shall not
include any corporation or organization which has a class of equity securities
listed on a national
730868.15
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<PAGE>
securities exchange (including the National Market System of the
NASDAQ Stock Market).
(c) The Icahn Group Beneficially Owns an aggregate of no
shares of common stock, par value .01 per share, of the Company.
ARTICLE II
Standstill Provisions
Section 2.01 Restrictions on Certain Actions by the Icahn
Group. (a) Each member of the Icahn Group agrees that during the term of this
Agreement it will not, nor will it permit any of its affiliates or associates,
from and after the date that such person becomes an affiliate or associate until
such time as such person ceases to be an affiliate or associate, directly or
indirectly, unless in any such case specifically invited in writing to do so by
the Board of Directors of the Company (the "Company Board"), to:
(i) except upon conversion of Warrants (as
defined in the Plan) or Convertible Preferred Stock (as defined in the Plan) or
any other security received by the Icahn Group under the Plan in respect of
their Marvel Interests or as a result of a stock split, stock dividend (or other
dividend or distribution of any security of the Company) or similar
recapitalization by the Company, acquire, offer to acquire, or agree to acquire
Beneficial Ownership of any equity or debt securities of the Company
(collectively,"Restricted Securities") by purchase, by joining a partnership,
limited partnership,
730868.15
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<PAGE>
syndicate or other "group" (as such term is used in Section 13(d)(3) of the
Exchange Act, such term to have such meaning throughout this Agreement) (any
such act to "acquire").
(ii) make, or in any way participate in, directly or
indirectly, any "solicitation" of "proxies" (as such terms are defined or used
in Regulation 14A under the Exchange Act) or become a "participant" in any
"election contest" (as such terms are defined or used in Rule 14a-11 under the
Exchange Act) with respect to the Company, or execute any written consent in
lieu of a meeting of holders of Restricted Securities of any class thereof;
(iii) initiate, propose or otherwise solicit
stockholders for the approval of one or more stockholder proposals with respect
to the Company or induce or attempt to induce any other person to initiate any
stockholder proposal;
(iv) seek nomination or election to the Company
Board, serve on the Company Board if elected, seek to place a representative on
the Company Board or seek the removal of any member of the Company Board;
(v) call or seek to have called any meeting of the
stockholders of the Company;
(vi)deposit any Restricted Securities in a voting
trust or subject them to a voting agreement or other agreement or arrangement
with respect to the voting of such Restricted Securities;
730868.15
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<PAGE>
(vii) otherwise act, directly or indirectly, alone or
in concert with others, to (A) seek to control the management of the Company or
the Company Board or the policies or affairs of the Company, (B) solicit,
propose, seek to effect or negotiate with any other person with respect to any
form of business combination transaction with the Company or any subsidiary, as
that term is defined in Rule 12b-2 under the Exchange Act (a "Subsidiary")
thereof, or any restructuring, recapitalization or similar transaction with
respect to the Company or any Subsidiary thereof, (C) solicit, make or propose
or encourage or negotiate with any other person with respect to, or announce an
intention to make, any tender offer or exchange offer for any Restricted
Securities, (D) disclose an intention, purpose, plan or proposal with respect to
the Company or any Restricted Securities inconsistent with the provisions of
this Agreement, including an intention, purpose, plan or proposal that is
conditioned on or would require the Company to waive the benefit of or amend any
provision of this Agreement, or (E) assist, participate in, facilitate,
encourage or solicit any effort or attempt by any person to do or seek to do any
of the foregoing;
(viii) request the Company (or its directors,
officers, employees or agents), directly or indirectly, to amend or waive any
material provisions of Section 2.01 or 2.02 of this Agreement (including this
Section 2.01(viii) or otherwise seek any material modification to or material
waiver of any of the
730868.15
5
<PAGE>
Icahn Group's agreements or obligations under Section 2.01 or
2.02 of this Agreement);
(ix) encourage or render advice to or make any
recommendation or proposal to any person (including any Passive Investment
Entity) to engage in any of the actions covered by this Section 2.01 (including
this clause(ix)).
(b) The Icahn Group shall not be deemed to have violated this
Agreement as a result of the taking of any actions set forth in Section 2.01(a)
or 2.02 of the Agreement by an entity which is a Passive Investment if:
(i) the Icahn Group and its affiliates, in the aggregate,
Beneficially Own 25% or less of the equity interests in that entity,
provided that (A) the Icahn Group and its affiliates did not have
actual knowledge that the entity intended to engage in those prohibited
activities at the time the Icahn Group or any of its affiliates
invested in the entity, (B) the Icahn Group notifies the Company as
soon as practical after obtaining actual knowledge that the entity
proposes to engage in any of such activities and Carl Icahn delivers an
affidavit to the Company stating that (x) the entity is a "Passive
Investment" as defined in this Section 2.01(b) and (y) neither the
Icahn Group nor any of its affiliates took any of the actions described
in Section 2.01 (a)(ix) of this Agreement with respect to those
activities by the entity, and (C) the Icahn Group and its affiliates do
not increase their investment in the entity
730868.15
6
<PAGE>
unless and until the entity ceases to Beneficially Own any Restricted
Securities and ceases taking any of any actions set forth in Section
2.01(a) or 2.02 of the Agreement; or
(ii) the Icahn Group and its affiliates, in the aggregate,
Beneficially Own more than 25% of the equity interests in that entity,
provided that (A) the Icahn Group and its affiliates did not have
actual knowledge that the entity intended to engage in those prohibited
activities at the time the Icahn Group or any of its affiliates
invested in the entity, (B) the Icahn Group notifies the Company as
soon as practical after obtaining actual knowledge that the entity
proposes to engage in any of such activities and Carl Icahn delivers an
affidavit to the Company stating that (x) the entity is a "Passive
Investment" as defined in this Section 2.01(b) and (y) neither the
Icahn Group nor any of its affiliates took any of the actions described
in Section 2.01 (a)(ix) of this Agreement with respect to those
activities by the entity, and (C) the Icahn Group and its affiliates
use all reasonable efforts to promptly reduce the percentage of the
equity interests in that entity that they Beneficially Own in the
aggregate to 25% or less.
The term "Passive Investment" shall mean any entity in which the Icahn Group
owns an interest and in which the ownership interest of the Icahn Group is
wholly passive and which is not otherwise an affiliate of the Icahn Group.
Section 2.02 Voting.
730868.15
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<PAGE>
(a) During the term of this Agreement, the members of the
Icahn Group agree to vote all Restricted Securities Beneficially Owned by them
in connection with any action to be taken by the Company's securityholders as
follows:
(i) in connection with any matter to be voted upon at
a meeting of the Company's securityholders with respect to which an
abstention will have the same effect as a vote against the matter, the
members of the Icahn Group shall vote all Restricted Securities
Beneficially Owned by them in the same proportion as the votes cast by
the holders of all other Restricted Securities; provided, however, that
if the holders of any class of Restricted Securities vote separately as
a class with respect to any such matter, the members of the Icahn Group
shall vote all Restricted Securities of that class Beneficially Owned
by them in the same proportion as the votes cast by the holders of all
other Restricted Securities of that class.
(ii)in connection with any other matter to be
voted upon at a meeting of the Company's securityholders, the members of the
Icahn Group shall cause all Restricted Securities Beneficially Owned by them to
be present in person or represented by proxy at the meeting for quorum purposes
but to abstain from voting on the matter.
(b) Compliance with this Section 2.02 by the members of the
Icahn Group shall not be deemed a violation of any of the provisions of Section
2.01 of this Agreement.
730868.15
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<PAGE>
Section 2.03 Acquisition of Securities in Violation of this
Agreement. If the Icahn Group or any affiliate or associate of the Icahn Group
acquires any Restricted Securities in violation of this Agreement, it will
promptly (but in any event within 30 days) dispose of such Restricted Securities
to persons which are not members, affiliates or associates of the Icahn Group;
provided, however, that the Company may also pursue any other available remedy
to which it may be entitled as a result of such violation.
Section 2.04 No Encouragement by the Company. The Company
agrees that it will not encourage, recommend or propose to any person that it
acquire Restricted Securities for the purpose of obtaining for itself the
protections of this Agreement or otherwise as a defense against an investment in
that person by any member of the Icahn Group or any affiliate of the Icahn
Group. If the Icahn Group believes this Section 2.04 has been violated, the
Icahn Group shall notify the Company in writing describing the alleged
violation. If, within 30 days after receipt of such notice, the Company shall
furnish the Icahn Group with an affidavit denying the violation, it shall be
conclusively presumed and determined that no such violation occurred and the
Icahn Group shall be deemed to have waived any claim under this Section 2.04.
Section 2.05 Conditions to Standstill Agreement.
(a) The restrictions contained in Sections
2.01 and 2.02 hereof shall not restrict the Icahn Group from
730868.15
9
<PAGE>
filing Administration Expense Claims to the extent permitted by
Section 12.2(c) of the Plan.
(b) The agreements and obligations contained
herein shall terminate in the event that (i) the Company voluntarily commences a
Chapter 7 or Chapter 11 case pursuant to Section 301 of Title 11 of the United
States Code (and for the avoidance of doubt, neither the filing against the
Company of an involuntary petition for relief under Title 11 of the United
States Code nor the Company's consenting to the entry of an order for relief
following the filing of an involuntary petition shall result in termination of
this Agreement), (ii) the Company or any of its affiliates seeks to acquire or
control any Restricted Person (as defined below) by taking any of the actions
set forth in Section 2.01 with respect to such Restricted Person or (iii) the
Company sells substantially all of its assets to any other person, or merges or
consolidates with any other person or effects any other similar reorganization,
if as a result of such merger, reorganization or consolidation the persons who
immediately prior thereto were stockholders of the Company cease to own
securities representing more than 50% of the aggregate voting power and 50% of
the common equity of such surviving entity, provided, however, that with respect
to the transactions described in this clause (iii) the agreements and
obligations hereunder shall terminate only upon the closing of such
transactions. As used in this Agreement, "Restricted Person" means any person,
other than the Company, (x) in which, as of the
730868.15
10
<PAGE>
time the Company or any of its affiliates commence, or publicly announce their
intention to commence, taking the actions described in clause (i) of this
Section 2.05(c), the Icahn Group has filed a Schedule 13D under the Exchange Act
or has otherwise publicly announced that it Beneficially Owns at least 5% of the
outstanding voting securities or (y) with respect to which, as of the time the
Company or any of its affiliates commence, or publicly announce their intention
to commence, taking the actions described in clause (i) of this Section 2.05(c),
the Icahn Group has made a filing under the Hart-Scott-Rodino Antitrust
Improvements Act of 1976, as amended.
ARTICLE III
Miscellaneous
Section 3.01 Enforcement. (a) Each member of the Icahn Group,
on the one hand, and the Company, on the other, acknowledges and agrees that
irreparable damage would occur if any of the provisions of this Agreement were
not performed in accordance with their specific terms or were otherwise
breached. Accordingly, the parties will be entitled to an injunction or
injunctions to prevent breaches of this Agreement and to enforce specifically
its provisions in any court of the United States or any state having
jurisdiction, this being in addition to any other remedy to which they may be
entitled at law or in equity.
730868.15
11
<PAGE>
(b) The Company and each member of the Icahn
Group each irrevocably agrees that any legal action or proceeding against it
with respect to this Agreement and any transaction contemplated by this
Agreement may be brought in the courts of the State of Delaware, or of the
United States of America for the District of Delaware, and by execution and
delivery of this Agreement the Company and each member of the Icahn Group each
irrevocably submits to the jurisdiction of each such court and irrevocably
designates, appoints and empowers the Secretary of State of the State of
Delaware to receive for and on its behalf service in the State of Delaware, and
further irrevocably consents to the service of process outside of the
territorial jurisdiction of such courts by mailing copies by registered United
States mail, postage prepaid, to its address specified in this Agreement.
Section 3.02 Entire Agreement. This Agreement constitutes the
entire understanding of the parties with respect to the transactions
contemplated by it and may be amended only by an agreement in writing executed
by all the parties.
Section 3.03 Severability. If any provision of this Agreement
is held by a court of competent jurisdiction to be unenforceable, the remaining
provisions shall remain in full force and effect. It is declared to be the
intention of the parties that they would have executed the remaining provisions
without including any that may be declared unenforceable.
730868.15
12
<PAGE>
Section 3.04 Headings. The headings in this Agreement are
solely for convenience of reference and shall be given no effect in the
construction or interpretation of any provision of this Agreement.
Section 3.05 Counterparts. This Agreement may be executed in
any number of counterparts, each of which shall be deemed an original, but all
of which together shall constitute one and the same instrument.
Section 3.06 Notices. All notices and other communi cations
hereunder shall be in writing and shall be delivered per sonally against receipt
thereof, or transmitted by telecopier or by registered or certified mail
(postage prepaid, return receipt requested) to the parties at the following
addresses (or at such other address for a party as shall be specified by like
notice):
If to the Company, to
Toy Biz, Inc.
685 Third Avenue
New York, New York 10017
Attention: Secretary
Telephone: (212) 588-5100
Telecopy: (212) 682-5272
with a copy to:
Battle Fowler LLP
75 East 55th Street
New York, New York 10022
Attention: John Turitzin, Esq.
Telephone: (212) 856-6873
Telecopy: (212) 856-7814
730868.15
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<PAGE>
if to Icahn or High River, to
High River Limited Partnership
c/o Icahn Associates Corp.
767 Fifth Avenue
New York, New York 10153
Attention: Mr. Carl C. Icahn
Telephone: (212) 702-4333
Telecopy: (212) 750-5807
with a copy to:
Gordon Altman Butowsky Weitzen Shalov & Wein
114 West 47th Street
New York, New York 10036
Attention: Marc Weitzen, Esq.
Telephone: (212) 626-0800
Telecopy: (212) 626-0799
-and-
Berlack Israels & Liberman LLP
120 West 45th Street
New York, New York 10036
Attention: Edward S. Weisfelner, Esq.
Telephone: (212) 704-0100
Telecopier: (212) 704-0196
Any notice shall be deemed to have been given on the date of
receipt if delivered personally or by overnight courier, the date of
transmission with confirmation back if transmitted by telecopier, or the third
day following posting if transmitted by mail.
Section 3.07 Successors and Assigns. Subject to Section 2.04
hereof, this Agreement shall bind the successors of the parties, and inure to
the benefit of any successor of any of the parties. No party hereto may assign
this Agreement without the other party's prior written consent.
Section 3.08 Termination. This Agreement shall terminate on
the fourth anniversary hereof.
730868.15
14
<PAGE>
Section 3.09 Litigation. In consideration of the mutual
undertakings contained herein, each of the parties hereto agrees to dismiss with
prejudice all pending litigation among the parties hereto.
Section 3.10 Governing Law. This Agreement will be governed by
and construed and enforced in accordance with the internal laws of the State of
Delaware, without giving effect to the conflict of laws principle thereof.
Section 3.11 Third Party Beneficiaries; Amendments; Waivers.
Each person (an "Allowed Fixed Senior Secured Claim Holder") who is a holder of
an Allowed Fixed Senior Secured Claim (as defined in the Plan) immediately prior
to the closing of the Transaction (as defined in the Plan) is an intended third
party beneficiary of this Agreement while that person Beneficially Owns any
Restricted Securities. This Agreement may not be amended, or any of its
provisions waived, except by a writing signed by each of the parties hereto and
by a majority of the Allowed Fixed Senior Secured Claim Holders who Beneficially
Own Restricted Securities as of the date of such amendment or waiver.
Section 3.12 Activities as Broker or Dealer. Acquisitions of
Restricted Securities by Icahn & Co. which are conducted by it in the ordinary
course of its business as a registered broker or dealer under the Exchange Act
and are of the type described in Rule 13d-1(b)(1)(i) under the Exchange Act
shall not be deemed to violate Section 2.01(a) of this Agreement.
730868.15
15
<PAGE>
IN WITNESS WHEREOF, the parties hereto have cause this
Agreement to be executed as of the date first referred to above.
TOY BIZ, INC.
by
Name: Joseph M. Ahearn
Title: President and Chief
Executive Officer
Carl C. Icahn
HIGH RIVER LIMITED PARTNERSHIP
By: Riverdale LLC, its
General Partner
Name:
Title:
730868.15
16
<PAGE>
STANDSTILL AGREEMENT dated October 1, 1998 between Toy Biz,
Inc., a Delaware corporation (the "Company"), Vincent Intrieri ("Intrieri"), and
Westgate International, L.P. ("Westgate", and together with Intrieri, the
"Westgate Group").
For good and valuable consideration, the receipt and
sufficiency of which is hereby acknowledged, the parties hereto agree as
follows:
ARTICLE I
Representations
Section 1.01 Representations of the Company. The Company
represents to the Westgate Group that it has full legal right, power and
authority to enter into and perform this Agreement, and the execution and
delivery of this Agreement by it and the consummation by it of the transactions
contemplated by this Agreement have been duly authorized by it. This Agreement
constitutes a valid, binding and enforceable agreement of the Company.
Section 1.02 Representations of the Westgate Group.
(a) Each member of the Westgate Group represents to the
Company that it has full legal right, power and authority to enter into and
perform this Agreement, and the execution and delivery of this Agreement by it
and the consummation by it of the transactions contemplated by this Agreement
have been duly authorized by it. This Agreement constitutes a valid, binding and
enforceable agreement of each member of the Westgate Group.
741961.2
1
<PAGE>
(b) The Westgate Group is the Beneficial Owner (as defined
below) of an aggregate of 100,000 shares of common stock, par value .01 per
share (the "Marvel Common Stock"), of Marvel Entertainment Group, Inc.
("Marvel")and an aggregate of $14,667,714.20 of Fixed Senior Secured Claims (as
defined in the Fourth Amended Plan of Reorganization of Marvel and certain sub
sidiaries thereof, filed by Toy Biz and certain secured creditors of Marvel in
the District Court for the District of Delaware (the "Plan"))(the "Fixed Senior
Secured Claims", and together with the Marvel Common Stock, the "Marvel
Interests") and neither the Westgate Group nor any affiliate or "associate" (as
defined below), thereof Beneficially Owns any Unsecured Claims (as defined in
the Plan) or any other Equity Interests (as defined in the Plan) or Claims (as
defined in the Plan). "Beneficial Owner" shall have the meaning set forth in
Rule 13d-3 of the Securities Exchange Act of 1934, as amended (the "Exchange
Act"), and any successor regulation thereto. For the purposes of this
definition, "Beneficial Ownership" and "Beneficially Own" shall refer to the
ownership interest of a Beneficial Owner. The term "affiliate" as used in this
Agreement shall have the meaning set forth in Rule 12b-2 under the Exchange Act,
or any successor regulation thereto. The term "associate" as used in this
Agreement shall have the meaning set forth in Rule 12b-2 under the Exchange Act,
or any successor regulation thereto, except that the term "associate" shall not
include any corporation or organization which has a class of equity securities
listed on a
741961.2
2
<PAGE>
national securities exchange (including the National Market System of the NASDAQ
Stock Market).
(c) The Westgate Group Beneficially Owns an aggregate of no
shares of common stock, par value .01 per share, of the Company.
ARTICLE II
Standstill Provisions
Section 2.01 Restrictions on Certain Actions by the Westgate
Group. (a) Each member of the Westgate Group agrees that during the term of this
Agreement it will not, nor will it permit any of its affiliates or associates,
from and after the date that such person becomes an affiliate or associate until
such time as such person ceases to be an affiliate or associate, directly or
indirectly, unless in any such case specifically invited in writing to do so by
the Board of Directors of the Company (the "Company Board"), to:
(i) except upon conversion of Warrants (as
defined in the Plan) or Convertible Preferred Stock (as defined in the Plan) or
any other security received by the Westgate Group under the Plan in respect of
their Marvel Interests or as a result of a stock split, stock dividend (or other
dividend or distribution of any security of the Company) or similar
recapitalization by the Company, acquire, offer to acquire, or agree to acquire
Beneficial Ownership of any equity or debt securities of the Company
(collectively,"Restricted Securities") by purchase, by joining a partnership,
limited partnership,
741961.2
3
<PAGE>
syndicate or other "group" (as such term is used in Section 13(d)(3) of the
Exchange Act, such term to have such meaning throughout this Agreement) (any
such act to "acquire").
(ii) make, or in any way participate in,
directly or indirectly, any "solicitation" of "proxies" (as such terms are
defined or used in Regulation 14A under the Exchange Act) or become a
"participant" in any "election contest" (as such terms are defined or used in
Rule 14a-11 under the Exchange Act) with respect to the Company, or execute any
written consent in lieu of a meeting of holders of Restricted Securities of any
class thereof;
(iii) initiate, propose or otherwise solicit
stockholders for the approval of one or more stockholder proposals with respect
to the Company or induce or attempt to induce any other person to initiate any
stockholder proposal;
(iv) seek nomination or election to the Company
Board, serve on the Company Board if elected, seek to place a representative on
the Company Board or seek the removal of any member of the Company Board;
(v) call or seek to have called any meeting of
the stockholders of the Company;
(vi) deposit any Restricted Securities in a
voting trust or subject them to a voting agreement or other agreement or
arrangement with respect to the voting of such Restricted Securities;
741961.2
4
<PAGE>
(vii) otherwise act, directly or indirectly,
alone or in concert with others, to (A) seek to control the management of the
Company or the Company Board or the policies or affairs of the Company, (B)
solicit, propose, seek to effect or negotiate with any other person with respect
to any form of business combination transaction with the Company or any
subsidiary, as that term is defined in Rule 12b-2 under the Exchange Act (a
"Subsidiary") thereof, or any restructuring, recapitalization or similar
transaction with respect to the Company or any Subsidiary thereof, (C) solicit,
make or propose or encourage or negotiate with any other person with respect to,
or announce an intention to make, any tender offer or exchange offer for any
Restricted Securities, (D) disclose an intention, purpose, plan or proposal with
respect to the Company or any Restricted Securities inconsistent with the
provisions of this Agreement, including an intention, purpose, plan or proposal
that is conditioned on or would require the Company to waive the benefit of or
amend any provision of this Agreement, or (E) assist, participate in,
facilitate, encourage or solicit any effort or attempt by any person to do or
seek to do any of the foregoing;
(viii) request the Company (or its directors,
officers, employees or agents), directly or indirectly, to amend or waive any
material provisions of Section 2.01 or 2.02 of this Agreement (including this
Section 2.01(viii) or otherwise seek any material modification to or material
waiver of any of the
741961.2
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<PAGE>
Westgate Group's agreements or obligations under Section 2.01 or
2.02 of this Agreement);
(ix) encourage or render advice to or make any
recommendation or proposal to any person (including any Passive Investment
Entity) to engage in any of the actions covered by this Section 2.01 (including
this clause(ix)).
(b) The Westgate Group shall not be deemed to have violated
this Agreement as a result of the taking of any actions set forth in Section
2.01(a) or 2.02 of the Agreement by an entity which is a Passive Investment if:
(i) the Westgate Group and its affiliates, in the aggregate,
Beneficially Own 25% or less of the equity interests in that entity,
provided that (A) the Westgate Group and its affiliates did not have
actual knowledge that the entity intended to engage in those prohibited
activities at the time the Westgate Group or any of its affiliates
invested in the entity, (B) the Westgate Group notifies the Company as
soon as practical after obtaining actual knowledge that the entity
proposes to engage in any of such activities and Carl Intrieri delivers
an affidavit to the Company stating that (x) the entity is a "Passive
Investment" as defined in this Section 2.01(b) and (y) neither the
Westgate Group nor any of its affiliates took any of the actions
described in Section 2.01 (a)(ix) of this Agreement with respect to
those activities by the entity, and (C) the Westgate Group and its
affiliates do not
741961.2
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<PAGE>
increase their investment in the entity unless and until the entity
ceases to Beneficially Own any Restricted Securities and ceases taking
any of any actions set forth in Section 2.01(a) or 2.02 of the
Agreement; or
(ii) the Westgate Group and its affiliates, in the aggregate,
Beneficially Own more than 25% of the equity interests in that entity,
provided that (A) the Westgate Group and its affiliates did not have
actual knowledge that the entity intended to engage in those prohibited
activities at the time the Westgate Group or any of its affiliates
invested in the entity, (B) the Westgate Group notifies the Company as
soon as practical after obtaining actual knowledge that the entity
proposes to engage in any of such activities and Carl Intrieri delivers
an affidavit to the Company stating that (x) the entity is a "Passive
Investment" as defined in this Section 2.01(b) and (y) neither the
Westgate Group nor any of its affiliates took any of the actions
described in Section 2.01 (a)(ix) of this Agreement with respect to
those activities by the entity, and (C) the Westgate Group and its
affiliates use all reasonable efforts to promptly reduce the percentage
of the equity interests in that entity that they Beneficially Own in
the aggregate to 25% or less.
The term "Passive Investment" shall mean any entity in which the Westgate Group
owns an interest and in which the ownership
741961.2
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<PAGE>
interest of the Westgate Group is wholly passive and which is not otherwise an
affiliate of the Westgate Group.
Section 2.02 Voting.
(a) During the term of this Agreement, the members of the
Westgate Group agree to vote all Restricted Securities Beneficially Owned by
them in connection with any action to be taken by the Company's securityholders
as follows:
(i) in connection with any matter to be voted upon at
a meeting of the Company's securityholders with respect to which an
abstention will have the same effect as a vote against the matter, the
members of the Westgate Group shall vote all Restricted Securities
Beneficially Owned by them in the same proportion as the votes cast by
the holders of all other Restricted Securities; provided, however, that
if the holders of any class of Restricted Securities vote separately as
a class with respect to any such matter, the members of the Westgate
Group shall vote all Restricted Securities of that class Beneficially
Owned by them in the same proportion as the votes cast by the holders
of all other Restricted Securities of that class.
(ii) in connection with any other matter to be
voted upon at a meeting of the Company's securityholders, the members of the
Westgate Group shall cause all Restricted Securities Beneficially Owned by them
to be present in person or represented by proxy at the meeting for quorum
purposes but to abstain from voting on the matter.
741961.2
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<PAGE>
(b) Compliance with this Section 2.02 by the members of the
Westgate Group shall not be deemed a violation of any of the provisions of
Section 2.01 of this Agreement.
Section 2.03 Acquisition of Securities in Violation of this
Agreement. If the Westgate Group or any affiliate or associate of the Westgate
Group acquires any Restricted Securities in violation of this Agreement, it will
promptly (but in any event within 30 days) dispose of such Restricted Securities
to persons which are not members, affiliates or associates of the Westgate
Group; provided, however, that the Company may also pursue any other available
remedy to which it may be entitled as a result of such violation.
Section 2.04 No Encouragement by the Company. The Company
agrees that it will not encourage, recommend or propose to any person that it
acquire Restricted Securities for the purpose of obtaining for itself the
protections of this Agreement or otherwise as a defense against an investment in
that person by any member of the Westgate Group or any affiliate of the Westgate
Group. If the Westgate Group believes this Section 2.04 has been violated, the
Westgate Group shall notify the Company in writing describing the alleged
violation. If, within 30 days after receipt of such notice, the Company shall
furnish the Westgate Group with an affidavit denying the violation, it shall be
conclusively presumed and determined that no such violation occurred and the
Westgate Group shall be deemed to have waived any claim under this Section 2.04.
741961.2
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<PAGE>
Section 2.05 Conditions to Standstill Agreement.
(a) The restrictions contained in Sections
2.01 and 2.02 hereof shall not restrict the Westgate Group from filing
Administration Expense Claims to the extent permitted by Section 12.2(c) of the
Plan.
(b) The agreements and obligations contained
herein shall terminate in the event that (i) the Company voluntarily commences a
Chapter 7 or Chapter 11 case pursuant to Section 301 of Title 11 of the United
States Code (and for the avoidance of doubt, neither the filing against the
Company of an involuntary petition for relief under Title 11 of the United
States Code nor the Company's consenting to the entry of an order for relief
following the filing of an involuntary petition shall result in termination of
this Agreement), (ii) the Company or any of its affiliates seeks to acquire or
control any Restricted Person (as defined below) by taking any of the actions
set forth in Section 2.01 with respect to such Restricted Person or (iii) the
Company sells substantially all of its assets to any other person, or merges or
consolidates with any other person or effects any other similar reorganization,
if as a result of such merger, reorganization or consolidation the persons who
immediately prior thereto were stockholders of the Company cease to own
securities representing more than 50% of the aggregate voting power and 50% of
the common equity of such surviving entity, provided, however, that with respect
to the transactions described in this clause (iii) the agreements and
obligations
741961.2
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hereunder shall terminate only upon the closing of such transactions. As used in
this Agreement, "Restricted Person" means any person, other than the Company,
(x) in which, as of the time the Company or any of its affiliates commence, or
publicly announce their intention to commence, taking the actions described in
clause (i) of this Section 2.05(c), the Westgate Group has filed a Schedule 13D
under the Exchange Act or has otherwise publicly announced that it Beneficially
Owns at least 5% of the outstanding voting securities or (y) with respect to
which, as of the time the Company or any of its affiliates commence, or publicly
announce their intention to commence, taking the actions described in clause (i)
of this Section 2.05(c), the Westgate Group has made a filing under the Hart-
Scott-Rodino Antitrust Improvements Act of 1976, as amended.
ARTICLE III
Miscellaneous
Section 3.01 Enforcement. (a) Each member of the Westgate
Group, on the one hand, and the Company, on the other, acknowledges and agrees
that irreparable damage would occur if any of the provisions of this Agreement
were not performed in accordance with their specific terms or were otherwise
breached. Accordingly, the parties will be entitled to an injunction or
injunctions to prevent breaches of this Agreement and to enforce specifically
its provisions in any court of the United States or
741961.2
11
<PAGE>
any state having jurisdiction, this being in addition to any other remedy to
which they may be entitled at law or in equity.
(b) The Company and each member of the Westgate Group each
irrevocably agrees that any legal action or proceeding against it with respect
to this Agreement and any transaction contemplated by this Agreement may be
brought in the courts of the State of Delaware, or of the United States of
America for the District of Delaware, and by execution and delivery of this
Agreement the Company and each member of the Westgate Group each irrevocably
submits to the jurisdiction of each such court and irrevocably designates,
appoints and empowers the Secretary of State of the State of Delaware to receive
for and on its behalf service in the State of Delaware, and further irrevocably
consents to the service of process outside of the territorial jurisdiction of
such courts by mailing copies by registered United States mail, postage prepaid,
to its address specified in this Agreement.
Section 3.02 Entire Agreement. This Agreement constitutes the
entire understanding of the parties with respect to the transactions
contemplated by it and may be amended only by an agreement in writing executed
by all the parties.
Section 3.03 Severability. If any provision of this
Agreement is held by a court of competent jurisdiction to be
unenforceable, the remaining provisions shall remain in full
force and effect. It is declared to be the intention of the
741961.2
12
<PAGE>
parties that they would have executed the remaining provisions without including
any that may be declared unenforceable.
Section 3.04 Headings. The headings in this Agreement are
solely for convenience of reference and shall be given no effect in the
construction or interpretation of any provision of this Agreement.
Section 3.05 Counterparts. This Agreement may be executed in
any number of counterparts, each of which shall be deemed an original, but all
of which together shall constitute one and the same instrument.
Section 3.06 Notices. All notices and other communi cations
hereunder shall be in writing and shall be delivered per sonally against receipt
thereof, or transmitted by telecopier or by registered or certified mail
(postage prepaid, return receipt requested) to the parties at the following
addresses (or at such other address for a party as shall be specified by like
notice):
If to the Company, to
Toy Biz, Inc.
685 Third Avenue
New York, New York 10017
Attention: Secretary
Telephone: (212) 588-5100
Telecopy: (212) 682-5272
with a copy to:
Battle Fowler LLP
75 East 55th Street
New York, New York 10022
Attention: John Turitzin, Esq.
Telephone: (212) 856-6873
Telecopy: (212) 856-7814
if to Intrieri or Westgate, to:
741961.2
13
<PAGE>
Berlack Israels & Liberman LLP
120 West 45th Street
New York, New York 10036
Attention: Edward S. Weisfelner, Esq.
Telephone: (212) 704-0100
Telecopier: (212) 704-0196
Any notice shall be deemed to have been given on the date of
receipt if delivered personally or by overnight courier, the date of
transmission with confirmation back if transmitted by telecopier, or the third
day following posting if transmitted by mail.
Section 3.07 Successors and Assigns. Subject to Section 2.04
hereof, this Agreement shall bind the successors of the parties, and inure to
the benefit of any successor of any of the parties. No party hereto may assign
this Agreement without the other party's prior written consent.
Section 3.08 Termination. This Agreement shall terminate on
the fourth anniversary hereof.
Section 3.09 Litigation. In consideration of the mutual
undertakings contained herein, each of the parties hereto agrees to dismiss with
prejudice all pending litigation among the parties hereto.
Section 3.10 Governing Law. This Agreement will be governed by
and construed and enforced in accordance with the internal laws of the State of
Delaware, without giving effect to the conflict of laws principle thereof.
Section 3.11 Third Party Beneficiaries; Amendments;
Waivers. Each person (an "Allowed Fixed Senior Secured Claim
741961.2
14
<PAGE>
Holder") who is a holder of an Allowed Fixed Senior Secured Claim (as defined in
the Plan) immediately prior to the closing of the Transaction (as defined in the
Plan) is an intended third party beneficiary of this Agreement while that person
Beneficially Owns any Restricted Securities. This Agreement may not be amended,
or any of its provisions waived, except by a writing signed by each of the
parties hereto and by a majority of the Allowed Fixed Senior Secured Claim
Holders who Beneficially Own Restricted Securities as of the date of such
amendment or waiver.
741961.2
15
<PAGE>
IN WITNESS WHEREOF, the parties hereto have cause this
Agreement to be executed as of the date first referred to above.
TOY BIZ, INC.
by
/s/ JOSEPH M. AHEARN
Name: Joseph M. Ahearn
Title: President and Chief
Executive Officer
/s/ VINCENT INTRIERI
Vincent Intrieri
WESTGATE INTERNATIONAL, L.P.
By: Martley International
Attorney-in-fact
/s/ VINCENT INTRIERI
Name: Vincent Intrieri
Title: Authorized Signator
741961.2
16
<PAGE>
EXHIBIT 18
For Exhibit 18 ("Stockholder Series A Warrant Agreement"),
see Exhibit 4.3 ("Class A Warrant Agreement, dated as of October 1, 1998,
between the Registrant and American Stock Transfer and Trust Company, as
warrant agent").
766448.1
<PAGE>
EXHIBIT 19
For Exhibit 19 ("Stockholder Series B Warrant Agreement"),
see Exhibit 4.4 ("Class B Warrant Agreement, dated as of October 1, 1998,
between the Registrant and American Stock Transfer and Trust Company,
as warrant agent").
766454.1
<PAGE>
EXHIBIT 20
For Exhibit 20 ("Stockholder Series C Warrant Agreement"),
see Exhibit 4.5 ("Class C Warrant Agreement, dated as of October 1, 1998,
between the Registrant and American Stock Transfer and Trust Company, as
warrant agent").
766465.1
<PAGE>
Exhibit 21
Marvel Enterprises, Inc.
685 Third Avenue
New York, NY 10017
[date]
Dear Former Claimholder of, or Interest-Holder in, Marvel Entertainment Group,
Inc.:
Enclosed you will find one or more warrant certificates that
are being distributed to you because of your status as: (i) a former stockholder
of Marvel Entertainment Group, Inc. (referred to in this letter as "Marvel");
(ii) a holder of certain class securities litigation claims arising out of the
purchase or sale of Marvel common stock; and/or (iii) an unsecured pre-petition
creditor of Marvel. This letter includes a description of those warrants and of
your litigation trust interests.
As you probably know, Marvel commenced a chapter 11 case on
December 27, 1996. On October 1, 1998 (the "Consummation Date"), a plan of
reorganization for Marvel (the "Plan") was consummated and Marvel ended its
chapter 11 case by combining with a subsidiary of Toy Biz, Inc., a Delaware
corporation ("Toy Biz"). In connection with that combination, Marvel became a
wholly owned subsidiary of Toy Biz and Toy Biz changed its name to Marvel
Enterprises, Inc. Also in connection with that combination, (1) the outstanding
shares of common stock of Marvel were cancelled and holders of record of Marvel
common stock on the Consummation Date, in exchange for those shares, obtained
the right to receive warrants to purchase shares of stock in Marvel Enterprises,
Inc. ("Marvel Enterprises") and became beneficiaries of one of the two
litigation trusts established under the terms of the Plan; (2) holders of
"Allowed Class Securities Litigation Claims" (as defined in the Plan), in
exchange for those claims, obtained the right to receive warrants to purchase
shares of stock in Marvel, Inc. and became beneficiaries of one of the two
litigation trusts established under the terms of the Plan; and (3) pre-petition
unsecured creditors, in exchange for their "Allowed Unsecured Claims" in
"Subclasses 4A through 4I" (as defined in the Plan), obtained the right to
receive a cash payment, obtained the right to receive warrants to purchase
shares of stock in Marvel Enterprises and became beneficiaries of both of the
litigation trusts established under the terms of the Plan.
I. THE WARRANTS
The warrants come in four types:
(1) Stockholder Series A Warrants, each of which allows
its holder to purchase one share of common stock in
Marvel Enterprises within three years of the
Consummation Date;
(2) Stockholder Series B Warrants, each of which allows
its holder to purchase one share of 8% cumulative
convertible exchangeable preferred stock in Marvel
Enterprises within six months of the date of that
warrant's issuance;
(3) Stockholder Series C Warrants, each of which allows
its holder to purchase one share of common stock in
Marvel Enterprises within four years of the
Consummation Date; and
733481.4
<PAGE>
(4) Plan Warrants, which are being issued only to
unsecured pre-petition creditors of Marvel, each of
which allows its holder to purchase one share of
common stock in Marvel Enterprises within four years
of the Consummation Date.
The terms of each of the warrants, including the manner in
which they may be exercised, are summarized on the reverse side of the
respective warrant certificates. The exercise price of each of your warrants and
its expiration date are also shown on the enclosed warrant certificates. The
terms of the common stock of Marvel Enterprises and the 8% cumulative
convertible exchangeable preferred stock of Marvel Enterprises are summarized in
Exhibit A to this letter.
Each former Marvel stockholder, holder of a class securities
litigation claim and unsecured pre-petition creditor is receiving a certain
number of the various types of warrants according to a formula. No fractional
warrants have been issued. Instead the warrants were rounded so that an amount
of Marvel stock that would otherwise have entitled its holder to between half a
warrant and a whole warrant (inclusive) entitled its holder to one warrant, and
an amount of Marvel stock that would otherwise have entitled its holder to less
than half a warrant entitled its holder to no warrant.
Any Stockholder Warrants (types A, B and C) and Plan Warrants
that you receive with this letter will be freely saleable by you.1 The
Stockholder Series B Warrants will not be listed on any national securities
exchange. Marvel Enterprises will use its reasonable efforts to cause the
Stockholder Series A Warrants, the Stockholder Series C Warrants and the Plan
Warrants to be listed on the New York Stock Exchange or the American Stock
Exchange as promptly as reasonably practicable. For further information on
trading your warrants, you are advised to consult your stockbroker.
Each of the types of warrants is issued under and governed by
a Warrant Agreement which provides the full terms of those warrants. The
description of each of the types of warrants in this letter is only a brief
summary of the terms of the warrants. If there is any conflict between the
description in this letter and the relevant Warrant Agreement, the terms of the
relevant Warrant Agreement shall control. Copies of the Warrant Agreements
governing your warrants may be obtained, without charge, on written or oral
request directed to: Secretary, Marvel Enterprises, Inc., 685 Third Avenue, New
York, New York 10017, or by calling (212) 588-5100. Requested copies of Warrant
Agreements will be sent by first class mail, postage prepaid.
II. THE LITIGATION TRUSTS
In accordance with the Plan, two litigation trusts were formed
on the Consummation Date: the MAFCO Litigation Trust and the Avoidance
Litigation Trust. (Capitalized terms not defined in this letter have the same
meanings here as they do in the Plan.) Each litigation trust is the legal owner
of litigation claims that used to belong to Marvel. The beneficiaries of each
litigation trust will be entitled to share in any net proceeds of that trust's
litigation claims.
- --------
1 Sales of your warrants are subject to legal restrictions, however, if you
are one of the few people (such as members of Marvel Enterprises' board of
directors, executive officers of Marvel Enterprises, and others who control
Marvel Enterprises or are under common control with it) who are
"affiliates" of Marvel Enterprises or if you are an "underwriter" within
the meaning of Section 1145(b) of title 11 of the United States Code
(commonly known as the "Bankruptcy Code").
733481.4
<PAGE>
The main purpose of the MAFCO Litigation Trust is to pursue
certain litigation claims against Ronald O. Perelman, Mafco Holdings Inc., and
various other affiliated parties. Those claims were asserted in a lawsuit begun
by Marvel in the United States District Court for the District of Delaware on
October 30, 1997. The beneficiaries of the MAFCO Litigation Trust are: (1)
holders of Allowed Unsecured Claims in Subclasses 4A through 4I, (2) holders of
Allowed Class Securities Litigation Claims, and (3) holders of record of Marvel
common stock on the Consummation Date.
The main purpose of the Avoidance Litigation Trust is to
pursue litigation claims arising pursuant to certain sections of title 11 of the
United States Code (the "Bankruptcy Code"). The beneficiaries of the Avoidance
Litigation Trust are: (1) holders of Allowed Unsecured Claims in Subclasses 4A
through 4I, (2) holders of Allowed Fixed Senior Secured Claims, and (3) Marvel
Enterprises.
Your beneficial interests in one or both litigation trusts are
not represented by any certificates, and may not be transferred or assigned
except by will, by the laws of intestacy, or by other operation of law. In other
words, you may not trade or sell your beneficial interests in the litigation
trust(s).
The right of each beneficiary of the MAFCO Litigation Trust or
the Avoidance Litigation Trust to receive distributions of that trust's net
litigation proceeds is determined according to a formula. Any distributions due
you under the terms of the relevant litigation trust agreement will be sent to
you without any action required on your part, except that IT IS YOUR
RESPONSIBILITY TO KEEP THE APPROPRIATE LITIGATION TRUSTEE(S) ADVISED OF YOUR
CURRENT ADDRESS. Provided as Exhibits B and C to this letter are forms that you
may use to alert the appropriate litigation trustee(s) to any changes in your
address.
Each litigation trust is governed by its own litigation trust
agreement which provides the full terms of that litigation trust. The
description of the MAFCO Litigation Trust and the Avoidance Litigation Trust in
this letter is only a brief summary of the terms of those trusts. If there is
any conflict between the description in this letter and the relevant litigation
trust agreement, the terms of the relevant litigation trust agreement shall
control. Copies of the MAFCO Litigation Trust Agreement and the Avoidance
Litigation Trust Agreement may be obtained, without charge, on written or oral
request directed to: Secretary, Marvel Enterprises, Inc., 685 Third Avenue, New
York, New York 10017, or by calling (212) 588-5100. Requested copies of
litigation trust agreements will be sent by first class mail, postage prepaid.
Marvel Enterprises is subject to the informational
requirements of the Securities Exchange Act of 1934, as amended, and files
reports, proxy statements and other information with the Securities and Exchange
Commission (the "Commission"). Copies of those reports, proxy statements and
other information can be inspected and copied at the public reference facilities
of the Commission at its principal office at Judiciary Plaza, 450 Fifth Street,
N.W., Room 1024, Washington, D.C. 20549, and at its regional offices at Citicorp
Center, 500 West Madison Street, Suite 1400, Chicago, Illinois 60661-2511, and
at 7 World Trade Center, Suite 1300, New York, New York 10048. Any interested
party may obtain copies of that material at prescribed rates from the Public
Reference Section of the Commission at its principal office at Judiciary Plaza,
450 Fifth Street, N.W., Room 1024, Washington, D.C. 20549. Marvel Enterprises
files information electronically with the
733481.4
<PAGE>
Commission, and the Commission maintains a Web Site that contains reports, proxy
and information statements and other information regarding registrants
(including Marvel Enterprises) that file electronically with the Commission. The
address of the Commission's Web Site is http://www.sec.gov. Those reports, proxy
statements and other information concerning Marvel Enterprises can also be
inspected at the offices of the New York Stock Exchange, Inc., 20 Broad Street,
New York, New York 10005.
Very truly yours,
Joseph M. Ahearn
President and Chief Executive Officer
Marvel Enterprises, Inc.
733481.4
<PAGE>
Exhibit A
The following discussion summarizes the material provisions of the
common stock (the "Common Stock"), par value $.01 per share, of Marvel
Enterprises, Inc. (the "Company") and the 8% cumulative convertible exchangeable
preferred stock (the "8% Preferred Stock"), par value $.01 per share, of the
Company. This summary does not purport to be complete and is qualified in its
entirety by reference to the full text of the certificate of incorporation and
the by-laws of the Company, as well as the Indenture for the Company's 8%
Convertible Subordinated Voting Debentures, which may be obtained, without
charge, on written or oral request directed to: Secretary, Marvel Enterprises,
Inc., 685 Third Avenue, New York, New York 10017, or by calling (212) 588-5100.
Requested copies of those documents will be sent by first class mail, postage
prepaid.
Shares of Common Stock
Under the Company's certificate of incorporation (the "Certificate of
Incorporation"), the Company's authorized capital stock consists of 250,000,000
shares of Common Stock and 100,000,000 shares of preferred stock (including
75,000,000 shares of 8% Preferred Stock). Holders of shares of Common Stock are
entitled to share equally in and to receive all dividends, if dividends are
declared, in accordance with the number of shares of Common Stock held by each
holder, subject to any preferential or other rights of the holders of
outstanding preferred stock. See "Shares of 8% Preferred Stock".
Shares of 8% Preferred Stock have preference over shares of Common
Stock with respect to the payment of dividends and the distribution of assets in
the event of liquidation or dissolution of the Company and other preferences.
The holders of shares of Common Stock are entitled to one vote for each
share of Common Stock held and are vested with all of the Company's voting
power, except as provided with respect to the 8% Preferred Stock, or as the
Company's Board of Directors (the "Board") may provide in the future with
respect to any series of preferred stock which it may hereafter authorize. The
shares of Common Stock do not have cumulative voting rights. No holder of shares
of Common Stock is entitled to preemptive or subscription rights.
The shares of Common Stock are listed on the New York Stock Exchange
under the symbol "MVL". The shares of 8% Preferred Stock [are listed on the
_______ under the symbol "___".]
Shares of 8% Preferred Stock
Ranking. The shares of 8% Preferred Stock have preference over the
shares of Common Stock with respect to payment of dividends and the distribution
of assets in the event of liquidation, winding up or dissolution of the Company.
Dividends relating to the shares of 8% Preferred Stock are cumulative and are
payable at the option of the Board (x) in cash, (y) in additional shares of 8%
Preferred Stock having an aggregate Liquidation Preference (as defined below) no
less than the dividend payment, or (z) in any combination of cash and additional
shares of 8% Preferred Stock valued on such basis. As long as any shares of 8%
Preferred Stock are outstanding, the Company shall not pay or declare, or issue
by way of any capital reorganization or reclassification, any dividend or
distribution on shares of Common Stock or on any series of capital stock ranking
junior to the 8% Preferred Stock (either as to dividends or upon liquidation,
dissolution or winding up), except (i) Approved Spinoff Distributions (as
defined below), (ii) dividends or distributions that are payable solely in
shares of Common Stock or any series of capital stock ranking junior to the 8%
Preferred Stock both as to dividends and upon liquidation, dissolution or
winding up, or (iii) any rights or warrants to subscribe for or purchase shares
described in clause (ii). "Approved Spinoff
733481.4
<PAGE>
Distribution" means a dividend or distribution of shares of stock having a
majority of the voting power of a subsidiary of the Company but only if the
Company receives a fairness opinion from a nationally recognized investment
banking firm to the effect that the adjustment of the conversion ratio of the 8%
Preferred Stock as a result of such dividend or distribution is fair to the
holders of the shares of 8% Preferred Stock from a financial point of view.
Voting. The holders of shares of Common Stock and the holders of 8%
Preferred Stock vote together as one class, except as otherwise provided in the
Certificate of Incorporation, and each holder of 8% Preferred Stock is entitled
to such number of votes for the 8% Preferred Stock held by him on all matters
submitted to a vote of the holders of Common Stock as shall be equal to the
largest number of whole shares of Common Stock into which all of his shares of
8% Preferred Stock are then convertible; provided, however, that the Company
shall not (A) consolidate with or merge into any other person in any transaction
in which the Company is not the continuing or surviving corporation, (B) permit
any other person to consolidate with or merge into the Company in any
transaction in which the Company is the continuing or surviving person, but the
Common Stock is changed into or exchanged for stock or other securities of any
other person or cash or any other property, (C) transfer all or substantially
all of its properties or its assets to any other person, or (D) exchange the
outstanding shares of 8% Preferred Stock for subordinated debentures (see
"Exchange," below) unless such transaction is approved by a majority of the
shares of outstanding 8% Preferred Stock, voting together as a separate class,
except that in the case of a transaction described in clauses (A), (B) or (C)
which is to be consummated prior to October 1, 2001, such approval shall not be
required if each of the following conditions is satisfied with respect to such
merger, consolidation, sale or transfer: (i) the holders of Common Stock will
receive consideration equal to at least $9.625 per share of Common Stock, and
(ii) the holders of 8% Preferred Stock will receive (x) the same consideration
such holders would have received had such holders converted their 8% Preferred
Stock to Common Stock immediately prior to consummation of the merger or
consolidation, plus (y) an amount equal to the present value of the amount of
dividends such holders would have been entitled to receive on their shares of 8%
Preferred Stock if such shares remained outstanding until October 1, 2001,
discounted at a discount rate of 10% per annum, compounded quarterly.
Certain Restrictions. The Company shall not, as long as any shares of
8% Preferred Stock are outstanding: (i) redeem or purchase or otherwise acquire
for consideration any stock ranking junior to or on a parity with (either as to
dividends or upon liquidation, dissolution or winding up) the 8% Preferred
Stock; (ii) permit any subsidiary of the Company to purchase or otherwise
acquire for consideration any shares of stock of the Company unless the Company
could purchase such shares at such time and in such manner; or (iii) without the
affirmative vote or consent of holders of at least two-thirds of the outstanding
shares of 8% Preferred Stock voting or consenting separately as one class,
authorize or issue any class or series of stock ranking (either as to dividends
or upon liquidation, dissolution or winding up) senior to or on parity with the
8% Preferred Stock, or issue any shares of 8% Preferred Stock other than (i) as
contemplated by the Fourth Amended Joint Plan of Reorganization Proposed by
Secured Lenders and the Company in the chapter 11 cases of Marvel Entertainment
Group, Inc. and certain of its affiliates (the "Plan"), including pursuant to
the Stockholder Series B Warrants referred to in the Plan, or (ii) as dividends
on shares of 8% Preferred Stock.
Redemption. The Company shall redeem all outstanding shares of 8%
Preferred Stock on October 1, 2011 at a price per share equal to the Liquidation
Preference plus an amount equal to all accrued but unpaid dividends thereon,
whether or not declared, to the redemption date. The Company may redeem all, but
not less than all, of the outstanding shares of the 8% Preferred Stock at any
time after October 1, 2001 at a price per share equal to the Liquidation
Preference, plus all accrued but unpaid dividends, whether or not declared. If
the Company elects to redeem the outstanding shares of 8% Preferred Stock, the
Company shall send a notice of redemption to each holder of the 8% Preferred
Stock specifying (i) the redemption date, which date shall be not less than
thirty (30) nor more than sixty (60) days following the date of mailing of the
notice of redemption, and (ii) the redemption price, including a calculation
thereof in reasonable detail.
733481.4
<PAGE>
Liquidation. Upon any liquidation, dissolution or winding up of the
Company, no distribution shall be made (i) to the holders of stock ranking
junior (upon liquidation, dissolution or winding up) to the 8% Preferred Stock
unless, prior thereto, the holders of 8% Preferred Stock shall have received
$10.00 per share (the "Liquidation Preference"), plus an amount equal to accrued
but unpaid dividends thereon, whether or not declared, to the date of such
payment, or (ii) to the holders of stock ranking on a parity (either as to
dividends or upon liquidation, dissolution or winding up) with the 8% Preferred
Stock, except distributions made ratably on the 8% Preferred Stock and all other
such parity stock in proportion to the total amounts to which the holders of all
such shares are entitled upon such liquidation, dissolution or winding up.
Conversion. Each share of the 8% Preferred Stock may, under certain
circumstances set forth more fully in the Certificate of Incorporation, be
converted at any time, at the option of the holder thereof, into shares of
Common Stock. Subject to the adjustment provisions specified in the Certificate
of Incorporation (the "Adjustment Provisions"), each share of 8% Preferred Stock
shall be convertible into 1.039 fully paid and nonassessable shares of Common
Stock. The Board may, but shall not be required to, increase the conversion rate
(i.e. number of shares of Common Stock into which each share of 8% Preferred
Stock may be converted), in addition to the adjustments required under the
Adjustment Provisions, as shall be determined by the Board to be advisable in
order to avoid or diminish any income deemed to be received by any holder of the
Common Stock or 8% Preferred Stock resulting from any dividend or distribution
of stock or issuance of rights or warrants to purchase or subscribe for stock or
from any event treated as such for federal income tax purposes. If at any time
on or after October 1, 2001, the Common Stock is (i) listed on a national
securities exchange or included for quotation on the National Market System of
the NASDAQ Stock Market and (ii) the closing price of the Common Stock on the
National Market System of the NASDAQ Stock Market or on such national securities
exchange exceeds $11.55 per share for a prescribed number of days, the Company
shall have the right, in its sole discretion, to convert outstanding shares of
8% Preferred Stock in tranches having an aggregate Liquidation Preference of up
to $50 million on each occasion into shares of Common Stock.
Exchange. Subject to the approval of the holders of 8% Preferred Stock
(see "Voting," above), the Company may, at its option, exchange all, but not
less than all, of the outstanding 8% Preferred Stock for 8% Convertible
Subordinated Voting Debentures of the Company (the "Subordinated Debentures").
The Subordinated Debentures will mature on October 1, 2011 and will have
substantially the same economic terms, voting rights and conversion features as
the 8% Preferred Stock.
If (i) the Company consolidates with or merges into any other person
and is not the continuing or surviving corporation of such consolidation or
merger, (ii) any other person consolidates with or merges into the Company and
the Company is the continuing or surviving person, but, in connection with such
consolidation or merger, the Common Stock is changed into or exchanged for stock
or other securities of any other person or cash or any other property, or (iii)
the Company transfers all or substantially all of its properties or its assets
to any other person, then, and in each such case, each outstanding share of 8%
Preferred Stock shall, upon the effective date of such event, be convertible
into the number of shares of stock or other securities or cash or other property
which the holder would have owned after giving effect to such event had such
share been converted pursuant to the Adjustment Provisions immediately prior to
the occurrence of such event, plus any additional shares of stock or other
securities or cash or other property payable by the terms of such event to the
holders of shares of 8% Preferred Stock.
733481.4
<PAGE>
Exhibit B
MAFCO LITIGATION TRUST
Note: This form is for the use of the following parties as beneficiaries
of the MAFCO Litigation Trust:
1. Holders of Allowed Unsecured Claims (other than Intercompany Claims
and the LaSalle Claim),
2. Holders of Allowed Class Securities Litigation Claims, and
3. Holders of Allowed Equity Interests in Entertainment,
as such terms are used in the
Fourth Amended Joint Plan of Reorganization
Proposed by the Secured Lenders and Toy Biz, Inc.
for Marvel Entertainment Group, Inc.
If you were a holder of Marvel common stock and are unsure which, if any,
category on the above list you fit into, USE THIS FORM.
NOTICE OF CHANGE OF ADDRESS OF BENEFICIARY
Beneficiary's name: ______________________________________
Social Security or Employer I.D. number: ____________________
Beneficiary's old address: _______________________________
_______________________________
_______________________________
_______________________________
Beneficiary's new address: _______________________________
_______________________________
_______________________________
_______________________________
Signature: _______________________________
Date: _______________________________
MAIL THIS FORM TO: Trustees, MAFCO Litigation Trust
Hellring Lindeman Goldstein & Siegal
One Gateway Center, Newark, New Jersey 07102
Attention: James A. Scarpone, Esq.
733481.4
<PAGE>
Exhibit C
AVOIDANCE LITIGATION TRUST
Note: This form is for the use of the following parties as beneficiaries of
the Avoidance Litigation Trust:
1. Holders of Allowed Unsecured Claims (other than Intercompany Claims
and the LaSalle Claim), and
2. Holders of Allowed Fixed Senior Secured Claims,
as such terms are used in the
Fourth Amended Joint Plan of Reorganization
Proposed by the Secured Lenders and Toy Biz, Inc.
for Marvel Entertainment Group, Inc.
NOTICE OF CHANGE OF ADDRESS OF BENEFICIARY
Beneficiary's name: ______________________________________
Social Security or Employer I.D. number: ____________________
Beneficiary's old address: _______________________________
_______________________________
_______________________________
_______________________________
Beneficiary's new address: _______________________________
_______________________________
_______________________________
_______________________________
Signature: _______________________________
Date: _______________________________
MAIL THIS FORM TO: Trustee, Avoidance Litigation Trust
c/o Kahn Consulting, Inc.
152 West 57th Street
New York, New York 10019
Attention: Christopher J. Kearns, Esq.
733481.4
- --------------------------------------------------------------------------------
EXHIBIT 2.2
AGREEMENT AND PLAN OF MERGER
by and Among
TOY BIZ, INC.,
MARVEL ENTERTAINMENT GROUP, INC.
and
MEG ACQUISITION CORP.
dated as of
August 12, 1998
- -------------------------------------------------------------------------------
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
<S> <C>
ARTICLE I THE MERGER...................................................................................2
Section 1.1 The Merger.............................................................................2
Section 1.2 Closing................................................................................2
Section 1.3 Effective Time.........................................................................2
Section 1.4 Certificate of Incorporation and By-Laws...............................................2
Section 1.5 Directors and Officers of the Surviving Corporation....................................2
ARTICLE II CONVERSION OF SECURITIES.....................................................................3
Section 2.1 Common Stock of Acquisition............................................................3
Section 2.2 Conversion of Marvel Common Stock......................................................3
Section 2.3 Stock Transfer Books...................................................................3
ARTICLE III REPRESENTATIONS AND WARRANTIES
OF THE COMPANY AND ACQUISITION..........................................................................4
Section 3.1 Organization, Standing and Corporation Power...........................................4
Section 3.2 Authorization; Validity of Agreement; Company Action ..................................4
Section 3.3 Consents and Approvals; No Violations..................................................4
Section 3.4 Subsidiary Ownership...................................................................5
ARTICLE IV COVENANTS ...................................................................................5
Section 4.1 Affiliates.............................................................................5
ARTICLE V CONDITIONS...................................................................................5
Section 5.1 Conditions to Each Party's Obligation to Effect the Mergers............................5
Section 5.2 Conditions to Marvel's Obligations to Effect the Merger................................6
ARTICLE VI TERMINATION .................................................................................6
Section 6.1 Termination............................................................................6
Section 6.2 Effect of Termination..................................................................7
ARTICLE VII MISCELLANEOUS................................................................................7
Section 7.1 Fees and Expenses......................................................................7
Section 7.2 Amendment, Modification and Other Action...............................................7
Section 7.3 Nonsurvival of Representations and Warranties..........................................7
Section 7.4 Notices................................................................................7
Section 7.5 Interpretation.........................................................................8
Section 7.6 Counterparts...........................................................................8
Section 7.7 Entire Agreement, No Third Party Beneficiaries; Rights of Ownership....................8
Section 7.8 Severability...........................................................................9
Section 7.9 Governing Law..........................................................................9
Section 7.10 Assignment.............................................................................9
Section 7.11 Enforcement............................................................................9
</TABLE>
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AGREEMENT AND PLAN OF MERGER
AGREEMENT AND PLAN OF MERGER (this "Agreement"), dated as of August 12,
1998, by and among Toy Biz, Inc. a Delaware corporation (the "Company"), Marvel
Entertainment Group, Inc., a Delaware corporation ("Marvel"), and MEG
Acquisition Corp., a Delaware corporation and a newly formed and direct
wholly-owned subsidiary of the Company ("Acquisition").
WHEREAS, the Board of Directors of Acquisition has unanimously approved,
and deems it advisable and in the best interests of its stockholders to
consummate, the merger (the "Merger") of Acquisition with and into Marvel, with
Marvel to be the Surviving Corporation (as hereinafter defined), upon the terms
and subject to the conditions set forth in this Agreement and in the Fourth
Amended Joint Plan of Reorganization proposed by the Company and certain senior
creditors of Marvel which is attached hereto as Exhibit A (the "Plan").
Capitalized terms used in this Agreement which are not defined in this Agreement
have the same meaning in this Agreement as in the Plan. In connection with the
Merger, each issued and outstanding share of common stock, par value $ .01 per
share, of Marvel (the "Marvel Common Stock"), will be canceled, and Stockholder
Series A Warrants, Stockholder Series B Warrants, and Stockholder Series C
Warrants (collectively, "Stockholder Warrants") and an interest in a litigation
trust, all as set forth in the Plan, will be issued to the holders of record of
shares of Marvel Common Stock as of the Effective Time (as defined in Section
1.3 hereof); and
WHEREAS, the chapter 11 trustee of Marvel has approved, and deems it
advisable and in the best interests of the stockholders and creditors of Marvel
to consummate the Merger of Acquisition with and into Marvel, with Marvel as the
Surviving Corporation (as hereinafter defined), upon the terms and subject to
the conditions set forth in this Agreement and in the Plan; and
WHEREAS, Marvel, together with eight of its wholly-owned subsidiaries
(collectively with Marvel, the "Marvel Debtors"), are chapter 11 debtors and
debtors in possession in cases pending under chapter 11 of title 11 of The
United States Code (11 U.S.C. ss.ss. 101 et seq.) (the "Bankruptcy Code"),
having commenced voluntary cases (Nos. 96-2066 through 96-2077 (HSB)) (the
"Reorganization Cases") in the United States Bankruptcy Court for the District
of Delaware (such Reorganization Cases having subsequently been transferred to
the United States District Court for the District of Delaware (the "District
Court")); and
WHEREAS, it is the intention of the parties hereto that the transactions
contemplated hereby be implemented in connection with the consummation the Plan.
NOW, THEREFORE, in consideration of the foregoing and the respective
representations, warranties, covenants and agreements set forth herein, the
parties hereto agree as follows:
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ARTICLE I
THE MERGER
Section 1.1 The Merger. Upon the terms and subject to the conditions
of this Agreement and in accordance with the General Corporation Law of the
State of Delaware (the "DGCL") and the Plan, and upon the authority granted by
the order entered by the District Court confirming the Plan (the "Confirmation
Order"), at the Effective Time (as defined in Section 1.3 hereof), Marvel and
Acquisition shall consummate the Merger pursuant to which (a) Acquisition shall
be merged with and into Marvel, and the separate corporate existence of
Acquisition shall thereupon cease, (b) Marvel shall be the successor or
surviving corporation in the Merger (sometimes hereinafter referred to as the
"Surviving Corporation") and shall continue to be covered by the laws of the
State of Delaware, including the DGCL, and (c) all of the rights, privileges,
immunities, powers and franchises of Marvel and Acquisition shall vest in the
Surviving Corporation and all obligations, duties, debts and liabilities of
Marvel and Acquisition shall become the obligations, duties, debts and
liabilities of the Surviving Corporation.
Section 1.2 Closing. Unless this Agreement shall have been terminated
and the transactions herein contemplated shall have been abandoned pursuant to
Section 6.1 hereof, and subject to the satisfaction or waiver of the conditions
set forth in Article V hereof, the closing of the Merger (the "Closing") shall
take place at 10:00 a.m. on a date to be specified by the parties hereto, which
shall be no later than the second business day after satisfaction or waiver of
all of the conditions set forth in Article V hereof (the "Closing Date"), at the
offices of Battle Fowler LLP, 75 East 55th Street, New York, New York 10022,
unless another date or place is agreed to in writing, by the parties hereto.
Section 1.3 Effective Time. The Company, Marvel and Acquisition will
cause a certificate of merger (the "Certificate of Merger") to be executed and
filed for the Merger on the Closing Date (or on such other date as to which the
Company and Marvel may agree) with the Secretary of State of the State of
Delaware (the "Secretary of State") as provided in the DGCL. The Merger shall
become effective on the date on which the Certificate of Merger has been duly
filed with the Secretary of State or such time after that date as is agreed upon
by the parties hereto and specified in the Certificate of Merger, and such time
is hereinafter referred to as the "Effective Time."
Section 1.4 Certificate of Incorporation and By-Laws. At the Effective
Time, the certificate of incorporation of Acquisition (the "Acquisition
Certificate"), as in effect immediately prior to the Effective Time, shall be
the certificate of incorporation of the Surviving Corporation until thereafter
amended in accordance with applicable law. The by-laws of Acquisition (the
"Acquisition By-Laws"), as in effect immediately prior to the Effective Time,
shall be the by-laws of the Surviving Corporation until thereafter amended in
accordance with applicable law.
Section 1.5 Directors and Officers of the Surviving Corporation. The
individuals listed on Exhibit B attached hereto shall be the directors and
officers, respectively, of the Surviving Corporation until their successors
shall have been duly elected or appointed or qualified or until their
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earlier death, resignation or removal in accordance with the Surviving
Corporation's Certificate of Incorporation and By-Laws.
ARTICLE II
CONVERSION OF SECURITIES
Section 2.1 Common Stock of Acquisition. Each share of common stock of
Acquisition issued and outstanding immediately prior to the Effective Time, by
virtue of the Merger and without any action on the part of the holder thereof,
will be converted into and become one validly issued, fully paid and
nonassessable share of common stock, $.01 par value par share, of the Surviving
Corporation.
Section 2.2 Conversion of Marvel Common Stock. As of the Effective
Time, by virtue of the Merger and without any action on the part of the Company,
Marvel, Acquisition or the holders of shares of Company Common Stock:
(a) Marvel Common Stock. Each issued and outstanding share of the
Marvel Common Stock shall be canceled, and each holder of record of shares
of Marvel Common Stock as of the Effective Time (other than shares of
Marvel Common Stock to be canceled in accordance with Section 2.2(b)
hereof) shall thereupon have the right to receive Stockholder Warrants and
an interest in a litigation trust, as set forth in the Plan. As of the
Effective Time, all shares of Marvel Common Stock shall no longer be
outstanding and shall automatically be canceled and retired and shall cease
to exist, and each holder of a certificate representing any such shares of
Marvel Common Stock shall cease to have any rights with respect thereto,
except the right to receive the certificates representing the Stockholder
Warrants (the "Stockholder Warrant Certificates") to be issued in
consideration for the shares formerly represented thereby in accordance
with this Section 2.2, without interest.
(b) Cancellation of Treasury Stock and Company-Owned Stock. All shares
of Marvel Common Stock that are owned by the Company and all shares of
Marvel Common Stock owned by Marvel or any wholly-owned subsidiary of
Marvel shall be canceled and retired and shall cease to exist and no
consideration shall be delivered in exchange therefor.
Section 2.3 Stock Transfer Books. At the Effective Time, the stock
transfer books of Marvel shall be closed and there shall be no further
registration of transfers of Marvel Common Stock or options or warrants to
purchase shares of Marvel thereafter on the records of Marvel.
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ARTICLE III
REPRESENTATIONS AND WARRANTIES OF THE COMPANY AND ACQUISITION
The Company and Acquisition severally represent and warrant to Marvel
as follows:
Section 3.1 Organization, Standing and Corporation Power. Each of the
Company and Acquisition is a corporation duly incorporated, validly existing and
in good standing under the laws of the State of Delaware, and each of them has
all requisite corporate power and authority to carry on its business
substantially as now conducted, except where the failure to do so would not
have, individually or in the aggregate, a Material Adverse Effect. For purposes
hereof, the term "Material Adverse Effect" means any change or effect that is or
is reasonably expected to be materially adverse to the condition (financial or
otherwise), business, assets or results of operations of the Company and its
subsidiaries taken as a whole or adversely effects the ability of the Company to
consummate the transactions contemplated by this Agreement in any material
respect or materially impairs or delays the Company's ability to perform its
obligations hereunder.
Section 3.2 Authorization; Validity of Agreement; Company Action. The
execution, delivery and performance by each of the Company and Acquisition of
this Agreement and the consummation of the Merger by the Company and Acquisition
are within the corporate powers and authority of each of the Company and
Acquisition and have been duly authorized by all necessary corporate action, as
the case may be, on the part of each of the Company and Acquisition. Each of the
Company, as sole stockholder of Acquisition, and the Board of Directors of
Acquisition has approved the Merger and no further corporate or stockholder
action is required on the part of Acquisition in connection with the
consummation of the Merger other than the filing of the Certificate of Merger as
contemplated by this Agreement. This Agreement has been duly executed and
delivered by each of the Company and Acquisition and, assuming this Agreement
constitutes the valid and binding agreement of Marvel, constitutes a valid and
binding obligation of each of the Company and Acquisition, enforceable against
each such party in accordance with its terms, subject to applicable bankruptcy,
insolvency, fraudulent conveyance, reorganization, moratorium and similar laws
affecting creditors' rights and remedies and to general principles of equity.
The execution and delivery of this Agreement does not, and the consummation of
the transactions contemplated by this Agreement and compliance with the
provisions of this Agreement, will not conflict with any of the provisions of
the Acquisition Certificate or Acquisition By-Laws.
Section 3.3 Consents and Approvals; No Violations. Except for the
filings, permits, authorizations, consents and approvals as may be required
under, and other applicable requirements of, (a) the Securities Act of 1933, as
amended (the "Securities Act"), (b) the Securities Exchange Act of 1934, as
amended (the "Exchange Act"), (c) the Bankruptcy Code (or filings with, or
authorizations of, the Bankruptcy Court or District Court), and (d) the DGCL,
and assuming the filings required under the Hart-Scott-Rodino Antitrust
Improvements Act of 1976, as amended (the "HSR Act"), are made and the waiting
period thereunder has been terminated or has expired, neither the execution,
delivery or performance of this Agreement by the Company and Acquisition nor the
consummation by the Company and Acquisition of the transactions contemplated
hereby nor
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compliance by the Company and Acquisition with any of the provisions hereof will
(i) conflict with or result in any breach of any provision of the certificate of
incorporation or the by-laws of the Company, Acquisition or any of their
subsidiaries, (ii) require any filing with, or permit, authorization, consent or
approval of, any court, arbitral tribunal, administrative agency or commission
or other governmental or regulatory authority or agency (a "Governmental
Entity"), or (iii) violate any order, writ, injunction, decree, statute, rule or
regulation applicable to the Company and Acquisition, their subsidiaries or any
of their properties or assets, excluding from the foregoing clauses (ii) and
(iii) such violations, breaches or defaults which would not, individually or in
the aggregate, have a material adverse effect on the Company, Acquisition and
their subsidiaries, taken as a whole, and which will not materially impair the
ability of the Company and Acquisition to consummate the transactions
contemplated hereby or by the Plan.
Section 3.4 Subsidiary Ownership. As of the date hereof, the Company
owns all of the outstanding capital stock of Acquisition. Acquisition was formed
by the Company solely for the purpose of engaging in the transactions
contemplated by this Agreement. Except as contemplated by this Agreement,
Acquisition has not engaged, directly or through any subsidiary, in any business
activities of any type or kind whatsoever.
ARTICLE IV
COVENANTS
Section 4.1 Affiliates. Prior to the Closing Date, Marvel shall
deliver to the Company a letter identifying all persons who are "affiliates" of
Marvel for purposes of Rule 145 under the Securities Act. The Company shall use
its best efforts to cause each such person or entity to deliver to the Company
on or prior to the Closing Date a written agreement substantially in the form
attached hereto as Exhibit C. The Company shall be entitled to cause to be
placed appropriate legends on any certificates evidencing Stockholder Warrants
or shares of stock issued on exercise of Stockholder Warrants to be received by
each such person or entity pursuant to the terms of this Agreement, and to issue
appropriate stop transfer instructions to the transfer agent for such
Stockholder Warrants or shares, to the effect that such Stockholder Warrants or
shares received or to be received by such person or entity pursuant to the terms
of this Agreement may only be sold, transferred or otherwise conveyed, and the
holder thereof may only reduce such holder's interest in or risks relating to
such shares, pursuant to an effective registration statement under the
Securities Act, in accordance with the provisions of paragraph (d) of Rule 145,
or in a manner not requiring registration under or pursuant to an exemption
provided from registration under the Securities Act.
ARTICLE V
CONDITIONS
Section 5.1 Conditions to Each Party's Obligation to Effect the
Mergers. The respective obligation of each party to effect the Merger shall be
subject to the satisfaction on or prior
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<PAGE>
to the Closing Date of each of the following conditions, any and all of which
may be waived in whole or in part by the Company, Marvel or Acquisition, as the
case may be, to the extent permitted by applicable law:
(a) HSR Act. Any waiting period (including any extension thereof)
under the HSR Act applicable to the Merger shall have expired or been
terminated;
(b) Statutes; Consents. No statute, rule, order, decree or regulation
shall have been enacted or promulgated by any Governmental Entity which
prohibits the consummation of the Merger and all governmental consents,
orders and approvals required for the consummation of the Merger and the
transactions contemplated hereby shall have been obtained and shall be in
effect at the Effective Time;
(c) Injunctions. There shall be no order or injunction of a
Governmental Entity of competent jurisdiction in effect precluding,
restraining, enjoining or prohibiting consummation of the Merger; and
(d) Confirmation Order. The District Court shall have entered the
Confirmation Order and its effectiveness and enforceability shall not be
subject to any stay or injunction and all conditions to the consummation of
the Plan shall have been satisfied or duly waived in accordance with the
Plan.
Section 5.2 Conditions to Marvel's Obligations to Effect the Merger.
Furthermore, the obligations of Marvel to consummate the Merger are subject to
the fulfillment of the conditions, which may be waived in whole or in part by
Marvel, that the representations and warranties of the Company contained in this
Agreement shall be true and correct in all material respects as of the Effective
Time after giving effect to the Merger as if made at and as of such time.
ARTICLE VI
TERMINATION
Section 6.1 Termination. This Agreement may be terminated and the
Mergers contemplated herein may be abandoned at any time prior to the Effective
Time, whether before or after stockholder approval thereof:
(a) By mutual written agreement of the Company, Marvel and
Acquisition;
(b) By Marvel or the Company and Acquisition, if the Closing shall not
have taken place on or before October 2, 1998; provided that the failure of
the Closing to occur on or before such date is not the result of the breach
of any representation or warranty or the failure to perform any covenant or
agreement or satisfy any condition hereunder by the party seeking to so
terminate;
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(c) By Marvel or the Company and Acquisition, upon written notice
given to the other if there shall be any law or regulation of any competent
authority that makes consummation of the Merger illegal or otherwise
prohibited, or if any governmental entity of competent jurisdiction shall
have issued a final non-appealable order, judgment, injunction or order
enjoining or otherwise prohibiting the transactions contemplated by this
Agreement; or
(d) By Marvel if the Company or Acquisition breach their
representations and warranties in any material respect and such breach has
not been cured to Marvel's reasonable satisfaction within 10 days of the
notice by Marvel to the Company and Acquisition of such breach.
Section 6.2 Effect of Termination. In the event of the termination of
this Agreement as provided in Section 6.1 hereof, written notice thereof shall
forthwith be given to the other party or parties specifying the provision hereof
pursuant to which such termination is made, and this Agreement shall forthwith
become null and void, and there shall be no liability on the part of any party
hereto.
ARTICLE VII
MISCELLANEOUS
Section 7.1 Fees and Expenses. Except as contemplated by this
Agreement, all costs and expenses incurred in connection with this Agreement and
the consummation of the transactions contemplated hereby shall be paid by the
party incurring such expenses.
Section 7.2 Amendment, Modification and Other Action. Subject to
applicable law, this Agreement may be amended, modified and supplemented in any
and all respects by written agreement of the parties hereto, at any time prior
to the Closing Date with respect to any of the terms contained herein.
Section 7.3 Nonsurvival of Representations and Warranties. None of the
representations and warranties in this Agreement or in any schedule, instrument
or other document delivered pursuant to this Agreement shall survive the
Effective Time.
Section 7.4 Notices. All notices and other communications hereunder
shall be in writing and shall be deemed given if delivered personally,
telecopied (which is confirmed) or sent by an overnight courier service, such as
Federal Express, to the parties at the following addresses (or at such other
address for a party as shall be specified by like notice):
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if to the Company or Acquisition, to:
Toy Biz, Inc.
685 Third Avenue
New York, New York 10017
Attention: Executive Vice President, Business Affairs
with a copy to:
Battle Fowler, LLP
75 East 55th Street
New York, New York 10022
Attention: Lawrence Mittman, Esq.
if to Marvel, to:
Marvel Entertainment Group, Inc.
387 Park Avenue South
9th Floor
New York, New York 10016
Attention: Joseph Calamari
with a copy to:
Gibbons, Del Deo, Dolan,
Griffinger & Vecchione
One Riverfront Plaza
Newark, New Jersey 07102
Attention: Frank E. Lawatsch, Jr.
Section 7.5 Interpretation. When a reference is made in this Agreement
to Sections, such reference shall be to a Section of this Agreement unless
otherwise indicated. Whenever the words "include", "includes" or "including" are
used in this Agreement they shall be deemed to be followed by the words "without
limitation". As used in this Agreement, the term "affiliate(s)" shall have the
meaning set forth in Rule 12b-2 under the Exchange Act.
Section 7.6 Counterparts. This Agreement may be executed in two or
more counterparts, all of which shall be considered one and the same agreement
and, if executed in counterparts, shall become effective when two or more
counterparts have been signed by the parties and delivered to the other parties.
Section 7.7 Entire Agreement, No Third Party Beneficiaries; Rights of
Ownership. This Agreement (including the documents and the instruments referred
to herein): (a) constitutes the entire agreement and supersedes all prior
agreements and understandings, both written and oral, among the parties with
respect to the subject matter hereof, and (b) is not intended to confer upon any
person other than the parties hereto any rights or remedies hereunder.
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Section 7.8 Severability. If any term, provision, covenant or
restriction of this Agreement is held by a Governmental Entity of competent
jurisdiction to be invalid, void, unenforceable or against its regulatory
policy, the remainder of the terms, provisions, covenants and restrictions of
this Agreement shall remain in full force and effect and shall in no way be
affected, impaired or invalidated.
Section 7.9 Governing Law. This Agreement shall be governed by and
construed in accordance with the laws of the State of Delaware without giving
effect to the principles of conflicts of law thereof.
Section 7.10 Assignment. Neither this Agreement nor any of the rights,
interests or obligations under this Agreement shall be assigned, in whole or in
part, by operation of law or otherwise by any of the parties without the prior
written consent of the other party. Subject to the preceding sentence, this
Agreement will be binding upon, inure to the benefit of, and be enforceable by,
the parties and their respective successors and assigns.
Section 7.11 Enforcement. The parties agree that irreparable damage
would occur in the event that any of the provisions of this Agreement were not
performed in accordance with their specific terms or were otherwise breached. It
is accordingly agreed that the parties shall be entitled to an injunction or
injunctions to prevent breaches of this Agreement and to enforce specifically
the terms and provisions of this Agreement, this being in addition to any other
remedy to which they are entitled at law or in equity.
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IN WITNESS WHEREOF, the Company, Marvel and Acquisition have caused
this Agreement to be signed by their respective officers thereunto duly
authorized as of the date first written above.
TOY BIZ, INC.
By:/s/WILLIAM H. HARDIE, III
-------------------------------------------
Name: William H. Hardie, III
Title: Executive Vice President,
Business Affairs and Secretary
MARVEL ENTERTAINMENT GROUP, INC.
By:/s/JOHN J. GIBBONS
-------------------------------------------
John J. Gibbons, as chapter 11 trustee
MEG ACQUISITION CORP.
By:/s/WILLIAM H. HARDIE, III
-------------------------------------------
Name: William H. Hardie
Title: Vice President and Secretary
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EXHIBIT A to Merger Agreement
Fourth Amended Joint Plan of Reorganization
Proposed by the Secured Lenders and Toy Biz, Inc.
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EXHIBIT B to Merger Agreement
Directors and Officers of the Surviving Corporation
Directors
Joseph M. Ahearn
William H. Hardie, III
David J. Fremed
Officers
Joseph M. Ahearn: President
William H. Hardie, III: Secretary and Vice President
David J. Fremed: Treasurer
Sidney Taubman: Vice President
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EXHIBIT C to Merger Agreement
Marvel Enterprises, Inc.
685 Third Avenue
New York, NY 10017
Gentlemen:
The undersigned is a holder of shares of common stock ("MEG Common
Stock") of Marvel Entertainment Group, Inc. ("MEG") and will receive Stockholder
Series A Warrants, Stockholder Series B Warrants and Stockholder Series C
Warrants (the "Warrants"), and upon exercise of such Warrants shares of common
stock and preferred stock of Marvel Enterprises, Inc. (the "Marvel Enterprises
Securities"), in connection with the merger (the "Merger") of MEG with and into
MEG Acquisition Corp., a Delaware corporation and a wholly owned subsidiary of
Marvel Enterprises, Inc. The undersigned acknowledges that the undersigned may
be deemed an "affiliate" of MEG within the meaning of Rule 145 ("Rule 145")
promulgated under the Securities Act of 1933, as amended (the "Act"), although
nothing contained herein should be construed as an admission of such fact.
If, in fact, the undersigned were an affiliate under the Act, the
undersigned's ability to sell, assign or transfer the Marvel Enterprises
Securities received in exchange for MEG Common Stock pursuant to the Merger
might be restricted unless the securities involved in such transaction were
registered under the Act or an exemption from such registration were available.
The undersigned understands that such exemptions are limited and the undersigned
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has obtained advice of counsel as to the nature and conditions of such
exemptions, including information with respect to the applicability to the sale
of such securities of Rules 144 and 145(d) promulgated under the Act.
The undersigned hereby covenants with Marvel Enterprises, Inc. that
the undersigned will not offer to sell, assign, transfer or otherwise dispose of
any of the Marvel Enterprises Securities received in exchange for shares of MEG
Common Stock pursuant to the Merger except (i) pursuant to an effective
Registration Statement under the Act, (ii) in compliance with Rule 145 under the
Act or (iii) in a transaction which does not require registration under the Act.
In the event of a sale or other disposition pursuant to Rule 145, the
undersigned will supply Marvel Enterprises, Inc. with evidence of compliance
with such Rule, in the form of a letter in the form of Exhibit A hereto and an
opinion, in form and substance reasonably acceptable to Marvel Enterprises,
Inc., from independent counsel reasonably satisfactory to Marvel Enterprises,
Inc. The undersigned understands that Marvel Enterprises, Inc. may instruct its
transfer agent to withhold the transfer of any securities disposed of by the
undersigned except in compliance with this letter. The undersigned acknowledges
and agrees that appropriate legends will be placed on certificates representing
Marvel Enterprises Securities received by the undersigned in the Merger or held
by a transferee thereof, which legends will be removed by delivery of substitute
certificates upon receipt of an opinion in form and substance reasonably
satisfactory to Marvel Enterprises, Inc. from independent counsel reasonably
satisfactory to Marvel Enterprises, Inc. to the effect that such legends are no
longer required for purposes of the Act.
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The undersigned acknowledges that (i) the undersigned has carefully
read this letter and understands the requirements hereof and the limitations
imposed upon the distribution, sale, transfer or other disposition of Marvel
Enterprises Securities and (ii) the receipt by Marvel Enterprises, Inc. of this
letter is an inducement and a condition to Marvel Enterprises, Inc.'s
obligations to consummate the Merger.
Very truly yours,
Dated: ____________________
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EXHIBIT A to Rule 145 Letter
[DATE]
Marvel Enterprises, Inc.
685 Third Avenue
New York, NY 10017
Gentlemen:
On ___________, I sold ________ Stockholder Series A Warrants,
________ Stockholder Series B Warrants, _________ Stockholder Series C Warrants,
_____ shares of common stock, par value $.01 per share and/or ____________
shares of preferred stock, par value $.01 per share ("Marvel Enterprises
Securities"), of Marvel Enterprises, Inc. (the "Company") which I received
pursuant to the merger of Marvel Entertainment Group, Inc. with and into MEG
Acquisition Corp., a wholly owned subsidiary of the Company.
Based upon the most recent report or statement filed by the Company
with the Securities and Exchange Commission, the Marvel Enterprises Securities
sold by me were within the prescribed limitations set forth in paragraph (e) of
Rule 144 promulgated under the Securities Act of 1933, as amended (the "Act").
I hereby represent that the above-described Marvel Enterprises
Securities were sold in "brokers' transactions" within the meaning of Section
4(4) of the Act or in transactions directly with a "market maker" as that term
is defined in Section (3)(a)(38) of the Securities Exchange Act of 1934, as
amended. I further represent that I have not solicited or arranged for the
solicitation of orders to buy the above-described Marvel Enterprises Securities,
and that I have not made any payment in connection with the offer or sale of
such shares to any person other than to the broker who executed the order in
respect of such sale.
Very truly yours,
639604.12
C-4
EXHIBIT 4.1
RESTATED CERTIFICATE OF INCORPORATION
OF
TOY BIZ, INC.
Toy Biz, Inc., a corporation (the "Corporation") organized and existing
under the General Corporation Law of the State of Delaware (the "GCL"), does
hereby certify as follows:
1. The present name of the Corporation is Toy Biz, Inc. The Corporation
was originally incorporated under the name "Toy Biz Acquisition, Inc.," and its
original certificate of incorporation was filed with the office of the Secretary
of State of the State of Delaware on March 18, 1993.
2. This Restated Certificate of Incorporation was duly adopted in
accordance with Sections 242 and 245 of the GCL, after an annual meeting of
stockholders called and held upon notice in accordance with Section 222 of the
GCL and after a vote of stockholders thereat.
3. This Restated Certificate of Incorporation restates and integrates
and further amends the certificate of incorporation of the Corporation, as
heretofore amended, supplemented, and/or restated (the "Certificate of
Incorporation").
4. The text of the Certificate of Incorporation is hereby restated and
integrated and further amended to read in its entirety as follows:
ARTICLE I
NAME
The name of the Corporation is Marvel Enterprises, Inc. (the
"Corporation").
ARTICLE II
REGISTERED OFFICE
The address of the registered office of the Corporation in the State of
Delaware is 1013 Centre Road, in the City of Wilmington, County of New Castle,
and the name of the
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registered agent of the Corporation at such address is The Prentice-Hall
Corporation System, Inc.
ARTICLE III
PURPOSES
The nature of the business or purposes of the Corporation is to engage
in any lawful act or activity for which corporations may be organized under the
GCL.
ARTICLE IV
CAPITAL STRUCTURE
4.1 Authorized Capital Stock. The total number of shares of capital
stock which the Corporation shall have authority to issue is 350,000,000 shares,
consisting of two classes of capital stock:
(a) 250,000,000 shares of common stock, par value $.01 per share (the
"Common Stock"); and
(b) 100,000,000 shares of preferred stock, par value $.01 per share
(the "Preferred Stock") of which 75,000,000 shares shall be designated as shares
of 8% Cumulative Convertible Exchangeable Preferred Stock.
4.2 Reclassification. Upon the filing (the "Effective Time") of this
Restated Certificate of Incorporation pursuant to the GCL, each share of the
Corporation's Class A common stock, $0.01 par value per share, issued and
outstanding immediately prior to the Effective Time (the "Class A Stock") shall
be reclassified as and changed into one validly issued, fully paid, and
non-assessable share of Common Stock authorized by subparagraph 4.1(a) of
Article IV hereof, without any action by the holder thereof (the
"Reclassification"). Each certificate that theretofore represented a share or
shares of Class A Stock shall thereafter represent that number of shares of
Common Stock into which the share or shares of Class A Stock represented by such
certificate shall have been reclassified; provided, however, that each record
holder of a stock certificate or certificates that theretofore represented a
share or shares of Class A Stock shall receive, upon surrender of such
certificate or certificates, a new certificate or certificates evidencing and
representing the number of shares of Common Stock to which such record holder is
entitled pursuant to the foregoing Reclassification.
4.3 Designations, Preferences, etc. The designations, preferences,
powers, and relative, participating, optional, and other rights and the
qualifications, limitations, and
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restrictions thereof, of the capital stock of the Corporation shall be as set
forth in this Certificate of Incorporation.
ARTICLE V
COMMON STOCK
5.1 Dividends. Subject to any preferential or other rights of the
holders of outstanding shares of Preferred Stock, when, as, and if dividends are
declared by the Corporation's Board of Directors in accordance with the
provisions of this Certificate of Incorporation on outstanding shares of Common
Stock, whether payable in cash, in property, or in securities of the
Corporation, the holders of shares of the Common Stock shall be entitled to
share equally in and to receive all such dividends, in accordance with the
number of shares of Common Stock held by each such holder.
5.2 Liquidation Rights. Upon any duly authorized voluntary or any
involuntary liquidation, dissolution, or winding-up of the affairs of the
Corporation, after payment in full or reasonable provision for payment in full
of all claims and obligations of the Corporation, in accordance with Section 281
of the GCL, as the same now exists or may hereafter be amended, or with the
provisions of any successor statute, shall have been made, and subject to any
preferential or other rights of holders of outstanding shares of Preferred
Stock, the holders of shares of Common Stock shall be entitled to share ratably,
in accordance with the number of shares of Common Stock held by each such
holder, in all remaining assets of the Corporation available for distribution
among the holders of Common Stock, whether such assets are capital, surplus, or
earnings. For the purposes of this Paragraph 5.2, neither the consolidation or
merger of the Corporation with or into any other entity or entities, nor the
sale, lease, exchange or transfer by the Corporation of all or any part of its
assets, nor the reduction of the number of authorized shares of the capital
stock or any class or series thereof of the Corporation, shall be deemed to be a
voluntary or involuntary liquidation, dissolution, or winding-up of the
Corporation as those terms are used in this Paragraph 5.2.
5.3 Voting Rights. At each annual or special meeting of stockholders
and for all other purposes, each holder of record of shares of Common Stock on
the relevant record date shall be entitled to one (1) vote for each share of
Common Stock standing in such holder's name on the stock transfer records of the
Corporation. The holders of shares of Common Stock shall not have cumulative
voting rights.
5.4 No Preemptive or Subscription Rights. No holder of shares of Common
Stock shall be entitled to preemptive or subscription rights.
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ARTICLE VI
PREFERRED STOCK
Shares of Preferred Stock may be issued from time to time in one or
more series only as may be determined and authorized in accordance with the
provisions of this Certificate of Incorporation. Subject to the provisions of
this Certificate of Incorporation, the Board of Directors is expressly
authorized, to the fullest extent permitted by law, to fix and alter the powers,
designations, preferences, and relative, optional, participating, and other
rights, and the qualifications, limitations, and restrictions thereof, granted
to or imposed upon any wholly unissued series of Preferred Stock and, unless
otherwise provided in any resolution or resolutions of the Board of Directors
originally fixing the number of shares constituting any such series, to increase
(but not above the total number of authorized shares of Preferred Stock) or
decrease (but not below the number of shares of such series then outstanding)
the number of shares of any such series subsequent to the issue of shares of
that series.
Authorized and unissued shares of any series of Preferred Stock may be
issued with such designations, powers, voting rights, preferences, and relative,
participating, optional and other rights, if any, and such qualifications,
limitations and restrictions thereof, if any, only as may be authorized in
accordance with the provisions of this Certificate of Incorporation prior to the
issuance of any shares of such series of Preferred Stock, including, but not
limited to: (i) the distinctive designation of each series and the number of
shares that will constitute such series; (ii) the voting rights, if any, of
shares of such series and whether the shares of any such series having voting
rights shall have multiple votes per share; (iii) the dividends payable on the
shares of such series, any restriction, limitation, or condition upon the
payment of such dividends, whether dividends shall be cumulative, and the dates
on which dividends are payable; (iv) the prices at which, and the terms and
conditions on which, the shares of such series may be redeemed, if such shares
are redeemable; (v) the purchase or sinking fund provisions, if any, for the
purchase or redemption of shares of such series; (vi) any preferential amount
payable upon shares of such series in the event of the liquidation, dissolution,
or winding-up of the Corporation, or any distribution of its assets; and (vii)
the prices or rates of conversion or exchange at which, and the terms and
conditions on which, the shares of such series are convertible or exchangeable,
if such shares are convertible or exchangeable.
Any and all shares of Preferred Stock issued and for which full
consideration has been paid or delivered shall be deemed fully paid and
non-assessable shares, and the holder thereof shall not be liable for any
further payment thereon.
6.1 8% Cumulative Convertible Exchangeable Preferred Stock. The initial
series of Preferred Stock shall be comprised of 75,000,000 shares and shall be
designated 8% Cumulative Convertible Exchangeable Preferred Stock (the "8%
Preferred Stock").
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The rights, preferences, privileges and restrictions granted to or
imposed upon the 8% Preferred Stock are as follows.
6.2 Dividends and Distributions. (a) The holders of 8% Preferred Stock
shall be entitled to receive, when and as declared by the Board of Directors out
of funds legally available for the purpose, dividends at a rate per annum equal
to 8% of the Liquidation Preference (as defined in Section 6.7) per share of the
8% Preferred Stock payable quarterly on the first business day of January,
April, July and October in each year (each such date being referred to herein as
a "Quarterly Dividend Payment Date"), commencing January 4, 1999. Dividends
shall be payable at the option of the Board of Directors (x) in cash, (y) in
additional shares of 8% Preferred Stock having an aggregate Liquidation
Preference no less than the dividend payment, or (z) in any combination of cash
and additional shares of 8% Preferred Stock valued on such basis. If any
dividend, or portion thereof, is not timely paid in cash, the Board of Directors
will be deemed to have elected to pay the dividend, or such portion, in shares
of 8% Preferred Stock which will be deemed issued for this purpose as of the
Dividend Payment Date applicable to that dividend. So long as any shares of 8%
Preferred Stock are outstanding, the Corporation shall not pay or declare, or
issue by way of any capital reorganization or reclassification, any dividend or
distribution on shares of Common Stock or on any series of capital stock ranking
junior to the 8% Preferred Stock (either as to dividends or upon liquidation,
dissolution or winding up), except (i) Approved Spinoff Distributions (as
defined in this paragraph), (ii) dividends or distributions that are payable
solely in shares of Common Stock or any series of capital stock ranking junior
to the 8% Preferred Stock both as to dividends and upon liquidation, dissolution
or winding up, or (iii) any rights or warrants to subscribe for or purchase
shares described in clause (ii). "Approved Spinoff Distribution" shall mean a
dividend or distribution of shares of stock having a majority of the voting
power of a subsidiary of the Corporation but only if the Corporation receives a
fairness opinion from a nationally recognized investment banking firm to the
effect that the adjustment of the conversion ratio of the 8% Preferred Stock as
a result of such dividend or distribution is fair to the holders of the 8%
Preferred Stock from a financial point of view.
(b) In the case of the original issuance of shares of 8% Preferred
Stock, dividends shall begin to accrue and be cumulative from the date of issue.
In the case of shares of 8% Preferred Stock issued at any other time, dividends
shall begin to accrue and be cumulative from the Quarterly Dividend Payment Date
next preceding the date of issue of such shares to which such dividends have
been paid, unless the date of issue is a Quarterly Dividend Payment Date or is a
date after the Dividend Record Date (as defined below) for the determination of
holders of shares of 8% Preferred Stock entitled to receive a quarterly dividend
and before the Quarterly Dividend Payment Date to which such Dividend Record
Date relates, in either of which events such dividends shall be cumulative from
such Quarterly Dividend Payment Date; provided, however, that if dividends shall
not be paid on such Quarterly Dividend Payment Date, then dividends shall accrue
and be cumulative from the Quarterly Dividend Payment Date to which such
dividends have been paid. Dividends paid on
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the shares of 8% Preferred Stock in an amount less than the total amount of such
dividends at the time accrued and payable on such shares shall be allocated
pro-rata on a share-by-share basis among all such shares at the time
outstanding. The record date (the "Dividend Record Date") for the determination
of holders of 8% Preferred Stock entitled to receive payment of a dividend on
any Quarterly Dividend Payment Date shall be the close of business on the last
day of the month preceding the month in which a Quarterly Dividend Payment Date
occurs.
6.3 Voting Rights. The holders of 8% Preferred Stock shall have the
following voting rights:
(a) Except as otherwise provided herein, each holder of shares of 8%
Preferred Stock shall be entitled to such number of votes for the 8% Preferred
Stock held by him on all matters submitted to a vote of holders of Common Stock
as shall be equal to the largest number of whole shares of Common Stock into
which all of his shares of 8% Preferred Stock are then convertible;
(b) Except as otherwise provided herein or by law, the holders of 8%
Preferred Stock and the holders of Common Stock shall vote together as one class
on all matters submitted to a vote of the Corporation's stockholders;
(c) The Corporation shall not (A) consolidate with or merge into any
other person in any transaction in which the Corporation is not the continuing
or surviving corporation, (B) permit any other person to consolidate with or
merge into the Corporation in any transaction in which the Corporation is the
continuing or surviving person, but the Common Stock is changed into or
exchanged for stock or other securities of any other person or cash or any other
property, (C) transfer all or substantially all of its properties or its assets
to any other person, or (D) exchange the outstanding 8% Preferred Stock for
Subordinated Notes (as defined in Section 7.1 hereof), pursuant to Article VII
hereof, unless such transaction is approved by a majority of the shares of
outstanding 8% Preferred Stock, voting together as a separate class, except that
in the case of a transaction described in subsections (A), (B) or (C) which is
to be consummated prior to October 1, 2001 such approval shall not be required
if each of the following conditions is satisfied with respect to such merger,
consolidation, sale or transfer: (i) the holders of Common Stock will receive
consideration equal to at least $9.625 per share of Common Stock, and (ii) the
holders of 8% Preferred Stock will receive (x) the same consideration such
holders would have received had such holders converted their 8% Preferred Stock
to Common Stock immediately prior to consummation of the merger or
consolidation, plus (y) an amount equal to the present value of the amount of
dividends such holders would have been entitled to receive on their shares of 8%
Preferred Stock if such shares remained outstanding until October 1, 2001,
discounted at a discount rate of 10% per annum, compounded quarterly.
6.4 Certain Restrictions. So long as any shares of 8% Preferred Stock
are outstanding, the Corporation shall not:
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(a) redeem or purchase or otherwise acquire for consideration any stock
ranking junior to or on a parity with (either as to dividends or upon
liquidation, dissolution or winding up) the 8% Preferred Stock;
(b) permit any subsidiary of the Corporation to purchase or otherwise
acquire for consideration any shares of stock of the Corporation unless the
Corporation could purchase such shares at such time and in such manner; or
(c) without the affirmative vote or consent of holders of at least
two-thirds of the outstanding shares of 8% Preferred Stock voting or consenting
separately as one class, authorize or issue any class or series of stock ranking
(either as to dividends or upon liquidation, dissolution or winding up) senior
to or on parity with the 8% Preferred Stock, or issue any shares of 8% Preferred
Stock other than (i) as contemplated by the Fourth Amended Joint Plan of
Reorganization Proposed by Secured Lenders and the Corporation in the chapter 11
cases of Marvel Entertainment Group, Inc. and certain of its affiliates (the
"Fourth Amended Plan"), including pursuant to the Stockholder Series B Warrants
referred to in the Fourth Amended Plan, or (ii) as dividends on shares of 8%
Preferred Stock.
6.5 Redemption. (a) The Corporation shall redeem all outstanding shares
of 8% Preferred Stock on October 1, 2011 at a price per share equal to the
Liquidation Preference plus an amount equal to all accrued but unpaid dividends
thereon, whether or not declared, to the redemption date.
(b) The Corporation may redeem all, but not less than all, of the
outstanding shares of the 8% Preferred Stock at any time after the October 1,
2001 at a price per share equal to the Liquidation Preference, plus all accrued
but unpaid dividends, whether or not declared, plus, if the redemption date is
not a Quarterly Dividend Payment Date, an amount equal to the annual dividend
per share multiplied by a fraction, the numerator of which is the number of days
from the Quarterly Dividend Payment Date next preceding the date of redemption
to the redemption date and the denominator of which is 365, provided that if the
redemption date occurs after a Dividend Record Date and before the Quarterly
Dividend Payment Date to which that Dividend Record Date relates, the dividend
otherwise payable on that Quarterly Dividend Payment Date shall not be paid by
the Corporation. If the Corporation elects to redeem the outstanding shares of
8% Preferred Stock as provided in this paragraph, the Corporation shall send a
notice of redemption to each holder of the 8% Preferred Stock specifying (i) the
redemption date, which date shall be not less than thirty (30) nor more than
sixty (60) days following the date of mailing of the notice of redemption, and
(ii) the redemption price, including a calculation thereof in reasonable detail.
(c) The following provisions shall apply to any redemption pursuant to
this Section 6.5:
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(i) On the redemption date, the Corporation shall deposit for the pro-
rata benefit of the holders of the shares of the outstanding 8% Preferred Stock
the funds necessary for such redemption with a bank or trust company in the
Borough of Manhattan, The City of New York, having a capital and surplus of at
least $100,000,000. Holders of shares of 8% Preferred Stock shall thereafter
have the right to receive payment of the redemption price for such shares by
surrendering to the Corporation, at its principal office or at such other office
or agency maintained by the Corporation for that purpose, a certificate or
certificates representing the shares of 8% Preferred Stock to the Corporation,
at its principal office or at such other office or agency maintained by the
Corporation for that purpose, a certificate or certificates representing such
shares. Any monies so deposited by the Corporation with a bank or trust company
pursuant to this subparagraph (c)(i) and unclaimed at the end of two years from
the redemption date shall revert to the general funds of the Corporation. After
such reversion, any such bank or trust company shall, upon demand, pay over to
the Corporation such unclaimed amounts and thereupon such bank or trust company
shall be relieved of all responsibility in respect thereof to such holder and
such holder shall look only to the Corporation for the payment of the redemption
price. Any interest accrued on funds so deposited pursuant to this subparagraph
(c)(i) shall be paid from time to time to the Corporation for its own account;
and
(ii) Upon the deposit of funds pursuant to subparagraph (i) in respect
of outstanding shares of the 8% Preferred Stock, notwithstanding that any
certificates for such shares shall not have been surrendered for cancellation,
the shares represented thereby shall no longer be deemed outstanding, the rights
to receive dividends thereon shall cease to accrue from and after the date of
redemption and all rights of the holders of the shares of the 8% Preferred Stock
shall cease and terminate, excepting only the right to receive the redemption
price therefor.
6.6 Reacquired Shares. Any shares of the 8% Preferred Stock redeemed or
purchased or otherwise acquired by the Corporation in any manner whatsoever
shall be retired and canceled promptly after the acquisition thereof. All such
shares shall upon their cancellation become authorized but unissued shares of
Preferred Stock and may be reissued as part of a new series of Preferred Stock
to be created by resolution or resolutions of the Board of Directors, subject to
the conditions or restrictions on issuance set forth herein.
6.7 Liquidation, Dissolution or Winding Up. Upon any liquidation,
dissolution or winding up of the corporation, no distribution shall be made (A)
to the holders of stock ranking junior (upon liquidation, dissolution or winding
up) to the 8% Preferred Stock unless, prior thereto, the holders of 8% Preferred
Stock shall have received $10.00 per share (the "Liquidation Preference"), plus
an amount equal to accrued but unpaid dividends thereon, whether or not
declared, to the date of such payment plus, if the date of such payment is not a
Quarterly Dividend Payment Date, an amount equal to the annual dividend per
share multiplied by a fraction, the numerator of which is the number of days
from the Quarterly Dividend Payment Date next preceding the date of such payment
to the date of such payment
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and the denominator of which is 365, provided that if the date of such payment
is after a Dividend Record Date and before the Quarterly Dividend Payment Date
to which that Dividend Record Date relates, the dividend otherwise payable on
that Quarterly Dividend Payment Date shall not be paid by the Corporation, or
(B) to the holders of stock ranking on a parity (either as to dividends or upon
liquidation, dissolution or winding up) with the 8% Preferred Stock, except
distributions made ratably on the 8% Preferred Stock and all other such parity
stock in proportion to the total amounts to which the holders of all such shares
are entitled upon such liquidation, dissolution or winding up.
6.8 Conversion. Each share of the 8% Preferred Stock may be converted
(an "Optional Conversion") at any time, at the option of the holder thereof,
into shares of Common Stock of the Corporation, on the terms and conditions set
forth below in this Section 6.8, and may be converted at the option of the
Corporation as provided in paragraph (g) of this Section 6.8.
(a) Subject to the provisions for adjustment hereinafter set forth,
each share of the 8% Preferred Stock shall be convertible in the manner
hereinafter set forth, into 1.039 fully paid and nonassessable shares of Common
Stock of the Corporation. Upon conversion of any shares of 8% Preferred Stock,
the holder thereof shall be entitled to receive all accrued but unpaid
dividends, whether or not declared, on the shares so converted plus, if the
conversion date is not a Quarterly Dividend Payment Date, an amount equal to the
annual dividend per share multiplied by a fraction, the numerator of which is
the number of days from the Quarterly Dividend Payment Date next preceding the
date of conversion to the conversion date and the denominator of which is 365
(the amount of any such unpaid dividends and the other amount being payable in
such number of shares of Common Stock which would be issuable upon conversion of
shares of 8% Preferred Stock having an aggregate Liquidation Preference equal to
such amount), provided that if the conversion date is after a Dividend Record
Date and before the Quarterly Dividend Payment Date to which that Dividend
Record Date relates, the dividend otherwise payable on that Quarterly Dividend
Payment Date in respect of the shares so converted shall not be paid by the
Corporation.
(b) The number of shares of Common Stock into which each share of the
8% Preferred Stock is convertible shall be adjusted from time to time as
follows:
(i) In case the Corporation shall at any time or from time to time
declare or pay any dividend on its Common Stock payable in its Common Stock or
effect a subdivision of the outstanding shares of its Common Stock into a
greater number of shares of Common Stock (by reclassification or otherwise than
by payment of a dividend in its Common Stock), or combine or consolidate the
outstanding shares of its Common Stock into a lesser number of shares of Common
Stock, by reclassification or otherwise, or the Corporation shall otherwise
effect a capital reorganization or reclassification of the Common Stock
permitted by this Article VI, then, and in each such case, the number of shares
of Common Stock into which each share of the 8% Preferred Stock is convertible
shall be adjusted so that the holder
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of each share thereof shall be entitled to receive, upon the conversion thereof,
the number of shares of Common Stock or number and kind of other securities
which the holder would have owned after giving effect to such event had such
shares been converted immediately prior to the occurrence of such event. An
adjustment made pursuant to this subparagraph (b)(i) shall become effective in
the case of any such dividend, immediately after the close of business on the
record date for the determination of holders of Common Stock entitled to receive
such dividend, and otherwise at the close of business on the day immediately
prior to the day upon which such corporate action becomes effective;
(ii) In case the Corporation at any time or from time to time shall
issue rights or warrants to all holders of shares of its Common Stock entitling
them (for a period expiring within 45 calendar days after the date of issuance)
to subscribe for or purchase shares of its Common Stock at a price per share (or
having a conversion price per share) less than the Current Market Price (as
defined in paragraph (c) below) per share of Common Stock on the record date
fixed for the determination of shareholders entitled to receive such right or
warrant, then, and in each such case (unless the holders of shares of the 8%
Preferred Stock shall be permitted to subscribe for or purchase shares of Common
Stock on the same basis as though such shares of the 8% Preferred Stock had been
converted into shares of Common Stock immediately prior to the close of business
on such record date), the number of shares of Common Stock into which each share
of the 8% Preferred Stock is convertible shall be adjusted so that the holder of
each share thereof shall be entitled to receive, upon the conversion thereof,
the number of shares of Common Stock determined by multiplying (a) the number of
shares of Common Stock into which such share was convertible immediately prior
to such event by (b) a fraction, the numerator of which shall be the sum of (I)
the number of shares of Common Stock outstanding on such record date plus (II)
the number of additional shares of Common Stock offered for subscription or
purchase, and the denominator of which shall be the sum of (I) the number of
shares of Common Stock outstanding on such record date plus (II) the number of
shares of Common Stock which the aggregate consideration receivable by the
Corporation for the total number of shares of Common Stock so offered would
purchase at such Current Market Price on such record date. For purposes of this
subparagraph (b)(ii), the aggregate consideration receivable by the Corporation
in connection with the issuance of rights of warrants to subscribe for or
purchase securities convertible into Common Stock shall be deemed to be equal to
the sum of the aggregate offering price of such securities plus the minimum
aggregate amount, if any, payable upon conversion of such securities into shares
of Common Stock. An adjustment made pursuant to this subparagraph (b)(ii) shall
be made upon the issuance of any such rights or warrants and shall be effective
retroactively immediately after the close of business on the record date fixed
for the determination of shareholders entitled to receive such rights or
warrants. For purposes of this subparagraph (b)(ii) the granting of the right to
purchase Common Stock (whether treasury shares or newly issued shares) pursuant
to any plan providing for the reinvestment of dividends or interest payable on
securities of the Corporation, and the investment of additional optional
amounts, in shares of Common Stock, in any such case at a price per share of not
less than 95% of the current market price (determined as provided in such plans)
per share of Common Stock, shall not be
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deemed to constitute an issue of rights or warrants by the Corporation within
the meaning of this subparagraph; and
(iii) In case the Corporation at any time or from time to time shall
declare, order, pay or make a dividend or other distribution of any kind or
nature whatsoever which is permitted to be made pursuant to this Article VI on
its Common Stock, other than a dividend payable in shares of the Corporation's
Common Stock or rights or warrants to subscribe for shares of the Corporation's
Common Stock covered under (ii) herein, then, and in each such case (unless the
holders of shares of the 8% Preferred Stock shall receive any such dividend or
other distribution on the same basis as though such shares of the 8% Preferred
Stock had been converted into shares of Common Stock immediately prior to the
close of business on the record date for the determination of holders of Common
Stock entitled to receive such dividend or other distribution), the number of
shares of Common Stock into which each share of the 8% Preferred Stock is
convertible shall be adjusted so that the holder of each share thereof shall be
entitled to receive, upon the conversion thereof, the number of shares of Common
Stock determined by multiplying (a) the number of shares of Common Stock into
which such share was convertible immediately prior to the close of business on
the record date fixed for the determination of holders of Common Stock entitled
to receive such dividend or distribution by (b) a fraction, the numerator of
which shall be the Current Market Price (as defined in paragraph (c) below) per
share of Common Stock on the record date fixed for the determination of holders
of Common Stock entitled to receive such dividend or distribution, and the
denominator of which shall be such Current Market Price per share of Common
Stock less the fair value of such dividend or distribution (as determined in
good faith by the Board of Directors of the Corporation, a certified resolution
with respect to which shall be filed with each transfer agent for the 8%
Preferred Stock) payable in respect of one share of Common Stock. An adjustment
made pursuant to this subparagraph (b)(iii) shall be made upon the opening of
business on the next business day following the date on which any such dividend
or distribution is made and shall be effective retroactively immediately after
the close of business on the record date fixed for the determination of holders
of Common Stock entitled to receive such dividend or distribution;
(c) The term "Current Market Price" shall mean, as applied to any class
of stock on any date, the average of the daily "Closing Prices" (as hereinafter
defined) for the 20 consecutive "Trading Days" (as hereinafter defined)
immediately prior to the date in question; provided, however, that in the event
that the Current Market Price per share of Common Stock is determined during a
period which includes the ex-dividend date for a dividend or distribution by the
Corporation on its Common Stock payable in shares of its Common Stock or the
record date for a stock split, reverse stock split, recapitalization or similar
corporate transaction, then, and in each such case, the Current Market Price
shall be appropriately adjusted to reflect the Current Market Price per Common
Stock equivalent. The term "Closing Price" on any day shall mean the last sales
price, regular way, per share of such stock on such day, or, if no such sale
takes place on such day, the average of the closing bid and asked prices,
regular way, as reported in the principal consolidation transaction reporting
639422.31
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system with respect to securities listed or admitted to trading on the New York
Stock Exchange or, if shares of such stock are not listed or admitted to trading
on the New York Stock Exchange, as reported in the principal consolidation
transaction reporting system with respect to securities listed on the principal
national securities exchange on which the shares of such stock are listed or
admitted to trading, including for these purposes the Nasdaq Stock Market
National Market System, or, if the shares of such stock are not listed or
admitted to trading on any national securities exchange, the average of the high
bid and low asked prices in the over-the-counter market, as reported by the
National Association of Securities Dealers Automated Quotation System ("NASDAQ")
or other similar system then in use or, if such bid and ask prices are not
reported on any such system, the fair market value of a share of Common Stock as
determined in good faith by the Board of Directors of the Corporation. The term
"Trading Day" shall mean a day on which the principal national securities
exchange on which shares of such stock are listed or admitted to trading is open
for the transaction of business or, if the shares of such stock are not listed
or admitted to trading on any national securities exchange, a Monday, Tuesday,
Wednesday, Thursday or Friday on which banking institutions in the Borough of
Manhattan, City and State of New York, are not authorized or obligated by law or
executive order to close (a "Business Day") and on which high bid and low asked
prices are quoted by NASDAQ or, if shares of such stock are not traded on
NASDAQ, by such other similar system or if shares of such stock are not traded
on any such system, a Business Day;
(d) If any adjustment in the number of shares of Common Stock into
which each share of the 8% Preferred Stock may be converted required pursuant to
this Section 6.8 would result in an increase or decrease of less than 1% in the
number of shares of Common Stock into which each share of the 8% Preferred Stock
is then convertible, the amount of any such adjustment shall be carried forward
and adjustment with respect thereto shall be made at the time of and together
with any subsequent adjustment which, together with such amount and any other
amount or amounts so carried forward, shall aggregate at least 1% of the number
of shares of Common Stock into which each share of the 8% Preferred Stock is
then convertible. All calculations under this Section 6.8 shall be made to the
nearest one-hundredth of a share;
(e) The Board of Directors may, but shall not be required to, increase
the number of shares of Common Stock into which each share of the 8% Preferred
Stock may be converted, in addition to the adjustments required by Section
6.8(b), as shall be determined by it (as evidenced by a resolution of the Board
of Directors) to be advisable in order to avoid or diminish any income deemed to
be received by any holder of the Common Stock or 8% Preferred Stock resulting
from any dividend or distribution of stock or issuance of rights or warrants to
purchase or subscribe for stock or from any event treated as such for federal
income tax purposes;
(f) The holder of any shares of the 8% Preferred Stock electing to make
an Optional Conversion shall do so by surrendering for such purpose to the
Corporation, at its principal office or at such other office or agency
maintained by the Corporation for that purpose, a certificate or certificates
representing the shares of 8% Preferred Stock to be
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converted accompanied by a written notice stating that such holder elects to
convert all or a specified whole number of such shares in accordance with the
provisions of this Section 6.8(f) and specifying the name or names in which such
holder wishes the certificate or certificates for shares of Common Stock to be
issued. In case such notice shall specify a name or names other than that of
such holder, such notice shall be accompanied by payment of all transfer taxes
payable upon the issuance of shares of Common Stock in such name or names. As
promptly as practicable, and in any event within five business days after the
surrender of such certificates and the receipt of such notice relating thereto
and, if applicable, payment of all transfer taxes, the Corporation shall deliver
or cause to be delivered (i) certificates representing the number of validly
issued, fully paid and nonassessable shares Common Stock of the Corporation to
which the holder of the 8% Preferred Stock so converted shall be entitled and
(ii) if less than the full number of shares of the 8% Preferred Stock evidenced
by the surrendered certificate or certificates are being converted, a new
certificate or certificates, of like tenor, for the number of shares evidenced
by such surrendered certificate or certificates less the number of shares
converted. Such conversions shall be deemed to have been made at the close of
business on the date of giving of such notice and of such surrender of the
certificate or certificates representing the shares of the 8% Preferred Stock to
be converted so that the rights of the holder thereof shall cease except for the
right to receive Common Stock of the Corporation in accordance herewith, and the
converting holder shall be treated for all purposes as having become the record
holder of such Common Stock of the Corporation at such time;
(g) The Corporation shall have the right, from time to time, on or
after October 1, 2001, in its sole discretion, to convert shares of 8% Preferred
Stock in tranches having an aggregate Liquidation Preference of up to $50
million on each occasion, into shares of Common Stock, as follows:
(i) If at any time on or after October 1, 2001 the Common Stock is (x)
listed on a national securities exchange or included for quotation on the
National Market System of the NASDAQ Stock Market and (y) the Closing Price of
the Common Stock on the National Market System of the NASDAQ Stock Market or on
such national securities exchange exceeds $11.55 per share (the "Test Amount")
for each Trading Day (as defined in paragraph (c) above) during a Testing Period
(as defined below), the Corporation shall have the right, in its sole
discretion, to convert issued and outstanding shares of 8% Preferred Stock into
shares of Common Stock, which conversion shall become effective as of a date no
earlier than ten (10) days and no later than forty (40) days following the end
of the relevant Testing Period, provided that the Corporation shall not have the
right to convert 8% Preferred Stock having an aggregate principal amount of more
than $50 million with respect to any single Testing Period. Any such conversion
compelled by the Corporation shall be referred to herein as a "Forced
Conversion." The Test Amount shall be appropriately adjusted in connection with
any stock split, stock dividend, reverse stock split, recapitalization or
similar corporate transaction.
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(ii) The shares of each holder of 8% Preferred Stock shall be converted
on a pro rata basis on any Forced Conversion. The transfer agent shall give
holders of the 8% Preferred Stock written notice of the Forced Conversion at
least ten (10) days prior to the effective date thereof, which notice shall
specify (A) the effective date , (B) the Testing Period utilized, (C) the
Aggregate Liquidation Amount of the 8% Preferred Stock to be converted, (D) the
pro ration factor, if less than all outstanding shares of 8% Preferred Stock are
to be converted and (E) the number of shares of Common Stock into which each
share of 8% Preferred Stock shall be converted pursuant to the Forced
Conversion. Any period of ten (10) consecutive Trading Days that does not
precede or include a previously announced effective date of a Forced Conversion
shall be referred to herein as a "Testing Period."
(iii) Following a Forced Conversion, the holders of shares of 8%
Preferred Stock shall have the right to receive certificates representing the
shares of Common Stock into which such shares of 8% Preferred Stock have been
converted by surrendering to the Corporation, at its principal office or at such
other office or agency maintained by the Corporation for that purpose, a
certificate or certificates representing the applicable shares of 8% Preferred
Stock. As promptly as practicable, and in any event within five business days
after the surrender of such certificates, the Corporation shall deliver or cause
to be delivered certificates representing the number of validly issued, fully
paid and nonassessable shares Common Stock of the Corporation to which the
holder of the 8% Preferred Stock so converted shall be entitled. Upon a Forced
Conversion, the rights of the holders of 8% Preferred Stock shall cease except
for the right to receive Common Stock of the Corporation in accordance herewith,
and the holder shall be treated for all purposes as having become the record
holder of such Common Stock of the Corporation at such time;
(iv) Upon the Forced Conversion of the 8% Preferred Stock, the holders
thereof shall be entitled to receive payment of all accrued but unpaid
dividends, whether or not declared, plus, if the conversion date is not a
Quarterly Dividend Payment Date, an amount equal to the annual dividend per
share multiplied by a fraction, the numerator of which is the number of days
from the Quarterly Dividend Payment Date next preceding the date of conversion
to the conversion date and the denominator of which is 365 (the amount of such
unpaid dividends and the other amount being payable in such number of shares of
Common Stock which would be issuable upon conversion of shares of 8% Preferred
Stock having an aggregate Liquidation Preference equal to such amount) in
respect of the shares so converted, provided that if the conversion date is
after a Dividend Record Date and before the Quarterly Dividend Payment Date to
which that Dividend Record Date relates, the dividend otherwise payable on that
Quarterly Dividend Payment Date in respect of the shares so converted shall not
be paid by the Corporation.
(h) In connection with the conversion of any shares of the 8% Preferred
Stock, no fractions of shares of Common Stock shall be issued, but the
Corporation shall pay a cash adjustment in respect of such fractional interest
in an amount equal to the market value of such fractional interest. In such
event, the market value of a share of Common Stock of the
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Corporation shall be the Closing Price of such shares on the last business day
on which such shares were traded immediately preceding the date upon which such
shares of 8% Preferred Stock are deemed to have been converted.
(i) The Corporation shall at all times reserve and keep available out
of its authorized Common Stock the full number of shares of Common Stock of the
Corporation issuable upon the conversion of all outstanding shares of the 8%
Preferred Stock.
6.9 Adjustments For Consolidation, Merger, etc. In case (A) the
Corporation shall consolidate with or merge into any other person and shall not
be the continuing or surviving corporation of such consolidation or merger, (B)
any other person shall consolidate with or merge into the Corporation and the
Corporation shall be the continuing or surviving person, but, in connection with
such consolidation or merger, the Common Stock shall be changed into or
exchanged for stock or other securities of any other person or cash or any other
property, or (C) the Corporation shall transfer all or substantially all of its
properties or its assets to any other person, then, and in each such case, each
outstanding share of 8% Preferred Stock shall, upon the effective date of such
event, be convertible into the number of shares of stock or other securities or
cash or other property which the holder would have owned after giving effect to
such event had such share been converted pursuant to Section 6.8 immediately
prior to the occurrence of such event, plus any additional shares of stock or
other securities or cash or other property payable by the terms of such event to
the holders of shares 8% Preferred Stock.
6.10 Reports as to Adjustments. Whenever the number of shares of Common
Stock into which the shares of the 8% Preferred Stock are convertible is
adjusted as provided in Section 6.8, the Corporation shall (A) promptly compute
such adjustment and furnish to each transfer agent for the 8% Preferred Stock a
certificate, signed by a principal financial officer of the Corporation, setting
forth the number of shares of Common Stock, or the number and kind of any other
securities, into which each share of the 8% Preferred Stock is convertible as a
result of such adjustment, a brief statement of the facts requiring such
adjustment and the computation thereof and when such adjustment will become
effective and (B) promptly mail to the holders of record of the outstanding
shares of the 8% Preferred Stock a notice stating that the number of shares into
which the shares of 8% Preferred Stock are convertible has been adjusted and
setting forth the new number of shares into which each share of the 8% Preferred
Stock is convertible as a result of such adjustment and when such adjustment
will become effective and the basis for such adjustment in appropriate detail.
6.11 Notices of Corporate Action. In the event of:
(a) any taking by the Corporation of a record of the holders of its
Common Stock for the purpose of determining the holders thereof who are entitled
to receive any distribution or any right or warrant permitted to be distributed
or given to the holder of
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Common Stock in accordance with this Article VI (other than a dividend payable
solely in shares of Common Stock).
(b) any capital reorganization, reclassification or recapitalization of
the Corporation (other than a subdivision or combination of the outstanding
shares of its Common Stock), any consolidation or merger involving the
Corporation and any other person (other than a consolidation or merger with a
wholly-owned subsidiary of the Corporation, provided that the Corporation is the
surviving or the continuing corporation and no change occurs in the Common
Stock), or any transfer of all or substantially all the assets of the
Corporation to any other person; or
(c) any voluntary or involuntary dissolution, liquidation or winding up
of the Corporation;
then, and in each such case, the Corporation shall cause to be mailed to each
transfer agent for the shares of the 8% Preferred Stock and to the holders of
record of the outstanding shares of the 8% Preferred Stock, at least 20 days (or
10 days in case of any event specified in clause (a) above) prior to the
applicable record or effective date hereinafter specified, a notice stating (i)
the date or expected date on which any such record is to be taken for the
purpose of such dividend, distribution or right and the amount and character of
such dividend, distribution or right or (ii) the date or expected date on which
any such reorganization, reclassification, recapitalization, consolidation,
merger, transfer, dissolution, liquidation or winding up is to take place and
the time, if any such time is to be fixed, as of which the holders of record of
Common Stock shall be entitled to exchange their shares of Common Stock for the
securities or other property deliverable upon such reorganization,
reclassification, recapitalization, consolidation, merger, transfer,
dissolution, liquidation or winding up. Such notice shall also state whether
such transaction will result in any adjustment in the number of shares of Common
Stock, or kind and number of any other securities, into which shares of the 8%
Preferred Stock are convertible and, if so, shall state the new number of shares
of Common Stock, or kind and number of any other securities, into which each
share of the 8% Preferred Stock shall be convertible upon such adjustment and
when such adjustment will become effective. The failure to give any notice
required by this Section 6.11, or any defect therein, shall not affect the
legality or validity of any such action requiring such notice.
ARTICLE VII
NOTE EXCHANGE
7.1 Right to Exchange 8% Preferred Stock for Subordinated Notes.
Subject to the terms and conditions set forth herein, including the approval of
the holders of 8% Preferred Stock as provided in Section 6.3(c) hereof, the
Corporation, as note issuer (the "Note Issuer"), may, at its option at any time
after April 1, 2000, exchange all, but not less
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than all, of the outstanding 8% Preferred Stock for subordinated notes (the
"Subordinated Notes") of the Note Issuer (the "Note Exchange"). Pursuant to the
Note Exchange, each share of 8% Preferred Stock shall be exchanged for a
Subordinated Note in an aggregate principal amount equal to the sum of (i) the
liquidation preference of the 8% Preferred Stock to be exchanged, as set forth
in Article VI hereof, and (ii) any accrued and unpaid dividends on such 8%
Preferred Stock. Notwithstanding the foregoing, the Subordinated Notes will be
in registered form without coupons in denominations of $100 (or such greater
amount as may be required by applicable State or Federal law) and integral
multiples of $100 in excess thereof and, in connection with the exchange of any
shares of the 8% Preferred Stock, no fractions of Subordinated Notes shall be
issued. If any fraction of a Subordinated Note would be issuable on the exchange
of the 8% Preferred Stock for Subordinated Notes, the Corporation shall direct
and deposit with the Paying Agent an amount sufficient to pay an amount in cash
for such fractional interests.
7.2 Terms of the Subordinated Notes.
(a) The Subordinated Notes shall be issued under an indenture
substantially in the form attached hereto as Exhibit A (the "Indenture"). The
holders of the Subordinated Notes shall be deemed to be stockholders, and the
Subordinated Notes shall be deemed to be shares of stock, for the purpose of any
provision of the Delaware General Corporation Law or this Restated Certificate
of Incorporation, which requires the vote of stockholders as a prerequisite to
any corporate action. The holders of the Subordinated Notes shall have the
voting rights set forth in Section 2.05 of the Indenture, which terms are
incorporated herein by reference.
(b) The annual rate of interest on the Subordinated Notes shall be 8%,
payable in the manner set forth in the form of Subordinated Note included as
Exhibit 1 to the Indenture from and after the Dividend Payment Date next
preceding the Note Exchange Date (as hereafter defined) or if the Note Exchange
Date is a Dividend Payment Date, from such date. The principal amount of the
Subordinated Notes shall be equal to the sum of (i) the liquidation preference
of the 8% Preferred Stock to be exchanged, as set forth in Article VI hereof,
and (ii) any accrued and unpaid dividends on such 8% Preferred Stock. The Notes
shall mature on October 1, 2011.
7.3 Manner of Exchange.
(a) The Note Issuer may elect to consummate the Note Exchange at any
time. The Note Issuer shall elect to consummate the Note Exchange by mailing to
each holder of record of the 8% Preferred Stock (a "Holder") a notice of
exchange (the "Note Exchange Notice") at such Holder's address as it appears on
the books of the Corporation. The Note Exchange Notice shall specify (x) a date
not less than 30 days nor more than 60 days following the date of the Note
Exchange Notice on which the Note Exchange is to be consummated (the
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"Note Exchange Date"), (y) the procedures for exchanging certificates
representing 8% Preferred Stock for certificates representing Subordinated Notes
and (z) the number of shares of 8% Preferred Stock to be exchanged and, if
applicable, each Holder's pro rata portion of shares to be exchanged.
(b) As of 5:00 p.m., New York City time, on the Note Exchange Date, the
8% Preferred Stock shall no longer be deemed to be outstanding and shall be
retired and all rights with respect to such shares, including, without
limitation, the rights, if any, to receive dividends and to receive notices and
to vote or consent (except for the right of the Holders to receive the
Subordinated Notes to which such Holder is entitled pursuant to the Note
Exchange) shall forthwith cease.
(c) Upon the exchange of shares of 8% Preferred Stock into Subordinated
Notes, as provided herein, the Note Issuer will pay any documentary, stamp or
similar issue or transfer taxes which may be due with respect to the transfer
and exchange of such exchanged shares, if any; provided, however, that if the
Subordinated Notes into which the shares of 8% Preferred Stock are exchangeable
are to be issued in the name of any person other than the Holder of the shares
of 8% Preferred Stock, the amount of any transfer taxes (whether imposed on the
Note Issuer, the holder or such other person) payable on account of the transfer
to such person will be payable by the Holder.
7.4 Selection of Indenture Trustee. Prior to the Note Exchange Date,
the Corporation shall appoint the person or entity to serve as trustee under the
Indenture (the "Indenture Trustee"). The Indenture Trustee shall satisfy the
requirements of Section 310(a)(1) of the Trust Indenture Act of 1939, as
amended, and shall have a combined capital and surplus of at least $100 million
as set forth in its most recent published annual report of condition.
7.5 Conditions to Note Exchange.
(a) It will be a condition to the Note Exchange that: (i) the
Subordinated Notes have been registered under the Securities Act of 1933, unless
an exemption from registration is available, (ii) the Indenture pursuant to
which the Subordinated Notes are to be issued has been executed and delivered by
the Note Issuer and the Indenture Trustee, (iii) the Indenture Trustee, for the
third party benefit of each holder of shares of 8% Preferred Stock on the Note
Exchange Date, shall have received an opinion from outside counsel with a
national reputation in corporate and securities and tax law matters (which may
be Battle Fowler LLP) to the effect that the Subordinated Notes will, when
issued in accordance with the terms of the Indenture, be legal, valid, binding
and enforceable obligations of the Note Issuer and that each holder of shares of
8% Preferred Stock will not recognize income, for federal income tax purposes,
in excess of (a) the principal amount of the Subordinated Notes to be issued to
each such holder minus (b) the sum of the amount paid by the initial holder for
the shares of 8% Preferred Stock exchanged therefor and the amount, if any, of
taxable income
639422.31
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previously recognized by such holder and successors due to its ownership of the
8% Preferred Stock exchanged therefor other than with respect to cash dividends,
(iv) immediately after the Note Exchange, no default or event of default will
exist under the Indenture, (v) the Indenture has been qualified under the Trust
Indenture Act of 1939, as amended, and (vi) the Subordinated Notes shall have
been listed on a national securities exchange or on the National Market System
of the NASDAQ stock market.
(b) The Note Exchange shall comply with all applicable federal and
state securities and blue sky laws and, subject to Section 9.2, the provisions
of this Article VII may be modified by the Note Issuer without the approval of
the holders of the 8% Preferred Stock in order to effect such compliance.
(c) The Note Issuer may take any action necessary, including without
limitation, amending or modifying the Indenture prior to the Note Exchange, in
order to qualify the Indenture under the Trust Indenture Act of 1939, as
amended, and as in effect from time to time.
ARTICLE VIII
MANAGEMENT OF THE CORPORATION
8.1 Except as otherwise provided herein, the business and affairs of
the Corporation shall be managed by or under the direction of the Board of
Directors. The number of Directors which shall constitute the entire Board of
Directors shall be eleven (11).
8.2 The Board of Directors shall have the power to adopt, amend, and
repeal the By-Laws of the Corporation.
8.3 The stockholders and directors shall have the power, if the By-Laws
so provide, to hold their respective meetings within or without the State of
Delaware and may (except as otherwise required by law) keep the Corporation's
books outside the State of Delaware, at such places as from time to time may be
designated by the By-Laws or the Board of Directors.
8.4 Election of directors need not be by written ballot unless the
By-laws so provide.
8.5 In addition to the powers and authority hereinbefore conferred upon
them, the directors are hereby empowered to exercise all such powers and do all
such acts and things as may be exercised or done by the Corporation, subject,
nevertheless, to the provisions of the GCL, this Certificate of Incorporation,
and the By-Laws; provided, however, that no
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By-Laws hereafter adopted shall invalidate any prior act of the directors which
would have been valid if such By-Laws had not been adopted.
ARTICLE IX
AMENDMENTS
9.1 The Corporation reserves the right to amend or repeal any
provisions contained in this Certificate of Incorporation from time to time and
at any time in the manner now or hereafter prescribed in this Certificate of
Incorporation or the By-Laws or required by the laws of the State of Delaware,
and all rights herein conferred upon stockholders are granted subject to such
reservation.
9.2 So long as any shares of the 8% Preferred Stock are outstanding,
without the affirmative vote or consent of holders of at least two-thirds of the
outstanding shares of the 8% Preferred Stock voting or consenting separately as
one class, no amendment may be made to (i) Article VI of this Certificate of
Incorporation which would increase or decrease the aggregate number of
authorized shares of the 8% Preferred Stock, increase or decrease the par value
of the shares of such class, make any change that adversely affects the
conversion or voting rights of the 8% Preferred Stock or alter or change any
other powers, preferences, or special rights of the shares of such class so as
to affect them adversely, (ii) Article VII hereof which would adversely affect
the rights of holders of 8% Preferred Stock or of Subordinated Notes, (iii) the
Indenture which is attached hereto as Exhibit A which would adversely affect the
rights of holders of Subordinated Notes or, (iv) this Section 9.2; provided,
however, as long as any shares of 8% Preferred Stock are outstanding, without
the unanimous vote or consent of holders of the outstanding 8% Preferred Stock
voting or consenting separately as one class, no amendment may be made to (i)
reduce the rate of or change the time of payment of dividends on the 8%
Preferred Stock, (ii) change the form of payment of any amounts payable in
respect of the 8% Preferred Stock, (iii) reduce the Liquidation Preference of
the 8% Preferred Stock, (iv) change the redemption date, or reduce the
redemption price, specified in Section 6.5(a) for the 8% Preferred Stock, or (v)
adversely effect the right to convert the 8% Preferred Stock into shares of
Common Stock as provided in Section 6.8.
ARTICLE X
LIMITATION OF LIABILITY OF DIRECTORS
No director of the Corporation shall be personally liable to the
Corporation or its stockholders for monetary damages for breach of fiduciary
duty as a director; provided, that the foregoing clause shall not eliminate or
limit the liability of a director (i) for any breach of the director's duty of
loyalty to the Corporation or its stockholders, (ii) for acts or omissions
639422.31
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not in good faith or that involve intentional misconduct or a knowing violation
of law, (iii) under Section 174 of the GCL, or (iv) for any transaction from
which the director derived an improper personal benefit. For purposes of the
prior sentence, the term "damages" shall, to the extent permitted by law,
include without limitation, any judgment, fine, amount paid in settlement,
penalty, punitive damages, excise or other tax assessed with respect to an
employee benefit plan, or expense of any nature (including, without limitation,
counsel fees and disbursements). Each person who serves as a director of the
Corporation while this Article X is in effect shall be deemed to be doing so in
reliance on the provisions of this Article X. Any repeal or modification of this
Article X shall not adversely affect any right or protection of a director
existing prior to such repeal or modification. The provisions of this Article X
are cumulative and shall be in addition to and independent of any and all other
limitations on or eliminations of the liabilities of directors of the
Corporation, as such, whether such limitations or eliminations arise under or
are created by any law, rule, regulation, by-law, agreement, vote of
stockholders or directors, or otherwise.
ARTICLE XI
ISSUANCE OF
NONVOTING EQUITY SECURITIES
The Corporation will not issue nonvoting equity securities to the
extent prohibited by Section 1123 of the United States Bankruptcy Code;
provided, however, that this Article XI (a) will have no further force and
effect beyond that required under Section 1123 of the United States Bankruptcy
Code, (b) will have such force and effect, if any, only for so long as such
Section 1123 is in effect and applicable to the Corporation, and (c) in all
events may be amended or eliminated in accordance with applicable law as from
time to time in effect.
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IN WITNESS WHEREOF, the Corporation has caused this Restated
Certificate of Incorporation to be duly executed and acknowledged, this 1st day
of October, 1998.
TOY BIZ, INC.
By: /s/ JOSEPH M. AHEARN
__________________________________________
Name: Joseph M. Ahearn
Title: President and Chief Executive
Officer
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Exhibit A
FORM OF INDENTURE1
================================================================================
TOY BIZ, INC.2
8% Convertible Subordinated Voting Debentures
due 2011
---------------
INDENTURE
---------------
Dated as of [ ]
[ ]
Trustee
================================================================================
- --------
1 Form of Indenture for Subordinated Notes to be issued in the event of an
exchange of the 8% Cumulative Convertible Exchangeable Preferred Stock (the
"8% Preferred Stock") of Toy Biz, Inc. (which expects to change its name to
"Marvel Enterprises, Inc." on or about
October 1, 1998).
2 Or the successor entity, the "Note Issuer" as defined in the Restated
Certificate of Incorporation of the Corporation.
705179.13
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TABLE OF CONTENTS
<TABLE>
<CAPTION>
<S> <C>
Page
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ARTICLE I
DEFINITIONS AND INCORPORATION BY REFERENCE........................................................................1
Section 1.01 Definitions.....................................................................................1
Section 1.02 Other Definitions...............................................................................5
Section 1.03 Incorporation by Reference of Trust Indenture Act...............................................5
Section 1.04 Rules of Construction...........................................................................5
ARTICLE II
THE SECURITIES....................................................................................................6
Section 2.01 Form and Dating.................................................................................6
Section 2.02 Execution and Authentication....................................................................6
Section 2.03 Registrar and Paying Agent......................................................................7
Section 2.04 Payment by the Corporation to the Trustee; Paying Agent to Hold Money in
Trust...........................................................................................7
Section 2.05 Voting Rights of Securityholders................................................................7
Section 2.06 Conversion Into Common Stock....................................................................8
Section 2.07 Adjustments For Consolidation, Merger, etc.....................................................14
Section 2.08 Reports as to Adjustments......................................................................14
Section 2.09 Notices of Corporate Action....................................................................15
Section 2.10 Securityholder Lists...........................................................................16
Section 2.11 Transfer and Exchange..........................................................................16
Section 2.12 Replacement Securities.........................................................................16
Section 2.13 Outstanding Securities.........................................................................17
Section 2.14 Treasury Securities............................................................................17
Section 2.15 Temporary Securities...........................................................................17
Section 2.16 Cancellation...................................................................................17
Section 2.17 Certain Limitations on Securities..............................................................18
ARTICLE III
COVENANTS........................................................................................................18
Section 3.01 Payment of Securities..........................................................................18
Section 3.02 Dividends, Etc.................................................................................18
Section 3.03 Reports by Corporation.........................................................................19
Section 3.04 Money for Security Payments to Be Held in Trust................................................19
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Page
Section 3.05 Compliance Certificate.........................................................................20
Section 3.06 Authorization of Common Stock..................................................................20
Section 3.07 Certain Restrictions...........................................................................20
ARTICLE IV
SUCCESSORS.......................................................................................................21
Section 4.01 When Corporation May Merge, etc................................................................21
Section 4.02 Successor Substituted..........................................................................22
ARTICLE V
DEFAULTS AND REMEDIES............................................................................................22
Section 5.01 Events of Default..............................................................................22
Section 5.02 Acceleration; Limitations on Acceleration......................................................22
Section 5.03 Other Remedies.................................................................................23
Section 5.04 Waiver of Default..............................................................................23
Section 5.05 Control by Majority............................................................................23
Section 5.06 Limitation on Suits............................................................................23
Section 5.07 Rights of Holders to Receive Payment...........................................................24
Section 5.08 Collection Suit by Trustee.....................................................................24
Section 5.09 Trustee May File Proofs of Claim...............................................................24
Section 5.10 Priorities.....................................................................................24
Section 5.11 Undertaking for Costs..........................................................................25
ARTICLE VI
TRUSTEE..........................................................................................................25
Section 6.01 Duties of Trustee..............................................................................25
Section 6.02 Rights of Trustee..............................................................................26
Section 6.03 Individual Rights of Trustee...................................................................27
Section 6.04 Disclaimer.....................................................................................27
Section 6.05 Notice of Defaults.............................................................................27
Section 6.06 Reports by Trustee to Holders..................................................................27
Section 6.07 Compensation and Indemnity.....................................................................27
Section 6.08 Replacement of Trustee.........................................................................28
Section 6.09 Successor Trustee by Merger....................................................................29
Section 6.10 Eligibility; Disqualification..................................................................29
705179.13
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Page
Section 6.11 Preferential Collection of Claims Against Corporation..........................................29
ARTICLE VII
SATISFACTION AND DISCHARGE.......................................................................................29
Section 7.01 Satisfaction and Discharge of Indenture........................................................29
Section 7.02 Application of Trust Money.....................................................................30
Section 7.03 Repayment to Corporation.......................................................................30
ARTICLE VIII
AMENDMENTS.......................................................................................................31
Section 8.01 Without Consent of Holders.....................................................................31
Section 8.02 With Consent of Holders........................................................................31
Section 8.03 Reserved.......................................................................................32
Section 8.04 Revocation and Effect of Consents..............................................................32
Section 8.05 Notation on or Exchange of Securities..........................................................32
Section 8.06 Trustee Protected..............................................................................32
Section 8.07 Rights of Holders to Receive Payment...........................................................32
ARTICLE IX
SUBORDINATION....................................................................................................33
Section 9.01 Agreement to Subordinate.......................................................................33
Section 9.02 Subordination..................................................................................33
Section 9.03 Notice to Trustee of Specified Events; Reliance on Certificate of Custodian....................34
Section 9.04 Trustee Entitled to Assume Payments Not Prohibited in Absence of Notice........................35
Section 9.05 Absolute Obligation to Pay.....................................................................35
Section 9.06 Trustee's Rights as Holder of Senior Debt......................................................35
Section 9.07 No Implied Obligations to Holders of Senior Debt...............................................36
Section 9.08 Enforceability of Subordination................................................................36
Section 9.09 Trustee Authorized to Effectuate Subordination.................................................36
ARTICLE X
REDEMPTION.......................................................................................................36
Section 10.01 Optional Redemption; Notice of Redemption......................................................36
705179.13
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Page
Section 10.02 Notice of Redemption...........................................................................36
Section 10.03 Effect of Notice of Redemption.................................................................37
Section 10.04 Deposit of the Redemption Price................................................................37
ARTICLE XI
MISCELLANEOUS....................................................................................................38
Section 11.01 Trust Indenture Act Controls...................................................................38
Section 11.02 Notices........................................................................................38
Section 11.03 Communication by Holders with Other Holders....................................................39
Section 11.04 Certificate and Opinion as to Conditions Present...............................................39
Section 11.05 Statements Required in Certificate or Opinion..................................................39
Section 11.06 Rules by Trustee and Agents....................................................................40
Section 11.07 Legal Holidays.................................................................................40
Section 11.08 No Recourse Against Others.....................................................................40
Section 11.09 Duplicate Originals............................................................................40
Section 11.10 Governing Law..................................................................................40
Section 11.11 No Adverse Interpretation of Other Agreements..................................................40
Section 11.12 Successors.....................................................................................40
Section 11.13 Severability...................................................................................40
Section 11.14 Table of Contents, Headings, etc...............................................................40
</TABLE>
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INDENTURE dated as of [_________________] between Toy Biz, Inc., a
Delaware corporation, and [______________________], a [_______________]
corporation, as trustee.
Each party agrees as follows for the benefit of the other party and for
the equal and ratable benefit of the Holders of the 8% Convertible Subordinated
Capital Debentures due October 1, 2011.
ARTICLE I
DEFINITIONS AND INCORPORATION BY REFERENCE
Section 1.01 Definitions.
"Affiliate" means, with respect to any specified Person, any other
Person directly or indirectly controlling or controlled by or under direct or
indirect common control with such specified Person. For the purpose of this
definition, "control" when used with respect to any specified Person means the
power to direct the management and policies of such Person, directly or
indirectly, whether through ownership of voting securities, by contract or
otherwise; and the terms "controlling" and "controlled" have meanings
correlative to the foregoing.
"Agent" means any Registrar, Paying Agent or co-Registrar.
"Board of Directors" means the Board of Directors of the Corporation or
any authorized committee of such Board.
"Business Day" means each Monday, Tuesday, Wednesday, Thursday and
Friday which is not a day on which banking institutions in the city in which the
Corporate Trust Office is located are authorized or obligated by law or
executive order to close.
"Commission" means the Securities and Exchange Commission, and its
successors.
"Common Stock" means the Corporation's common stock, par value $.01 per
share.
"Consolidated Tangible Capital" of any Person means, at any date, the
total amount of non-redeemable preferred stock and common shareholders' equity
(excluding amounts attributable to securities which are exchangeable for or
convertible into securities other than non-redeemable preferred stock or common
stock and any amounts attributable to shares issued pursuant to an acquisition
by such Person) which would appear on a consolidated statement of financial
condition of such Person as at such date prepared in accordance with generally
accepted accounting principles, less all intangible assets appearing thereon.
705179.13
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"Corporate Trust Office" means the corporate trust office of the
Trustee at which at any particular time its corporate trust business shall be
principally administered, which on the date hereof is [______________________].
"Corporation" means Toy Biz, Inc. (which expects to change its name to
"Marvel Enterprises, Inc." on or about October 1, 1998) or its successor "Note
Issuer", provided that any such successor Person shall have become such pursuant
to the applicable provisions of this Indenture, and thereafter, "Corporation"
shall mean each successor Person, and any other obligor upon the Securities.
"Default" means an event or condition the occurrence of which would,
with the lapse of time or the giving of notice or both, become an Event of
Default.
"8% Preferred Stock" means the 8% Cumulative Convertible Exchangeable
Preferred Stock of the Corporation.
"Exchange Act" means the Securities Exchange Act of 1934, as amended,
and as in effect from time to time.
"Holder" or "Securityholder" means a Person in whose name a Security is
registered in the register of the Securities kept by the Registrar.
"Indebtedness" means, with respect to any Person, at any date, (i) all
indebtedness, obligations or other liabilities for borrowed money, whether
matured or unmatured, liquidated or unliquidated, direct or contingent, joint or
several, and whether now existing or hereafter created; (ii) all indebtedness
secured by any mortgage, lien, pledge, charge or encumbrance upon Property owned
by such Person; (iii) all indebtedness, obligations or liabilities of others of
the type described in the preceding clauses (i) and (ii) which the Corporation
has guaranteed or is in any other way liable for; and (iv) all amendments,
renewals, extensions or refundings of any such indebtedness, obligation or
liability; (v) all obligations to pay rent or other amounts under any lease of
(or other arrangement conveying the right to use) Property which obligation is
required to be classified and accounted for as a capital lease on a balance
sheet prepared in accordance with generally accepted accounting principles; (vi)
all payment obligations with respect to interest rate or currency protection
agreements; (vii) all obligations as an account party under any letter of credit
or in respect of bankers' acceptance; and (viii) all obligations of any third
party secured by Property (regardless of whether or not the Note Issuer is
liable for repayment of such obligations).
"Indenture" means this instrument as amended from time to time by one
or more indentures supplemental hereto entered into pursuant to the applicable
provisions hereto.
"Interest Payment Due" means the date specified in the Securities as
the fixed date on which interest is due and payable.
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"Officer" means the Chairman of the Board of Directors, the President,
any Vice President, the Treasurer, the Secretary, any Assistant Treasurer or any
Assistant Secretary of the Corporation.
"Officers' Certificate" means a certificate signed by (i) the Chairman
or Vice Chairman of the Board of Directors, President or any Vice President and
(ii) the Treasurer, Secretary or any Assistant Treasurer or any Assistant
Secretary of the Corporation and delivered to the Trustee by the terms of this
Indenture; provided that, in the event an Officer of the Corporation holds a
position set forth in (i) or (ii) above, such Officer may sign an Officer's
Certificate only in his capacity as an Officer under either clause (i) or (ii),
but not both.
"Opinion of Counsel" means a written opinion from legal counsel, which
opinion and legal counsel are acceptable to the Trustee. The counsel may be an
employee of or counsel to the Corporation.
"Order of the Corporation" means a written order signed in the name of
the Corporation by its President or any Vice President and by its Treasurer,
Secretary or any Assistant Treasurer or Assistant Secretary of the Corporation
and delivered to the Trustee.
"Person" means an individual, partnership, corporation or
unincorporated organization, and a government or agency or political subdivision
thereof.
"Principal" means principal amount of a debt security plus the premium,
if any, on the security.
"Primary Indebtedness" means Indebtedness other than Indebtedness
Ranking on Parity with the Securities or Ranking Junior to the Securities.
"Property" means any interest in any kind of property or asset, whether
real, personal or mixed, or tangible or intangible.
"Ranking Junior to the Securities" means, as respects any obligation of
the Corporation, an obligation that by express provisions in the instrument
creating, evidencing or governing such obligation (i) is specifically designated
as ranking junior to the Securities, (ii) ranks junior to and not equally with
or prior to the Securities (or to the Securities and any other obligations of
the Corporation ranking on a parity with the Securities) in right of payment
upon the happening of a Specified Event, as defined in Section 9.02, and (iii)
is also made junior and subordinate in right of payment to other obligations of
the Corporation to at least the same extent as the Securities are made junior
and subordinate thereto by the provisions of Section 9.02.
"Ranking on a Parity with the Securities" means, with respect to any
obligation of the Corporation, an obligation that by express provisions in the
instrument creating, evidencing or
705179.13
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governing such obligation (i) is specifically designated as ranking on a parity
with the Securities, (ii) ranks equally with and not prior to the Securities in
right of payment upon the happening of a Specified Event and (iii) is also made
junior and subordinate in right of payment to other obligations of the
Corporation to the same extent as the Securities are made junior and subordinate
thereto by the provisions of Section 9.02.
"Record Date" means the 15th day (whether or not a Business Day) of the
month preceding the month in which an Interest Payment Date occurs.
"Redemption Date" means, when used with respect to any Security to be
redeemed, the date fixed for such redemption pursuant to this Indenture and the
Security.
"Redemption Price" means, when used with respect to any Security to be
redeemed, the price fixed for such redemption pursuant to this Indenture and the
Security as set forth in Section 10.01.
"Securities" means the "8% Convertible Subordinated Voting Debentures
due October 1, 2011" described above and issued under this Indenture.
"Senior Debt" means principal of and premium, if any, and interest on
all indebtedness and obligations of, and claims against, the Corporation (other
those of the holders of 8% Preferred Stock or any other equity interests of the
Corporation) including, without limitation, commercial paper, repurchase
agreements, trade debt, secured Indebtedness and the Corporation's other
obligations to its general and secured creditors, whether outstanding on the
date hereof or hereafter created, incurred, assumed or guaranteed by the
Corporation (and all renewals, extensions or refundings thereof); provided,
however, that "Senior Debt" shall not include the Securities, any Indebtedness
Ranking on a Parity with the Securities or any Indebtedness Ranking Junior to
the Securities.
"Subsidiary" means any corporation of which the Corporation owns,
directly or indirectly, more than 50% of the Voting Stock.
"TIA" means the Trust Indenture Act of 1939, as amended, and as in
effect from time to time.
"Trustee" means the party named as such in this indenture until a
successor replaces it and thereafter means such successor.
"Trust Officer" means any officer within the Corporate Trust Office (or
any successor group) of the Trustee, including any Vice President, any Assistant
Vice President, any Assistant Secretary or any other officer of the Trustee
customarily performing functions similar to those performed by any of the above
designated officers and also means, with
705179.13
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respect to a particular corporate trust matter, any other officer to whom such
matter is referred because of his knowledge of or familiarity with the
particular subject.
"Voting Stock" means securities of any class or classes of a
corporation the holders of which are ordinarily, in the absence of
contingencies, entitled to vote for corporate directors (or Persons performing
similar functions).
Section 1.02 Other Definitions.
Term Defined in
---- ----------
"Blockage Period"...............................................Section 9.02(b)
"Default Notice"................................................Section 9.02(b)
"Event of Default"..............................................Section 5.01
"Legal Holiday".................................................Section 11.07
"Paying Agent"..................................................Section 2.03
"Registrar".....................................................Section 2.03
"Specified Event"...............................................Section 9.02(a)
Section 1.03 Incorporation by Reference of Trust Indenture Act.
Whenever this Indenture refers to a provision of the TIA, the provision is
incorporated by reference in and made a part of this Indenture, whether or not
this Indenture is qualified under the TIA.
The following TIA terms used in this Indenture have the following
meanings:
"indenture securities" means the Securities;
"indenture security holder" means a Securityholder;
"indenture to be qualified" means this Indenture;
"indenture trustee" or "institutional trustee" means the Trustee; and
"obligor" on the securities means the Corporation.
All other terms used in this Indenture that are defined by the TIA,
defined by TIA reference to another statute or defined by rule of the Commission
under the TIA have the meanings assigned to them thereby.
Section 1.04 Rules of Construction. Unless the context otherwise
requires: (i) a term has the meaning assigned to it; (ii) an accounting term not
otherwise defined has the meaning assigned to it in accordance with generally
accepted accounting principles in effect in the United States at the date of
such computation; (iii) "or" is always used inclusively (for
705179.13
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example, the phrase "A" or "B" means "A or B or both," not "either A or B, but
not both"); (iv) words in the singular include the plural, and in the plural
include the singular; (v) provisions apply to successive events and
transactions; and unless specifically stated, the words "herein," "hereof,"
"hereto" and "hereunder" and other words of similar import refer to this
Indenture as a whole and not to any particular Article, Section or other
subdivision.
ARTICLE II
THE SECURITIES
Section 2.01 Form and Dating. The Securities and Trustee's certificate
of authentication shall be substantially in the form of Exhibit 1, which is part
of this Indenture. The Securities may have notations, legends or endorsements
required by law, stock exchange rule or usage. Each Security shall be dated the
date of its authentication.
Section 2.02 Execution and Authentication. The Securities shall be
executed on behalf of the Corporation by its Chairman of the Board, its
President or one of its Vice Presidents under its corporate seal and attested by
its Secretary or one of its Assistant Secretaries. The signature of any of these
officers on the Securities may be actual or facsimile.
If an officer whose signature is on a Security no longer holds that
office at the time the Security is authenticated, the Security shall
nevertheless be valid.
A Security shall not be valid until authenticated by the manual
signature of the Trustee. Such manual signature of the Trustee shall be
conclusive evidence that the Security has been authenticated under this
Indenture.
The Trustee shall authenticate Securities for original issue up to the
aggregate principal amount stated in paragraph 5 of the Securities upon an Order
of the Corporation. The aggregate principal amount of Securities outstanding at
any time may not exceed the amount as stated in paragraph 5 of the Securities
except as provided in Section 2.12.
The Trustee may appoint an authenticating agent acceptable to the
Corporation to authenticate Securities, which authenticating agent shall be
compensated by the Corporation. An authenticating agent may authenticate
Securities whenever the Trustee may do so, other than the authentication of
Securities issued upon original issue or pursuant to Section 2.12. Except as
provided in the previous sentence, each reference in this Indenture to
authentication by the Trustee includes authentication by such agent. An
authenticating agent has the same rights as an Agent to deal with the
Corporation or an Affiliate.
705179.13
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Section 2.03 Registrar and Paying Agent. The Corporation shall maintain
an office or agency where Securities may be presented for registration of
transfer or for exchange ("Registrar") and an office or agency where Securities
may be presented for payment ("Paying Agent"). The Registrar shall keep a
register of the Securities and of their transfer and exchange. The Corporation
may appoint one or more additional Paying Agents. The term "Paying Agent"
includes any additional Paying Agent. The Corporation or any of its Subsidiaries
may act as Paying Agent or Registrar.
The Corporation shall enter into an appropriate agency agreement with
any Agent not a party to this Indenture. The agreement shall implement the
provisions of this Indenture that relate to such Agent. The Corporation shall
give prompt written notice to the Trustee of the name and address of any such
Agent and any change in the address of such Agent. If the Corporation fails to
maintain a Registrar or Paying Agent, the Trustee shall act as such.
The Corporation initially appoints the Trustee as Registrar and Paying
Agent.
Section 2.04 Payment by the Corporation to the Trustee; Paying Agent to
Hold Money in Trust. On each due date for the payment of principal of, or
interest on, any of the Securities, the Corporation shall deposit with the
Trustee or Paying Agent, as the case may be, in immediately available funds a
sum sufficient to pay the principal or interest so becoming due.
The Corporation will require each Paying Agent other than the Trustee
to execute and deliver to the Trustee an instrument in which such Paying Agent
shall agree that such Paying Agent will:
(1) hold all sums held by it for the payment of the principal
of or interest on the Securities in trust for the benefit of the
Persons entitled thereto until such sums shall be paid to such Persons
or otherwise disposed of as herein provided;
(2) give the Trustee notice of any default by the Corporation
(or any other obligor upon the Securities) in the making of any payment
of principal or interest; and
(3) at any time during the continuance of any such default,
upon the written request of the Trustee, forthwith pay to the Trustee
all sums so held in trust by such Paying Agent.
Section 2.05 Voting Rights of Securityholders. Holders of Securities
shall have the following voting rights:
(a) Except as otherwise provided herein, each Holder shall be
entitled to such number of votes for each Security held by him on all
matters submitted to a vote of
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holders of Common Stock as shall be equal to the largest number of
whole shares of Common Stock into which all of such Holder's Securities
are then convertible.
(b) Except as otherwise provided herein or by law, the Holders
and the holders of Common Stock shall vote together as one class on all
matters submitted to a vote of the Corporation's stockholders.
(c) The Corporation shall not (A) consolidate with or merge
into any other person in any transaction in which the Corporation is
not the continuing or surviving corporation, (B) permit any other
person to consolidate with or merge into the Corporation in any
transaction in which the Corporation is the continuing or surviving
person, but the Common Stock is changed into or exchanged for stock or
other securities of any other person or cash or any other property, or
(C) transfer all or substantially all of its properties or assets to
any other person, unless such transaction is approved by Holders of a
majority in principal amount of the outstanding Securities, voting
together as a separate class, except that, in the case of a merger,
consolidation or transfer to be consummated prior to October 1, 2001,
such approval shall not be required if each of the following conditions
are satisfied with respect to such merger, consolidation, sale or
transfer: (i) the holders of Common Stock will receive consideration
equal to at least $9.625 per share of Common Stock, and (ii) the
Holders will receive (x) the same consideration such holders would have
received had such Holders converted their Securities to Common Stock
immediately prior to consummation of the merger, consolidation, sale or
transfer, plus (y) an amount equal to the present value of the amount
of interest such Holders would have been entitled to receive on their
Securities if such Securities remained outstanding until October 1,
2001, discounted at a discount rate of 10% per annum, compounded
quarterly.
Section 2.06 Conversion Into Common Stock. A Security may be converted
(an "Optional Conversion") at any time, at the option of a Holder, into shares
of Common Stock, on the terms and conditions set forth below in this Section
2.06, and may be converted at the option of the Corporation as provided in
paragraph (g) of this Section 2.06.
(a) Subject to the provisions for adjustment hereinafter set
forth, each one thousand dollars ($1,000) in principal amount of
Securities shall be convertible in the manner hereinafter set forth,
into the number of fully paid and non-assessable shares of Common Stock
obtained by multiplying [THE NUMBER OF SHARES OF COMMON STOCK INTO
WHICH EACH SHARE OF 8% PREFERRED STOCK IS CONVERTIBLE ON THE DATE OF
THE EXCHANGE OF 8% PREFERRED STOCK INTO SECURITIES] by a fraction, the
numerator of which is one thousand (1,000) and the denominator of which
is [THE LIQUIDATION PREFERENCE OF EACH SHARE OF 8% PREFERRED STOCK ON
THE DATE OF THE EXCHANGE]. Upon conversion of a Security, a Holder
shall be entitled to receive all accrued and unpaid interest up to the
date of conversion of such Securities (the amount
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of any such unpaid interest being payable in such number of shares of
Common Stock which would be issuable upon conversion of Securities
having an aggregate principal amount equal to such amount), provided
that if the conversion date is after the Record Date and before the
Interest Payment Date to which that Record Date relates, the interest
payment otherwise payable on that Interest Payment Date in respect of
such Securities shall not be paid by the Corporation.
(b) The number of shares of Common Stock into which a Security
is convertible shall be adjusted from time to time as follows:
(i) In case the Corporation shall at any time or from
time to time declare or pay any dividend on Common Stock payable in
Common Stock or effect a subdivision of the outstanding shares of its
Common Stock into a greater number of shares of Common Stock (by
reclassification or otherwise than by payment of a dividend in Common
Stock), or combine or consolidate the outstanding shares of Common
Stock into a lesser number of shares of Common Stock, by
reclassification or otherwise, or the Corporation shall otherwise
effect a capital reorganization or reclassification of the Common Stock
permitted by the Corporation's Restated Certificate of Incorporation,
as amended, then, and in each such case, the number of shares of Common
Stock into which a Security is convertible shall be adjusted so that
the Holder shall be entitled to receive, upon the conversion thereof,
the number of shares of Common Stock or number and kind of other
securities which a Holder would have owned after giving effect to such
event had such Security been converted immediately prior to the
occurrence of such event. An adjustment made pursuant to this
subparagraph (b) shall become effective in the case of any such
dividend, immediately after the close of business on the record date
for the determination of holders of Common Stock entitled to receive
such dividend, and otherwise at the close of business on the day
immediately prior to the day upon which such corporate action becomes
effective;
(ii) In case the Corporation at any time or from time to
time shall issue rights or warrants to all holders of shares of Common
Stock entitling them (for a period expiring within 45 calendar days
after the date of issuance) to subscribe for or purchase shares of
Common Stock at a price per share (or having a conversion price per
share) less than the Current Market Price (as defined in paragraph (c)
below) per share of Common Stock on the record date fixed for the
determination of shareholders entitled to receive such right or
warrant, then, and in each such case (unless Holders shall be permitted
to subscribe for or purchase shares of Common Stock on the same basis
as though the Securities had been converted into shares of Common Stock
immediately prior to the close of business on such record date), the
number of shares of Common Stock into which each Security is
convertible shall be adjusted so that a Holder thereof shall be
entitled to receive, upon the conversion thereof, the number of shares
of Common Stock determined by multiplying (a) the number of shares of
Common Stock
705179.13
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<PAGE>
into which such Security was convertible immediately prior to such
event by (b) a fraction, the numerator of which shall be the sum of (I)
the number of shares of Common Stock outstanding on such record date
plus (II) the number of additional shares of Common Stock offered for
subscription or purchase, and the denominator of which shall be the sum
of (x) the number of shares of Common Stock outstanding on such record
date plus (y) the number of shares of Common Stock which the aggregate
consideration receivable by the Corporation for the total number of
shares of Common Stock so offered would purchase at such Current Market
Price on such record date. For purposes of this subparagraph (b)(ii),
the aggregate consideration receivable by the Corporation in connection
with the issuance of rights of warrants to subscribe for or purchase
securities convertible into Common Stock shall be deemed to be equal to
the sum of the aggregate offering price of such securities plus the
minimum aggregate amount, if any, payable upon conversion of such
securities into shares of Common Stock. An adjustment made pursuant to
this subparagraph (b)(ii), shall be made upon the issuance of any such
rights or warrants and shall be effective retroactively immediately
after the close of business on the record date fixed for the
determination of shareholders entitled to receive such rights or
warrants. For purposes of this subparagraph (b)(ii) the granting of the
right to purchase Common Stock (whether treasury shares or newly issued
shares) pursuant to any plan providing for the reinvestment of
dividends or interest payable on securities of the Corporation, and the
investment of additional optional amounts, in shares of Common Stock,
in any such case at a price per share of not less than 95% of the
current market price (determined as provided in such plans) per share
of Common Stock, shall not be deemed to constitute an issue of rights
or warrants by the Corporation within the meaning of this subparagraph
(b)(ii); and
(iii) In case the Corporation at any time or from time to
time shall declare, order, pay or make a distribution of any kind or
nature whatsoever which is permitted to be made pursuant to this
Indenture on its Common Stock, other than a dividend payable in shares
of Common Stock or rights or warrants to subscribe for shares of Common
Stock covered under 2.06(b) (ii) herein, then, and in each such case
(unless the Holders shall receive any such dividend or other
distribution on the same basis as though the Securities had been
converted into shares of Common Stock immediately prior to the close of
business on the record date for the determination of holders of Common
Stock entitled to receive such dividend or other distribution), the
number of shares of Common Stock into which each Security is
convertible shall be adjusted so that the Holder of each Security shall
be entitled to receive, upon the conversion thereof, the number of
shares of Common Stock determined by multiplying (a) the number of
shares of Common Stock into which such Security was convertible
immediately prior to the close of business on the record date fixed for
the determination of holders of Common Stock entitled to receive such
dividend or distribution by (b) a fraction, the numerator of which
shall be the Current Market Price (as defined in paragraph (c) below)
per share of Common Stock on the record date fixed for the
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determination of holders of Common Stock entitled to receive such
dividend or distribution, and the denominator of which shall be such
Current Market Price per share of Common Stock less the fair value of
such dividend or distribution (as determined in good faith by the Board
of Directors of the Corporation, a certified resolution with respect to
which shall be filed with the Trustee) payable in respect of one share
of Common Stock. An adjustment made pursuant to this subparagraph
(b)(iii) shall be made upon the opening of business on the next
business day following the date on which any such dividend or
distribution is made and shall be effective retroactively immediately
after the close of business on the record date fixed for the
determination of holders of Common Stock entitled to receive such
dividend or distribution;
(c) The term "Current Market Price" shall mean, as applied to
any class of stock on any date, the average of the daily "Closing
Prices" (as hereinafter defined) for the 20 consecutive "Trading Days"
(as hereinafter defined) immediately prior to the date in question;
provided, however, that in the event that the Current Market Price per
share of Common Stock is determined during a period which includes the
ex-dividend date for a dividend or distribution by the Corporation on
its Common Stock payable in shares of its Common Stock, or the record
date for a stock split, reverse stock split, recapitalization or
similar corporate transaction, then, and in each such case, the Current
Market Price shall be appropriately adjusted to reflect the Current
Market Price per Common Stock equivalent. The term "Closing Price" on
any day shall mean the last sales price, regular way, per share of such
stock on such day, or, if no such sale takes place on such day, the
average of the closing bid and asked prices, regular way, as reported
in the principal consolidation transaction reporting system with
respect to securities listed or admitted to trading on the New York
Stock Exchange or, if shares of such stock are not listed or admitted
to trading on the New York Stock Exchange, as reported in the principal
consolidation transaction reporting system with respect to securities
listed on the principal national securities exchange on which the
shares of such stock are listed or admitted to trading, including for
these purposes the Nasdaq Stock Market National Market System or, if
the shares of such stock are not listed or admitted to trading on any
national securities exchange, the average of the high bid and low asked
prices in the over-the-counter market, as reported by the National
Association of Securities Dealers Automated Quotation System ("NASDAQ")
or other similar system then in use or, if such bid and ask prices are
not reported on any such system, the fair market value of a share of
Common Stock as determined in good faith by the Board of Directors of
the Corporation. The term "Trading Day" shall mean a day on which the
principal national securities exchange on which shares of such stock
are listed or admitted to trading is open for the transaction of
business or, if the shares of such stock are not listed or admitted to
trading on any national securities exchange, a Monday, Tuesday,
Wednesday, Thursday or Friday on which banking institutions in the
Borough of Manhattan, City and State of New York, are not authorized or
obligated by law or executive order to close (a "Business Day") and on
which high bid and low asked prices are quoted on NASDAQ or, if shares
of such stock are not traded
705179.13
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on NASDAQ, by such other similar system or if shares of such stock are
not traded on any such system, a Business Day;
(d) If any adjustment in the number of shares of Common Stock
into which each Security may be converted required pursuant to this
Section 2.06 would result in an increase or decrease of less than 1% in
the number of shares of Common Stock into which each Security is then
convertible, the amount of any such adjustment shall be carried forward
and adjustment with respect thereto shall be made at the time of and
together with any subsequent adjustment which, together with such
amount and any other amount or amounts so carried forward, shall
aggregate at least 1% of the number of shares of Common Stock into
which each Security is then convertible. All calculations under this
Section 2.06 shall be made to the nearest one-hundredth of a share;
(e) The Board of Directors may, but shall not be required to,
increase the number of shares of Common Stock into which each Security
may be converted, in addition to the adjustments required by Section
2.06(b), as shall be determined by it (as evidenced by a resolution of
the Board of Directors) to be advisable in order to avoid or diminish
any income deemed to be received by any holder of the Common Stock or
the Securities resulting from any dividend or distribution of stock or
issuance of rights or warrants to purchase or subscribe for stock or
from any event treated as such for federal income tax purposes;
(f) A Holder of any of the Securities electing to make an
Optional Conversion shall do so by surrendering for such purpose to the
Corporation, at its principal office or at such other office or agency
maintained by the Corporation for that purpose, the Securities to be
converted accompanied by a written notice stating that such Holder
elects to convert all or a specified whole number of such Securities in
accordance with the provisions of this Section 2.06(f) and specifying
the name or names in which such Holder wishes the certificate or
certificates for shares of Common Stock to be issued. In case such
notice shall specify a name or names other than that of such Holder,
such notice shall be accompanied by payment of all transfer taxes
payable upon the issuance of shares of Common Stock in such name or
names. As promptly as practicable, and in any event within five
business days after the surrender of such Securities and the receipt of
such notice relating thereto and, if applicable, payment of all
transfer taxes, the Corporation shall deliver or cause to be delivered
certificates representing the number of validly issued, fully paid and
nonassessable shares of Common Stock to which a Holder of the
Securities so converted shall be entitled. Such conversions shall be
deemed to have been made at the close of business on the date of giving
of such notice and of such surrender of the Securities to be converted
so that the rights of a Holder shall cease except for the right to
receive Common Stock in accordance herewith, and the converting Holder
shall be treated for all purposes as having become the record holder of
such Common Stock at such time;
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(g) The Corporation shall have the right, from time to time,
on or after October 1, 2001, in its sole discretion, to convert the
Securities in tranches having an aggregate Principal amount of $50
million on each occasion, into the shares of Common Stock, as follows:
(i) If at any time on or after October 1, 2001 the
Common Stock is (i) listed on a national securities exchange or
included for quotation on the National Market System of the NASDAQ
Stock Market and (ii) the Closing Price of the Common Stock on the
National Market System of the NASDAQ Stock Market or on such national
securities exchange exceeds $11.55 per share (the "Test Amount") for
each Trading Day (as defined in paragraph (c) above) during a Testing
Period (as defined below), the Corporation shall have the right, in its
sole discretion, to convert Securities into shares of Common Stock,
which conversion shall become effective as of a date no earlier than
ten (10) days and no later than forty (40) days following the end of
the relevant Testing Period, provided that the Corporation shall not
have the right to convert Securities having an aggregate principal
amount of more than $50 million with respect to any single Testing
Period. Any such conversion compelled by the Corporation shall be
referred to herein as a "Forced Conversion." The Test Amount shall be
appropriately adjusted in connection with any stock split, stock
dividend, reverse stock split, recapitalization or similar corporate
transaction.
(ii) The Securities held by each Holder shall be converted
on a pro rata basis on any Forced Conversion. The transfer agent shall
give holders of the Securities written notice of the Forced Conversion
at least ten (10) days prior to the effective date thereof, which
notice shall specify (A) the effective date, (B) the Testing Period
utilized, (C) the aggregate value of the Securities to be converted,
(D) the pro-ration factor, if less than all Securities are to be
converted and (E) the number of shares of Common Stock into which each
Security shall be converted pursuant to the Forced Conversion. Any
period of ten (10) consecutive Trading Days that does not precede or
include a previously announced effective date of a Forced Conversion
shall be referred to herein as a "Testing Period."
(iii) Following a Forced Conversion, the Holders shall have
the right to receive certificates representing the shares of Common
Stock into which the Securities have been converted by surrendering to
the Corporation, at its principal office or at such other office or
agency maintained by the Corporation for that purpose, the applicable
Securities. As promptly as practicable, and in any event within five
business days after the surrender of the Securities, the Corporation
shall deliver or cause to be delivered certificates representing the
number of validly issued, fully paid and nonassessable shares Common
Stock to which the Holder of the Securities so converted shall be
entitled. Upon a Forced Conversion, the rights of the Holders of the
Securities shall cease except for the right to receive Common Stock in
accordance herewith, and
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the Holder shall be treated for all purposes as having become the
record holder of such Common Stock at such time;
(iv) Upon the Forced Conversion of the Securities, the
Holders thereof shall be entitled to receive payment of all accrued and
unpaid interest to the effective date of the conversion (the amount of
such unpaid interest being payable in such number of shares of Common
Stock which would be issuable upon conversion of the Securities having
an aggregate principal amount equal to such amount) in respect of the
shares so converted, provided that if the conversion date is after the
Record Date and before the Interest Payment Date to which that Interest
Record Date relates, the interest otherwise payable on that Interest
Payment Date in respect of the Securities so converted shall not be
paid by the Corporation.
(h) In connection with the conversion of the Securities, no
fractions of shares of Common Stock shall be issued, but the
Corporation shall pay a cash adjustment in respect of such fractional
interest in an amount equal to the market value of such fractional
interest. In such event, the market value of a share of Common Stock
shall be the Closing Price of such shares on the last business day on
which such shares were traded immediately preceding the date upon which
the Securities are deemed to have been converted.
Section 2.07 Adjustments For Consolidation, Merger, etc. In case (i)
the Corporation shall consolidate with or merge into any other person and shall
not be the continuing or surviving corporation of such consolidation or merger,
(ii) any other person shall consolidate with or merge into the Corporation and
the Corporation shall be the continuing or surviving person, but, in connection
with such consolidation or merger, the Common Stock shall be changed into or
exchanged for stock or other securities of any other person or cash or any other
property, or (iii) the Corporation shall transfer all or substantially all of
its properties or its assets to any other person, then, and in each such case,
each Security shall, upon the effective date of such event, thereafter represent
the right to receive the number of shares of stock or other securities or cash
or other property which the Holder would have owned after giving effect to such
event had such Security been converted into Common Stock pursuant to Section
2.06 immediately prior to the occurrence of such event, plus any additional
shares of stock or other securities or cash or other property payable by the
terms of such event to the Holders.
Section 2.08 Reports as to Adjustments. Whenever the number of shares
of Common Stock into which the Securities are convertible is adjusted as
provided in Section 2.06, the Corporation shall (i) promptly compute such
adjustment and furnish to the Trustee and the Registrar a certificate, signed by
a principal financial officer of the Corporation, setting forth the number of
shares of Common Stock, or the number and kind of any other securities, into
which each Security is convertible as a result of such adjustment, a brief
statement of the facts requiring such adjustment and the computation thereof and
when such adjustment will become
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effective and (ii) promptly mail to the Holders a notice stating that the number
of shares into which the Securities are convertible has been adjusted and
setting forth the new number of shares into which the Securities are convertible
as a result of such adjustment and when such adjustment will become effective
and the basis for such adjustment in appropriate detail.
Section 2.09 Notices of Corporate Action. In the event of:
(a) any taking by the Corporation of a record of the holders
of its Common Stock for the purpose of determining the holders thereof
who are entitled to receive any distribution or any right or warrant
permitted to be distributed or given to the holder of Common Stock in
accordance with Article VI of the Corporation's Restated Certificate of
Incorporation (other than a dividend payable solely in shares of Common
Stock).
(b) any capital reorganization, reclassification or
recapitalization of the Corporation (other than a subdivision or
combination of the outstanding shares of its Common Stock), any
consolidation or merger involving the Corporation and any other person
(other than a consolidation or merger with a wholly-owned subsidiary of
the Corporation, provided that the Corporation is the surviving or the
continuing corporation and no change occurs in the Common Stock), or
any transfer of all or substantially all the assets of the Corporation
to any other person; or
(c) any voluntary or involuntary dissolution, liquidation or
winding up of the Corporation;
then, and in each such case, the Corporation shall cause to be mailed to the
Trustee and to the Holders, at least 20 days (or 10 days in case of any event
specified in clause (a) above) prior to the applicable record or effective date
hereinafter specified, a notice stating (i) the date or expected date on which
any such record is to be taken for the purpose of such distribution or right and
the amount and character of such distribution or right or (ii) the date or
expected date on which any such reorganization, reclassification,
recapitalization, consolidation, merger, transfer, dissolution, liquidation or
winding up is to take place and the time, if any such time is to be fixed, as of
which the Holders shall be entitled to exchange their shares of Common Stock
into which their Securities are convertible or other property deliverable upon
such reorganization, reclassification, recapitalization, consolidation, merger,
transfer, dissolution, liquidation or winding up. Such notice shall also state
whether such transaction will result in any adjustment in the number of shares
of Common Stock, or kind and number of any other securities, into which shares
of the 8% Preferred Stock are convertible and, if so, shall state the new number
of shares of Common Stock, or kind and number of any other securities, into
which Securities shall be convertible upon such adjustment and when such
adjustment will become effective. The failure to give any notice required by
this Section 2.09, or any defect therein, shall not affect the legality or
validity of any such action requiring such notice.
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Section 2.10 Securityholder Lists. The Trustee shall preserve in as
current a form as is reasonably practicable the most recent list available to it
of the names and addresses of Securityholders. If the Trustee is not the
Registrar, the Corporation shall furnish to the Trustee at least 10 days before
each Interest Payment Date and at such other times as the Trustee may request in
writing all information in the possession or control of the Corporation or any
Paying Agent as to the names and addresses of the Securityholders in such form
and as of such date as the Trustee may reasonably require.
Section 2.11 Transfer and Exchange. When Securities are presented to
the Registrar or a co-Registrar with a request to register the transfer of such
Securities or to exchange them for an equal principal amount of Securities of
authorized denominations of $100 (or such greater amount as may be required by
applicable State or Federal law) and integral multiples of $100 in excess
thereof, the Registrar shall register the transfer or make the exchange if its
requirements for such transactions are met. To permit registrations of transfers
and exchanges, the Corporation shall execute and the Trustee shall authenticate
Securities at the Registrar's request. The Trustee, the Registrar and the Paying
Agent shall be entitled to rely on such representation in authenticating,
registering the transfer or exchange of, or making of payments on, the
Securities.
The Registrar shall not be required (i) to issue, register the transfer
of or exchange Securities during a period beginning at the opening of 15
Business Days before the day of any selection of Securities for conversion under
Section 2.06(g) or for redemption under Section 10.01 and ending at that close
of business on the day of such selection, or (ii) to register the transfer of or
exchange any Security so selected for conversion or redemption in whole or in
part, except for the unconverted or unredeemed portion of any Security being
converted or redeemed in part.
Section 2.12 Replacement Securities. If the Holder of a mutilated
Security surrenders such Security to the Trustee, the Corporation shall execute
and the Trustee shall authenticate and deliver in exchange therefor a new
Security of like tenor and principal amount and bearing a number not
contemporaneously outstanding.
If the Holder of a Security claims that the Security has been lost,
destroyed or wrongfully taken, the Corporation shall issue and the Trustee shall
authenticate a replacement Security if the Trustee's requirements are met. If
required by the Trustee or the Corporation, such Holder shall provide an
indemnity bond sufficient in the judgment of both the Corporation and the
Trustee to protect the Corporation, the Trustee, any Agent or any authenticating
agent from any loss which any of them may suffer if a Security is replaced. The
Corporation may charge for its expenses in replacing a Security.
Every replacement Security issued under this Section shall constitute
an obligation of the Corporation, entitled to all the benefits of this Indenture
equally and proportionately with any and all other Securities.
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Section 2.13 Outstanding Securities. The Securities outstanding at any
time are all the Securities authenticated by the Trustee except for those
canceled by it, those delivered to it for cancellation, and those described in
this Section as not outstanding.
If a Security is replaced pursuant to Section 2.12, it ceases to be
outstanding unless the Trustee receives proof satisfactory to it that the
replaced security is held by a bona fide purchaser.
If Securities are considered paid under Section 3.01, they cease to be
outstanding and interest on them ceases to accrue.
A Security does not cease to be outstanding because the Corporation or
an Affiliate of the Corporation holds the Security.
Section 2.14 Treasury Securities. In determining whether the Holders of
the required principal amount of Securities have concurred in any direction,
vote, waiver or consent, Securities owned by the Corporation or an Affiliate of
the Corporation shall be considered as though they are not outstanding, except
that for the purposes of determining whether the Trustee or the Corporation
shall be protected in relying on any such direction, vote, waiver or consent,
only Securities which the Trustee actually knows are so owned shall be so
disregarded.
Section 2.15 Temporary Securities. Until definitive Securities are
ready for delivery, the Corporation may prepare and the Trustee shall, upon
Order of the Corporation, authenticate temporary Securities. Temporary
Securities shall be substantially in the form of definitive Securities but may
have variations that the Corporation considers appropriate for temporary
Securities including, without limitation, a legend stating that such temporary
Security is a temporary Security. Without unreasonable delay, the Corporation
shall prepare and the Trustee shall authenticate definitive Securities in
exchange for temporary Securities. Until such exchange, such temporary
Securities shall be entitled to the same rights, benefits and privileges as the
definitive Securities.
Section 2.16 Cancellation. The Corporation at any time may deliver
Securities to the Trustee for cancellation. The Registrar and Paying Agent shall
forward to the Trustee any Securities surrendered to them for registration of
transfer, exchange or payment. The Trustee shall cancel all Securities
surrendered for registration of transfer, exchange, payment, replacement or
cancellation and shall destroy canceled Securities and deliver a certificate of
such destruction to the Corporation, unless the Corporation directs the Trustee
to deliver canceled Securities to the Corporation. The Corporation may not issue
new Securities to replace securities that it has paid or that have been
delivered to the Trustee for cancellation.
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Section 2.17 Certain Limitations on Securities. Notwithstanding
anything to the contrary in this Indenture (or in any related document):
(a) In the event that the obligations represented by the
Securities are assumed in full by another corporation, which shall
succeed by merger or otherwise to substantially all of the assets and
the business of the Corporation, and payment or provision for payment
shall have been made in respect of all matured installments of interest
upon the Securities together with all matured installments of principal
on such Securities which shall have become due otherwise than by
acceleration, then any default caused by the appointment of a receiver
for the Corporation shall be deemed to have been cured, and any
declaration consequent upon such default declaring the principal and
interest on the Securities to be immediately due and payable shall be
deemed to have been rescinded.
(b) The Securities are unsecured by the assets of the
Corporation, or any of its affiliates.
(c) The Securities are subordinated and junior in right of
payment to all Indebtedness of the Corporation, whether secured or
unsecured, other than Indebtedness Ranking Junior to the Securities and
Indebtedness Ranking on a Parity with the Securities.
(d) The Securities are ineligible as collateral for a loan by
the Corporation.
ARTICLE III
COVENANTS
Section 3.01 Payment of Securities. The Corporation shall punctually
pay the principal of and interest on the Securities on the dates and in the
manner provided in the Securities. Principal and interest shall be considered
paid on the date due if the Trustee or all Paying Agents hold on that date money
designated for and sufficient to pay all principal and interest then due.
Section 3.02 Dividends, Etc. So long as any Securities are outstanding,
the Corporation shall not pay or declare, or issue by way of any capital
reorganization or reclassification, any dividend or distribution on shares of
Common Stock or on any series of capital stock, except (i) Approved Spinoff
Distributions (as defined in this paragraph), (ii) dividends or distributions
that are payable solely in shares of Common Stock or any series of capital
stock, or (iii) any rights or warrants to subscribe for or purchase shares
described in clause (ii). "Approved Spinoff Distribution" shall mean a dividend
or distribution of shares of stock having a majority of the voting power of a
subsidiary of the Corporation but only if (x)
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the dividend or distribution of those subsidiary shares is approved by a vote of
at least 75% of the members of the Corporation's board of directors and (y) the
Corporation receives a fairness opinion from a nationally recognized investment
banking firm to the effect that the adjustment of the conversion ratio of the
Securities as a result of such dividend is fair to the Holders of the Securities
from a financial point of view.
Section 3.03 Reports by Corporation.
(a) The Corporation shall file with the Trustee within 5 days
after it files them with the Commission copies of the annual and
quarterly reports and of the information, documents and other reports
which the Corporation files, or which are filed in respect of the
Corporation, with the Commission pursuant to Section 13 of the Exchange
Act and the regulations of the Commission thereunder, or any other
rules and regulations of the Commission under the Exchange Act as may
from time to time be in effect. If the Corporation is not subject to
the requirements of Section 13 of the Exchange Act, the Corporation
shall file with the Trustee, within 15 days after it would have
otherwise been required to file pursuant to the Exchange Act, financial
statements including any notes thereto, and a "Management's Discussion
and Analysis of Financial Condition and Results of Operations," both
comparable to that which the Corporation would have been required to
include in the annual and quarterly reports, information documents or
other reports (under rules currently in effect on the date hereof)
which the Corporation would have been required to file pursuant to
Section 13 of the Exchange Act.
(b) While any of the Securities are outstanding, the
Corporation shall mail to each Holder copies of the annual and
quarterly reports of the Corporation that it is required to file with
the Trustee pursuant to Section 3.03(a) (or summaries thereof) within
30 days after such filing is required to be made.
Section 3.04 Money for Security Payments to Be Held in Trust. If the
Corporation shall at any time act as its own Paying Agent, it will, on or before
each due date of the principal of or interest on the Securities, segregate and
hold in trust in a trust or special deposit account for the benefit of the
Persons entitled thereto a sum sufficient to pay the principal or interest so
becoming due until such sum shall be paid to such Person or otherwise disposed
of as herein provided, and will promptly notify the Trustee of its action or
failure so to act.
Whenever the Corporation shall have one or more Paying Agents, it will,
on or prior to each date for the payment of the principal of or interest on the
Securities, deposit with the Paying Agents sums sufficient to pay the principal
or interest so becoming due, such sums to be held in trust for the benefit of
the Persons entitled to such payments pursuant to the agreement referred to in
Section 2.04; and, unless such Paying Agent is the Trustee, the Corporation will
promptly notify the Trustee of its action or failure so to act.
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For the purpose of obtaining the satisfaction and discharge of this
Indenture or for any other purpose, the Corporation may at any time pay, or
direct any Paying Agent to pay, to the Trustee all sums held in trust by the
Corporation or such Paying Agent, such sums to be held by the Trustee, the
Corporation or such Paying Agent, as the case may be, shall be released from all
further liability with respect to such money.
Section 3.05 Compliance Certificate. The Corporation shall deliver to
the Trustee, within 120 days after the end of each fiscal year of the
Corporation, an Officers' Certificate stating that a review of the activities of
the Corporation and its Subsidiaries during the preceding fiscal year has been
made under the supervision of the signing Officers with a view to determining
whether the Corporation has kept, observed, performed and fulfilled its
obligations under this Indenture, and further stating, as to each such officer
signing such Certificate, that to the best of his knowledge the Corporation has
kept, observed, performed and fulfilled each and every covenant contained in
this Indenture and is not in default in the performance or observance of any of
the terms, provisions and conditions hereof (or, if a Default or Event of
Default shall have occurred, describing all such Defaults or Events of Default
of which he may have knowledge and specifying what action the Corporation is
taking or proposes to take with respect thereto) and that to the best of his
knowledge no event has occurred and remains in existence by reason of which
payments on account of the principal of or interest on the Securities are
prohibited.
The Corporation will, so long as any of the Securities are outstanding,
deliver to the Trustee at its Corporate Trust Office, forthwith upon becoming
aware of any Default, Event of Default or default in the performance of any
covenant, agreement or condition contained in this Indenture, an Officers'
Certificate describing such Default, Event of Default or default and specifying
what action the Corporation is taking or proposes to take with respect thereto.
Any such Certificate delivered under this Section 3.05 shall comply with Section
314 of the TIA.
Section 3.06 Authorization of Common Stock. The Corporation shall at
all times reserve and keep available out of its authorized Common Stock the full
number of shares of Common Stock of the Corporation issuable upon the conversion
of all outstanding Securities.
Section 3.07 Certain Restrictions. So long as any Securities are
outstanding, the Corporation shall not:
(a) redeem or purchase or otherwise acquire for consideration
any shares of its capital stock or Securities Ranking Junior to or on a
Parity with the Securities; and
(b) permit any subsidiary of the Corporation to purchase or
otherwise acquire for consideration any shares of capital stock or
Securities Ranking Junior to or on a Parity with the Securities of the
Corporation unless the Corporation could purchase such shares or
Securities at such time and in such manner.
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(c) without the affirmative vote or consent of Holders of at
least two-thirds in principal amount of the Securities, issue any
securities representing Indebtedness ranking on parity with the
Securities or issue any Securities other than in payment of interest on
Securities.
ARTICLE IV
SUCCESSORS
Section 4.01 When Corporation May Merge, etc. Subject to Section 2.17,
the Corporation shall not consolidate or merge with or into, or transfer, sell,
lease or convey all or substantially all of its Property to, any Person unless:
(i) the corporation formed by or surviving any such
consolidation or merger, or the Person to which such transfer, sale,
lease or conveyance shall have been made, unconditionally assumes by
supplemental indenture all the obligations of the Corporation under the
Securities and this Indenture including but not limited to the due and
punctual payment of the principal of and interest on all the
Securities; and
(ii) immediately after the transaction no Default or Event
of Default exists.
The Corporation shall deliver to the Trustee prior to the proposed
transaction an Officers' Certificate to the foregoing effect and an Opinion of
Counsel stating that the proposed transaction and such supplemental indenture
comply with this Indenture and that all conditions precedent to the consummation
of the transaction under this Indenture have been met.
The surviving corporation shall be the successor Corporation, but the
predecessor Corporation in the case of a transfer, sale, lease or conveyance
shall not be released from the obligation to pay the principal of and interest
on the Securities.
The parties hereto recognize that the remedies otherwise provided in
this Indenture may not provide an adequate remedy in the case of noncompliance
by the Corporation under this Section. The parties hereto therefore agree that,
in any such case of noncompliance, the Trustee shall be entitled to seek an
injunction or specific performance of the Corporation's obligations under this
Section, or any other equitable remedies, in addition to other remedies provided
in this Indenture.
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Section 4.02 Successor Substituted. Upon any consolidation or merger,
or any transfer, sale, lease or conveyance of all or substantially all of the
assets of the Corporation in accordance with Section 4.01, the successor Person
formed by such consolidation or into which the Corporation is merged or to which
such transfer, sale, lease or conveyance is made shall succeed to, and be
substituted for, and may exercise every right and power of, the Corporation
under this Indenture with the same effect as if such successor had been named as
the Corporation herein.
ARTICLE V
DEFAULTS AND REMEDIES
Section 5.01 Events of Default. An "Event of Default" occurs if:
(1) the Corporation defaults in the payment of the principal
on any Security when the same becomes due and payable at maturity or
upon redemption, acceleration or otherwise;
(2) the Corporation defaults in the payment of interest on any
Security when the same becomes due and payable and the Default
continues for a period of 30 days.
(3) the Corporation fails to comply with any of its other
agreements or covenants in or provisions of the Securities or this
Indenture, and such default continues for a period of 30 days after the
Trustee notifies the Corporation, or the Holders of at least 25% in
principal amount of the then-outstanding Securities notify the
Corporation and the Trustee, of such Default;
Section 5.02 Acceleration; Limitations on Acceleration. Subject to
Section 2.16, if an Event of Default occurs and is continuing, the Trustee by
notice to the Corporation, or the Holders of at least 25% in principal amount of
the then-outstanding Securities by notice to the Corporation and the Trustee,
may declare the principal and any accrued interest on all the Securities to be
due and payable. Upon such declaration the principal and interest shall be due
and payable immediately without any presentment, demand, protest or notice to
the Corporation, all of which the Corporation expressly waives.
The Holders of a majority in principal amount of the then-outstanding
Securities by notice to the Trustee may rescind an acceleration and its
consequences if:
(1) the rescission would not conflict with any judgment or
decree;
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(2) all existing Events of Default have been cured or waived
except nonpayment of principal or interest that has become due solely
because of the acceleration; and
(3) all payments then due the Trustee and any predecessor
Trustee under Section 6.07 have been made.
Section 5.03 Other Remedies. Subject to Section 2.16, if an Event of
Default occurs and is continuing, the Trustee may pursue any available remedy by
an action at law, suit in equity or other appropriate proceeding to collect the
payment of principal of or interest on the Securities or to enforce the
performance of any provision of the Securities or this Indenture.
The Trustee may maintain a proceeding even if it does not possess any
of the Securities or does not produce any of them in the proceeding. A delay or
omission by the Trustee or any Securityholder in exercising any right or remedy
accruing upon a Default or Event of Default shall not impair the right or remedy
or constitute a waiver of or acquiescence in such Default or Event of Default.
All remedies are cumulative to the extent permitted by law.
Section 5.04 Waiver of Default. The Holders of at least a majority in
principal amount of the then-outstanding Securities by notice to the Trustee may
waive an existing Default or Event of Default and its consequences except a
continuing Default or Event of Default in the payment of the principal of or
interest on any Security. No such waiver shall extend to any subsequent or other
Default or Event of Default.
Section 5.05 Control by Majority. The Holders of a majority in
principal amount of the then-outstanding Securities may direct the time, method
and place of conducting any pro ceeding for any remedy available to the Trustee
or exercising any trust or power conferred on it. However, the Trustee may
refuse to follow any direction that conflicts with law, regulation or this
Indenture, is unduly prejudicial to the rights of other Securityholders or would
subject the Trustee to personal liability.
Section 5.06 Limitation on Suits. A Securityholder may pursue a remedy
with respect to this Indenture or the Securities only if:
(1) the Holder gives to the Trustee notice of a continuing
Event of Default;
(2) the Holders of at least 25% in principal amount of the
then-outstanding Securities make a request to the Trustee to pursue the
remedy;
(3) such Holder or Holders offer(s) to the Trustee indemnity
satisfactory to the Trustee against any loss, liability or expense;
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(4) the Trustee does not comply with the request within 60
days after the receipt of the notice, the request and the offer of
indemnity; and
(5) during such 60-day period the Holders of a majority in
principal amount of the then-outstanding Securities do not give the
Trustee a direction inconsistent with the request.
A Securityholder may not use this Indenture to prejudice the rights of
another Securityholder or to obtain a preference or priority over another
Securityholder.
Section 5.07 Rights of Holders to Receive Payment. Subject only to
Article IX, Section 2.16 and the provisions of Section 5.02 regarding rescission
of acceleration, notwith standing any other provision of this Indenture, the
right of any holder of a Security to receive payment of principal of and
interest on the Security on or after the due date expressed in the Security, or
to bring suit for the enforcement of any such payment on or after such date,
shall not be impaired or affected without the consent of the Holder.
Section 5.08 Collection Suit by Trustee. If an Event of Default
specified in clause (1) of Section 5.01 occurs and is continuing, the Trustee
may recover judgment in its own name and as trustee of an express trust against
the Corporation for the whole amount of principal and interest remaining unpaid
on the Securities and any compensation due the Trustee under Section 6.07.
Section 5.09 Trustee May File Proofs of Claim. The Trustee may file
such proofs of claim and other papers or documents as may be necessary or
advisable in order to have the claims of the Trustee and the Securityholders
allowed in any judicial proceedings relative to the Corporation, its creditors
or its Property.
Nothing herein contained shall be deemed to authorize the Trustee to
authorize or consent to or accept or adopt on behalf of any Securityholder any
plan of reorganization, arrangement, adjustment or composition affecting the
Securities or the rights of any Holder thereof, or to authorize the Trustee to
vote in respect of the claim of any Securityholder in any such proceeding.
Section 5.10 Priorities. If the Trustee collects any money pursuant to
this Article V, it shall pay out the money in the following order:
First: to the Trustee for amounts due under Section 6.07;
Second: to holders of Senior Debt to the extent required by
Article IX;
Third: to Securityholders for amounts due and unpaid on the
Securities for principal and interest, ratably, without preference or
priority of any kind, according to
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the amounts due and payable on the Securities for principal and
interest, respectively; and
Fourth: to the Corporation, its successors or assigns, or to
whomever may be legally entitled to receive the remainder, or as a
court of competent jurisdiction may determine.
The Trustee may fix a record date and a payment date for any payment to
the Securityholders pursuant to this Article.
Section 5.11 Undertaking for Costs. In any suit for the enforcement of
any right or remedy under this Indenture or in any suit against the Trustee for
any action taken or omitted by it as a Trustee, a court in its discretion may
require the filing by any party litigant in the suit of an undertaking to pay
the costs of the suit, and the court in its discretion may assess reasonable
costs, including reasonable attorneys' fees, against any party litigant in the
suit having due regard to the merits and good faith of the claims or defenses
made by the party litigant. This Section does not apply to a suit by the
Trustee, a suit by a Holder for the enforcement of rights set forth in Section
5.07, or a suit by Holders of at least 25% in principal amount of the
then-outstanding Securities.
ARTICLE VI
TRUSTEE
Section 6.01 Duties of Trustee.
(a) If an Event of Default has occurred and is continuing, the
Trustee shall exercise such of the rights and powers vested in it by
this Indenture, and use the same degree of care and skill in their
exercise, as a prudent man would exercise or use under the
circumstances in the conduct of his own affairs.
(b) Except during the continuance of an Event of Default:
(1) the Trustee need perform only those duties that are
specifically set forth in this Indenture and no others; and
(2) in the absence of bad faith on its part, the Trustee
may conclusively rely, as to the truth of the statements and
the correctness of the opinions expressed therein, upon
certificates or opinions furnished to the Trustee and
conforming to the requirements of this Indenture but shall not
be required to verify the accuracy of the contents of such
certificates or opinions. However,
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the Trustee shall examine the certificates and opinions to
determine whether or not they conform to the requirements of
this Indenture.
(c) The Trustee may not be relieved from liability for its own
negligent action or failure to act, or its own willful misconduct,
except that:
(1) this paragraph does not limit the effect of
paragraph (b) of this Section;
(2) the Trustee shall not be liable for any error of
judgement made in good faith by a Trust Officer, unless it is
proved that the Trustee was negligent in ascertaining the
pertinent facts; and
(3) the Trustee shall not be liable with respect to any
action it takes or omits to take in good faith in accordance
with a direction received by it pursuant to Section 5.05.
(d) Every provision of this Indenture that in any way relates
to the Trustee is subject to paragraphs (a), (b) and (c) of this
Section.
(e) The Trustee may refuse to perform any duty or exercise any
right or power unless it receives an indemnity satisfactory to it
against any loss, liability or expense.
(f) The Trustee shall not be liable for interest on any money
received by it except as the Trustee may agree with the Corporation.
Money held in trust by the Trustee need not be segregated from other
funds except to the extent required by law.
Section 6.02 Rights of Trustee.
(a) The Trustee may rely on any document believed by it to be
genuine and to have been signed or presented by the proper person. The
Trustee need not investigate any fact or matter stated in the document.
(b) Before the Trustee acts or refrains from acting, it may
require an Officers' Certificate or an opinion of Counsel. The Trustee
shall not be liable for any action it takes or omits to take in good
faith in reliance on such Certificate or Opinion.
(c) The Trustee may act through agents and shall not be
responsible for the misconduct or negligence of any agent appointed
with due care.
(d) The Trustee shall not be liable for any action it takes or
omits to take in good faith which it believes to be authorized or
within its rights or powers.
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Section 6.03 Individual Rights of Trustee. The Trustee in its
individual or any other capacity may become the owner or pledgee of Securities
and may otherwise deal with the Corporation or an Affiliate with the same rights
it would have if it were not Trustee. Any Agent may do the same with like
rights. However, the Trustee is subject to Sections 6.10 and 6.11.
Section 6.04 Disclaimer. The Trustee makes no representation as to the
validity or adequacy of this Indenture or the Securities, it shall not be
accountable for the Corporation's use of the proceeds from the Securities, and
it shall not be responsible for any statement in the Securities other than its
authentication.
Section 6.05 Notice of Defaults. If a Default or Event of Default has
occurred and is continuing of which a Trust Officer of the Trustee has actual
knowledge, the Trustee shall mail to Securityholders a notice of the Default or
Event of Default within 90 days after it becomes known to the Trustee. Except in
the case of a Default or Event of Default in payment of principal of or interest
on any Security, the Trustee may withhold notice if and so long as a committee
of its Trust Officers in good faith determines that withholding the notice is in
the interest of Securityholders.
Section 6.06 Reports by Trustee to Holders.
(a) Within 60 days after each April 15, the Trustee shall mail
to each Securityholder and the Corporation a brief report dated as of
such April 15 that complies with TIA Section 313(a). The Trustee shall
also comply with TIA Section 313(b)(2).
(b) In lieu of the foregoing reports, so long as this
Indenture is not qualified under the TIA, the Trustee may transmit by
mail to the Corporation a statement as to its qualifications and
eligibility hereunder, and shall transmit by mail a copy of such
statement to such Holders who have previously furnished a written
request therefor to the Trustee.
Section 6.07 Compensation and Indemnity. The Corporation shall pay to
the Trustee from time to time reasonable compensation for its services. The
Trustee's compensation shall not be limited by any law on compensation of a
trustee of an express trust. The Corporation shall reimburse the Trustee upon
request for all reasonable out-of-pocket expenses incurred by it. Such expenses
shall include the reasonable compensation and out-of-pocket expenses of the
Trustee's agents and counsel.
The Corporation shall indemnify the Trustee against any loss or
liability incurred by it in connection with its services hereunder except as set
forth in the next paragraph. The Trustee shall notify the Corporation promptly
of any claim for which it may seek indemnity.
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The Corporation shall settle or defend the claim and the Trustee shall cooperate
in the defense. The Trustee may have separate counsel, at the expense of the
Corporation.
The Corporation need not reimburse any expense or indemnity against any
loss or liability incurred by the Trustee through negligence or bad faith.
To secure the Corporation's payment obligations in this Section, the
Trustee shall have a lien prior to the Securities on all money or property held
or collected by the Trustee, except that held in trust to pay principal of and
interest on particular securities.
Section 6.08 Replacement of Trustee. A resignation or removal of the
Trustee and appointment of a successor Trustee shall become effective only upon
the successor Trustee's acceptance of appointment as provided in this Section.
The Trustee may resign by so notifying the Corporation. The Holders of
a majority in principal amount of the then-outstanding Securities may remove the
Trustee by so notifying the Trustee and the Corporation. The Corporation may
remove the Trustee if:
(1) the Trustee fails to comply with Section 6.10;
(2) the Trustee is adjudged a bankrupt or an insolvent or an
order for relief is entered with respect to the Trustee under any
bankruptcy or similar law for the benefit of creditors;
(3) a custodian or public officer takes charge of the Trustee
or its Property; or
(4) the Trustee becomes incapable of acting.
If the Trustee resigns or is removed or if a vacancy exists in the
office of Trustee for any reason, the Corporation shall promptly appoint a
successor Trustee. Within one year after the successor Trustee takes office, the
Holders of a majority in principal amount of the then-outstanding Securities may
appoint a successor Trustee to replace the successor Trustee appointed by the
Corporation.
If a successor Trustee does not take office within 60 days after the
retiring Trustee resigns or is removed, the retiring Trustee, the Corporation or
the Holders of at least 10% in principal amount of the then-outstanding
Securities may petition any court of competent jurisdiction for the appointment
of a successor Trustee.
If the Trustee fails to comply with Section 6.10, any Securityholder
may petition any court of competent jurisdiction for the removal of the Trustee
and the appointment of a successor Trustee.
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A successor Trustee shall deliver a written acceptance of its
appointment to the retiring Trustee and to the Corporation. Thereupon the
resignation or removal of the retiring Trustee shall become effective and the
successor Trustee shall have all the rights, powers and duties of the Trustee
under this Indenture. The successor Trustee shall mail a notice of its
succession to Securityholders. The retiring Trustee shall promptly transfer all
Property held by it as Trustee to the successor Trustee, subject to the lien
provided for in Section 6.07.
Section 6.09 Successor Trustee by Merger. If the Trustee consolidates,
merges or converts into, or transfers all or substantially all of its corporate
trust business to, another corporation, the successor corporation without any
further act shall be the successor Trustee.
Section 6.10 Eligibility; Disqualification. This Indenture shall always
have a Trustee who satisfies the requirements of TIA Section 310(a)(1). The
Trustee shall always have a combined capital and surplus of at least $10 million
as set forth in its most recent published annual report of condition. The
Trustee is subject to TIA Section 310(b), including the optional provision
permitted by the second sentence of TIA Section 310(b)(9).
Section 6.11 Preferential Collection of Claims Against Corporation. The
Trustee shall comply with TIA Section 311(a), excluding any creditor
relationship listed in TIA Section 311(b). A Trustee who has resigned or been
removed shall comply with TIA Section 311(a) to the extent indicated therein.
ARTICLE VII
SATISFACTION AND DISCHARGE
Section 7.01 Satisfaction and Discharge of Indenture. This Indenture
shall cease to be of further effect (except as to (i) any rights of
substitution, registration of transfer and exchange of Securities herein
expressly provided for, (ii) rights hereunder of Holders to receive payments of
principal of, or interest on, the Securities and (iii) the rights, obligations
and immunities of the Trustee hereunder, including without limitation, its
rights under Section 6.07), and the Trustee, on the demand and at the expense of
the Corporation, shall execute proper instruments acknowledging satisfaction and
discharge of this Indenture when:
(1) either
(A) all Securities theretofore authenticated and
delivered (other than (i) Securities which have been
destroyed, lost or stolen and which have been replaced or paid
as provided in Article II, and (ii) Securities for the payment
of which money has theretofore been deposited in trust with
the Trustee or any Paying Agent or segregated and held in
trust by the Corporation and thereafter
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repaid to the Corporation or discharged from such trust, as
provided in Section 7.03) have been delivered to the Trustee
for cancellation; or
(B) the principal of all such Securities not theretofore
delivered to the Trustee for cancellation has become due and
payable and the Corporation has deposited or caused to be
deposited in trust with the Trustee, solely for the benefit of
the Holders, funds in an amount sufficient to pay and
discharge the entire Indebtedness on such Securities not
theretofore delivered to the Trustee for cancellation;
(2) the Corporation has irrevocably paid or caused to be
irrevocably paid all other sums payable hereunder by the Corporation;
and
(3) the Corporation has delivered to the Trustee an Officers'
Certificate and an Opinion of Counsel, each stating that all conditions
precedent provided for herein to be complied with by the Corporation
relating to the satisfaction and discharge of this Indenture have been
complied with.
Section 7.02 Application of Trust Money. The Trustee shall hold in
trust money deposited with it pursuant to Section 7.01. It shall apply the
deposited money through the Paying Agents and in accordance with the Indenture
to the payment of principal and Interest, on the Securities. Money so held in
trust shall not be subject to Article IX.
Section 7.03 Repayment to Corporation. Any money deposited with the
Trustee or any Paying Agent, or then held by the Corporation in trust for the
payment of principal or interest that remains unclaimed for two years after such
principal or interest has become due and payable shall be paid to the
Corporation upon request, or, if then held by the Corporation, shall be released
from such trust; provided, however, that the Trustee or such Paying Agent, may,
at the expense of the Corporation, cause to be published once in a newspaper of
general circulation in the City of New York or mail to each such Holder, notice
that such money remains unclaimed and that, after a date specified therein,
which shall not be less than 30 days from the date of such publication or
mailing, any unclaimed balance of such money then re maining will be repaid to
the Corporation. After such money has been paid to the Corporation or released
from trust, Securityholders entitled to the money must look to the Corporation
for payment as general creditors unless an applicable abandoned property law
designates another person.
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ARTICLE VIII
AMENDMENTS
Section 8.01 Without Consent of Holders. The Corporation and the
Trustee may amend this Indenture or the Securities without the consent of any
Securityholder:
(1) to cure any ambiguity, defect or inconsistency;
(2) to comply with Section 4.01;
(3) to provide for definitive Securities in exchange for
global Securities;
(4) to make any change that does not adversely affect the
legal rights hereunder of any Securityholder; or
(5) to take any action necessary to qualify this Indenture
under the TIA.
Section 8.02 With Consent of Holders. The Corporation and the Trustee
may amend this Indenture or the Securities with the written consent of the
holders of at least a majority in principal amount of the then-outstanding
Securities. However, without the consent of each Securityholder affected, an
amendment under this Section may not:
(1) reduce the amount of Securities whose Holders must consent
to an amendment;
(2) reduce the rate of or change the time for or in any way
affect the terms of payment of interest on any Security;
(3) reduce the principal of or change the fixed maturity of
any Security, or change the date on which any Security may be subject
to conversion or redemption, or reduce the Redemption Price therefor;
(4) make any Security payable in money other than that stated
in the Security;
(5) make any change in Section 5.04 or 5.07 or the second
sentence of this Section 8.02;
(6) make any change in Article IX that adversely affects the
rights of any Securityholder; or
(7) make any change in Section 2.06 hereof that adversely
effects the right to convert the Securities into shares of Common
Stock.
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After an amendment under this Section becomes effective, the
Corporation shall mail to Securityholders a notice briefly describing the
amendment.
Section 8.03 Reserved.
Section 8.04 Revocation and Effect of Consents. Until an amendment or
waiver becomes effective, a consent to it by a Holder is a continuing consent by
the Holder and every subsequent Holder of a Security or portion of a Security
that evidences the same date as the consenting Holder's Security, even if
notation of the consent is not made on any Security. However, any such Holder or
subsequent Holder may revoke the consent as to his security or portion of a
Security if the Trustee receives the notice of revocation before the date the
amendment or waiver becomes effective. An amendment or waiver becomes effective
in accordance with its terms and thereafter binds every Securityholder.
Section 8.05 Notation on or Exchange of Securities. If an amendment,
supplement or waiver changes the terms of the Securities, the Trustee may
require the Holders of such Securities to deliver them to the Trustee. The
Trustee may place an appropriate notation on such Securities about the changed
terms and return them to such Holders. Alternatively, the Corporation in
exchange for all securities may issue and the Trustee shall authenticate new
Securities that reflect the changed terms.
Section 8.06 Trustee Protected. The Trustee shall sign any amendment,
supplement or waiver if requested by the Corporation, so long as the same
complies with the requirements of this Indenture and in doing so shall be
entitled to receive, and shall be fully protected in relying upon an opinion of
counsel stating that the execution of any amendment, supplement or waiver
authorized pursuant to this Article is authorized or permitted by this
Indenture, is not inconsistent herewith and is valid and binding on the
Corporation in accordance with its terms. However, the Trustee need not sign any
amendment, supplement or waiver that adversely affects its rights, duties,
liabilities or immunities. The Corporation may not sign an amendment or
supplement until its Board of Directors approves it (a certified copy of the
resolutions in which such approval is given shall be delivered to the Trustee
prior to its signing any amendment, supplement or waiver).
Section 8.07 Rights of Holders to Receive Payment. Subject only to
Article IX, Section 2.16 and the provisions of Section 8.02 regarding rescission
of acceleration, notwith standing any other provision of this Indenture, the
right of any holder of a Security to receive payment of principal of and
interest on the Security on or after the due date expressed in the Security, or
to bring suit for the enforcement of any such payment on or after such date
shall not be impaired or affected without the consent of the Holder.
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ARTICLE IX
SUBORDINATION
Section 9.01 Agreement to Subordinate. The Corporation, and each
Securityholder by accepting a Security, agrees that the Indebtedness evidenced
by the Security is subordinated and junior in right of payment to the prior
payment in full of all Senior Debt to the extent and in the manner provided in
this Article.
Each Holder, by his acceptance of a Security, acknowledges that the
provisions of this Article are for the benefit of all holders of Senior Debt
who, in reliance upon such provisions, become holders of, or continue to hold,
Senior Debt.
Section 9.02 Subordination.
(a) The Indebtedness evidenced by the Securities shall be
subordinate and junior in right of payment to all Senior Debt to the
extent and in the manner set forth in this Section. In the event of any
insolvency, receivership, conservatorship, reorganization, dissolution,
readjustment of debt, marshaling of assets and liabilities or similar
proceedings or any liquidation relating to or winding up of the
Corporation as a whole, whether voluntary or involuntary (each, a
"Specified Event" and collectively, the "Specified Events"), the
holders of Senior Debt shall be entitled to payment in full of all
principal of, premium, if any, and interest on Senior Debt before the
Holders are entitled to any payment on account of the principal of,
premium, if any, or interest on the Securities. Subject to Section
2.17, in the event of any Specified Event, after payment in full of all
sums owing on the Senior Debt, the Holders, together with the holders
of any Indebtedness of the Corporation Ranking on a Parity with the
Securities, shall be entitled to be paid from the remaining assets of
the Corporation. In addition, during the continuance of any Specified
Event, all principal of, premium, if any, and interest on the
Securities which shall have become due and payable shall be due and
payable in full to the Securityholders entitled thereto before any
payment or other distribution shall be made on account of any
Indebtedness or other obligation of the Corporation Ranking Junior to
the Securities.
(b) If any event of default occurs and is continuing (or if
such an event of default would occur upon any payment with respect to
the Securities), as such event of default is defined in any Primary
Indebtedness or in the instrument under which such Primary Indebtedness
is outstanding, permitting the holders thereof to accelerate the
maturity thereof and if the holder or holders or a representative
thereof gives written notice of such event of default (which notice
makes specific reference to this subparagraph) to the Corporation and
the Trustee (a "Default Notice"), then, unless and until such event of
default has been cured or waived or has ceased to exist, then, during
the 180 days after the delivery of such Default Notice (the "Blockage
Period") (i) no
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payment of or with respect to the principal of, premium, if any, or
interest on the Securities (including any payment or distribution that
may be payable or deliverable to holders of Securities by reason of the
payment of any other debt of the Corporation subordinated to the
payment of the Securities), but not including any payment of interest
on the Securities paid in the form of additional Securities, shall be
made directly or indirectly by or on behalf of the Corporation and (ii)
no direct or indirect payment shall be made by or on behalf of the
Corporation with respect to any repurchase, redemption or other
retirement of any of the Securities for cash or property or otherwise.
For all purposes of this Section 9.02(b), an event of default which
existed or was continuing with respect to the Primary Indebtedness, the
holders of which initiated the Blockage Period, on the date such
Blockage Period commenced may not be or be made the basis for the
commencement of any subsequent Blockage Period by the holder or holders
of such Primary Indebtedness (or a representative of such holder or
holders) unless such event of default is cured or waived or has ceased
to exist for a period of not less than 90 consecutive days.
(c) In the event that, notwithstanding the foregoing, any
payment shall be received directly or indirectly by the Trustee or any
Holder when such payment is prohibited by Section 9.02(a) or 9.02(b),
such payment shall be held in trust for the benefit of, and shall
forthwith be paid over or delivered to, the holders of Primary
Indebtedness, of their respective representatives, or to the trustee or
trustees under any indenture pursuant to which any of such Primary
Indebtedness may have been issued, as their respective interests may
appear, but only to the extent that, upon notice from the Trustee to
the holders of Primary Indebtedness, as the case may be, that such
prohibited payment has been made, the holders of the Primary
Indebtedness notify the Trustee of the amounts then due and owing on
the Primary Indebtedness, if any, and only the amounts specified in
such notice to the Trustee shall be paid to the holders of Primary
Indebtedness.
The foregoing subordination provisions shall in no way be affected,
modified, waived or revoked by the occurrence of any Event of Default hereunder
or any acceleration of the maturity of the Securities in consequence thereof.
Section 9.03 Notice to Trustee of Specified Events; Reliance on
Certificate of Custodian. The Corporation shall give prompt written notice to
the Trustee and the Paying Agent of any Specified Event affecting the
Corporation. The Trustee and the Paying Agent shall be entitled to assume that
no Specified Event has occurred unless the Corporation has given such notice.
Upon any distribution of assets of the Corporation or payment by or on
behalf of the Corporation referred to in Section 9.02, the Trustee and the
Securityholders shall be entitled to rely upon any order or decree of a court or
governmental body of competent jurisdiction in which any proceedings relating to
a Specified Event are pending, and the Trustee and the
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Securityholders shall be entitled to rely upon a certificate of the custodian or
agent or other Person making any distribution to the Trustee or to the
Securityholders for the purpose of ascertaining the persons entitled to
participate in such distribution, the holders of Senior Debt and other
Indebtedness of the Corporation, the amount thereof or payable thereon, the
amount or amounts paid or distributed thereon and all other facts pertinent
thereto or to this Article.
Section 9.04 Trustee Entitled to Assume Payments Not Prohibited in
Absence of Notice.
(a) Subject to Section 2.17, nothing contained in this Article
or elsewhere in this Indenture, or in any of the Securities, shall
prevent the Corporation from making payment of or on account of the
principal of, premium, if any, or interest on the Securities, or from
depositing with the Trustee moneys for such payments, or prevent the
Trustee from making payments from moneys deposited with it hereunder
for the payment of or on account of the principal of, premium, if any,
or interest on the Securities if such payment or deposit is not
contrary to the conditions described in Section 9.02 on the date of
such payment or deposit.
(b) The Trustee shall not at any time be charged with
knowledge of the existence of any facts which would prohibit the making
of any payment to or by the Trustee, unless and until the Trustee shall
have received written notice thereof at its Corporate Trust Office from
the Corporation at least three business days prior to any payment date.
Thereafter, the Trustee shall use its best efforts to prevent any
prohibited payment under Section 9.02. Prior to the receipt of any such
written notice the Trustee shall be entitled to assume conclusively
that no such facts exist, and shall be fully protected in making any
such payment in any such event.
Section 9.05 Absolute Obligation to Pay. Subject to Section 2.17,
nothing contained in this Indenture or in the Securities shall:
(1) impair, as between the Corporation and the
Securityholders, the obligation of the Corporation, which is absolute
and unconditional, to pay the principal of and interest on the
Securities in accordance with their terms;
(2) affect the relative rights of the Securityholders and
creditors of the Corporation other than holders of Senior Debt;
(3) prevent the Trustee or any Securityholder from exercising
all or any of its available remedies upon a Default or an Event of
Default.
Section 9.06 Trustee's Rights as Holder of Senior Debt. The Trustee in
its individual or any other capacity may hold Senior Debt with the same rights
it would have if it were not the Trustee. Any Agent may do the same with like
rights.
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Section 9.07 No Implied Obligations to Holders of Senior Debt. No
implied covenants or obligations with respect to the holders of Senior Debt
shall be read into this Indenture against the Trustee. The Trustee shall not be
deemed to owe any fiduciary duty to the holders of Senior Debt and shall not be
liable to any such holder if it shall pay over or distribute to or on behalf of
Securityholders or the Corporation moneys or assets to which any holder of
Senior Debt shall be entitled.
Section 9.08 Enforceability of Subordination. The rights of any holder
of Senior Debt to enforce the subordination of the Indebtedness evidenced by the
Securities shall not be prejudiced or impaired by any act or failure to act by
the Corporation or by its failure to comply with the Indenture.
Section 9.09 Trustee Authorized to Effectuate Subordination. Each
Securityholder, by accepting a Security, authorizes and directs the Trustee on
his behalf to take such action as may be necessary or appropriate to effectuate
the subordination provided in this Article and appoints the Trustee his
attorney-in-fact for any and all such purposes.
ARTICLE X
REDEMPTION
Section 10.01 Optional Redemption; Notice of Redemption. The
Corporation may redeem all, but not less than all, of the outstanding Securities
at any time after October 1, 2001 upon payment of the Principal amount plus all
accrued and unpaid interest thereon to the date of the redemption, provided that
if the redemption date occurs after the Record Date and before the Interest
Payment Date to which that Record Date relates, the interest otherwise payable
on that Interest Payment Date shall not be paid by the Corporation.
If the Corporation elects to redeem Securities pursuant to this
subparagraph, it shall furnish to the Trustee an Officer's Certificate notifying
the Trustee of the Redemption Date at least 50 days but not more than 90 days
before such Redemption Date.
Section 10.02 Notice of Redemption. At least 30 days but not more than
60 days before a Redemption Date, the Trustee shall mail a notice of redemption
by first-class mail to each Holder stating that the Securities are to be
redeemed in the Corporation's name and at its expense.
The notice shall state:
(1) the Redemption Date;
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(2) the Redemption Price and the amount of accrued and unpaid
interest to be paid;
(3) the name and address of the Paying Agent or Agents; and
(4) that the Securities must be surrendered to a Paying Agent
to collect the Redemption Price.
Section 10.03 Effect of Notice of Redemption. Once notice of redemption
is mailed, the Securities called for redemption become due and payable on the
specified Redemption Date at the Redemption Price plus accrued and unpaid
interest to the Redemption Date.
Section 10.04 Deposit of the Redemption Price.
(a) On the Redemption Date, the Corporation shall deposit for
the pro-rata benefit of the Holders of the Securities the funds
necessary for the payment of the Redemption Price with a bank or trust
company in the Borough of Manhattan, The City of New York, having a
capital and surplus of at least $100,000,000. Holders shall thereafter
have the right to receive payment of the Redemption Price for such
Securities by surrendering to the Corporation, at its principal office
or at such other office or agency maintained by the Corporation for
that purpose, the Securities to the Corporation, at its principal
office or at such other office or agency maintained by the Corporation
for that purpose. Any monies so deposited by the Corporation with a
bank or trust company pursuant to this subparagraph (a) and unclaimed
at the end of five years from the Redemption Date shall revert to the
general funds of the Corporation. After such reversion, any such bank
or trust company shall, upon demand, pay over to the Corporation such
unclaimed amounts and thereupon such bank or trust company shall be
relieved of all responsibility in respect thereof to such Holder and
such Holder shall look only to the Corporation for the payment of the
Redemption Price. Any interest accrued on funds so deposited pursuant
to this paragraph (a) shall be paid from time to time to the
Corporation for its own account; and
(b) Upon the deposit for funds pursuant to subparagraph (a) of
this Section in respect of outstanding Securities, the Securities
represented thereby shall no longer be deemed outstanding, the rights
to receive interest thereon shall cease to accrue from and after the
Redemption Date and all rights of the Holders shall cease and
terminate, excepting only the right to receive the Redemption Price
therefor.
705179.13
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<PAGE>
ARTICLE XI
MISCELLANEOUS
Section 11.01 Trust Indenture Act Controls. Any provision of this
Indenture which would be required to be contained herein if the Indenture were
qualified under the TIA shall be construed and interpreted in accordance with
interpretations of the TIA by courts and the Commission.
Section 11.02 Notices. Any notice or communication to the Corporation
or the Trustee is duly given if in writing and delivered in person or mailed by
first-class mail to the following address:
The Corporation's address is:
Toy Biz, Inc.
685 Third Avenue
New York, New York 10017
Attention: Chief Executive Officer
The Trustee's address is:
[ ]
[ ]
[ ]
Attention: [ ]
Telephone: [ ]
Telecopy: [ ]
With respect to notices between the Trustee and the Corporation only,
notices may also be given by facsimile transmission with receipt confirmed by
telephone and followed by an original sent by guaranteed overnight courier.
The Corporation or the Trustee by notice to the other may designate
additional or different addresses for subsequent notices or communications.
Any notice or communication to a Securityholder shall be in writing and
mailed by first-class mail to his address shown on the register kept by the
Registrar. Failure to mail a notice or a communication to a Securityholder or
any defect in it shall not affect its sufficiency with respect to other
Securityholders.
705179.13
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<PAGE>
If a notice or communication is delivered or mailed, as the case may
be, in the manner provided above within the time prescribed, it is duly given,
whether or not the addressee receives it.
If the Corporation mails a notice or communication to Securityholders,
it shall mail a copy to the Trustee and each Agent at the same time.
Section 11.03 Communication by Holders with Other Holders.
Securityholders may communicate pursuant to TIA Section 312(b) with other
Securityholders with respect to their rights under this Indenture or the
Securities. The Trustee shall comply with the provisions of TIA Section 312(b).
The Corporation, the Trustee, the Registrar and anyone else shall have the
protection of TIA Section 312(c).
Section 11.04 Certificate and Opinion as to Conditions Present. Upon
any request or application by the Corporation to the Trustee to take any action
under this Indenture, the Corporation shall furnish to the Trustee:
(a) an Officers' Certificate stating that, in the opinion of
the signers, all conditions precedent, if any, provided for in this
Indenture relating to the proposed action have been complied with; and
(b) an Opinion of Counsel stating that, in the opinion of such
counsel, all such conditions precedent have been complied with.
Section 11.05 Statements Required in Certificate or Opinion. Each
certificate or opinion with respect to compliance with a condition or covenant
provided for in this Indenture shall include:
(1) a statement that the person making such certificate or
opinion has read such covenant or condition;
(2) a brief statement as to the nature and scope of the
examination or investigation upon which the statements or opinions
contained in such certificate or opinion are based;
(3) a statement that, in the opinion of such person, he has
made such examination or investigation as is necessary to enable him to
express an informed opinion as to whether or not such covenant or
condition has been complied with; and
(4) a statement as to whether or not, in the opinion of such
person, such condition or covenant has been complied with.
705179.13
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<PAGE>
Section 11.06 Rules by Trustee and Agents. The Trustee may make
reasonable rules for action by or a meeting of Securityholders. The Registrar or
Paying Agents may make reasonable rules and set reasonable requirements for
their functions.
Section 11.07 Legal Holidays. A "Legal Holiday" with respect to any
place is a Saturday, a Sunday or a day on which banking institutions are not
required to be open in such place. If a payment date is a Legal Holiday at a
place of payment, payment may be made at the place on the next succeeding day
that is not a Legal Holiday, and no interest shall accrue for the intervening
period.
Section 11.08 No Recourse Against Others. The Securities and the
obligations of the Corporation under this Indenture are solely obligations of
the Corporation and no officer, director, employee or stockholder shall as such
be liable for any failure by the Corporation to pay amounts on the Securities
when due or perform any such obligation.
Section 11.09 Duplicate Originals. The parties may sign any number of
copies of this Indenture. One signed copy is enough to prove this Indenture.
Section 11.10 Governing Law. The internal laws of the State of Delaware
shall govern this Indenture and the Securities.
Section 11.11 No Adverse Interpretation of Other Agreements. This
Indenture may not be used to interpret another indenture, loan or debt agreement
of the Corporation or a Sub sidiary. Any such indenture, loan or debt agreement
may not be used to interpret this Indenture.
Section 11.12 Successors. All agreements of the Corporation in this
Indenture and the Securities shall bind its successor. All agreements of the
Trustee in this Indenture shall bind its successor.
Section 11.13 Severability. In case any provision in this Indenture or
in the Securities shall be invalid, illegal or unenforceable, the validity,
legality and enforceability of the remaining provisions shall not in any way be
affected or impaired thereby.
Section 11.14 Table of Contents, Headings, etc. The Table of Contents
and headings of the Articles and Sections of this Indenture have been inserted
for the convenience of reference only, are not to be considered a part thereof,
and shall in no way modify or restrict any of the terms or provisions hereof.
705179.13
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<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused their names to be
signed hereto by their respective officers thereunto duly authorized as of the
day and year first above written.
TOY BIZ, INC.
By:_____________________________________
Name:
Title:
Attest:
______________________________
[ ]
as Trustee
By:_____________________________________
Name:
Title:
Attest:
______________________________
705179.13
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<PAGE>
Exhibit 1
[Form of Face of Security1]
THE DEBENTURES EVIDENCED BY THIS CERTIFICATE MAY BE ISSUED AND TRANSFERRED ONLY
IN DENOMINATIONS OF $100 AND INTEGRAL MULTIPLES THEREOF (OR SUCH GREATER AMOUNT
AS MAY BE REQUIRED BY APPLICABLE STATE OR FEDERAL LAW).
No. __________ $__________
TOY BIZ, INC.
8% Convertible Subordinated Voting Debentures due 2011
Toy Biz, Inc., a Delaware corporation, promises to pay ___________ or
registered assigns, the principal sum of ____________ Dollars on October 1,
2011, unless earlier redeemed or accelerated after an Event of Default on the
terms and in the manner described in the Indenture, as hereinafter defined, and
to pay interest thereon at the rate of 8% per annum. Payment of principal and
interest shall be made in the method and subject to the terms set forth in
provisions appearing on the reverse hereof, which provisions, in their entirety,
shall for all purposes have the same effect as if set forth at this place.
IN WITNESS WHEREOF, Toy Biz, Inc. has caused this instrument to be executed
in its corporate name by the manual or facsimile signature of its President or a
Vice President and attested by its Secretary or an Assistant Secretary.
Dated: [ ]
TOY BIZ, INC.
(SEAL)
By: ________________________________
Attest:
By: ________________________________
- ------------------
1 Both the face and reverse of this form of Security are subject to change to
reflect any changes made in the Form of Indenture to which this Form of
Security is attached. No such change in the Form of Security shall be made
which materially adversely affects the rights and interests of holders of
8% Preferred Stock without the consent of the holders so affected, as
provided in the Indenture.
634635.5
A-1
<PAGE>
FORM OF TRUSTEE'S CERTIFICATE OF AUTHENTICATION
This is one of the 8% Convertible Subordinated Voting Debentures due 2011
referred to in the within-mentioned Indenture.
Dated: [________________]
as Trustee
By: _________________________________
Authorized Signatory
634635.5
A-2
<PAGE>
[Form of Reverse of Security]
TOY BIZ, INC.
1. The Securities. This Security is one of a duly authorized Issue of
subordinated voting debentures issued by Toy Biz, Inc., a Delaware corporation
(the "Corporation"), designated as its 8% Convertible Subordinated Voting
Debentures due October 1, 2011 and referred to hereinafter as the "Securities".
2. Interest. The Corporation promises to pay interest on the principal
amount of this Security at the rate per annum shown above. The Corporation will
pay interest on the first business day of January, April, July and October in
each year (each an "Interest Payment Date"), commencing on the first Interest
Payment Date following the date of issuance hereof. Interest on the Securities
will accrue from the most recent Interest Payment Date to which interest has
been paid or, if no interest has been paid, from the date hereof. Interest shall
be payable at the option of the Board of Directors of the Corporation (x) in
cash, (y) in additional Securities having an aggregate Principal amount equal to
the interest payment due, or (z) in any combination of cash and additional
Securities valued on such basis. Interest will be computed on the basis of a
three hundred sixty five (365) day year (or three hundred sixty six (366) days
in a leap year).
3. Method of Payment; Form. The Corporation will pay interest on the
Securities to the persons who are registered Holders of Securities at the close
of business on the last day (whether or not such day is a Business Day) of the
month preceding the month in which an Interest Payment Date (a "Record Date")
occurs even though Securities are canceled after the Record Date and on or
before the Interest Payment Date. Holders must surrender Securities to a Paying
Agent to collect principal payments. The Corporation will pay principal and cash
interest in money of the United States that at the time of payment is legal
tender for payment of public and private debts. However, the Corporation or the
Paying Agent may, at its election, pay principal and cash interest by check
payable in such money. It may mail an interest check to a Holder's registered
address.
4. Paying Agents and Registrar. The Trustee (as defined herein) will act as
a Paying Agent and Registrar. The Corporation may change any Paying Agent or
Registrar without notice to any Securityholder. The Corporation may act in any
such capacity.
5. Indenture. The Corporation issued the Securities under an Indenture
dated as of [ ] (the "Indenture"), between the Corporation and [ ], as trustee
(the "Trustee"). The Securities were issued pursuant to the exchange of the 8%
Cumulative Convertible Exchangeable Preferred Stock of the Corporation (the "8%
Preferred Stock") pursuant to the terms thereof. The terms of the Securities
include those stated in the Indenture and those made part of the Indenture by
reference to the Trust Indenture Act of 1939 as amended, and as in effect from
time to time (the "Trust Indenture Act"). The Securities are subject to all such
634635.5
A-3
<PAGE>
terms and Securityholders are referred to the Indenture and such Act for a
statement of such terms. The Securities are unsecured general obligations of the
Corporation. The indebtedness evidenced by this Security is unsecured by the
assets of the Corporation or any of its affiliates. This Security is not
eligible as collateral for any loan by the Corporation.
6. Subordination. The Securities are subordinated to Senior Debt on
liquidation of the Corporation, any event of default in respect of Senior Debt
(as defined in the Indenture) and certain other events specified in the
Indenture.
7. Denominations, Transfer, Exchange. The Securities are in registered form
without coupons in denominations of $100 (or such greater amount as may be
required by applicable State or Federal law) and integral multiples of $100 in
excess thereof. The transfer of Securities may be registered and Securities may
be exchanged as provided in the Indenture. The Registrar may require a Holder,
among other things, to furnish appropriate endorsements and transfer documents
and to pay any taxes or other governmental charges and fees required by law or
permitted by the Indenture. The Registrar need not exchange or register the
transfer of any Security or portion of a Security selected for redemption. Also,
it need not exchange or register the transfer of any Securities for a period of
15 days before a selection of Securities to be redeemed.
8. Redemption. The Corporation may redeem all, but not less than all, of
the outstanding Securities at any time after October 1, 2001 upon payment of the
Principal amount, plus all accrued and unpaid interest thereon, provided that if
the redemption date occurs after an Record Date and before the Interest Payment
Date to which that Record Date relates, the interest otherwise payable on that
Interest Payment Date shall not be paid by the Corporation.
Notice of redemption will be mailed at least 30 days but not more than 60
days before the Redemption Date to each Holder of Securities to be redeemed at
his registered address.
The securities are not subject to any sinking fund.
9. Persons Deemed Owners. The registered Holder of a Security may be
treated as its owner for all purposes.
10. Amendments and Waivers. The Indenture or the Securities may be amended
with the consent of the Holders of at least a majority in principal amount of
the then-outstanding Securities, and may be amended without the consent of any
Securityholder, to cure any ambiguity, defect or inconsistency, to provide for
assumption of the Corporation's obligations to Securityholder, to make any
change that does not adversely affect the rights of any Securityholder or to
take any action necessary to qualify the Indenture under the Trust Indenture
Act.
11. Defaults and Remedies. An Event of Default is: default for 30 days in
payment of interest on the Securities; default in payment of principal or
premium on the Securities (including any sinking fund payments) when it becomes
due and payable at maturity or upon
634635.5
A-4
<PAGE>
redemption, acceleration or otherwise; failure by the Corporation for 30
days after notice to it to comply with any of its other agreements or covenants
in the Indenture or the Securities or the Holders of at least 25% in principal
amount of the then outstanding Securities notify the Corporation and the Trustee
of such Default. Subject to paragraph 17 of this Security, if an Event of
Default occurs and is continuing, the Trustee or the Holders of at least 25% in
principal amount of the then-outstanding Securities may declare all the
Securities to be due and payable immediately. Securityholders may not enforce
the Indenture or the Securities except as provided in the Indenture. The Trustee
may require indemnity satisfactory to it before it enforces the Indenture or the
Securities. Subject to certain limitations described in the Indenture, Holders
of a majority in principal amount of the then-outstanding Securities may direct
the Trustee in its exercise of any trust or power.
12. Trustee Dealings with Corporation. The Trustee in its individual or any
other capacity, may make loans to, and perform services for the Corporation or
its Affiliates, and may otherwise deal with the Corporation or its Affiliates,
as if it were not Trustee.
13. No Recourse Against Others. The Securities and the obligations of the
Corporation under the Indenture are solely obligations of the Corporation and no
officer, director, employee or stockholder of the Corporation shall as such be
liable for any failure of the Corporation to pay amounts on the Securities when
due or perform any such obligation.
14. Unclaimed Money. If money for the payment of principal of or interest
on any Security remains unclaimed for two years, the Trustee or its Agents will
pay the money back to the Corporation at the Corporation's request. After that,
Holders entitled to this money must look to the Corporation for payment, unless
a law governing abandoned property designates another person.
15. Discharge Upon Redemption or Maturity. Subject to the terms of the
Indenture, the Indenture will be discharged and canceled upon the payment of all
the Securities.
16. Authentication. This Security shall not be valid until authenticated by
the manual signature of the Trustee or an authenticating agent.
17. Conversion. A holder of a Security may convert it into Common Stock of
the corporation at any time before the close of business on October 1, 2011.
To convert a Security a Holder must (1) complete and sign the conversion
notice on the back of the Security, (2) surrender the Security to the
Corporation, (3) furnish appropriate endorsements and transfer documents if
required by the Registrar or the Corporation, and (4) pay any transfer or
similar tax if required.
634635.5
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<PAGE>
18. Certain Limitations on Securities. This Security is not secured by the
assets of the Corporation, or any of its Affiliates or Subsidiaries, and is not
eligible as collateral for any loan by the Corporation.
19. Definitions. Terms defined in the Indenture and not otherwise defined
in this Security are used in this Security with the meanings so defined.
20. Abbreviations. Customary abbreviations may be used in the name of a
Securityholder or an assignee, such as: TEN COM (= tenants in common), TEN ENT
(= tenants by the entireties), JT TEN (= joint tenants with right of
survivorship and not as tenants in common), CUST (= Custodian), and UNIF GIFT
MIN ACT (= Uniform Gifts to Minors Act).
The Corporation will furnish to any Securityholder upon written request and
without charge a copy of the Indenture, which has in it the text of this
Security in larger type. Requests may be made to: Toy Biz, Inc., 685 Third
Avenue, New York, New York 10017, Attention: Chief Executive Officer.
634635.5
A-6
<PAGE>
ASSIGNMENT FORM
To assign this Security, fill in the form below: For valuable
consideration, the undersigned registered Holder or Holders of this Security
assign and transfer this Security to
- --------------------------------------------------------------------------------
(Insert assignee's soc. sec. or tax I.D. no.)
- --------------------------------------------------------------------------------
(Print or type assignee's name, address and zip code)
and irrevocably constitute and appoint _________________ agent transfer this
Security on the books of the Corporation. The agent may substitute another act
for him.
- --------------------------------------------------------------------------------
Date: Your signature________________________________
(Sign exactly as your name appears
on the other side of this Security)
Signature Guaranteed
By____________________________________________
634635.5
A-7
<PAGE>
CONVERSION NOTICE
To convert this Security into Common Stock of the
Company, check the box:
---------
---------
If you want the stock certificate made out in another
person's name fill in the form below:
---------
---------
(insert other person's social security tax I.D. no.)
---------------------------------------------------
---------------------------------------------------
---------------------------------------------------
---------------------------------------------------
(Print or type other person's name, address and zip
code)
Date: Your signature________________________________
(Sign exactly as your name appears
on the other side of this Security)
Signature Guaranteed
By____________________________________________
634635.5
A-8
EXHIBIT 4.2
PLAN WARRANT AGREEMENT
WARRANT AGREEMENT
-----------------
WARRANT AGREEMENT, dated as of October 1, 1998 (this "Agreement")
between Marvel Enterprises, Inc., a Delaware corporation (the "Company"), and
American Stock Transfer & Trust Company, as warrant agent (the "Warrant Agent").
WHEREAS, as consideration paid by the Company in connection with the
settlement and resolution of all disputes between certain unsecured creditors of
Marvel Entertainment Group, Inc., a Delaware corporation ("Marvel"), and the
Debtors (as herein defined), in connection with a Fourth Amended Joint Plan of
Reorganization under Chapter 11, Title 11, United States Code (the "Plan of
Reorganization"), for Marvel, 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. (collectively, the "Debtors"), jointly proposed by the Company and certain
holders of senior secured indebtedness of Marvel, the Company proposes to issue
and deliver warrant certificates (the "Warrant Certificates") as provided in the
Plan of Reorganization to each holder of an Allowed Unsecured Claim (as defined
in the Plan of Reorganization) evidencing Plan Warrants (the "Warrants") to
acquire, under certain circumstances, up to an aggregate of 1,750,000 shares of
the common stock, $.01 par value per share, of the Company (the "Common Stock"),
such number of Warrants and shares of Common Stock being subject to adjustment
as set forth herein; and
WHEREAS, the Company desires the Warrant Agent to act on behalf of the
Company, and the Warrant Agent is willing to so act, in connection with the
issuance of the Warrant Certificates and other matters provided herein.
NOW, THEREFORE, in consideration of the premises and the mutual
agreements herein set forth, and for the purpose of defining the respective
rights and obligations of the Company, the Warrant Agent and the Holders (as
defined herein), the parties hereto agree as follows:
SECTION 1. Certain Definitions. As used in this Agreement, the
following terms shall have the following respective meanings:
"Affiliate" means, (i) with respect to any specified Person, any other
Person that, directly or indirectly, controls, is controlled by or is under
direct or indirect common
677106.12
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<PAGE>
control with such specified Person, or any executive officer or director of any
such specified Person or other Person or (ii) with respect to any natural
Person, any Person having a relationship with such person by blood, marriage or
adoption not more remote than first cousin. For the purposes of this definition,
"control," when used with respect to any specified Person, means the possession,
direct or indirect, of the power to direct the management and policies of such
Person, directly or indirectly, whether through the ownership of voting
securities, by contract or otherwise; provided, however, that beneficial
ownership of 10% or more of the voting securities of a Person will be deemed to
be control. The terms "controlling" and "controlled" have meanings correlative
to the foregoing.
"Board of Directors" means the Company's Board of Directors or a duly
appointed committee of the Company's Board of Directors.
"Business Day" means each Monday, Tuesday, Wednesday, Thursday and
Friday which is not a day on which banking institutions in The City of New York,
or the city in which the principal corporate trust office of the Warrant Agent
is located, are authorized or obligated by law or executive order to be closed.
"Common Stock" has the meaning set forth in the preamble hereof.
"Company" means Marvel Enterprises, Inc., a Delaware corporation, and
its successors and assigns.
"Consummation Date" has the meaning set forth in the Plan of
Reorganization.
"Exchange Act" means the Securities Exchange Act of 1934, as amended,
and the rules and regulations of the Securities and Exchange Commission
thereunder.
"Exercise Price" means the purchase price per share of Common Stock to
be paid upon the exercise of each Warrant in accordance with the terms hereof,
which price shall be $17.25 per share of Common Stock, subject to adjustment
from time to time pursuant to Section 11 hereof.
"Expiration Date" means the first business day after the fourth
anniversary of the Consummation Date.
"Fair Market Value" means, with respect to any share of Common Stock,
as of the date of determination the average of the daily Closing Price for each
of the 20 consecutive trading days preceding the date of such computation. The
closing price for each day shall be:
677106.12
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<PAGE>
(a) if the Common Stock shall be then listed or admitted to trading on
the New York Stock Exchange, the closing price on the
NYSE-Consolidated Tape (or any successor composite tape reporting
transactions on the New York Stock Exchange) or, if such a composite
tape shall not be in use or shall not report transactions in the
Common Stock, or if the Common Stock shall be listed on a stock
exchange other that the New York Stock Exchange, the last reported
sales price regular way or, in case no such reported sale takes place
on such day, the average of the closing bid and asked prices regular
way for such day, in each case on the principal national securities
exchange on which the shares of Common Stock are listed or admitted to
trading (which shall be the national securities exchange on which the
greatest number of shares of the Common Stock have been traded during
such 20 consecutive trading days); or
(b) if the Common Stock is not listed or admitted to trading, the
average of the closing sale prices as reported by the NASDAQ National
Market System or, if the Common Stock is not included on such system,
the average of the closing bid and asked prices of the Common Stock in
the over-the-counter market as reported by any system maintained by
the NASD or any comparable system or, if the Common Stock is not
included for quotation in any such system, the average of the closing
bid and asked prices as furnished by two members of the NASD selected
reasonably and in good faith from time to time by the Board of
Directors for that purpose; or
(c) if the Common Stock is not listed or admitted to trading and in
the absence of one or more such quotations, the Fair Market Value
shall be as reasonably determined in good faith by the Board of
Directors (which determination shall be reasonably described in a
written notice delivered to the Warrantholders) or, if an objection is
made to such determination by a Qualifying Warrantholder (as defined
below) in accordance with the following sentence, as determined by an
Independent Appraiser in accordance with the following sentence. In
the event that any Qualifying Warrantholder shall object to the
determination of the Board of Directors of the Fair Market Value by
delivering written notice to the Company within ten (10) Business Days
following the receipt by such Qualifying Warrantholder of such
determination of the Board of Directors, the Fair Market Value shall
instead be determined in good faith by an Independent Appraiser. The
determination of the Board of Directors of the Fair Market Value shall
be binding and conclusive if no objection is made to such
determination by a Qualifying Warrantholder in accordance with the
terms set forth above in this paragraph. The fees and expenses of any
Independent Appraiser determining the Fair Market Value shall be borne
by the Company and the determination by such Independent Appraiser of
the Fair Market Value shall be binding and conclusive.
"Holder" or "Warrantholder" means the registered holder of a Warrant.
677106.12
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<PAGE>
"Independent Appraiser" means any nationally recognized investment
banking firm or accounting firm (other than any investment banking firm or
accounting firm having a significant ongoing relationship with the Company or
the Qualifying Warrantholder at the time of the appraisal) selected jointly in
good faith by the Board of Directors and the Qualifying Warrantholder, whose
fees and expenses shall be paid by the Company.
"Person" means any individual, corporation, limited liability company,
partnership, joint venture, association, joint-stock company, trust,
unincorporated organization, government or any agency or political subdivision
thereof, or other entity.
"Plan of Reorganization" has the meaning set forth in the preamble
hereof.
"Qualifying Warrantholder" means any Warrantholder (or group of
Warrantholders) that, at the time of any objection to the determination of the
Board of Directors of the Fair Market Value, beneficially owns collectively,
together with its Affiliates, at least ten percent (10%) of the Warrants on a
fully diluted basis.
"Register" has the meaning set forth in Section 5(c) hereof.
"Securities Act" means the Securities Act of 1933, as amended, or any
similar Federal statute, and the rules and regulations of the Securities and
Exchange Commission thereunder.
"Transfer Agent" has the meaning set forth in Section 10 hereof.
"Warrant Agent" means American Stock Transfer & Trust Company or the
successor or successors of such Warrant Agent appointed in accordance with the
terms hereof.
"Warrant Certificates" has the meaning set forth in the preamble
hereof.
"Warrants" has the meaning set forth in the preamble hereof.
"Warrants Shares" means the shares of Common Stock issued or issuable
upon the exercise of the Warrants pursuant to the terms of this Agreement.
SECTION 2. Appointment of Warrant Agent. The Company hereby appoints
the Warrant Agent to act as agent for the Company in accordance with the terms
and conditions set forth in this Agreement, and the Warrant Agent hereby accepts
such appointment.
SECTION 3. Warrant Certificates. (a) The Warrant Certificates to be
delivered pursuant to this Agreement shall be in registered form only, shall be
substantially in the form set forth in Exhibit A attached hereto and shall have
such insertions as are appropriate or required or
677106.12
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<PAGE>
permitted by this Agreement and may have such letters, numbers, designations or
other marks of identification and such legends, summaries and endorsements
stamped, printed, lithographed or engraved thereon as the Company may deem
appropriate and as are not inconsistent with the provisions of this Agreement,
or as may be required to comply with any law or with any rule or regulation
pursuant thereto or with any rule or regulation of any securities exchange on
which the Warrants may from time to time be listed. Warrant Certificates shall
be dated the date of countersignature by the Warrant Agent.
(b) Pending the preparation of definitive Warrant Certificates,
temporary Warrant Certificates may be issued, which may be printed,
lithographed, typewritten, mimeographed or otherwise produced, and which will be
substantially of the tenor of the definitive Warrant Certificates in lieu of
which they are issued.
(c) If temporary Warrant Certificates are issued, the Company will
cause definitive Warrant Certificates to be prepared without unreasonable delay.
After the preparation of definitive Warrant Certificates, the temporary Warrant
Certificates shall be exchangeable for definitive Warrant Certificates upon
surrender of the temporary Warrant Certificates to the Warrant Agent, without
charge to the Holder. Temporary Warrant Certificates so surrendered for exchange
shall be canceled by the Warrant Agent and disposed of by the Warrant Agent in a
manner satisfactory to the Company. Until so exchanged, the temporary Warrant
Certificates shall in all respects be entitled to the same benefits under this
Agreement as definitive Warrant Certificates.
SECTION 4. Execution of Warrant Certificates. (a) Warrant Certificates
shall be signed on behalf of the Company by its Chairman of the Board, its Chief
Executive Officer, its President or a Vice President of the Company. Such
signature upon the Warrant Certificates may be manual or in the form of a
facsimile signature of the present or any future Chairman of the Board, Chief
Executive Officer, President or Vice President of the Company, and may be
imprinted or otherwise reproduced on the Warrant Certificates and for that
purpose the Company may adopt and use the facsimile signature of any person who
shall have been Chairman of the Board, Chief Executive Officer, President or
Vice President of the Company, notwithstanding the fact that at the time the
Warrant Certificates shall be countersigned and delivered or disposed of he or
she shall have ceased to hold such office.
(b) In case any officer of the Company who shall have signed any of
the Warrant Certificates shall cease to be such officer before the Warrant
Certificates so signed shall have been countersigned by the Warrant Agent, or
delivered to the Holder thereof, such Warrant Certificates nevertheless shall be
countersigned and delivered with the same force and effect as though such person
had not ceased to be such officer of the Company, unless the Warrant Agent has
received written instructions from the Company not to countersign and deliver
such Certificates; and any Warrant Certificate may be signed on behalf of the
Company by any person who, at the actual date of the execution of such Warrant
Certificate, shall be a proper officer of
677106.12
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the Company to sign such Warrant Certificate, although at the date of the
execution of this Warrant Agreement any such person was not such officer.
SECTION 5. Registration and Countersignature. (a) The Company and the
Warrant Agent, on behalf of the Company, shall number and register the Warrant
Certificates in a Register (as hereinafter defined) as they are issued by the
Company which such register shall be maintained in accordance with Section 5(c)
hereof.
(b) Warrant Certificates shall be manually countersigned by the
Warrant Agent and shall not be valid for any purpose unless so countersigned.
The Warrant Agent shall, upon written instructions of the Chairman of the Board,
the Chief Executive Officer, the President or a Vice President of the Company,
initially countersign, issue and deliver Warrants entitling the Holders thereof
to purchase not more than the number of Warrant Shares referred to above in the
first recital hereof and shall countersign and deliver Warrants as otherwise
provided in this Agreement.
(c) The Company shall maintain, or cause to be maintained, a register
(the "Register") of the Warrants at its registered office, at the principal
office of the Warrant Agent or at any other place in the United States of
America designated by the Company, showing (i) the names and the latest known
address of each person who is or has been a Holder; (ii) the number of Warrants
held by each Holder; and (iii) the date and particulars of the issue and
transfer of Warrants. The registered owner on the Register may be deemed and
treated by the Company, the Warrant Agent and all other persons dealing with the
Warrants evidenced thereby as the Holder and absolute owner thereof for any
purpose and as the person entitled to exercise the right represented thereby, or
to the transfer on the books of the Company, any notice to the contrary
notwithstanding, and, until such transfer of the Warrant on such books in
accordance with the provisions of this Agreement, the Company may treat the
registered owner on the Register as the owner for all purposes.
SECTION 6. Registration of Transfers and Exchanges. (a) The Warrant
Agent shall from time to time, subject to the limitations of Section 7 hereof,
register the transfer of any outstanding Warrant Certificates upon the records
to be maintained by it for that purpose, upon surrender thereof accompanied by a
written instrument or instruments of transfer in form satisfactory to the
Warrant Agent, duly executed by the Holder or Holders thereof or by the duly
appointed legal representative thereof or by a duly authorized attorney. Upon
any such registration of transfer a new Warrant Certificate(s) of like tenor and
representing in the aggregate the number of Warrants transferred, shall be
issued to the transferee(s), and the surrendered Warrant Certificate shall be
canceled by the Warrant Agent. Upon any partial transfer, a new Warrant
Certificate of like tenor and representing in the aggregate the number of
Warrants which were not so transferred, shall be issued to, and in the name of,
the Warrantholder. Canceled Warrant Certificates shall thereafter be disposed of
in a manner satisfactory to the Company.
677106.12
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<PAGE>
(b) Any Warrant Certificate may be exchanged, subdivided or combined
with other Warrant Certificates evidencing the same rights as the rights
evidenced thereby upon presentation and surrender thereof at the principal
office of the Warrant Agent, together with a written notice signed by the Holder
hereof specifying the denominations in which new Warrant Certificate(s) are to
be issued. Upon presentation and surrender of any Warrant Certificates, together
with such written notice, for exchange, subdivision or combination of such
Warrant Certificates, the Company will issue a new Warrant Certificate or
Warrant Certificates, in the denominations requested, of like tenor entitling
the Holder(s) thereof to purchase the same aggregate number of Warrant Shares as
the Warrant Certificate(s) so surrendered. Such new Warrant Certificate(s) will
be registered in the name of the Holder submitting such request. Any Warrant
Certificate surrendered for exchange, subdivision or combination shall be
canceled promptly upon the issuance of such new Warrant Certificate(s) and then
be disposed of by such Warrant Agent in a manner satisfactory to the Company.
(c) The Warrant Agent is hereby authorized to countersign and deliver,
in accordance with the provisions of this Section 6 and of Section 5 hereof, the
new Warrant Certificates required pursuant to the provisions of this Section 6.
SECTION 7. Terms of Warrants; Exercise of Warrants. (a) Subject to the
terms of this Agreement, each Holder shall have the right, upon payment of the
Exercise Price in accordance with the terms of this Agreement, from and after
the date of issuance of such Warrants until 5:00 p.m., New York City time, on
the Expiration Date, to receive from the Warrant Agent on behalf of the Company
the number of fully paid and nonassessable Warrant Shares which the Holder may
at the time be entitled to receive on exercise of Warrants. Each Warrant not
exercised on or before 5:00 p.m., New York City time, on the Expiration Date
shall become void and all rights thereunder and all rights in respect thereof
under this Agreement shall cease as of such time.
(b) The Warrants may be exercised during normal business hours on any
Business Day on or prior to the Expiration Date upon surrender to the Warrant
Agent on behalf of the Company at the principal office of the Warrant Agent of
the certificate or certificates evidencing the Warrants to be exercised with the
form of subscription to purchase on the reverse thereof duly completed and
signed, and upon payment to the Warrant Agent for the account of the Company of
the Exercise Price as adjusted as herein provided, for each of the Warrant
Shares in respect of which such Warrants are then exercised. Payment of the
aggregate Exercise Price for the number of Warrant Shares specified in the
subscription form shall be made by wire transfer or by certified or official
bank check payable to the order of the Company in immediately available funds in
lawful money of the United States of America.
(c) Upon surrender of Warrants in accordance with this Section 7, and
payment of the Exercise Price as provided above, the Warrant Agent shall
thereupon promptly notify the Company, and the Warrant Agent shall deliver or
cause to be delivered, as promptly as possible thereafter, but in any event
within three (3) Business Days of receipt of such surrender and payment, to the
Holder of such Warrant Certificate appropriate evidence of ownership of any
677106.12
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Warrant Shares or other securities or property (including any money) to which
the Holder is entitled, and, to the extent possible, certificates representing
the Warrant Shares or such other securities shall be in such denomination(s) as
such Holder shall request, and registered or otherwise placed in, or payable to
the order of, such name or names as may be directed in writing by the Holder,
and shall deliver or cause to be delivered such evidence of ownership and any
other securities or property (including any money) to the person or persons
entitled to receive the same, together with an amount in cash in lieu of any
fraction of a share as provided in Section 13 hereof. Any such evidence of
ownership shall be deemed to have been issued and any Person so designated to be
named therein shall be deemed to have become a holder of record of such Warrant
Shares as of the date of the surrender of such Warrants and payment of the
Exercise Price, notwithstanding that the stock transfer books of the Company
shall then be closed or that certificates representing such shares shall not
then be actually delivered to the Holder.
(d) The Warrants shall be exercisable either in full or from time to
time in part and, in the event that a Warrant Certificate is surrendered to the
Warrant Agent for exercise of fewer than all of the Warrants represented by such
Warrant Certificate at any time prior to the Expiration Date, a new certificate
evidencing the remaining Warrant or Warrants but otherwise identical to the
surrendered Warrant Certificate will be issued by the Company, and the Warrant
Agent is hereby irrevocably authorized to countersign and to deliver the
required new Warrant Certificate pursuant to the provisions of this Section 7
and of Section 4 hereof as promptly as possible, but in any event within three
(3) Business Days of receipt of the certificate evidencing the Warrants, and the
Company, whenever required by the Warrant Agent, will supply the Warrant Agent
with Warrant Certificates duly executed on behalf of the Company for such
purpose.
(e) All Warrant Certificates surrendered upon exercise of Warrants
shall be canceled by the Warrant Agent. Such canceled Warrant Certificates shall
then be disposed of by the Warrant Agent in a manner satisfactory to the
Company. The Warrant Agent shall account promptly to the Company with respect to
such Warrants exercised and concurrently pay to the Company as promptly as
practicable, but in any event within five (5) Business Days of receipt, all
monies received by the Warrant Agent for the purchase of the Warrant Shares
through the exercise of such Warrants.
(f) The Warrant Agent shall keep copies of this Agreement and any
notices given or received hereunder by or from the Company available for
inspection by the Holders during normal business hours at its office. The
Company shall supply the Warrant Agent from time to time with such numbers of
copies of this Agreement as the Warrant Agent may reasonably request.
SECTION 8. Payment of Taxes. The Company will pay all documentary
stamp taxes and other governmental charges attributable to the initial issuance
of Warrant Shares upon the exercise of Warrants; provided, however, that the
Company shall not be required to pay any tax or taxes which may be payable in
respect of any transfer involved in the issue of any Warrant
677106.12
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<PAGE>
Certificates or any certificates for Warrant Shares in a name other than that of
the Holder of a Warrant Certificate surrendered upon the exercise of a Warrant,
and the Company shall not be required to issue or deliver such Warrant
Certificates unless or until the Person or Persons requesting the issuance
thereof shall have paid to the Company the amount of such tax or shall have
established to the satisfaction of the Company that such tax has been paid.
SECTION 9. Mutilated, Destroyed, Lost and Stolen Warrant Certificates.
(a) If (i) any mutilated Warrant Certificate is surrendered to the Warrant Agent
or (ii) the Company and the Warrant Agent receive evidence to their reasonable
satisfaction of the destruction, loss or theft of any Warrant Certificate, and
there is delivered to the Company and the Warrant Agent such certificate or
indemnity as may be required by them to save each of them harmless, then, in the
absence of notice to the Company or the Warrant Agent that such Warrant
Certificate has been acquired by a bona fide purchaser, the Company shall
execute and upon the Company's written request the Warrant Agent shall
countersign and deliver, in exchange for any such mutilated Warrant Certificate
or in lieu of and in substitution for any such destroyed, lost or stolen Warrant
Certificate, a new Warrant Certificate of like tenor and for a like aggregate
number of Warrants. An applicant for such a substitute Warrant Certificate shall
also comply with such other reasonable regulations as the Company may prescribe.
(b) Upon the issuance of any new Warrant Certificate under this
Section 9, the Company may require the payment by the Holder of a sum sufficient
to cover any tax or other governmental charge that may be imposed in relation
thereto and the payment of such other reasonable charges as the Company may
prescribe, including reimbursement of reasonable fees and expenses of the
Company and the Warrant Agent incidental thereto.
(c) The provisions of this Section 9 are exclusive and shall preclude
(to the extent lawful) all other rights or remedies with respect to the
replacement of mutilated, destroyed, lost or stolen Warrant Certificates.
SECTION 10. Issuance of Warrant Shares. The Company will keep a copy
of this Agreement on file with the transfer agent for the Common Stock (the
"Transfer Agent") and with every subsequent transfer agent for any shares of the
Company's capital stock issuable upon the exercise of the rights of purchase
represented by the Warrants. The Warrant Agent is hereby irrevocably authorized
to requisition, from time to time, from such Transfer Agent the certificates
representing shares of the Common Stock and any cash which may be payable as
provided in Section 13 hereof required to honor outstanding Warrants upon
exercise thereof in accordance with the terms of this Agreement. The Company
will supply such Transfer Agent with duly executed certificates representing
shares of Common Stock for such purposes and will provide or otherwise make
available any cash which may be payable as provided in Section 13 hereof. The
Company will furnish such Transfer Agent and the Warrant Agent a copy of all
notices of adjustments and certificates related thereto, transmitted to each
Holder of the Warrants pursuant to Section 14 hereof.
677106.12
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<PAGE>
SECTION 11. Adjustment of Exercise Price and Number of Warrant Shares
Issuable. The number and kind of Warrant Shares purchasable upon the exercise of
Warrants and the Exercise Price shall be subject to adjustment from time to time
as follows:
(a) Stock Dividends. If at any time after the date of the issuance of
the Warrants and prior to the Expiration Date (i) the Company shall
pay a stock dividend or other distribution payable in shares of Common
Stock or (ii) the number of shares of Common Stock shall have been
increased by a subdivision or split-up of shares of Common Stock,
then, on the date of the payment of such dividend or distribution
(retroactive to the record date) or immediately after the effective
date of subdivision or split-up, as the case may be, the number of
Warrant Shares to be delivered upon exercise of the Warrants will be
increased so that the Warrantholder will be entitled to receive the
number of Warrant Shares that such Warrantholder would have owned
immediately following such action had the Warrants been exercised
immediately prior thereto or, in the case of a stock dividend or
distribution, prior to the record date for determination of
shareholders entitled thereto, and the Exercise Price will be adjusted
as provided in Section 11(g) hereof.
(b) Combination of Stock. If the number of shares of Common Stock
outstanding at any time after the date of the issuance of the Warrants
shall have been decreased by a combination of the outstanding shares
of Common Stock, then, immediately after the effective date of such
combination, the number of Warrant Shares to be delivered upon
exercise of each Warrant will be decreased so that the Warrantholder
thereafter will be entitled to receive the number of Warrant Shares
that such Warrantholder would have owned immediately following such
action had such Warrant been exercised immediately prior thereto, and
the Exercise Price will be adjusted as provided in Section 11(g)
hereof.
(c) Reorganization, Etc. If any capital reorganization of the Company,
or any reclassification of the Common Stock, or any consolidation of
the Company with or merger of the Company with or into any other
Person or any sale, lease or other transfer of all or substantially
all of the assets of the Company to any other Person, shall be
effected in such a way that the holders of Common Stock shall be
entitled to receive stock, other securities, cash or other assets
(whether such stock, other securities, cash or other assets are issued
or distributed by the Company or another Person) with respect to or in
exchange for Common Stock, then, upon exercise of each Warrant, the
Warrantholder shall have the right to receive the kind and amount of
stock, other securities, cash or other assets receivable upon such
reorganization, reclassification, consolidation, merger or sale, lease
or other transfer by a holder of the number of Warrant Shares that
such Warrantholder would have been entitled to receive upon exercise
of such Warrant had such Warrant been exercised immediately before
such reorganization, reclassification,
677106.12
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<PAGE>
consolidation, merger or sale, lease or other transfer, subject to
adjustments (as determined in good faith by the Board of Directors of
the Company). Adjustments for events subsequent to the effective date
of such a reorganization, reclassification, consolidation, merger,
sale or transfer of assets shall be as nearly equivalent as may be
practicable to the adjustments provided for in this Agreement. In any
such event, effective provisions shall be made in the certificate or
articles of incorporation of the resulting or surviving corporation,
in any contract of sale, merger, conveyance, lease, transfer or
otherwise so that the provisions set forth herein for the protection
of the rights of the Warrantholders shall thereafter continue to be
applicable; and any such resulting or surviving corporation shall
expressly assume the obligation to deliver, upon exercise, such shares
of stock, other securities, cash and property. The provisions of this
Section 11 shall similarly apply to successive consolidations,
mergers, sales, leases or transfers.
(d) Adjustment for Rights Issue. In case the Company shall issue
rights, options or warrants or other securities convertible or
exchangeable for Common Stock or for any other such right, option or
warrant (collectively, "Rights") to all holders of its outstanding
Common Stock entitling them to subscribe for purchase or obtain upon
conversion or exchange to shares of Common Stock at a Price Per Share
which is lower at the record date mentioned below than either (x) the
then current Fair Market Value per share of Common Stock or (y) the
Exercise Price, or both, the number of Warrant Shares thereafter
purchasable upon the exercise of each Warrant shall be determined by
multiplying the number of Warrant Shares theretofore purchasable upon
exercise of each Warrant by a fraction, the numerator of which shall
be the number of shares of Common Stock outstanding on the date of
issuance of such Rights plus the additional Number of Shares of Common
Stock offered for subscription, purchase or issuance upon conversion
or exchange in connection with such Rights and the denominator of
which shall be the number of shares of Common Stock outstanding on the
date of issuance of such Rights plus the number of shares which the
aggregate Proceeds received or receivable by the Company upon exercise
of such Rights would purchase at the greater of (x) the Fair Market
Value per share of Common Stock at such record date or (y) the
Exercise Price. Such adjustment shall be made whenever Rights are
issued, and shall become effective immediately after the record date
for the determination of stockholders entitled to receive Rights. As
used herein, "Price Per Share" shall be defined and determined in
accordance with the following formula:
P = R/N
where
P = Price Per Share;
677106.12
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R = the "Proceeds" received or receivable by the Company in
respect of Rights which shall be the total amount received or
receivable by the Company in consideration for the issuance and
sale of such Rights plus the aggregate amount of additional
consideration payable to the Company upon exercise thereof;
provided that the proceeds received or receivable by the Company
shall be the cash proceeds before deducting therefrom any
compensation paid or discount allowed in the sale, underwriting
or purchase thereof by underwriters or dealers or others
performing similar services; and
N = the "Number of Shares," which in the case of Rights is the
maximum number of shares of Common Stock initially issuable upon
exercise thereof.
(e) Adjustment for Other Distributions. In case the Company shall
distribute to all holders of its shares of Common Stock (x) evidences
of indebtedness or assets (excluding cash dividends or distributions
payable out of the consolidated earnings or surplus legally available
for such dividends or distributions and dividends or distributions
referred to in paragraphs (a), (c) or (d) above) of the Company or any
subsidiary or (y) shares of capital stock of a subsidiary of the
Company (such evidences of indebtedness, assets and securities as set
forth in clauses (x) and (y) above, collectively, "Assets"), then in
each case the number of Warrant Shares thereafter purchasable upon the
exercise of each Warrant shall be determined by multiplying the number
of Warrant Shares theretofore purchasable upon the exercise of each
Warrant by a fraction, the numerator of which shall be the Fair Market
Value per share of Common Stock on the date of such distribution and
the denominator of which shall be such Fair Market Value per share of
Common Stock less the fair value as of such record date as determined
reasonably and in good faith by the Board of Directors of the Company
of the portion of the Assets applicable to one share of Common Stock.
Such adjustment shall be made whenever any such distribution is made,
and shall become effective on the date of distribution retroactive to
the record date for the determination of stockholders entitled to
receive such distribution.
(f) Carryover. Notwithstanding any other provision of this Section 11,
no adjustment shall be made to the number of Warrant Shares to be
delivered to the Warrantholder (or to the Exercise Price) if such
adjustment represents less than 1% of the number of Warrant Shares to
be so delivered, but any lesser adjustment shall be carried forward
and shall be made at the time and together with the earlier to occur
of (i) the exercise of all or any portion of a Warrant and (ii) the
next subsequent adjustment that, together with any adjustments so
carried forward, shall amount to 1% or more of the number of Warrant
Shares to be so delivered.
677106.12
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(g) Exercise Price Adjustment.
(i) Whenever the number of Warrant Shares purchasable upon the
exercise of the Warrants is adjusted as provided pursuant to this
Section 11, the Exercise Price payable upon the exercise of a
Warrant shall be adjusted by multiplying such Exercise Price
immediately prior to such adjustment by a fraction, the numerator
of which shall be the number of Warrant Shares purchasable upon
the exercise of the Warrant immediately prior to such adjustment,
and the denominator of which shall be the number of Warrant
Shares purchasable immediately thereafter; provided, however,
that the Exercise Price for each Warrant Share shall in no event
be less than the par value of such Warrant Share.
(ii) If at any time after the date of the issuance of a Warrant,
the Company shall pay to holders of record of Common Stock any
cash dividends or other cash distributions, then, on the date of
the payment of such dividend or distribution (retroactive to the
record date), the Exercise Price payable upon the exercise of
such Warrant shall be adjusted by reducing the Exercise Price by
the amount of such dividend or distribution applicable to one
share of Common Stock; provided, however, that the Exercise Price
for each Warrant Share shall in no event be less than the par
value of such Warrant Share.
(h) Decrease in Exercise Price. The Company, in its sole discretion,
shall have the right at any time, or from time to time, to decrease
the Exercise Price of the Warrants and/or increase the number of
Warrants Shares issuable upon the exercise of the Warrants, including
as it considers to be advisable in order that any event treated for
federal income tax purposes as a dividend of stock or stock rights
shall not be taxable to recipients.
(i) Other Adjustments. If any event occurs as to which the foregoing
provisions of this Section 11 are not strictly applicable or, if
strictly applicable, would not, in the good faith judgment of the
Board of Directors, fairly protect the purchase rights of the Holders
in accordance with the essential intent and principles of such
provisions, then the Board of Directors shall make such adjustments in
the application of such provisions, in accordance with such essential
intent and principles, as shall be reasonably necessary, in the good
faith opinion of the Board of Directors, to protect such purchase
rights as aforesaid.
(j) Further Equitable Adjustments. If, after one or more adjustments
to the Exercise Price pursuant to this Section 11, the Exercise Price
cannot be reduced further without falling below the greater of (i)
$0.01 or (ii) the lowest positive
677106.12
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<PAGE>
exercise price legally permissible for warrants to acquire shares of
Common Stock, the Company shall make further adjustments to compensate
the Holder, consistent with the foregoing principles, as the Board of
Directors, acting in good faith, deems necessary, including an
increase in the number of Warrant Shares issuable upon exercise of
outstanding Warrants and/or a cash payment to the Holders.
SECTION 12. Statement on Warrants. Irrespective of any adjustment(s)
in the number or kind of Warrant Shares issuable upon the exercise in whole or
in part of the Warrants or the Exercise Price, Warrants theretofore or
thereafter issued may continue to express the same number and kind of Warrant
Shares as are stated in the Warrants initially issuable from time to time
pursuant to this Agreement, all subject to further adjustment as provided
herein.
SECTION 13. Fractional Interest. The Company shall not be required to
issue fractional shares of Common Stock on the exercise of Warrants. If more
than one Warrant shall be presented for exercise in full at the same time by the
same Holder, the number of full Warrant Shares which shall be issuable upon such
exercise shall be computed on the basis of the aggregate number of shares of
Common Stock acquirable on exercise of the Warrants so presented. If any
fraction of a share of Common Stock would, except for the provisions of this
Section 13, be issuable on the exercise of any Warrant (or specified portion
thereof), the Company shall (i) direct and deposit with the Transfer Agent an
amount sufficient to pay an amount in cash calculated by it to equal the then
current Fair Market Value per share multiplied by such fraction computed to the
nearest whole cent and (ii) deliver to the Transfer Agent a written certificate
of an officer of the Company setting forth the then current Fair Market Value
per share which certificate shall be conclusive evidence of the correctness of
the matters set forth therein, absent clear error. The Holders, by their
acceptance of the Warrant Certificates, expressly waive any and all rights to
receive any fraction of a share of Common Stock or a stock certificate
representing a fraction of a share of Common Stock.
SECTION 14. Notices to Warrantholders. (a) Upon any adjustment of the
Exercise Price or number of Warrant Shares issuable pursuant to Section 11
hereof, the Company shall as promptly as practicable (x) give a written
certificate of the Company to the Warrant Agent of such adjustment or
adjustments which certificate shall set forth (i) the number of Warrant Shares
issuable upon the exercise of a Warrant and the Exercise Price after such
adjustment, (ii) a brief statement of the facts requiring such adjustment, (iii)
the computation by which such adjustment was made, and (y) cause to be given to
each of the registered Holders of the Warrant Certificates at his address
appearing on the Register written notice of such adjustments by first-class
mail, postage prepaid. The Warrant Agent shall be entitled to rely on the
above-referenced certificate(s) and shall be under no duty or responsibility
with respect to any such certificate(s), except to exhibit the same from time to
time to any Holder desiring an inspection thereof during reasonable business
hours. The Warrant Agent shall not at any time be under any duty or
responsibility to any Holder to determine whether any facts exist that may
require any adjustment of the number of Warrant Shares or other stock or
property issuable on exercise of the Warrants or the Exercise Price, or with
respect to the nature or extent of any such adjustment when made,
677106.12
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<PAGE>
or with respect to the method employed in making such adjustment or the validity
or value (or the kind or amount) of any Warrant Shares or other stock or
property which may be issuable on exercise of the Warrants. The Warrant Agent
shall not be responsible for any failure of the Company to make any cash payment
or to issue, transfer or deliver any Warrant Share or stock certificates or
other stock, securities or property upon the exercise of any Warrant.
(b) Prior to the Expiration Date, and for so long as the Warrants have
not been exercised in full, in the event of:
(i) any taking by the Company of a record of the holders of any class
of securities for the purpose of determining the holders thereof who are
entitled to receive any dividend or other distribution, or any right to
subscribe for, purchase or otherwise acquire any shares of stock of any
class or any other securities, indebtedness or property, or to receive any
other right, option or warrant; or
(ii) any capital reorganization of the Company, any reclassification
or recapitalization of the capital stock of the Company (other than a
change in par value, or from par value to no par value, or from no par
value to par value, or as a result of a subdivision or combination), any
consolidation or merger involving the Company and any other party or any
transfer of all or substantially all the assets of the Company to any other
party or any tender offer or exchange offer by the Company for shares of
Common Stock; or
(iii) any voluntary or involuntary dissolution, liquidation or
winding-up of the Company,
then the Company shall cause to be filed with the Warrant Agent and shall cause
to be given to each Warrantholder at its address appearing on the Warrant
Register, at least twenty (20) days prior to the applicable record date
hereinafter specified, or promptly in the case of events for which there is no
record date, by first class mail, postage prepaid, a written notice stating (i)
the date as of which the holders of record of shares of Common Stock entitled to
receive any such rights, options, warrants or distributions are to be
determined, or (ii) the initial expiration date set forth in any tender offer or
exchange offer for shares of Common Stock, or (iii) the date on which any such
reclassification, consolidation, merger, conveyance, transfer, dissolution,
liquidation or winding up is expected to become effective or consummated, as
well as the date as of which it is expected that the holders of record of shares
of Common Stock shall be entitled to exchange such shares for securities or
other property, if any, deliverable upon such reclassification, consolidation,
merger, conveyance, transfer, dissolution, liquidation or winding-up. The
failure to give the notice required by this Section 14 or any defect therein
shall not affect the legality or validity of any distribution, right, option,
warrant, reclassification, consolidation, merger, conveyance, transfer,
dissolution, liquidation, winding up or action, or the vote upon any of the
foregoing.
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<PAGE>
SECTION 15. Reservation of Warrant Shares, Etc. The Company hereby
agrees that at all times there shall be reserved for issuance and delivery upon
exercise of the Warrants, free from preemptive rights, liens, security interests
and other encumbrances, such number of shares of authorized but unissued or
treasury shares of Common Stock, or other stock or securities deliverable
pursuant to Section 11, as shall be required for issuance or delivery upon
exercise of the Warrants. Without limiting the generality of the foregoing, the
Company agrees that it will not take any action which would result in Warrant
Shares when issued not being validly and legally issued and fully paid and
nonassessable. The Company hereby represents that, as of the date hereof, it has
sufficient shares of Common Stock reserved for issuance upon exercise of all
outstanding Warrants.
SECTION 16. Warrant Agent. The Warrant Agent undertakes the duties and
obligations imposed by this Agreement upon the following terms and conditions,
by all of which the Company and the Holders, by their acceptance thereof, shall
be bound:
(a) The statements contained herein and in the Warrant Certificates
shall be taken as statements of the Company, and the Warrant Agent
assumes no responsibility for the correctness of any of the same
except such as describe the Warrant Agent or action taken or to be
taken by it. The Warrant Agent assumes no responsibility with respect
to the distribution of the Warrant Certificates or Warrant Shares or
payment or refund of the Exercise Price except as herein otherwise
provided.
(b) The Warrant Agent may consult at any time with counsel
satisfactory to it and the Warrant Agent shall incur no liability or
responsibility to the Company or to any holder of any Warrant
Certificate in respect to any action taken, suffered or omitted by it
hereunder in good faith and in accordance with the opinion or the
advice of such counsel.
(c) The Company agrees to pay to the Warrant Agent reasonable
compensation for all services rendered by the Warrant Agent in the
execution of this Agreement, to reimburse the Warrant Agent for all
expenses, taxes and governmental charges and other charges of any kind
and nature reasonably incurred by the Warrant Agent in the execution
of this Agreement and to indemnify the Warrant Agent and save it
harmless against any and all liabilities, including judgments,
reasonable costs and counsel fees, for anything done or omitted by the
Warrant Agent in the execution of this Agreement except as a result of
its negligence, bad faith or willful misconduct.
(d) The Warrant Agent shall be under no obligation to institute any
action, suit or legal proceeding or to take any other action likely to
involve expense unless the Company or one or more Holders shall
furnish the Warrant Agent with reasonable security for any costs and
expenses which may be incurred, but this provision shall
677106.12
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<PAGE>
not affect the power of the Warrant Agent to take such action as it
may consider proper, whether with or without any such security. All
rights of action under this Agreement or under any of the Warrants may
be enforced by the Warrant Agent without the possession of any of the
Warrant Certificates or the production thereof at any trial or other
proceeding relative thereto, and any such action, suit or proceeding
instituted by the Warrant Agent shall be brought in its name as
Warrant Agent and any recovery of judgment shall be for the ratable
benefit of the Holders, as the respective rights or interests may
appear.
(e) The Warrant Agent, and any stockholder, director, officer or
employee of it, may buy, sell or deal in any of the Warrants or other
securities of the Company or become pecuniarily interested in any
transaction in which the Company may be interested, or contract with
or lend money to the Company or otherwise act as fully and freely as
though it were not Warrant Agent under this Agreement. Nothing herein
shall preclude the Warrant Agent from acting in any other capacity for
the Company or for any other legal entity.
(f) The Warrant Agent shall not at any time be under any duty or
responsibility to any Holder or the Company to make or cause to be
made any adjustment of the Exercise Price or number of the Warrant
Shares or other securities or property deliverable as provided in this
Agreement, or to determine whether any facts exist which may require
any of such adjustments, or with respect to the nature or extent of
any such adjustments, when made, or with respect to the method
employed in making the same. The Warrant Agent shall not be
accountable with respect to the validity or value or the kind or
amount of any Warrant Shares or of any securities or property which
may at any time be issued or delivered upon the exercise of any
Warrant or with respect to whether any such Warrant Shares or other
securities will when issued be validly issued and fully paid and
nonassessable, and makes no representation with respect thereto.
SECTION 17. Merger, Consolidation or Change of Name of Warrant Agent.
(a) Any corporation into which the Warrant Agent may be merged or with which it
may be consolidated, or any corporation resulting from any merger or
consolidation to which the Warrant Agent shall be a party, or any corporation
succeeding to the business of the Warrant Agent, shall be the successor to the
Warrant Agent hereunder without the execution or filing of any paper or any
further act on the part of any of the parties hereto. In case at the time such
successor to the Warrant Agent shall succeed to the agency created by this
Agreement, and in case at that time any of the Warrant Certificates shall have
been countersigned but not delivered, any such successor to the Warrant Agent
may adopt the countersignature of the original Warrant Agent; and in case at
that time any of the Warrant Certificates shall not have been countersigned, any
successor to the Warrant Agent may countersign such Warrant Certificates either
in the name of the predecessor Warrant Agent or in the name of the successor to
the Warrant Agent; and in all such
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cases such Warrant Certificates shall have the full force and effect provided in
the Warrant Certificates and in this Agreement.
(b) In case at any time the name of the Warrant Agent shall be changed
and at such time any of the Warrant Certificates shall have been countersigned
but not delivered, the Warrant Agent whose name has been changed may adopt the
countersignature under its prior name, and in case at that time any of the
Warrant Certificates shall not have been countersigned, the Warrant Agent may
countersign such Warrant Certificates either in its prior name or in its changed
name, and in all such cases such Warrant Certificates shall have the full force
and effect provided in the Warrant Certificates and in this Agreement.
SECTION 18. Resignation and Removal of Warrant Agent; Appointment of
Successor. (a) No resignation or removal of the Warrant Agent and no appointment
of a successor warrant agent shall become effective until the acceptance of
appointment by the successor warrant agent as provided herein. The Warrant Agent
may resign its duties and be discharged from all further duties and liability
hereunder (except liability arising as a result of the Warrant Agent's own
negligence or willful misconduct) after giving written notice to the Company.
The Company may remove the Warrant Agent upon written notice, and the Warrant
Agent shall thereupon in like manner be discharged from all further duties and
liabilities hereunder, except as aforesaid. The Warrant Agent shall, at the
Company's expense, cause to be mailed (by first class mail, postage prepaid) to
each Holder at his last address as shown on the Register a copy of said notice
of resignation or notice of removal, as the case may be. Upon such resignation
or removal, the Company shall appoint in writing a new warrant agent. If the
Company shall fail to make such appointment within a period of 30 days after it
has been notified in writing of such resignation by the resigning Warrant Agent
or after such removal, then the resigning Warrant Agent or the Holder of any
Warrant may apply to any court of competent jurisdiction for the appointment of
a new warrant agent. Any new warrant agent, whether appointed by the Company or
by such a court, shall be a corporation doing business under the laws of the
United States or any state thereof, in good standing and having a combined
capital and surplus of not less than US$50,000,000. After acceptance in writing
of such appointment by the new warrant agent, it shall be vested with the same
powers, rights, duties and responsibilities as if it had been originally named
herein as the Warrant Agent, without any further assurance, conveyance, act or
deed; but if for any reason it shall be necessary or expedient to execute and
deliver any further assurance, conveyance, act or deed, the same shall be done
at the expense of the Company and shall be legally and validly executed and
delivered by the resigning or removed Warrant Agent. Not later than the
effective date of any such appointment, the Company shall give notice thereof to
the resigning or removed Warrant Agent. Failure to give any notice provided for
in this Section 18(a), however, or any defect therein, shall not affect the
legality or validity of the resignation of the Warrant Agent or the appointment
of a new warrant agent, as the case may be.
(b) Any corporation into which the Warrant Agent or any new warrant
agent may be merged shall be a successor Warrant Agent under this Agreement
without any further act.
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Any such successor Warrant Agent shall, at the Warrant Agent's expense, promptly
cause notice of its succession as Warrant Agent to be mailed (by first class
mail, postage prepaid) to each Holder at such Holder's last address as shown on
the Register.
SECTION 19. Money and Other Property Deposited with the Warrant Agent.
Any money, securities and other property which at any time shall be deposited by
the Company or on its behalf with the Warrant Agent pursuant to this Agreement
shall be and are hereby assigned, transferred and set over to the Warrant Agent
in trust for the purpose for which such moneys, securities or other property
shall have been deposited, which such purpose shall be stated in writing in
reasonable detail and delivered to the Warrant Agent; but such moneys,
securities or other property need not be segregated from other funds, securities
or other property of the Warrant Agent except to the extent required by law. The
Warrant Agent shall distribute any money deposited with it for payment and
distribution to any Holder by mailing by first-class mail a check in such amount
as is appropriate to such Holder at the address shown on the Register, or as it
may be otherwise directed in writing by such Holder, upon surrender of such
Holder's Warrants. Any money or other property deposited with the Warrant Agent
for payment and distribution to any Holder that remains unclaimed for two years,
less one day after the date the money was deposited with the Warrant Agent,
shall be paid to the Company upon its request therefor.
SECTION 20. Compliance with Government Regulations; Qualification
under the Securities Laws.
(a) The Company covenants that if the shares of Common Stock required
to be reserved for purposes of exercise of Warrants require, under any
federal or state law, registration with or approval of any
governmental authority before such shares may be issued upon exercise
or to allow the resale or transfer of the Warrants or of such shares
by the Holders generally, the Company will, unless the Company has
received an opinion of counsel to the effect that such registration is
not then permitted by such laws, use reasonable best efforts to cause
such shares to be duly so registered or approved, as the case may be;
provided that in no event shall such shares of Common Stock be issued,
and the exercise of all Warrants shall be suspended, for the period
during which any such registration or approval is required for the
issuance of such shares upon exercise but not in effect; provided,
further, that the Expiration Date shall be extended one day for each
day (or portion thereof) that any such suspension is in effect. The
Company shall promptly notify the Warrant Agent of any such
suspension, and the Warrant Agent shall have no duty, responsibility
or liability in respect of any shares of Common Stock issued or
delivered prior to its receipt of such notice. The Company shall
promptly notify the Warrant Agent of the termination of any such
suspension, and such notice shall set forth the number of days that
the Exercise Period shall be extended as a result of such suspension.
The foregoing provisions of this Section 20 shall not require that the
Company effect or obtain any such registration or approval of the
Warrants
677106.12
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or Warrant Shares in order to allow the resale or transfer thereof by
any Person that may be an underwriter for purposes of Section 1145 of
Chapter 11, Title 11 of the United States Code or to whom such
registration or approval requirement is applicable as a result of that
Person being an Affiliate of the Company or Marvel.
(b) The Company covenants that it shall, until the expiration of one
year after the Expiration Date, make available adequate current public
information with respect to the Company so as to satisfy paragraph (c)
of Rule 144 under the Securities Act.
(c) The Company covenants that it shall use reasonable best efforts to
have the Warrants and the Common Stock listed on the New York Stock
Exchange or the American Stock Exchange, subject to official notice of
issuance and subject to satisfaction of the Warrants with listing
requirements, as soon as practicable after the date hereof.
SECTION 21. Notices. (a) Any notice pursuant to this Agreement to be
given by the Warrant Agent or by any Holder to the Company shall be deemed given
(x) if delivered personally, then at the time of delivery, (y) if sent by
overnight courier service, then at the time of delivery, or (z) if mailed by
first-class, certified or overnight mail, five (5) Business Days after having
been deposited in the mail with postage prepaid, in each case addressed (until
another address is filed in writing by the Company with the Warrant Agent), as
follows:
Marvel Enterprises, Inc.
685 Third Avenue
New York, New York 10017
Facsimile No.: 212-682-5272
Telephone: 212-588-5100
Attention: Corporate Secretary
(b) In case the Company shall fail to maintain such office or agency
or shall fail to give such notice of the location or of any change in the
location thereof, presentations may be made and notices and demands may be
served at the principal office of the Warrant Agent.
(c) Any notice pursuant to this Agreement to be given by the Company
or by any Holder to the Warrant Agent shall be deemed given (x) if delivered
personally, then at the time of delivery, (y) if sent by overnight courier
service, then at the time of delivery, or (z) if mailed by first-class,
certified or overnight mail, five (5) Business Days after having been deposited
in the mail with postage prepaid, in each case addressed (until another address
is filed in writing by the Warrant Agent with the Company) as follows:
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<PAGE>
American Stock Transfer & Trust Company
40 Wall Street
New York, NY 10005
(d) Any notice pursuant to this Agreement to be given by the Company
or by the Warrant Agent to any Holder shall be deemed given (x) if delivered
personally, then at the time of delivery, (y) if sent by overnight courier
service, then at the time of delivery, or (z) if mailed by first-class,
certified or overnight mail, five (5) Business Days after having been deposited
in the mail with postage prepaid, in each case addressed to the Holder at such
Holder's address as shown on the Register. Failure to mail a notice or
communication to a Holder or any defect in it shall not affect its sufficiency
with respect to other Holders.
(e) If a notice or communication is mailed in the manner provided
above within the time prescribed, it is duly given, whether or not the addressee
receives it.
(f) If the Company mails a notice or communication to a Holder or
Holders, it shall deliver a copy of such notice to the Warrant Agent at the same
time.
SECTION 22. Supplements and Amendments. The Company and the Warrant
Agent may from time to time supplement or amend this Agreement without the
approval of any Holders in order to cure any ambiguity or to correct or
supplement any provision contained herein which may be defective or inconsistent
with any other provision herein, or to make any other provisions in regard to
matters or questions arising hereunder which the Company and the Warrant Agent
may deem necessary or desirable and which shall not in any way adversely affect
the interests of the Holders. Any amendment or supplement to this Agreement that
has an adverse effect on the interests of Holders, including supplements or
amendments referred to in the first sentence of this Section 22, shall require
the written consent of Holders representing a majority of the then outstanding
Warrants. The consent of each Holder affected shall be required for any
amendment pursuant to which the Exercise Price would be increased or the number
of Warrant Shares purchasable upon exercise of Warrants would be decreased.
SECTION 23. Successors. All the covenants and provisions of this
Agreement by or for the benefit of the Company or the Warrant Agent shall bind
and inure to the benefit of their respective successors and assigns hereunder.
SECTION 24. Termination. This Agreement (other than the Company's
obligations with respect to Warrants previously exercised and with respect to
indemnification under Section 16(c)) shall terminate at 5:00 p.m., New York City
time, on the Expiration Date.
SECTION 25. Governing Law. This Agreement and each Warrant Certificate
issued hereunder shall be governed by and construed in accordance with the laws
of the State of Delaware.
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SECTION 26. Benefits of This Agreement. (a) Nothing in this Agreement
shall be construed to give any person other than the Company, the Warrant Agent
and the Warrantholders (or other respective successors or assigns) any legal or
equitable right, remedy or claim under this Agreement. This Agreement shall be
for the sole and exclusive benefit of the Company, the Warrant Agent and the
Warrantholders (and other respective successors or assigns).
(b) Prior to the exercise of the Warrants, no Holder as such, shall be
entitled to any rights of a stockholder of the Company, including, without
limitation, the right to receive dividends or subscription rights, the right to
vote, to consent, to exercise any preemptive right, to receive any notice of
meetings of stockholders for the election of directors of the Company or any
other matter or to receive any notice of any proceedings of the Company, except
as may be specifically provided for herein. No provisions hereof, in the absence
of affirmative action by the Warrantholder hereof to purchase Warrant Shares,
and no enumeration herein of the rights or privileges of the Warrantholder shall
give rise to any liability of such Warrantholder as a stockholder of the
Company.
(c) All rights of action in respect of this Agreement are vested in
the Holders, and any Holder without the consent of the Warrant Agent or the
Holder, may, on such Holder's own behalf and for such Holder's own benefit,
enforce, and may institute and maintain any suit, action or proceeding against
the Company suitable to enforce, or otherwise in respect of, such Holder's
rights hereunder, including the right to exercise, exchange or surrender for
purchase such Holder's Warrants in the manner provided in this Agreement.
SECTION 27. Counterparts. This Agreement may be executed in any number
of counterparts and each of such counterparts shall for all purposes be deemed
to be an original, and all such counterparts shall together constitute but one
and the same instrument.
SECTION 28. Headings. The headings of the Sections of this Agreement
have been inserted for convenience of reference only, are not to be considered a
part hereof and shall in no way modify or restrict any of the terms or
provisions hereof.
SECTION 29. Severability. Any term or provision of this Agreement or
the Warrants which is invalid or unenforceable in any jurisdiction shall, as to
such jurisdiction, be ineffective to the extent of such invalidity or
unenforceability without rendering invalid or unenforceable the other terms and
provisions of this Agreement or the Warrants or affecting the validity or
enforceability of any of the terms or provisions of this Agreement or the
Warrants in any other jurisdiction.
677106.12
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<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to
be duly executed, as of the day and year first above written.
MARVEL ENTERPRISES, INC.
By: /s/ WILLIAM H. HARDIE, III
----------------------------------
Name: William H. Hardie, III
Title: Executive Vice President, Business
Affairs
AMERICAN STOCK TRANSFER & TRUST
COMPANY
By: /s/ HERBERT J. LEMMER
----------------------------------
Name: Herbert J. Lemmer
Title: Vice President
677106.12
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<PAGE>
EXHIBIT A
EXERCISABLE ON OR BEFORE 5:00 P.M. NEW YORK CITY TIME ON
-----------------.
No.__________ Cusip No. _____________
_____________ Warrants
[Form of Plan Warrant Certificate]
MARVEL ENTERPRISES, INC.
(Incorporated under the laws of the State of Delaware)
This Warrant Certificate certifies that _________ or its registered
assigns, is the registered holder of Warrants expiring __________ (the
"Warrants") to purchase shares of Common Stock (the "Common Stock"), of Marvel
Enterprises, Inc., a Delaware corporation (the "Company"). Each Warrant entitles
the registered holder upon exercise at any time during normal business hours
after the date hereof and on or before 5:00 p.m., New York City time, on
_______________, to receive from the Company _________ fully paid and
nonassessable shares of Common Stock (each such share a "Warrant Share") at the
initial exercise price (the "Exercise Price") of $17.25 per share payable in
accordance with the terms, provisions and conditions of the Warrant Agreement
referred to on the reverse hereof upon surrender of this Warrant Certificate and
payment of the Exercise Price at the office or agency of the Warrant Agent, but
only subject to the terms, provisions and conditions set forth herein and in the
Warrant Agreement. The Exercise Price and number of Warrant Shares issuable upon
exercise of the Warrants are subject to adjustment from time to time upon the
occurrence of certain events set forth in the Warrant Agreement.
No Warrant may be exercised after 5:00 p.m., New York City time, on
___________ and, to the extent not exercised by such time, such Warrants shall
become void.
Reference is hereby made to the further provisions of this Warrant
Certificate set forth on the reverse hereof and such further provisions shall
for all purposes have the same effect as though fully set forth at this place.
The terms of this Warrant Certificate are qualified in their entirety
by reference to the Warrant Agreement and, in the event of a conflict between
the terms of this Warrant Certificate and the terms of the Warrant Agreement,
the terms of the Warrant Agreement shall
A-1
677106.12
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control the rights, interests and obligations of the holders of the Warrants,
the Warrant Agent and the Company with respect to the Warrants.
This Warrant Certificate shall not be valid unless countersigned by
the Warrant Agent, as such term is used in the Warrant Agreement.
This Warrant Certificate shall be governed by and construed in
accordance with the laws of the State of Delaware.
IN WITNESS WHEREOF, the Company has caused this Warrant Certificate to
be signed by a duly authorized Officer.
Dated:
MARVEL ENTERPRISES, INC.
By______________________________________
Name:
Title:
Countersigned:
AMERICAN STOCK TRANSFER & TRUST COMPANY,
as Warrant Agent
By________________________________________
Authorized Signature
A-2
677106.12
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[REVERSE SIDE]
The Warrants evidenced by this Warrant Certificate are part of a duly
authorized issue of Warrants expiring on the Expiration Date entitling the
holder on exercise to receive shares of Common Stock of the Company and are
issued or to be issued pursuant to a Warrant Agreement dated as of _______, 1998
(the "Warrant Agreement"), duly executed and delivered by the Company to
American Stock Transfer & Trust Company, as Warrant Agent (the "Warrant Agent"),
which Warrant Agreement is hereby incorporated by reference in and made a part
of this instrument and is hereby referred to for a description of the rights,
limitation of rights, obligations, duties and immunities thereunder of the
Warrant Agent, the Company and the holders (the words "holders" or "holder"
meaning the registered holders or registered holders) of the Warrants. A copy of
the Warrant Agreement may be obtained by the holder hereof upon written request
to the Company. By accepting initial delivery, transfer or exchange of this
Warrant, the duly registered holder shall be deemed to have agreed to the terms
of the Warrant Agreement as it may be in effect from time to time, including any
amendments or supplements duly adopted in accordance therewith.
Payment of the Exercise Price may be made, at the option of the
holder, in cash by wire transfer or by certified or official bank check payable
to the order of the Company in immediately available funds in lawful money of
the United States of America.
Upon due presentation for registration of transfer of this Warrant
Certificate, with or without other Warrant Certificates, at the office of the
Warrant Agent, a new Warrant Certificate or Warrant Certificates of like tenor
and evidencing in the aggregate a like number of Warrants shall be issued to the
transferee(s) in exchange for this Warrant Certificate, with or without other
Warrant Certificates, subject to the limitations provided in the Warrant
Agreement, without charge except for any tax or other governmental charge
imposed in connection therewith.
The Company and the Warrant Agent may deem and treat the registered
holder(s) thereof as the absolute owner(s) of this Warrant Certificate
(notwithstanding any notation of ownership or other writing hereon made by
anyone), for the purpose of any exercise hereof, of any distribution to the
holder(s) hereof, and for all other purposes. Neither the Warrants nor this
Warrant Certificate entities any holder hereof to any rights of a stockholder of
the Company.
A-3
677106.12
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SUBSCRIPTION FORM
(To be executed only upon exercise of Warrants represented by this
Warrant Certificate)
To: American Stock Transfer & Trust Company,
as Warrant Agent
40 Wall Street
New York, New York 10005
The undersigned hereby irrevocably exercises [_____________] of the
Warrants represented by this Warrant Certificate and herewith makes payment in
accordance with the terms and conditions specified in this Warrant Certificate
and in the Warrant Agreement and surrenders this Warrant Certificate and all
right, title and interest therein to and directs that the shares of Common Stock
of Marvel Enterprises, Inc. (the "Warrant Shares") deliverable upon the exercise
of such Warrants be registered or placed in the name and at the address
specified below and delivered thereto.
Dated:
---------------------------------------
(Signature of Owner)
---------------------------------------
(Street Address)
---------------------------------------
(City) (State) (Zip Code)
Signature Guaranteed By:
---------------------------------------
Securities and/or check or other property (including, if such number of Warrants
exercised shall not be all of the Warrants evidenced by this Warrant
Certificate, a new Warrant Certificate for the balance remaining of such
Warrants) to be issued or delivered to:
Name:
Street Address:
City, State and Zip Code:
Please insert social security or identifying number:
A-4
677106.12
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FORM OF ASSIGNMENT
For value received from the Assignee(s) named below, the undersigned
registered Holder of this Warrant Certificate hereby sells, assigns, and
transfers unto the Assignee(s) named below (including the undersigned with
respect to any Warrants constituting a part of the Warrants evidenced by this
Warrant Certificate not being assigned hereby) all of the right of the
undersigned under this Warrant Certificate, with respect to the number of
Warrants set forth below:
Social Security
or other
Name of Assignee Address Identifying No. No. of Warrants
- ---------------- ------- ---------------- ---------------
and does hereby irrevocably constitute and appoint the undersigned's attorney to
make such transfer on the books of maintained for the purposes, with full power
of substitution in the premises.
Dated:
---------------------------------------
(Signature of Owner)
---------------------------------------
(Street Address)
---------------------------------------
(City) (State) (Zip Code)
Signature Guaranteed By:
---------------------------------------
A-5
677106.12
EXHIBIT 4.3
CLASS A WARRANT AGREEMENT
WARRANT AGREEMENT
-----------------
WARRANT AGREEMENT, dated as of October 1, 1998 (this "Agreement")
between Marvel Enterprises, Inc., a Delaware corporation (the "Company"), and
American Stock Transfer & Trust Company, as warrant agent (the "Warrant Agent").
WHEREAS, as consideration paid by the Company in connection with the
settlement and resolution of all disputes between stockholders of Marvel
Entertainment Group, Inc., a Delaware corporation ("Marvel"), and the Debtors
(as herein defined), in connection with a Fourth Amended Joint Plan of
Reorganization under Chapter 11, Title 11, United States Code (the "Plan of
Reorganization"), for Marvel, 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. (collectively, the "Debtors"), jointly proposed by the Company and certain
holders of senior secured indebtedness of Marvel, the Company proposes to issue
and deliver warrant certificates (the "Warrant Certificates"), as provided in
the Plan of Reorganization to each holder of an Allowed Unsecured Claim, the
LaSalle Claim, an Allowed Equity Interest or Allowed Class Securities Litigation
Claim (as defined in the Plan of Reorganization) evidencing Class A Warrants
(the "Warrants") to acquire, under certain circumstances, an aggregate of
4,000,000 shares of the common stock, $.01 par value per share, of the Company
(the "Common Stock"), such number of Warrants and shares of Common Stock being
subject to adjustment as set forth herein; and
WHEREAS, the Company desires the Warrant Agent to act on behalf of the
Company, and the Warrant Agent is willing to so act, in connection with the
issuance of the Warrant Certificates and other matters provided herein.
NOW, THEREFORE, in consideration of the premises and the mutual
agreements herein set forth, and for the purpose of defining the respective
rights and obligations of the Company, the Warrant Agent and the Holders (as
defined herein), the parties hereto agree as follows:
SECTION 1. Certain Definitions. As used in this Agreement, the
following terms shall have the following respective meanings:
"Affiliate" means, (i) with respect to any specified Person, any other
Person that, directly or indirectly, controls, is controlled by or is under
direct or indirect common control with such specified Person, or any
executive officer or director of any such specified Person or other Person
or (ii) with respect to any natural Person, any Person
731147.6
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having a relationship with such person by blood, marriage or adoption not
more remote than first cousin. For the purposes of this definition,
"control," when used with respect to any specified Person, means the
possession, direct or indirect, of the power to direct the management and
policies of such Person, directly or indirectly, whether through the
ownership of voting securities, by contract or otherwise; provided,
however, that beneficial ownership of 10% or more of the voting securities
of a Person will be deemed to be control. The terms "controlling" and
"controlled" have meanings correlative to the foregoing.
"Board of Directors" means the Company's Board of Directors or a duly
appointed committee of the Company's Board of Directors.
"Business Day" means each Monday, Tuesday, Wednesday, Thursday and
Friday which is not a day on which banking institutions in the City of New
York, or the city in which the principal corporate trust office of the
Warrant Agent is located, are authorized or obligated by law or executive
order to be closed.
"Common Stock" has the meaning set forth in the preamble hereof.
"Company" means Marvel Enterprises, Inc., a Delaware corporation, and
its successors and assigns.
"Consummation Date" has the meaning set forth in the Plan of
Reorganization.
"Exchange Act" means the Securities Exchange Act of 1934, as amended,
and the rules and regulations of the Securities and Exchange Commission
thereunder.
"Exercise Price" means the purchase price per share of Common Stock to
be paid upon the exercise of each Warrant in accordance with the terms
hereof, which price shall be 12.00 per share of Common Stock, subject to
adjustment from time to time pursuant to Section 11 hereof.
"Expiration Date" means the first business day after the third
anniversary of the Consummation Date.
"Fair Market Value" means, with respect to any share of Common Stock,
as of the date of determination the average of the daily Closing Price for
each of the 20 consecutive trading days preceding the date of such
computation. The closing price for each day shall be:
(a) if the Common Stock shall be then listed or admitted to trading on
the New York Stock Exchange, the closing price on the
NYSE-Consolidated Tape (or any successor composite tape reporting
transactions on the New York Stock Exchange)
731147.6
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<PAGE>
or, if such a composite tape shall not be in use or shall not report
transactions in the Common Stock, or if the Common Stock shall be
listed on a stock exchange other that the New York Stock Exchange, the
last reported sales price regular way or, in case no such reported
sale takes place on such day, the average of the closing bid and asked
prices regular way for such day, in each case on the principal
national securities exchange on which the shares of Common Stock are
listed or admitted to trading (which shall be the national securities
exchange on which the greatest number of shares of the Common Stock
have been traded during such 20 consecutive trading days); or
(b) if the Common Stock is not listed or admitted to trading, the
average of the closing sale prices as reported by the NASDAQ National
Market System or, if the Common Stock is not included on such system,
the average of the closing bid and asked prices of the Common Stock in
the over-the-counter market as reported by any system maintained by
the NASD or any comparable system or, if the Common Stock is not
included for quotation in any such system, the average of the closing
bid and asked prices as furnished by two members of the NASD selected
reasonably and in good faith from time to time by the Board of
Directors for that purpose; or
(c) if the Common Stock is not listed or admitted to trading and in
the absence of one or more such quotations, the Fair Market Value
shall be as reasonably determined in good faith by the Board of
Directors (which determination shall be reasonably described in a
written notice delivered to the Warrantholders) or, if an objection is
made to such determination by a Qualifying Warrantholder (as defined
below) in accordance with the following sentence, as determined by an
Independent Appraiser in accordance with the following sentence. In
the event that any Qualifying Warrantholder shall object to the
determination of the Board of Directors of the Fair Market Value by
delivering written notice to the Company within ten (10) Business Days
following the receipt by such Qualifying Warrantholder of such
determination of the Board of Directors, the Fair Market Value shall
instead be determined in good faith by an Independent Appraiser. The
determination of the Board of Directors of the Fair Market Value shall
be binding and conclusive if no objection is made to such
determination by a Qualifying Warrantholder in accordance with the
terms set forth above in this paragraph. The fees and expenses of any
Independent Appraiser determining the Fair Market Value shall be borne
by the Company and the determination by such Independent Appraiser of
the Fair Market Value shall be binding and conclusive.
"Holder" or "Warrantholder" means the registered holder of a Warrant.
"Independent Appraiser" means any nationally recognized investment
banking firm or accounting firm (other than any investment banking firm or
accounting firm having a
731147.6
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significant ongoing relationship with the Company or the Qualifying
Warrantholder at the time of the appraisal) selected jointly in good faith
by the Board of Directors and the Qualifying Warrantholder, whose fees and
expenses shall be paid by the Company.
"Person" means any individual, corporation, limited liability company,
partnership, joint venture, association, joint-stock company, trust,
unincorporated organization, government or any agency or political
subdivision thereof, or other entity.
"Plan of Reorganization" has the meaning set forth in the preamble
hereof.
"Qualifying Warrantholder" means any Warrantholder (or group of
Warrantholders) that, at the time of any objection to the determination of
the Board of Directors of the Fair Market Value, beneficially owns
collectively, together with its Affiliates, at least ten percent (10%) of
the Warrants on a fully diluted basis.
"Register" has the meaning set forth in Section 5(c) hereof.
"Securities Act" means the Securities Act of 1933, as amended, or any
similar Federal statute, and the rules and regulations of the Securities
and Exchange Commission thereunder.
"Transfer Agent" has the meaning set forth in Section 10 hereof.
"Warrant Agent" means American Stock Transfer & Trust Company or the
successor or successors of such Warrant Agent appointed in accordance with
the terms hereof.
"Warrant Certificates" has the meaning set forth in the preamble
hereof.
"Warrants" has the meaning set forth in the preamble hereof.
"Warrants Shares" means the shares of Common Stock issued or issuable
upon the exercise of the Warrants pursuant to the terms of this Agreement.
SECTION 2. Appointment of Warrant Agent. The Company hereby appoints
the Warrant Agent to act as agent for the Company in accordance with the terms
and conditions set forth in this Agreement, and the Warrant Agent hereby accepts
such appointment.
SECTION 3. Warrant Certificates. (a) The Warrant Certificates to be
delivered pursuant to this Agreement shall be in registered form only, shall be
substantially in the form set forth in Exhibit A attached hereto and shall have
such insertions as are appropriate or required or permitted by this Agreement
and may have such letters, numbers, designations or other marks of
identification and such legends, summaries and endorsements stamped, printed,
lithographed or
731147.6
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engraved thereon as the Company may deem appropriate and as are not inconsistent
with the provisions of this Agreement, or as may be required to comply with any
law or with any rule or regulation pursuant thereto or with any rule or
regulation of any securities exchange on which the Warrants may from time to
time be listed. Warrant Certificates shall be dated the date of countersignature
by the Warrant Agent.
(b) Pending the preparation of definitive Warrant Certificates,
temporary Warrant Certificates may be issued, which may be printed,
lithographed, typewritten, mimeographed or otherwise produced, and which will be
substantially of the tenor of the definitive Warrant Certificates in lieu of
which they are issued.
(c) If temporary Warrant Certificates are issued, the Company will
cause definitive Warrant Certificates to be prepared without unreasonable delay.
After the preparation of definitive Warrant Certificates, the temporary Warrant
Certificates shall be exchangeable for definitive Warrant Certificates upon
surrender of the temporary Warrant Certificates to the Warrant Agent, without
charge to the Holder. Temporary Warrant Certificates so surrendered for exchange
shall be canceled by the Warrant Agent and disposed of by the Warrant Agent in a
manner satisfactory to the Company. Until so exchanged, the temporary Warrant
Certificates shall in all respects be entitled to the same benefits under this
Agreement as definitive Warrant Certificates.
SECTION 4. Execution of Warrant Certificates. (a) Warrant Certificates
shall be signed on behalf of the Company by its Chairman of the Board, its Chief
Executive Officer, its President or a Vice President of the Company. Such
signature upon the Warrant Certificates may be manual or in the form of a
facsimile signature of the present or any future Chairman of the Board, Chief
Executive Officer, President or Vice President of the Company, and may be
imprinted or otherwise reproduced on the Warrant Certificates and for that
purpose the Company may adopt and use the facsimile signature of any person who
shall have been Chairman of the Board, Chief Executive Officer, President or
Vice President of the Company, notwithstanding the fact that at the time the
Warrant Certificates shall be countersigned and delivered or disposed of he or
she shall have ceased to hold such office.
(b) In case any officer of the Company who shall have signed any of
the Warrant Certificates shall cease to be such officer before the Warrant
Certificates so signed shall have been countersigned by the Warrant Agent, or
delivered to the Holder thereof, such Warrant Certificates nevertheless shall be
countersigned and delivered with the same force and effect as though such person
had not ceased to be such officer of the Company, unless the Warrant Agent has
received written instructions from the Company not to countersign and deliver
such Certificates; and any Warrant Certificate may be signed on behalf of the
Company by any person who, at the actual date of the execution of such Warrant
Certificate, shall be a proper officer of the Company to sign such Warrant
Certificate, although at the date of the execution of this Warrant Agreement any
such person was not such officer.
731147.6
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SECTION 5. Registration and Countersignature. (a) The Company and the
Warrant Agent, on behalf of the Company, shall number and register the Warrant
Certificates in a Register (as hereinafter defined) as they are issued by the
Company which such register shall be maintained in accordance with Section 5(c)
hereof.
(b) Warrant Certificates shall be manually countersigned by the
Warrant Agent and shall not be valid for any purpose unless so countersigned.
The Warrant Agent shall, upon written instructions of the Chairman of the Board,
the Chief Executive Officer, the President or a Vice President of the Company,
initially countersign, issue and deliver Warrants entitling the Holders thereof
to purchase not more than the number of Warrant Shares referred to above in the
first recital hereof and shall countersign and deliver Warrants as otherwise
provided in this Agreement.
(c) The Company shall maintain, or cause to be maintained, a register
(the "Register") of the Warrants at its registered office, at the principal
office of the Warrant Agent or at any other place in the United States of
America designated by the Company, showing (i) the names and the latest known
address of each person who is or has been a Holder; (ii) the number of Warrants
held by each Holder; and (iii) the date and particulars of the issue and
transfer of Warrants. The registered owner on the Register may be deemed and
treated by the Company, the Warrant Agent and all other persons dealing with the
Warrants evidenced thereby as the Holder and absolute owner thereof for any
purpose and as the person entitled to exercise the right represented thereby, or
to the transfer on the books of the Company, any notice to the contrary
notwithstanding, and, until such transfer of the Warrant on such books in
accordance with the provisions of this Agreement, the Company may treat the
registered owner on the Register as the owner for all purposes.
SECTION 6. Registration of Transfers and Exchanges. (a) The Warrant
Agent shall from time to time, subject to the limitations of Section 7 hereof,
register the transfer of any outstanding Warrant Certificates upon the records
to be maintained by it for that purpose, upon surrender thereof accompanied by a
written instrument or instruments of transfer in form satisfactory to the
Warrant Agent, duly executed by the Holder or Holders thereof or by the duly
appointed legal representative thereof or by a duly authorized attorney. Upon
any such registration of transfer a new Warrant Certificate(s) of like tenor and
representing in the aggregate the number of Warrants transferred, shall be
issued to the transferee(s), and the surrendered Warrant Certificate shall be
canceled by the Warrant Agent. Upon any partial transfer, a new Warrant
Certificate of like tenor and representing in the aggregate the number of
Warrants which were not so transferred, shall be issued to, and in the name of,
the Warrantholder. Canceled Warrant Certificates shall thereafter be disposed of
in a manner satisfactory to the Company.
(b) Any Warrant Certificate may be exchanged, subdivided or combined
with other Warrant Certificates evidencing the same rights as the rights
evidenced thereby upon presentation and surrender thereof at the principal
office of the Warrant Agent, together with a written notice signed by the Holder
hereof specifying the denominations in which new Warrant
731147.6
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Certificate(s) are to be issued. Upon presentation and surrender of any Warrant
Certificates, together with such written notice, for exchange, subdivision or
combination of such Warrant Certificates, the Company will issue a new Warrant
Certificate or Warrant Certificates, in the denominations requested, of like
tenor entitling the Holder(s) thereof to purchase the same aggregate number of
Warrant Shares as the Warrant Certificate(s) so surrendered. Such new Warrant
Certificate(s) will be registered in the name of the Holder submitting such
request. Any Warrant Certificate surrendered for exchange, subdivision or
combination shall be canceled promptly upon the issuance of such new Warrant
Certificate(s) and then be disposed of by such Warrant Agent in a manner
satisfactory to the Company.
(c) The Warrant Agent is hereby authorized to countersign and
deliver, in accordance with the provisions of this Section 6 and of Section 5
hereof, the new Warrant Certificates required pursuant to the provisions of this
Section 6.
SECTION 7. (a) Subject to the terms of this Agreement, each Holder
shall have the right, upon payment of the Exercise Price in accordance with the
terms of this Agreement, from and after the date of issuance of such Warrants
until 5:00 p.m., New York City time, on the Expiration Date, to receive from the
Warrant Agent on behalf of the Company the number of fully paid and
nonassessable Warrant Shares which the Holder may at the time be entitled to
receive on exercise of such Warrants. Each Warrant not exercised on or before
5:00 p.m., New York City time, on the Expiration Date shall become void and all
rights thereunder and all rights in respect thereof under this Agreement shall
cease as of such time.
(b) The Warrants may be exercised during normal business hours on any
Business Day on or prior to the Expiration Date upon surrender to the Warrant
Agent on behalf of the Company at the principal office of the Warrant Agent of
the certificate or certificates evidencing the Warrants to be exercised with the
form of subscription to purchase on the reverse thereof duly completed and
signed, and upon payment to the Warrant Agent for the account of the Company of
the Exercise Price as adjusted as herein provided, for each of the Warrant
Shares in respect of which such Warrants are then exercised. Payment of the
aggregate Exercise Price for the number of Warrant Shares specified in the
subscription form shall be made by wire transfer or by certified or official
bank check payable to the order of the Company in immediately available funds in
lawful money of the United States of America.
(c) Upon surrender of Warrants in accordance with this Section 7, and
payment of the Exercise Price as provided above, the Warrant Agent shall
thereupon promptly notify the Company, and the Warrant Agent shall deliver or
cause to be delivered, as promptly as possible thereafter, but in any event
within three (3) Business Days of receipt of such surrender and payment, to the
Holder of such Warrant Certificate appropriate evidence of ownership of any
Warrant Shares or other securities or property (including any money) to which
the Holder is entitled, and, to the extent possible, certificates representing
the Warrant Shares or such other securities shall be in such denomination(s) as
such Holder shall request, and registered or otherwise placed in, or payable to
the order of, such name or names as may be directed in writing
731147.6
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<PAGE>
by the Holder, and shall deliver or cause to be delivered such evidence of
ownership and any other securities or property (including any money) to the
person or persons entitled to receive the same, together with an amount in cash
in lieu of any fraction of a share as provided in Section 13 hereof. Any such
evidence of ownership shall be deemed to have been issued and any Person so
designated to be named therein shall be deemed to have become a holder of record
of such Warrant Shares as of the date of the surrender of such Warrants and
payment of the Exercise Price, notwithstanding that the stock transfer books of
the Company shall then be closed or that certificates representing such shares
shall not then be actually delivered to the Holder.
(d) The Warrants shall be exercisable either in full or from time to
time in part and, in the event that a Warrant Certificate is surrendered to the
Warrant Agent for exercise of fewer than all of the Warrants represented by such
Warrant Certificate at any time prior to the Expiration Date, a new certificate
evidencing the remaining Warrant or Warrants but otherwise identical to the
surrendered Warrant Certificate will be issued by the Company, and the Warrant
Agent is hereby irrevocably authorized to countersign and to deliver the
required new Warrant Certificate pursuant to the provisions of this Section 7
and of Section 4 hereof as promptly as possible, but in any event within three
(3) Business Days of receipt of the certificate evidencing the Warrants, and the
Company, whenever required by the Warrant Agent, will supply the Warrant Agent
with Warrant Certificates duly executed on behalf of the Company for such
purpose.
(e) All Warrant Certificates surrendered upon exercise of Warrants
shall be canceled by the Warrant Agent. Such canceled Warrant Certificates shall
then be disposed of by the Warrant Agent in a manner satisfactory to the
Company. The Warrant Agent shall account promptly to the Company with respect to
such Warrants exercised and concurrently pay to the Company as promptly as
practicable, but in any event within five (5) Business Days of receipt, all
monies received by the Warrant Agent for the purchase of the Warrant Shares
through the exercise of such Warrants.
(f) The Warrant Agent shall keep copies of this Agreement and any
notices given or received hereunder by or from the Company available for
inspection by the Holders during normal business hours at its office. The
Company shall supply the Warrant Agent from time to time with such numbers of
copies of this Agreement as the Warrant Agent may reasonably request.
SECTION 8. Payment of Taxes. The Company will pay all documentary
stamp taxes and other governmental charges attributable to the initial issuance
of Warrant Shares upon the exercise of Warrants; provided, however, that the
Company shall not be required to pay any tax or taxes which may be payable in
respect of any transfer involved in the issue of any Warrant Certificates or any
certificates for Warrant Shares in a name other than that of the Holder of a
Warrant Certificate surrendered upon the exercise of a Warrant, and the Company
shall not be required to issue or deliver such Warrant Certificates unless or
until the Person or Persons
731147.6
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requesting the issuance thereof shall have paid to the Company the amount of
such tax or shall have established to the satisfaction of the Company that such
tax has been paid.
SECTION 9. Mutilated, Destroyed, Lost and Stolen Warrant Certificates.
(a) If (i) any mutilated Warrant Certificate is surrendered to the Warrant Agent
or (ii) the Company and the Warrant Agent receive evidence to their reasonable
satisfaction of the destruction, loss or theft of any Warrant Certificate, and
there is delivered to the Company and the Warrant Agent such certificate or
indemnity as may be required by them to save each of them harmless, then, in the
absence of notice to the Company or the Warrant Agent that such Warrant
Certificate has been acquired by a bona fide purchaser, the Company shall
execute and upon the Company's written request the Warrant Agent shall
countersign and deliver, in exchange for any such mutilated Warrant Certificate
or in lieu of and in substitution for any such destroyed, lost or stolen Warrant
Certificate, a new Warrant Certificate of like tenor and for a like aggregate
number of Warrants. An applicant for such a substitute Warrant Certificate shall
also comply with such other reasonable regulations as the Company may prescribe.
(b) Upon the issuance of any new Warrant Certificate under this
Section 9, the Company may require the payment by the Holder of a sum sufficient
to cover any tax or other governmental charge that may be imposed in relation
thereto and the payment of such other reasonable charges as the Company may
prescribe, including reimbursement of reasonable fees and expenses of the
Company and the Warrant Agent incidental thereto.
(c) The provisions of this Section 9 are exclusive and shall preclude
(to the extent lawful) all other rights or remedies with respect to the
replacement of mutilated, destroyed, lost or stolen Warrant Certificates.
SECTION 10. Issuance of Warrant Shares. The Company will keep a copy
of this Agreement on file with the transfer agent for the Common Stock (the
"Transfer Agent") and with every subsequent transfer agent for any shares of the
Company's capital stock issuable upon the exercise of the rights of purchase
represented by the Warrants. The Warrant Agent is hereby irrevocably authorized
to requisition, from time to time, from such Transfer Agent the certificates
representing shares of the Common Stock and any cash which may be payable as
provided in Section 13 hereof required to honor outstanding Warrants upon
exercise thereof in accordance with the terms of this Agreement. The Company
will supply such Transfer Agent with duly executed certificates representing
shares of Common Stock for such purposes and will provide or otherwise make
available any cash which may be payable as provided in Section 13 hereof. The
Company will furnish such Transfer Agent and the Warrant Agent a copy of all
notices of adjustments and certificates related thereto, transmitted to each
Holder of the Warrants pursuant to Section 14 hereof.
SECTION 11. Adjustment of Exercise Price and Number of Warrant Shares
Issuable. The number and kind of Warrant Shares purchasable upon the exercise of
Warrants and
731147.6
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the Exercise Price shall be subject to adjustment from time to time as follows,
if at any time after the Consummation Date and prior to the Expiration Date:
(a) Stock Dividends. The Company shall pay a stock dividend or other
distribution payable in shares of Common Stock or the number of shares
of Common Stock shall have been increased by a subdivision or split-up
of shares of Common Stock, then, on the date of the payment of such
dividend or distribution (retroactive to the record date) or
immediately after the effective date of subdivision or split-up, as
the case may be, the number of Warrant Shares to be delivered upon
exercise of the Warrants will be increased so that the Warrantholder
will be entitled to receive the number of Warrant Shares that such
Warrantholder would have owned immediately following such action had
the Warrants been exercised immediately prior thereto or, in the case
of a stock dividend or distribution, prior to the record date for
determination of shareholders entitled thereto, and the Exercise Price
will be adjusted as provided in Section 11(g) hereof.
(b) Combination of Stock. If the number of shares of Common Stock
outstanding shall have been decreased by a combination of the
outstanding shares of Common Stock, then, immediately after the
effective date of such combination, the number of Warrant Shares to be
delivered upon exercise of each Warrant will be decreased so that the
Warrantholder thereafter will be entitled to receive the number of
Warrant Shares that such Warrantholder would have owned immediately
following such action had such Warrant been exercised immediately
prior thereto, and the Exercise Price will be adjusted as provided in
Section 11(g) hereof.
(c) Reorganization, Etc. If any capital reorganization of the Company,
or any reclassification of the Common Stock, or any consolidation of
the Company with or merger of the Company with or into any other
Person or any sale, lease or other transfer of all or substantially
all of the assets of the Company to any other Person, shall be
effected in such a way that the holders of Common Stock shall be
entitled to receive stock, other securities, cash or other assets
(whether such stock, other securities, cash or other assets are issued
or distributed by the Company or another Person) with respect to or in
exchange for Common Stock, then, upon exercise of each Warrant, the
Warrantholder shall have the right to receive the kind and amount of
stock, other securities, cash or other assets receivable upon such
reorganization, reclassification, consolidation, merger or sale, lease
or other transfer by a holder of the number of Warrant Shares that
such Warrantholder would have been entitled to receive upon exercise
of such Warrant had such Warrant been exercised immediately before
such reorganization, reclassification, consolidation, merger or sale,
lease or other transfer, subject to adjustments (as determined in good
faith by the Board of Directors of the Company). Adjustments for
events subsequent to the effective date of such a reorganization,
reclassification,
731147.6
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consolidation, merger, sale or transfer of assets shall be as nearly
equivalent as may be practicable to the adjustments provided for in
this Agreement. In any such event, effective provisions shall be made
in the certificate or articles of incorporation of the resulting or
surviving corporation, in any contract of sale, merger, conveyance,
lease, transfer or otherwise so that the provisions set forth herein
for the protection of the rights of the Warrantholders shall
thereafter continue to be applicable; and any such resulting or
surviving corporation shall expressly assume the obligation to
deliver, upon exercise, such shares of stock, other securities, cash
and property. The provisions of this Section 11 shall similarly apply
to successive consolidations, mergers, sales, leases or transfers.
(d) Adjustment for Rights Issue. In case the Company shall issue
rights, options or warrants or other securities convertible or
exchangeable for Common Stock or for any other such right, option or
warrant (collectively, "Rights") to all holders of its outstanding
Common Stock entitling them to subscribe for, purchase or obtain upon
conversion or exchange shares of Common Stock at a Price Per Share
which is lower at the record date mentioned below than either (x) the
then current Fair Market Value per share of Common Stock or (y) the
Exercise Price, or both, the number of Warrant Shares thereafter
purchasable upon the exercise of each Warrant shall be determined by
multiplying the number of Warrant Shares theretofore purchasable upon
exercise of each Warrant by a fraction, the numerator of which shall
be the number of shares of Common Stock outstanding on the date of
issuance of such Rights plus the additional Number of Shares of Common
Stock offered for subscription, purchase or issuance upon conversion
or exchange in connection with such Rights and the denominator of
which shall be the number of shares of Common Stock outstanding on the
date of issuance of such Rights plus the number of shares which the
aggregate Gross Proceeds received or receivable by the Company upon
exercise of such Rights would purchase at the greater of (x) the Fair
Market Value per share of Common Stock at such record date or (y) the
Exercise Price. Such adjustment shall be made whenever Rights are
issued, and shall become effective immediately after the record date
for the determination of stockholders entitled to receive Rights. As
used herein, "Price Per Share" shall be defined and determined in
accordance with the following formula:
P = R/N
where
P = Price Per Share;
R = the "Gross Proceeds" received or receivable by the
Company in respect of Rights which shall be the total
amount received or receivable by the Company in
consideration for the issuance and sale of such Rights plus
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the aggregate amount of additional consideration payable to
the Company upon exercise thereof; provided that the
proceeds received or receivable by the Company shall be the
cash proceeds before deducting therefrom any cash
compensation paid or discount allowed in the sale,
underwriting or purchase thereof by underwriters or dealers
or others performing similar services; and
N = the "Number of Shares," which in the case of Rights is
the maximum number of shares of Common Stock initially
issuable upon exercise thereof.
(e) Adjustment for Other Distributions. In case the Company shall
distribute to all holders of its shares of Common Stock (x) evidences
of indebtedness or assets (excluding cash dividends or distributions
payable out of the consolidated earnings or surplus legally available
for such dividends or distributions and dividends or distributions
referred to in paragraphs (a), (c) or (d) above) of the Company or any
subsidiary or (y) shares of capital stock of a subsidiary of the
Company (such evidences of indebtedness, assets and securities as set
forth in clauses (x) and (y) above, collectively, "Assets"), then in
each case the number of Warrant Shares thereafter purchasable upon the
exercise of each Warrant shall be determined by multiplying the number
of Warrant Shares theretofore purchasable upon the exercise of each
Warrant by a fraction, the numerator of which shall be the Fair Market
Value per share of Common Stock on the date of such distribution and
the denominator of which shall be such Fair Market Value per share of
Common Stock less the fair value as of such record date as determined
reasonably and in good faith by the Board of Directors of the Company
of the portion of the Assets applicable to one share of Common Stock.
Such adjustment shall be made whenever any such distribution is made,
and shall become effective on the date of distribution retroactive to
the record date for the determination of stockholders entitled to
receive such distribution.
(f) Carryover. Notwithstanding any other provision of this Section 11,
no adjustment shall be made to the number of Warrant Shares to be
delivered to the Warrantholder (or to the Exercise Price) if such
adjustment represents less than 1% of the number of Warrant Shares to
be so delivered, but any lesser adjustment shall be carried forward
and shall be made at the time and together with the earlier to occur
of (i) the exercise of all or any portion of a Warrant and (ii) the
next subsequent adjustment that, together with any adjustments so
carried forward, shall amount to 1% or more of the number of Warrant
Shares to be so delivered.
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(g) Exercise Price Adjustment.
(i) Whenever the number of Warrant Shares purchasable upon the
exercise of the Warrants is adjusted as provided pursuant to this
Section 11, the Exercise Price payable upon the exercise of a
Warrant shall be adjusted by multiplying such Exercise Price
immediately prior to such adjustment by a fraction, the numerator
of which shall be the number of Warrant Shares purchasable upon
the exercise of the Warrant immediately prior to such adjustment,
and the denominator of which shall be the number of Warrant Shares
purchasable immediately thereafter; provided, however, that the
Exercise Price for each Warrant Share shall in no event be less
than the par value of such Warrant Share.
(ii) If at any time, the Company shall pay to holders of record of
Common Stock any cash dividends or other cash distributions, then,
on the date of the payment of such dividend or distribution
(retroactive to the record date), the Exercise Price payable upon
the exercise of such Warrant shall be adjusted by reducing the
Exercise Price by the amount of such dividend or distribution
applicable to one share of Common Stock; provided, however, that
the applicable Exercise Price for each Warrant Share shall in no
event be less than the par value of such Warrant Share.
(h) Decrease in Exercise Price. The Company, in its sole discretion,
shall have the right at any time, or from time to time, to decrease
the Exercise Price of the Warrants and/or increase the number of
Warrants Shares issuable upon the exercise of the Warrants, including
as it considers to be advisable in order that any event treated for
federal income tax purposes as a dividend of stock or stock rights
shall not be taxable to recipients.
(i) Other Adjustments. If any event occurs as to which the foregoing
provisions of this Section 11 are not strictly applicable or, if
strictly applicable, would not, in the good faith judgment of the
Board of Directors, fairly protect the purchase rights of the Holders
in accordance with the essential intent and principles of such
provisions, then the Board of Directors shall make such adjustments in
the application of such provisions, in accordance with such essential
intent and principles, as shall be reasonably necessary, in the good
faith opinion of the Board of Directors, to protect such purchase
rights as aforesaid.
(j) Further Equitable Adjustments. If, after one or more adjustments
to the Exercise Price pursuant to this Section 11, the Exercise Price
cannot be reduced further without falling below the greater of (i)
$.01 or (ii) the lowest positive exercise price legally permissible
for warrants to acquire shares of Common Stock, the Company shall make
further adjustments to compensate the Holder, consistent
731147.6
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with the foregoing principles, as the Board of Directors, acting in
good faith, deems necessary, including an increase in the number of
Warrant Shares issuable upon exercise of outstanding Warrants and/or a
cash payment to the Holders.
SECTION 12. Statement on Warrants. Irrespective of any adjustment(s)
in the number or kind of Warrant Shares issuable upon the exercise in whole or
in part of the Warrants or the Exercise Price, Warrants theretofore or
thereafter issued may continue to express the same number and kind of Warrant
Shares as are stated in the Warrants initially issuable from time to time
pursuant to this Agreement, all subject to further adjustment as provided
herein.
SECTION 13. Fractional Interest. The Company shall not be required to
issue fractional shares of Common Stock on the exercise of Warrants. If more
than one Warrant shall be presented for exercise in full at the same time by the
same Holder, the number of full Warrant Shares which shall be issuable upon such
exercise shall be computed on the basis of the aggregate number of shares of
Common Stock acquirable on exercise of the Warrants so presented. If any
fraction of a share of Common Stock would, except for the provisions of this
Section 13, be issuable on the exercise of any Warrant (or specified portion
thereof), the Company shall (i) direct and deposit with the Transfer Agent an
amount sufficient to pay an amount in cash calculated by it to equal the then
current Fair Market Value per share multiplied by such fraction computed to the
nearest whole cent and (ii) deliver to the Transfer Agent a written certificate
of an officer of the Company setting forth the then current Fair Market Value
per share which certificate shall be conclusive evidence of the correctness of
the matters set forth therein, absent clear error. The Holders, by their
acceptance of the Warrant Certificates, expressly waive any and all rights to
receive any fraction of a share of Common Stock or a stock certificate
representing a fraction of a share of Common Stock.
SECTION 14. Notices to Warrantholders. (a) Upon any adjustment of the
Exercise Price or number of Warrant Shares issuable pursuant to Section 11
hereof, the Company shall as promptly as practicable (x) give a written
certificate of the Company to the Warrant Agent of such adjustment or
adjustments which certificate shall set forth (i) the number of Warrant Shares
issuable upon the exercise of a Warrant and the Exercise Price after such
adjustment, (ii) a brief statement of the facts requiring such adjustment, (iii)
the computation by which such adjustment was made, and (y) cause to be given to
each of the registered Holders of the Warrant Certificates at his address
appearing on the Register written notice of such adjustments by first-class
mail, postage prepaid. The Warrant Agent shall be entitled to rely on the
above-referenced certificate(s) and shall be under no duty or responsibility
with respect to any such certificate(s), except to exhibit the same from time to
time to any Holder desiring an inspection thereof during reasonable business
hours. The Warrant Agent shall not at any time be under any duty or
responsibility to any Holder to determine whether any facts exist that may
require any adjustment of the number of Warrant Shares or other stock or
property issuable on exercise of the Warrants or the Exercise Price, or with
respect to the nature or extent of any such adjustment when made, or with
respect to the method employed in making such adjustment or the validity or
value (or the kind or amount) of any Warrant Shares or other stock or property
which may be issuable on
731147.6
14
<PAGE>
exercise of the Warrants. The Warrant Agent shall not be responsible for any
failure of the Company to make any cash payment or to issue, transfer or deliver
any Warrant Share or stock certificates or other stock, securities or property
upon the exercise of any Warrant.
(b) Prior to the Expiration Date, and for so long as Warrants have not
been exercised in full, in the event of:
(i) any taking by the Company of a record of the holders of any class
of securities for the purpose of determining the holders thereof who are
entitled to receive any dividend or other distribution, or any right to
subscribe for, purchase or otherwise acquire any shares of stock of any
class or any other securities, indebtedness or property, or to receive any
other right, option or warrant; or
(ii) any capital reorganization of the Company, any reclassification
or recapitalization of the capital stock of the Company (other than a
change in par value, or from par value to no par value, or from no par
value to par value, or as a result of a subdivision or combination), any
consolidation or merger involving the Company and any other party or any
transfer of all or substantially all the assets of the Company to any other
party or any tender offer or exchange offer by the Company for shares of
Common Stock; or
(iii) any voluntary or involuntary dissolution, liquidation or
winding-up of the Company,
then the Company shall cause to be filed with the Warrant Agent and shall cause
to be given to each Warrantholder at such Warrantholder's address appearing on
the Warrant Register, at least twenty (20) days prior to the applicable record
date hereinafter specified, or promptly in the case of events for which there is
no record date, by first class mail, postage prepaid, a written notice stating
(i) the date as of which the holders of record of shares of Common Stock
entitled to receive any such rights, options, warrants or distributions are to
be determined, or (ii) the initial expiration date set forth in any tender offer
or exchange offer for shares of Common Stock, or (iii) the date on which any
such reclassification, consolidation, merger, conveyance, transfer, dissolution,
liquidation or winding up is expected to become effective or consummated, as
well as the date as of which it is expected that the holders of record of shares
of Common Stock shall be entitled to exchange such shares for securities or
other property, if any, deliverable upon such reclassification, consolidation,
merger, conveyance, transfer, dissolution, liquidation or winding-up. The
failure to give the notice required by this Section 14 or any defect therein
shall not affect the legality or validity of any distribution, right, option,
warrant, reclassification, consolidation, merger, conveyance, transfer,
dissolution, liquidation, winding up or action, or the vote upon any of the
foregoing.
SECTION 15. Reservation of Warrant Shares, Etc. The Company hereby
agrees that at all times there shall be reserved for issuance and delivery upon
exercise of the Warrants,
731147.6
15
<PAGE>
free from preemptive rights, liens, security interests and other encumbrances,
such number of shares of authorized but unissued or treasury shares of Common
Stock, or other stock or securities deliverable pursuant to Section 11, as shall
be required for issuance or delivery upon exercise of the Warrants. Without
limiting the generality of the foregoing, the Company agrees that it will not
take any action which would result in Warrant Shares when issued not being
validly and legally issued and fully paid and nonassessable. The Company hereby
represents that, as of the date hereof, it has sufficient shares of Common Stock
reserved for issuance upon exercise of all outstanding Warrants.
SECTION 16. Warrant Agent. The Warrant Agent undertakes the duties and
obligations imposed by this Agreement upon the following terms and conditions,
by all of which the Company and the Holders, by their acceptance thereof, shall
be bound:
(a) The statements contained herein and in the Warrant Certificates
shall be taken as statements of the Company, and the Warrant Agent
assumes no responsibility for the correctness of any of the same
except such as describe the Warrant Agent or action taken or to be
taken by it. The Warrant Agent assumes no responsibility with respect
to the distribution of the Warrant Certificates or Warrant Shares or
payment or refund of the Exercise Price except as herein otherwise
provided.
(b) The Warrant Agent may consult at any time with counsel
satisfactory to it and the Warrant Agent shall incur no liability or
responsibility to the Company or to any holder of any Warrant
Certificate in respect to any action taken, suffered or omitted by it
hereunder in good faith and in accordance with the opinion or the
advice of such counsel.
(c) The Company agrees to pay to the Warrant Agent reasonable
compensation for all services rendered by the Warrant Agent in the
execution of this Agreement, to reimburse the Warrant Agent for all
expenses, taxes and governmental charges and other charges of any kind
and nature reasonably incurred by the Warrant Agent in the execution
of this Agreement and to indemnify the Warrant Agent and save it
harmless against any and all liabilities, including judgments,
reasonable costs and counsel fees, for anything done or omitted by the
Warrant Agent in the execution of this Agreement except as a result of
its negligence, bad faith or willful misconduct.
(d) The Warrant Agent shall be under no obligation to institute any
action, suit or legal proceeding or to take any other action likely to
involve expense unless the Company or one or more Holders shall
furnish the Warrant Agent with reasonable security for any costs and
expenses which may be incurred, but this provision shall not affect
the power of the Warrant Agent to take such action as it may consider
proper, whether with or without any such security. All rights of
action under this
731147.6
16
<PAGE>
Agreement or under any of the Warrants may be enforced by the Warrant
Agent without the possession of any of the Warrant Certificates or the
production thereof at any trial or other proceeding relative thereto,
and any such action, suit or proceeding instituted by the Warrant
Agent shall be brought in its name as Warrant Agent and any recovery
of judgment shall be for the ratable benefit of the Holders, as the
respective rights or interests may appear.
(e) The Warrant Agent, and any stockholder, director, officer or
employee of it, may buy, sell or deal in any of the Warrants or other
securities of the Company or become pecuniarily interested in any
transaction in which the Company may be interested, or contract with
or lend money to the Company or otherwise act as fully and freely as
though it were not Warrant Agent under this Agreement. Nothing herein
shall preclude the Warrant Agent from acting in any other capacity for
the Company or for any other legal entity.
(f) The Warrant Agent shall not at any time be under any duty or
responsibility to any Holder or the Company to make or cause to be
made any adjustment of the Exercise Price or number of the Warrant
Shares or other securities or property deliverable as provided in this
Agreement, or to determine whether any facts exist which may require
any of such adjustments, or with respect to the nature or extent of
any such adjustments, when made, or with respect to the method
employed in making the same. The Warrant Agent shall not be
accountable with respect to the validity or value or the kind or
amount of any Warrant Shares or of any securities or property which
may at any time be issued or delivered upon the exercise of any
Warrant or with respect to whether any such Warrant Shares or other
securities will when issued be validly issued and fully paid and
nonassessable, and makes no representation with respect thereto.
SECTION 17. Merger, Consolidation or Change of Name of Warrant Agent.
(a) Any corporation into which the Warrant Agent may be merged or with which it
may be consolidated, or any corporation resulting from any merger or
consolidation to which the Warrant Agent shall be a party, or any corporation
succeeding to the business of the Warrant Agent, shall be the successor to the
Warrant Agent hereunder without the execution or filing of any paper or any
further act on the part of any of the parties hereto. In case at the time such
successor to the Warrant Agent shall succeed to the agency created by this
Agreement, and in case at that time any of the Warrant Certificates shall have
been countersigned but not delivered, any such successor to the Warrant Agent
may adopt the countersignature of the original Warrant Agent; and in case at
that time any of the Warrant Certificates shall not have been countersigned, any
successor to the Warrant Agent may countersign such Warrant Certificates either
in the name of the predecessor Warrant Agent or in the name of the successor to
the Warrant Agent; and in all such cases such Warrant Certificates shall have
the full force and effect provided in the Warrant Certificates and in this
Agreement.
731147.6
17
<PAGE>
(b) In case at any time the name of the Warrant Agent shall be changed
and at such time any of the Warrant Certificates shall have been countersigned
but not delivered, the Warrant Agent whose name has been changed may adopt the
countersignature under its prior name, and in case at that time any of the
Warrant Certificates shall not have been countersigned, the Warrant Agent may
countersign such Warrant Certificates either in its prior name or in its changed
name, and in all such cases such Warrant Certificates shall have the full force
and effect provided in the Warrant Certificates and in this Agreement.
SECTION 18. Resignation and Removal of Warrant Agent; Appointment of
Successor. (a) No resignation or removal of the Warrant Agent and no appointment
of a successor warrant agent shall become effective until the acceptance of
appointment by the successor warrant agent as provided herein. The Warrant Agent
may resign its duties and be discharged from all further duties and liability
hereunder (except liability arising as a result of the Warrant Agent's own
negligence or willful misconduct) after giving written notice to the Company.
The Company may remove the Warrant Agent upon written notice, and the Warrant
Agent shall thereupon in like manner be discharged from all further duties and
liabilities hereunder, except as aforesaid. The Warrant Agent shall, at the
Company's expense, cause to be mailed (by first class mail, postage prepaid) to
each Holder at his last address as shown on the Register a copy of said notice
of resignation or notice of removal, as the case may be. Upon such resignation
or removal, the Company shall appoint in writing a new warrant agent. If the
Company shall fail to make such appointment within a period of 30 days after it
has been notified in writing of such resignation by the resigning Warrant Agent
or after such removal, then the resigning Warrant Agent or the Holder of any
Warrant may apply to any court of competent jurisdiction for the appointment of
a new warrant agent. Any new warrant agent, whether appointed by the Company or
by such a court, shall be a corporation doing business under the laws of the
United States or any state thereof, in good standing and having a combined
capital and surplus of not less than US$50,000,000. After acceptance in writing
of such appointment by the new warrant agent, it shall be vested with the same
powers, rights, duties and responsibilities as if it had been originally named
herein as the Warrant Agent, without any further assurance, conveyance, act or
deed; but if for any reason it shall be necessary or expedient to execute and
deliver any further assurance, conveyance, act or deed, the same shall be done
at the expense of the Company and shall be legally and validly executed and
delivered by the resigning or removed Warrant Agent. Not later than the
effective date of any such appointment, the Company shall give notice thereof to
the resigning or removed Warrant Agent. Failure to give any notice provided for
in this Section 18(a), however, or any defect therein, shall not affect the
legality or validity of the resignation of the Warrant Agent or the appointment
of a new warrant agent, as the case may be.
(b) Any corporation into which the Warrant Agent or any new warrant
agent may be merged shall be a successor Warrant Agent under this Agreement
without any further act. Any such successor Warrant Agent shall, at the Warrant
Agent's expense, promptly cause notice of its succession as Warrant Agent to be
mailed (by first class mail, postage prepaid) to each Holder at such Holder's
last address as shown on the Register.
731147.6
18
<PAGE>
SECTION 19. Money and Other Property Deposited with the Warrant Agent.
Any money, securities and other property which at any time shall be deposited by
the Company or on its behalf with the Warrant Agent pursuant to this Agreement
shall be and are hereby assigned, transferred and set over to the Warrant Agent
in trust for the purpose for which such moneys, securities or other property
shall have been deposited, which such purpose shall be stated in writing in
reasonable detail and delivered to the Warrant Agent; but such moneys,
securities or other property need not be segregated from other funds, securities
or other property of the Warrant Agent except to the extent required by law. The
Warrant Agent shall distribute any money deposited with it for payment and
distribution to any Holder by mailing by first-class mail a check in such amount
as is appropriate to such Holder at the address shown on the Register, or as it
may be otherwise directed in writing by such Holder, upon surrender of such
Holder's Warrants. Any money or other property deposited with the Warrant Agent
for payment and distribution to any Holder that remains unclaimed for two years,
less one day after the date the money was deposited with the Warrant Agent,
shall be paid to the Company upon its request therefor.
SECTION 20. Compliance with Government Regulations; Qualification
under the Securities Laws.
(a) The Company covenants that if the shares of Common Stock required
to be reserved for purposes of exercise of Warrants require, under any
federal or state law, registration with or approval of any
governmental authority before such shares may be issued upon exercise
or to allow the resale or transfer of the Warrants or of such shares
the Holders generally, the Company will, unless the Company has
received an opinion of counsel to the effect that such registration is
not then permitted by such laws, use reasonable best efforts to cause
such shares to be duly so registered or approved, as the case may be;
provided that in no event shall such shares of Common Stock be issued,
and the exercise of all Warrants shall be suspended, for the period
during which any such registration or approval is required for the
issuance of such shares upon exercise but is not in effect; provided,
further, that the Expiration Date shall be extended one day for each
day (or portion thereof) that any such suspension is in effect. The
Company shall promptly notify the Warrant Agent of any such
suspension, and the Warrant Agent shall have no duty, responsibility
or liability in respect of any shares of Common Stock issued or
delivered prior to its receipt of such notice. The Company shall
promptly notify the Warrant Agent of the termination of any such
suspension, and such notice shall set forth the number of days that
the Exercise Period shall be extended as a result of such suspension.
The foregoing provisions of this Section 20 shall not require that the
Company effect or obtain any such registration or approval of the
Warrants or Warrant Shares in order to allow the resale or transfer
thereof by any Person that may be an underwriter for purposes of
Section 1145 of Chapter 11, Title 11 of the United States Code or to
whom such registration or
731147.6
19
<PAGE>
approval requirement is applicable as a result of that Person being an
Affiliate of the Company or Marvel.
(b) The Company covenants that it shall, until the expiration of one
year after the Expiration Date, make available adequate current public
information with respect to the Company so as to satisfy paragraph (c)
of Rule 144 under the Securities Act.
(c) The Company covenants that it shall use reasonable best efforts to
have the Common Stock and Warrants listed on the New York Stock
Exchange or the American Stock Exchange, subject to official notice of
issuance and subject to satisfaction of the Warrants with listing
requirements, as soon as practicable after the date hereof.
SECTION 21. Notices. (a) Any notice pursuant to this Agreement to be
given by the Warrant Agent or by any Holder to the Company shall be deemed given
(x) if delivered personally, then at the time of delivery, (y) if sent by
overnight courier service, then at the time of delivery, or (z) if mailed by
first class, certified or overnight mail, five (5) Business Days after having
been deposited in the mail with postage prepaid, in each case, addressed (until
another address is filed in writing by the Company with the Warrant Agent), as
follows:
Marvel Enterprises, Inc.
685 Third Avenue
New York, New York 10017
Facsimile No.: 212-682-5272
Telephone: 212-588-5100
Attention: Corporate Secretary
(b) In case the Company shall fail to maintain such office or agency
or shall fail to give such notice of the location or of any change in the
location thereof, presentations may be made and notices and demands may be
served at the principal office of the Warrant Agent.
(c) Any notice pursuant to this Agreement to be given by the Company
or by any Holder to the Warrant Agent shall be deemed given (x) if delivered
personally, then at the time of delivery, (y) if sent by overnight courier
service, then at the time of delivery, or (z) if mailed by first class,
certified or overnight mail, five (5) Business Days after having been deposited
in the mail with postage prepaid, in each case, addressed (until another address
is filed in writing by the Warrant Agent with the Company) as follows:
American Stock Transfer & Trust Company
40 Wall Street
New York, New York 10005
731147.6
20
<PAGE>
(d) Any notice pursuant to this Agreement to be given by the Company
or by the Warrant Agent to any Holder shall be deemed given (x) if delivered
personally, then at the time of delivery, (y) if sent by overnight courier
service, then at time of delivery, or (z) if mailed by first-class, certified or
overnight mail, five (5) Business Days after having been deposited in the mail
with postage prepaid, in each case, addressed to the Holder at such Holder's
address as shown on the Register. Failure to mail a notice or communication to a
Holder or any defect in it shall not affect its sufficiency with respect to
other Holders.
(e) If a notice or communication is mailed in the manner provided
above within the time prescribed, it is duly given, whether or not the addressee
receives it.
(f) If the Company mails a notice or communication to a Holder or
Holders, it shall deliver a copy of such notice to the Warrant Agent at the same
time.
SECTION 22. Supplements and Amendments. The Company and the Warrant
Agent may from time to time supplement or amend this Agreement without the
approval of any Holders in order to cure any ambiguity or to correct or
supplement any provision contained herein which may be defective or inconsistent
with any other provision herein, or to make any other provisions in regard to
matters or questions arising hereunder which the Company and the Warrant Agent
may deem necessary or desirable and which shall not in any way adversely affect
the interests of the Holders. Any amendment or supplement to this Agreement that
has an adverse effect on the interests of Holders, including supplements or
amendments referred to in the first sentence of this Section 22, shall require
the written consent of Holders representing a majority of the then outstanding
Warrants. The consent of each Holder affected shall be required for any
amendment pursuant to which the Exercise Price would be increased or the number
of Warrant Shares purchasable upon exercise of Warrants would be decreased.
SECTION 23. Successors. All the covenants and provisions of this
Agreement by or for the benefit of the Company or the Warrant Agent shall bind
and inure to the benefit of their respective successors and assigns hereunder.
SECTION 24. Termination. This Agreement (other than the Company's
obligations with respect to Warrants previously exercised and with respect to
indemnification under Section 16(c)) shall terminate at 5:00 p.m., New York City
time, on the Expiration Date.
SECTION 25. Governing Law. This Agreement and each Warrant Certificate
issued hereunder shall be governed by and construed in accordance with the laws
of the State of Delaware.
SECTION 26. Benefits of This Agreement. (a) Nothing in this Agreement
shall be construed to give any person other than the Company, the Warrant Agent
and the Warrantholders (or other respective successors or assigns) any legal or
equitable right, remedy or
731147.6
21
<PAGE>
claim under this Agreement. This Agreement shall be for the sole and exclusive
benefit of the Company, the Warrant Agent and the Warrantholders (and other
respective successors or assigns).
(b) Prior to the exercise of the Warrants, no Holder as such, shall be
entitled to any rights of a stockholder of the Company, including, without
limitation, the right to receive dividends or subscription rights, the right to
vote, to consent, to exercise any preemptive right, to receive any notice of
meetings of stockholders for the election of directors of the Company or any
other matter or to receive any notice of any proceedings of the Company, except
as may be specifically provided for herein. No provisions hereof, in the absence
of affirmative action by the Warrantholder hereof to purchase Warrant Shares,
and no enumeration herein of the rights or privileges of the Warrantholder shall
give rise to any liability of such Warrantholder as a stockholder of the
Company.
(c) All rights of action in respect of this Agreement are vested in
the Holders, and any Holder without the consent of the Warrant Agent or the
Holder, may, on such Holder's own behalf and for such Holder's own benefit,
enforce, and may institute and maintain any suit, action or proceeding against
the Company suitable to enforce, or otherwise in respect of, such Holder's
rights hereunder, including the right to exercise, exchange or surrender for
purchase such Holder's Warrants in the manner provided in this Agreement.
SECTION 27. Counterparts. This Agreement may be executed in any number
of counterparts and each of such counterparts shall for all purposes be deemed
to be an original, and all such counterparts shall together constitute but one
and the same instrument.
SECTION 28. Headings. The headings of the Sections of this Agreement
have been inserted for convenience of reference only, are not to be considered a
part hereof and shall in no way modify or restrict any of the terms or
provisions hereof.
SECTION 29. Severability. Any term or provision of this Agreement or
the Warrants which is invalid or unenforceable in any jurisdiction shall, as to
such jurisdiction, be ineffective to the extent of such invalidity or
unenforceability without rendering invalid or unenforceable the other terms and
provisions of this Agreement or the Warrants or affecting the validity or
enforceability of any of the terms or provisions of this Agreement or the
Warrants in any other jurisdiction.
731147.6
22
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to
be duly executed, as of the day and year first above written.
MARVEL ENTERPRISES, INC.
By: /s/WILLIAM H. HARDIE, III
-------------------------------------------------
Name: William H. Hardie, III
Title: Executive Vice President, Business Affairs
AMERICAN STOCK TRANSFER & TRUST COMPANY
By: /s/HERBERT J. LEMMER
-------------------------------------------------
Name: Herbert J. Lemmer
Title: Vice President
731147.6
23
<PAGE>
EXHIBIT A-1
EXERCISABLE ON OR BEFORE 5:00 P.M. NEW YORK CITY TIME ON
-----------------.
Class A No. _______ Cusip No. ___________
___________ Class A Warrants
[Form of Class A Warrant Certificate]
MARVEL ENTERPRISES, INC.
(Incorporated under the laws of the State of Delaware)
This Warrant Certificate certifies that _________ or its registered
assigns, is the registered holder of Class A Warrants expiring __________ (the
"Warrants") to purchase shares of Common Stock (the "Common Stock"), of Marvel
Enterprises, Inc., a Delaware corporation (the "Company"). Each Warrant entitles
the registered holder upon exercise at any time during normal business hours
after the date hereof and on or before 5:00 p.m., New York City time, on
_______________, to receive from the Company _________ fully paid and
nonassessable shares of Common Stock (each such share a "Warrant Share") at the
initial exercise price (the "Exercise Price") of $12.00 per share payable in
accordance with the terms, provisions and conditions of the Warrant Agreement
referred to on the reverse hereof upon surrender of this Warrant Certificate and
payment of the Exercise Price at the office or agency of the Warrant Agent, but
only subject to the terms, provisions and conditions set forth herein and in the
Warrant Agreement. The Exercise Price and number of Warrant Shares issuable upon
exercise of the Warrants are subject to adjustment from time to time upon the
occurrence of certain events set forth in the Warrant Agreement.
No Warrant may be exercised after 5:00 p.m., New York City time, on
___________ and, to the extent not exercised by such time, such Warrants shall
become void.
Reference is hereby made to the further provisions of this Warrant
Certificate set forth on the reverse hereof and such further provisions shall
for all purposes have the same effect as though fully set forth at this place.
The terms of this Warrant Certificate are qualified in their entirety
by reference to the Warrant Agreement and, in the event of a conflict between
the terms of this Warrant Certificate and the terms of the Warrant Agreement,
the terms of the Warrant Agreement shall
A-1
731147.6
<PAGE>
control the rights, interests and obligations of the holders of the Warrants,
the Warrant Agent and the Company with respect to the Warrants.
This Warrant Certificate shall not be valid unless countersigned by
the Warrant Agent, as such term is used in the Warrant Agreement.
This Warrant Certificate shall be governed by and construed in
accordance with the laws of the State of Delaware.
IN WITNESS WHEREOF, the Company has caused this Warrant Certificate to
be signed by a duly authorized Officer.
Dated:
MARVEL ENTERPRISES, INC.
By
--------------------------------------
Name:
Title:
Countersigned:
AMERICAN STOCK TRANSFER & TRUST COMPANY,
as Warrant Agent
By
--------------------------
Authorized Signature
A-2
731147.6
<PAGE>
[REVERSE SIDE]
The Warrants evidenced by this Warrant Certificate are part of a duly
authorized issue of Warrants expiring on the Expiration Date entitling the
holder on exercise to receive shares of Common Stock of the Company and are
issued or to be issued pursuant to a Warrant Agreement dated as of _________ __,
1998 (the "Warrant Agreement"), duly executed and delivered by the Company to
American Stock Transfer & Trust Company, as Warrant Agent (the "Warrant Agent"),
which Warrant Agreement is hereby incorporated by reference in and made a part
of this instrument and is hereby referred to for a description of the rights,
limitation of rights, obligations, duties and immunities thereunder of the
Warrant Agent, the Company and the holders (the words "holders" or "holder"
meaning the registered holders or registered holders) of the Warrants. A copy of
the Warrant Agreement may be obtained by the holder hereof upon written request
to the Company. By accepting initial delivery, transfer or exchange of this
Warrant, the duly registered holder shall be deemed to have agreed to the terms
of the Warrant Agreement as it may be in effect from time to time, including any
amendments or supplements duly adopted in accordance therewith.
Payment of the Exercise Price may be made, at the option of the
holder, in cash by wire transfer or by certified or official bank check payable
to the order of the Company in immediately available funds in lawful money of
the United States of America.
Upon due presentation for registration of transfer of this Warrant
Certificate, with or without other Warrant Certificates, at the office of the
Warrant Agent, a new Warrant Certificate or Warrant Certificates of like tenor
and evidencing in the aggregate a like number of Warrants shall be issued to the
transferee(s) in exchange for this Warrant Certificate, with or without other
Warrant Certificates, subject to the limitations provided in the Warrant
Agreement, without charge except for any tax or other governmental charge
imposed in connection therewith.
The Company and the Warrant Agent may deem and treat the registered
holder(s) thereof as the absolute owner(s) of this Warrant Certificate
(notwithstanding any notation of ownership or other writing hereon made by
anyone), for the purpose of any exercise hereof, of any distribution to the
holder(s) hereof, and for all other purposes. Neither the Warrants nor this
Warrant Certificate entities any holder hereof to any rights of a stockholder of
the Company.
A-3
731147.6
<PAGE>
SUBSCRIPTION FORM
(To be executed only upon exercise of Warrants represented by this
Warrant Certificate)
To: American Stock Transfer & Trust Company,
as Warrant Agent
40 Wall Street
New York, New York 10005
The undersigned hereby irrevocably exercises [_____________] of the
Class A Warrants represented by this Warrant Certificate and herewith makes
payment in accordance with the terms and conditions specified in this Warrant
Certificate and in the Warrant Agreement and surrenders this Warrant Certificate
and all right, title and interest therein to and directs that the shares of
Common Stock of Marvel Enterprises, Inc. (the "Warrant Shares") deliverable upon
the exercise of such Class A Warrants be registered or placed in the name and at
the address specified below and delivered thereto.
Dated:
---------------------------------------
(Signature of Owner)
---------------------------------------
(Street Address)
---------------------------------------
(City) (State) (Zip Code)
Signature Guaranteed By:
---------------------------------------
Securities and/or check or other property (including, if such number of Class A
Warrants exercised shall not be all of the Class A Warrants evidenced by this
Warrant Certificate, a new Warrant Certificate for the balance remaining of such
Class A Warrants) to be issued or delivered to:
Name:
Street Address:
City, State and Zip Code:
Please insert social security or identifying number:
A-4
731147.6
<PAGE>
FORM OF ASSIGNMENT
For value received from the Assignee(s) named below, the undersigned
registered Holder of this Warrant Certificate hereby sells, assigns, and
transfers unto the Assignee(s) named below (including the undersigned with
respect to any Class A Warrants constituting a part of the Class A Warrants
evidenced by this Warrant Certificate not being assigned hereby) all of the
right of the undersigned under this Warrant Certificate, with respect to the
number of Class A Warrants set forth below:
Social Security
or other
Name of Assignee Address Identifying No. No. of Warrants
- ---------------- ------- --------------- ---------------
and does hereby irrevocably constitute and appoint the undersigned's attorney to
make such transfer on the books of maintained for the purposes, with full power
of substitution in the premises.
Dated:
---------------------------------------
(Signature of Owner)
---------------------------------------
(Street Address)
---------------------------------------
(City) (State) (Zip Code)
Signature Guaranteed By:
---------------------------------------
A-5
731147.6
EXHIBIT 4.4
CLASS B WARRANT AGREEMENT
WARRANT AGREEMENT
-----------------
WARRANT AGREEMENT, dated as of October 1, 1998 (this "Agreement")
between Marvel Enterprises, Inc., a Delaware corporation (the "Company"), and
American Stock Transfer & Trust Company, as warrant agent (the "Warrant Agent").
WHEREAS, as consideration paid by the Company in connection with the
settlement and resolution of all disputes between stockholders of Marvel
Entertainment Group, Inc., a Delaware corporation ("Marvel"), and the Debtors
(as herein defined), in connection with a Fourth Amended Joint Plan of
Reorganization under Chapter 11, Title 11, United States Code (the "Plan of
Reorganization"), for Marvel, 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. (collectively, the "Debtors"), jointly proposed by the Company and certain
holders of senior secured indebtedness of Marvel, the Company proposes to issue
and deliver warrant certificates (the "Warrant Certificates"), at such time, and
from time to time as provided in the Plan of Reorganization (the "Warrant
Distribution Date") to each holder of an Allowed Unsecured Claim, the LaSalle
Claim, an Allowed Equity Interest or Allowed Class Securities Litigation Claim
(as defined in the Plan of Reorganization) evidencing Class B Warrants (the
"Warrants") to acquire, under certain circumstances, an aggregate of 3,000,000
shares of the 8% cumulative convertible exchangeable preferred stock, $0.01 par
value per share, of the Company (the "Preferred Stock"), such number of Warrants
and shares of Preferred Stock being subject to adjustment as set forth herein;
and
WHEREAS, the Company desires the Warrant Agent to act on behalf of the
Company, and the Warrant Agent is willing to so act, in connection with the
issuance of the Warrant Certificates and other matters provided herein.
NOW, THEREFORE, in consideration of the premises and the mutual
agreements herein set forth, and for the purpose of defining the respective
rights and obligations of the Company, the Warrant Agent and the Holders (as
defined herein), the parties hereto agree as follows:
SECTION 1. Certain Definitions. As used in this Agreement, the
following terms shall have the following respective meanings:
"Affiliate" means, (i) with respect to any specified Person, any other
Person that, directly or indirectly, controls, is controlled by or is under
direct or indirect common control with such specified Person, or any
executive officer or director of any such
731156.6
1
<PAGE>
specified Person or other Person or (ii) with respect to any natural
Person, any Person having a relationship with such person by blood,
marriage or adoption not more remote than first cousin. For the purposes of
this definition, "control," when used with respect to any specified Person,
means the possession, direct or indirect, of the power to direct the
management and policies of such Person, directly or indirectly, whether
through the ownership of voting securities, by contract or otherwise;
provided, however, that beneficial ownership of 10% or more of the voting
securities of a Person will be deemed to be control. The terms
"controlling" and "controlled" have meanings correlative to the foregoing.
"Board of Directors" means the Company's Board of Directors or a duly
appointed committee of the Company's Board of Directors.
"Business Day" means each Monday, Tuesday, Wednesday, Thursday and
Friday which is not a day on which banking institutions in The City of New
York, or the city in which the principal corporate trust office of the
Warrant Agent is located, are authorized or obligated by law or executive
order to be closed.
"Closing Price" means (a) if the Preferred Stock shall be then listed
or admitted to trading on the New York Stock Exchange, the closing price on
the NYSE-Consolidated Tape (or any successor composite tape reporting
transactions on the New York Stock Exchange) or, if such a composite tape
shall not be in use or shall not report transactions in the Preferred
Stock, or if the Preferred Stock shall be listed on a stock exchange other
than the New York Stock Exchange, the last reported sales price regular way
or, in case no such reported sale takes place on such day, the average of
the closing bid and asked prices regular way for such day, in each case on
the principal national securities exchange on which the shares of Preferred
Stock are listed or admitted to trading (which shall be the national
securities exchange on which the greatest number of shares of the Preferred
Stock have been traded on such day or, if the Closing Price is being
determined for the purpose of determining the "Fair Market Value", during
the 20 consecutive trading days referred to in the definition of the term
"Fair Market Value"); or
(b) if the Preferred Stock is not listed or admitted to trading, the
average of the closing sale prices as reported by the NASDAQ National
Market System or, if the Preferred Stock is not included on such system,
the average of the closing bid and asked prices of the Preferred Stock in
the over-the-counter market as reported by any system maintained by the
NASD or any comparable system or, if the Preferred Stock is not included
for quotation in any such system, the average of the closing bid and asked
prices as furnished by two members of the NASD selected reasonably and in
good faith from time to time by the Board of Directors for that purpose; or
(c) if the Preferred Stock is not listed or admitted to trading and in
the absence of one or more such quotations, the Fair Market Value shall be
as reasonably determined
731156.6
2
<PAGE>
in good faith by the Board of Directors (which determination shall be
reasonably described in a written notice delivered to the Warrantholders)
or, if an objection is made to such determination by a Qualifying
Warrantholder (as defined below) in accordance with the following sentence,
as determined by an Independent Appraiser in accordance with the following
sentence. In the event that any Qualifying Warrantholder shall object to
the determination of the Board of Directors of the Fair Market Value by
delivering written notice to the Company within ten (10) Business Days
following the receipt by such Qualifying Warrantholder of such
determination of the Board of Directors, the Fair Market Value shall
instead be determined in good faith by an Independent Appraiser. The
determination of the Board of Directors of the Fair Market Value shall be
binding and conclusive if no objection is made to such determination by a
Qualifying Warrantholder in accordance with the terms set forth above in
this paragraph. The fees and expenses of any Independent Appraiser
determining the Fair Market Value shall be borne by the Company and the
determination by such Independent Appraiser of the Fair Market Value shall
be binding and conclusive.
"Common Stock" means the common stock, $0.01 par value per share, of
the Company.
"Company" means Marvel Enterprises, Inc., a Delaware corporation, and
its successors and assigns.
"Consummation Date" has the meaning set forth in the Plan of
Reorganization.
"Current Market Price" means the Closing Price of the Common Stock as
of the day immediately preceding the day on which the Current Market Price
is determined, or, in the case of a firm commitment underwriting, the
Closing Price on the date on which the price at which the Company is
contractually bound to sell its Common Stock in an underwritten offering is
fixed.
"Exchange Act" means the Securities Exchange Act of 1934, as amended,
and the rules and regulations of the Securities and Exchange Commission
thereunder.
"Exercise Price" means the purchase price per share of Common Stock to
be paid upon the exercise of each Warrant in accordance with the terms
hereof, which price shall be determined as described below, in each case
subject to adjustment from time to time pursuant to Section 11 hereof. With
respect to each series of Warrants issued on a particular Warrant
Distribution Date, the Exercise Price shall be an amount per share of
Preferred Stock as follows:
731156.6
3
<PAGE>
<TABLE>
<CAPTION>
If the Warrant Distribution Date is But Before: Then the
a date on or after: Exercise
Price
shall be:
<S> <C> <C>
[The Consummation Date] [The date 30 days after the $10.65
Consummation Date]
[The date 30 days after the [The date 60 days after the $10.76
Consummation Date] Consummation Date]
[The date 60 days after the [The date 90 days after the $10.86
Consummation Date] Consummation Date]
[The date 90 days after the [The date 120 days after the $10.97
Consummation Date] Consummation Date]
[The date 120 days after the [The date 150 days after the $11.08
Consummation Date] Consummation Date]
[The date 150 days after the [The date 180 days after the $11.19
Consummation Date] Consummation Date]
[The date 180 days after the [The date 210 days after the $11.31
Consummation Date] Consummation Date]
[The date 210 days after the [The date 240 days after the $11.42
Consummation Date] Consummation Date]
[The date 240 days after the [The date 270 days after the $11.53
Consummation Date] Consummation Date]
[The date 270 days after the [The date 300 days after the $11.65
Consummation Date] Consummation Date]
[The date 300 days after the [The date 330 days after the $11.76
Consummation Date] Consummation Date]
[The date 330 days after the [The date 360 days after the $11.88
Consummation Date] Consummation Date]
</TABLE>
"Expiration Date" means the first business day occurring more than six
months after the applicable Warrant Distribution Date.
"Fair Market Value" means, with respect to any share of Preferred
Stock, as of the date of determination the average of the daily Closing
Price for each of the 20 consecutive trading days preceding the date of
such computation.
731156.6
4
<PAGE>
"Holder" or "Warrantholder" means the registered holder of a Warrant.
"Independent Appraiser" means any nationally recognized investment
banking firm or accounting firm (other than any investment banking firm or
accounting firm having a significant ongoing relationship with the Company
or the Qualifying Warrantholder at the time of the appraisal) selected
jointly in good faith by the Board of Directors and the Qualifying
Warrantholder, whose fees and expenses shall be paid by the Company.
"Person" means any individual, corporation, limited liability company,
partnership, joint venture, association, joint-stock company, trust,
unincorporated organization, government or any agency or political
subdivision thereof, or other entity.
"Plan of Reorganization" has the meaning set forth in the preamble
hereof.
"Preferred Stock" has the meaning set forth in the preamble hereof.
"Qualifying Warrantholder" means any Warrantholder (or group of
Warrantholders) that, at the time of any objection to the determination of
the Board of Directors of the Fair Market Value, beneficially owns
collectively, together with its Affiliates, at least ten percent (10%) of
the Warrants on a fully diluted basis.
"Register" has the meaning set forth in Section 5(c) hereof.
"Securities Act" means the Securities Act of 1933, as amended, or any
similar Federal statute, and the rules and regulations of the Securities
and Exchange Commission thereunder.
"Transfer Agent" has the meaning set forth in Section 10 hereof.
"Warrant Agent" means American Stock Transfer & Trust Company or the
successor or successors of such Warrant Agent appointed in accordance with
the terms hereof.
"Warrant Certificates" has the meaning set forth in the preamble
hereof.
"Warrant Distribution Date" has the meaning set forth in the preamble
hereof.
"Warrants" has the meaning set forth in the preamble hereof.
"Warrants Shares" means the shares of Preferred Stock issued or
issuable upon the exercise of the Warrants pursuant to the terms of this
Agreement.
731156.6
5
<PAGE>
SECTION 2. Appointment of Warrant Agent. The Company hereby appoints
the Warrant Agent to act as agent for the Company in accordance with the terms
and conditions set forth in this Agreement, and the Warrant Agent hereby accepts
such appointment.
SECTION 3. Warrant Certificates. (a) The Warrant Certificates to be
delivered pursuant to this Agreement shall be in registered form only, shall be
substantially in the form set forth in Exhibit A attached hereto and shall have
such insertions as are appropriate or required or permitted by this Agreement
and may have such letters, numbers, designations or other marks of
identification and such legends, summaries and endorsements stamped, printed,
lithographed or engraved thereon as the Company may deem appropriate and as are
not inconsistent with the provisions of this Agreement, or as may be required to
comply with any law or with any rule or regulation pursuant thereto or with any
rule or regulation of any securities exchange on which the Warrants may from
time to time be listed. Warrant Certificates shall be dated the date of
countersignature by the Warrant Agent.
(b) The Warrant Certificates shall be issued at such time, and from
time to time, as provided in the Plan of Reorganization. Each Warrant
Certificate issued as of a particular Warrant Distribution Date and the Warrants
represented thereby shall be designated as a separate series (i.e., Class B,
Series 1; Class B, Series 2; etc.).
(c) Pending the preparation of definitive Warrant Certificates,
temporary Warrant Certificates may be issued, which may be printed,
lithographed, typewritten, mimeographed or otherwise produced, and which will be
substantially of the tenor of the definitive Warrant Certificates in lieu of
which they are issued.
(d) If temporary Warrant Certificates are issued, the Company will
cause definitive Warrant Certificates to be prepared without unreasonable delay.
After the preparation of definitive Warrant Certificates, the temporary Warrant
Certificates shall be exchangeable for definitive Warrant Certificates upon
surrender of the temporary Warrant Certificates to the Warrant Agent, without
charge to the Holder. Temporary Warrant Certificates so surrendered for exchange
shall be canceled by the Warrant Agent and disposed of by the Warrant Agent in a
manner satisfactory to the Company. Until so exchanged, the temporary Warrant
Certificates shall in all respects be entitled to the same benefits under this
Agreement as definitive Warrant Certificates.
SECTION 4. Execution of Warrant Certificates. (a) Warrant Certificates
shall be signed on behalf of the Company by its Chairman of the Board, its Chief
Executive Officer, its President or a Vice President of the Company. Such
signature upon the Warrant Certificates may be manual or in the form of a
facsimile signature of the present or any future Chairman of the Board, Chief
Executive Officer, President or Vice President of the Company, and may be
imprinted or otherwise reproduced on the Warrant Certificates and for that
purpose the Company may adopt and use the facsimile signature of any person who
shall have been Chairman of the Board, Chief Executive Officer, President or
Vice President of the Company, notwithstanding the
731156.6
6
<PAGE>
fact that at the time the Warrant Certificates shall be countersigned and
delivered or disposed of he or she shall have ceased to hold such office.
(b) In case any officer of the Company who shall have signed any of
the Warrant Certificates shall cease to be such officer before the Warrant
Certificates so signed shall have been countersigned by the Warrant Agent, or
delivered to the Holder thereof, such Warrant Certificates nevertheless shall be
countersigned and delivered with the same force and effect as though such person
had not ceased to be such officer of the Company, unless the Warrant Agent has
received written instructions from the Company not to countersign and deliver
such Certificates; and any Warrant Certificate may be signed on behalf of the
Company by any person who, at the actual date of the execution of such Warrant
Certificate, shall be a proper officer of the Company to sign such Warrant
Certificate, although at the date of the execution of this Warrant Agreement any
such person was not such officer.
SECTION 5. Registration and Countersignature. (a) The Company and the
Warrant Agent, on behalf of the Company, shall number and register the Warrant
Certificates in a Register (as hereinafter defined) as they are issued by the
Company which such register shall be maintained in accordance with Section 5(c)
hereof.
(b) Warrant Certificates shall be manually countersigned by the
Warrant Agent and shall not be valid for any purpose unless so countersigned.
The Warrant Agent shall, upon written instructions of the Chairman of the Board,
the Chief Executive Officer, the President or a Vice President of the Company,
initially countersign, issue and deliver Warrants entitling the Holders thereof
to purchase not more than the number of Warrant Shares referred to above in the
first recital hereof and shall countersign and deliver Warrants as otherwise
provided in this Agreement.
(c) The Company shall maintain, or cause to be maintained, a register
(the "Register") of the Warrants at its registered office, at the principal
office of the Warrant Agent or at any other place in the United States of
America designated by the Company, showing (i) the names and the latest known
address of each person who is or has been a Holder; (ii) the number of Warrants
of each series held by each Holder; and (iii) the date and particulars of the
issue and transfer of Warrants. The registered owner on the Register may be
deemed and treated by the Company, the Warrant Agent and all other persons
dealing with the Warrants evidenced thereby as the Holder and absolute owner
thereof for any purpose and as the person entitled to exercise the right
represented thereby, or to the transfer on the books of the Company, any notice
to the contrary notwithstanding, and, until such transfer of the Warrant on such
books in accordance with the provisions of this Agreement, the Company may treat
the registered owner on the Register as the owner for all purposes.
SECTION 6. Registration of Transfers and Exchanges. (a) The Warrant
Agent shall from time to time, subject to the limitations of Section 7 hereof,
register the transfer of any outstanding Warrant Certificates upon the records
to be maintained by it for that purpose, upon
731156.6
7
<PAGE>
surrender thereof accompanied by a written instrument or instruments of transfer
in form satisfactory to the Warrant Agent, duly executed by the Holder or
Holders thereof or by the duly appointed legal representative thereof or by a
duly authorized attorney. Upon any such registration of transfer a new Warrant
Certificate(s) of like tenor and representing in the aggregate the number and
series of Warrants transferred, shall be issued to the transferee(s), and the
surrendered Warrant Certificate shall be canceled by the Warrant Agent. Upon any
partial transfer, a new Warrant Certificate of like tenor and representing in
the aggregate the number and series of Warrants which were not so transferred,
shall be issued to, and in the name of, the Warrantholder. Canceled Warrant
Certificates shall thereafter be disposed of in a manner satisfactory to the
Company.
(b) Any Warrant Certificate of a particular series may be exchanged,
subdivided or combined with other Warrant Certificates of the same series
evidencing the same rights as the rights evidenced thereby upon presentation and
surrender thereof at the principal office of the Warrant Agent, together with a
written notice signed by the Holder hereof specifying the denominations in which
new Warrant Certificate(s) are to be issued. Upon presentation and surrender of
any Warrant Certificates of a particular series, together with such written
notice, for exchange, subdivision or combination of such Warrant Certificates,
the Company will issue a new Warrant Certificate or Warrant Certificates, in the
denominations requested, of the same series and like tenor entitling the
Holder(s) thereof to purchase the same aggregate number of Warrant Shares as the
Warrant Certificate(s) so surrendered. Such new Warrant Certificate(s) will be
registered in the name of the Holder submitting such request. Any Warrant
Certificate surrendered for exchange, subdivision or combination shall be
canceled promptly upon the issuance of such new Warrant Certificate(s) and then
be disposed of by such Warrant Agent in a manner satisfactory to the Company.
(c) The Warrant Agent is hereby authorized to countersign and deliver,
in accordance with the provisions of this Section 6 and of Section 5 hereof, the
new Warrant Certificates required pursuant to the provisions of this Section 6.
SECTION 7. Terms of Warrants; Exercise of Warrants. (a) The Warrants
issued hereunder shall be identical in form except (i) that each Warrant
Certificate issued as of a particular Warrant Distribution Date and the Warrants
represented thereby shall be designated as a separate series (i.e., Class B,
Series 1; Class B, Series 2; etc.), and (ii) as to variations among each series
of Warrants as to the applicable Exercise Price and the applicable Expiration
Date.
(b) Subject to the terms of this Agreement, each Holder shall have the
right, upon payment of the applicable Exercise Price then in effect for such
Holder's series of Warrants in accordance with the terms of this Agreement, from
and after the date of issuance of such of Warrants until 5:00 p.m., New York
City time, on the applicable Expiration Date for such series of Warrants, to
receive from the Warrant Agent on behalf of the Company the number of fully paid
and nonassessable Warrant Shares which the Holder may at the time be entitled to
receive on exercise of such series of Warrants. Each Warrant not exercised on or
before 5:00 p.m., New
731156.6
8
<PAGE>
York City time, on the applicable Expiration Date shall become void and all
rights thereunder and all rights in respect thereof under this Agreement shall
cease as of such time.
(c) The Warrants may be exercised during normal business hours on any
Business Day on or prior to the applicable Expiration Date upon surrender to the
Warrant Agent on behalf of the Company at the principal office of the Warrant
Agent of the certificate or certificates evidencing the Warrants to be exercised
with the form of subscription to purchase on the reverse thereof duly completed
and signed, and upon payment to the Warrant Agent for the account of the Company
of the applicable Exercise Price as adjusted as herein provided, for each of the
Warrant Shares in respect of which such Warrants are then exercised. Payment of
the aggregate Exercise Price for the number of Warrant Shares specified in the
subscription form shall be made by wire transfer or by certified or official
bank check payable to the order of the Company in immediately available funds in
lawful money of the United States of America.
(d) Upon surrender of Warrants in accordance with this Section 7, and
payment of the applicable Exercise Price as provided above, the Warrant Agent
shall thereupon promptly notify the Company, and the Warrant Agent shall deliver
or cause to be delivered, as promptly as possible thereafter, but in any event
within three (3) Business Days of receipt of such surrender and payment, to the
Holder of such Warrant Certificate appropriate evidence of ownership of any
Warrant Shares or other securities or property (including any money) to which
the Holder is entitled, and, to the extent possible, certificates representing
the Warrant Shares or such other securities shall be in such denomination(s) as
such Holder shall request, and registered or otherwise placed in, or payable to
the order of, such name or names as may be directed in writing by the Holder,
and shall deliver or cause to be delivered such evidence of ownership and any
other securities or property (including any money) to the person or persons
entitled to receive the same, together with an amount in cash in lieu of any
fraction of a share as provided in Section 13 hereof. Any such evidence of
ownership shall be deemed to have been issued and any Person so designated to be
named therein shall be deemed to have become a holder of record of such Warrant
Shares as of the date of the surrender of such Warrants and payment of the
applicable Exercise Price, notwithstanding that the stock transfer books of the
Company shall then be closed or that certificates representing such shares shall
not then be actually delivered to the Holder.
(e) The Warrants shall be exercisable either in full or from time to
time in part and, in the event that a Warrant Certificate is surrendered to the
Warrant Agent for exercise of fewer than all of the Warrants represented by such
Warrant Certificate at any time prior to the applicable Expiration Date, a new
certificate evidencing the remaining Warrant or Warrants but otherwise identical
to the surrendered Warrant Certificate (including, without limitation, of the
same series) will be issued by the Company, and the Warrant Agent is hereby
irrevocably authorized to countersign and to deliver the required new Warrant
Certificate pursuant to the provisions of this Section 7 and of Section 4 hereof
as promptly as possible, but in any event within three (3) Business Days of
receipt of the certificate evidencing the Warrants, and the Company, whenever
required by the Warrant Agent, will supply the Warrant Agent with Warrant
Certificates duly executed on behalf of the Company for such purpose.
731156.6
9
<PAGE>
(f) All Warrant Certificates surrendered upon exercise of Warrants
shall be canceled by the Warrant Agent. Such canceled Warrant Certificates shall
then be disposed of by the Warrant Agent in a manner satisfactory to the
Company. The Warrant Agent shall account promptly to the Company with respect to
such Warrants exercised and concurrently pay to the Company as promptly as
practicable, but in any event within five (5) Business Days of receipt, all
monies received by the Warrant Agent for the purchase of the Warrant Shares
through the exercise of such Warrants.
(g) The Warrant Agent shall keep copies of this Agreement and any
notices given or received hereunder by or from the Company available for
inspection by the Holders during normal business hours at its office. The
Company shall supply the Warrant Agent from time to time with such numbers of
copies of this Agreement as the Warrant Agent may reasonably request.
SECTION 8. Payment of Taxes. The Company will pay all documentary
stamp taxes and other governmental charges attributable to the initial issuance
of Warrant Shares upon the exercise of Warrants; provided, however, that the
Company shall not be required to pay any tax or taxes which may be payable in
respect of any transfer involved in the issue of any Warrant Certificates or any
certificates for Warrant Shares in a name other than that of the Holder of a
Warrant Certificate surrendered upon the exercise of a Warrant, and the Company
shall not be required to issue or deliver such Warrant Certificates unless or
until the Person or Persons requesting the issuance thereof shall have paid to
the Company the amount of such tax or shall have established to the satisfaction
of the Company that such tax has been paid.
SECTION 9. Mutilated, Destroyed, Lost and Stolen Warrant Certificates.
(a) If (i) any mutilated Warrant Certificate is surrendered to the Warrant Agent
or (ii) the Company and the Warrant Agent receive evidence to their reasonable
satisfaction of the destruction, loss or theft of any Warrant Certificate, and
there is delivered to the Company and the Warrant Agent such certificate or
indemnity as may be required by them to save each of them harmless, then, in the
absence of notice to the Company or the Warrant Agent that such Warrant
Certificate has been acquired by a bona fide purchaser, the Company shall
execute and upon the Company's written request the Warrant Agent shall
countersign and deliver, in exchange for any such mutilated Warrant Certificate
or in lieu of and in substitution for any such destroyed, lost or stolen Warrant
Certificate, a new Warrant Certificate of the same series, like tenor and for a
like aggregate number of Warrants. An applicant for such a substitute Warrant
Certificate shall also comply with such other reasonable regulations as the
Company may prescribe.
(b) Upon the issuance of any new Warrant Certificate under this
Section 9, the Company may require the payment by the Holder of a sum sufficient
to cover any tax or other governmental charge that may be imposed in relation
thereto and the payment of such other reasonable charges as the Company may
prescribe, including reimbursement of reasonable fees and expenses of the
Company and the Warrant Agent incidental thereto.
731156.6
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<PAGE>
(c) The provisions of this Section 9 are exclusive and shall preclude
(to the extent lawful) all other rights or remedies with respect to the
replacement of mutilated, destroyed, lost or stolen Warrant Certificates.
SECTION 10. Issuance of Warrant Shares. The Company will keep a copy
of this Agreement on file with the transfer agent for the Preferred Stock (the
"Transfer Agent") and with every subsequent transfer agent for any shares of the
Company's capital stock issuable upon the exercise of the rights of purchase
represented by the Warrants. The Warrant Agent is hereby irrevocably authorized
to requisition, from time to time, from such Transfer Agent the certificates
representing shares of the Preferred Stock and any cash which may be payable as
provided in Section 13 hereof required to honor outstanding Warrants upon
exercise thereof in accordance with the terms of this Agreement. The Company
will supply such Transfer Agent with duly executed certificates representing
shares of Preferred Stock for such purposes and will provide or otherwise make
available any cash which may be payable as provided in Section 13 hereof. The
Company will furnish such Transfer Agent and the Warrant Agent a copy of all
notices of adjustments and certificates related thereto, transmitted to each
Holder of the Warrants pursuant to Section 14 hereof.
SECTION 11. Adjustment of Exercise Price and Number of Warrant Shares
Issuable. The number and kind of Warrant Shares purchasable upon the exercise of
Warrants and the applicable Exercise Price shall be subject to adjustment from
time to time as follows, if at any time after the Consummation Date and prior to
the applicable Expiration Date:
(a) Stock Dividends. The Company shall pay a stock dividend or other
distribution payable in shares of Preferred Stock or the number of
shares of Preferred Stock shall have been increased by a subdivision
or split-up of shares of Preferred Stock, then, on the date of the
payment of such dividend or distribution (retroactive to the record
date) or immediately after the effective date of subdivision or
split-up, as the case may be, the number of Warrant Shares to be
delivered upon exercise of the Warrants will be increased so that the
Warrantholder will be entitled to receive the number of Warrant Shares
that such Warrantholder would have owned immediately following such
action had the Warrants been exercised immediately prior thereto or,
in the case of a stock dividend or distribution, prior to the record
date for determination of shareholders entitled thereto, and the
applicable Exercise Price will be adjusted as provided in Section
11(g) hereof.
(b) Combination of Stock. If the number of shares of Preferred Stock
outstanding shall have been decreased by a combination of the
outstanding shares of Preferred Stock, then, immediately after the
effective date of such combination, the number of Warrant Shares to be
delivered upon exercise of each Warrant will be decreased so that the
Warrantholder thereafter will be entitled to receive the number of
Warrant Shares that such Warrantholder would have owned immediately
731156.6
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<PAGE>
following such action had such Warrant been exercised immediately
prior thereto, and the applicable Exercise Price will be adjusted as
provided in Section 11(g) hereof.
(c) Reorganization, Etc. If any capital reorganization of the Company,
or any reclassification of the Preferred Stock, or any consolidation
of the Company with or merger of the Company with or into any other
Person or any sale, lease or other transfer of all or substantially
all of the assets of the Company to any other Person, shall be
effected in such a way that the holders of Preferred Stock shall be
entitled to receive stock, other securities, cash or other assets
(whether such stock, other securities, cash or other assets are issued
or distributed by the Company or another Person) with respect to or in
exchange for Preferred Stock, then, upon exercise of each Warrant, the
Warrantholder shall have the right to receive the kind and amount of
stock, other securities, cash or other assets receivable upon such
reorganization, reclassification, consolidation, merger or sale, lease
or other transfer by a holder of the number of Warrant Shares that
such Warrantholder would have been entitled to receive upon exercise
of such Warrant had such Warrant been exercised immediately before
such reorganization, reclassification, consolidation, merger or sale,
lease or other transfer, subject to adjustments (as determined in good
faith by the Board of Directors of the Company). Adjustments for
events subsequent to the effective date of such a reorganization,
reclassification, consolidation, merger, sale or transfer of assets
shall be as nearly equivalent as may be practicable to the adjustments
provided for in this Agreement. In any such event, effective
provisions shall be made in the certificate or articles of
incorporation of the resulting or surviving corporation, in any
contract of sale, merger, conveyance, lease, transfer or otherwise so
that the provisions set forth herein for the protection of the rights
of the Warrantholders shall thereafter continue to be applicable; and
any such resulting or surviving corporation shall expressly assume the
obligation to deliver, upon exercise, such shares of stock, other
securities, cash and property. The provisions of this Section 11 shall
similarly apply to successive consolidations, mergers, sales, leases
or transfers.
(d) Adjustment for Rights Issue. In case the Company shall issue
rights, options, warrants or other securities convertible or
exchangeable for Preferred Stock or for any other such right, option
or warrant (collectively, "Rights") to all holders of its outstanding
Preferred Stock entitling them to subscribe for, purchase or obtain
upon conversion or exchange shares of Preferred Stock at a Price Per
Share which is lower at the record date mentioned below than either
(x) the then current Fair Market Value per share of Preferred Stock or
(y) the Exercise Price, or both, the number of Warrant Shares
thereafter purchasable upon the exercise of each Warrant shall be
determined by multiplying the number of Warrant Shares theretofore
purchasable upon exercise of each Warrant by a fraction, the numerator
of which shall be the number of shares of Preferred Stock outstanding
on the date
731156.6
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of issuance of such Rights plus the additional Number of Shares of
Preferred Stock offered for subscription, purchase or issuance upon
conversion or exchange in connection with such Rights and the
denominator of which shall be the number of shares of Preferred Stock
outstanding on the date of issuance of such Rights plus the number of
shares which the aggregate Gross Proceeds received or receivable by
the Company upon exercise of such Rights would purchase at the greater
of (x) the Fair Market Value per share of Preferred Stock at such
record date or (y) the Exercise Price. Such adjustment shall be made
whenever Rights are issued, and shall become effective immediately
after the record date for the determination of stockholders entitled
to receive Rights. As used herein, "Price Per Share" shall be defined
and determined in accordance with the following formula:
P = R/N
where
P = Price Per Share;
R = the "Gross Proceeds" received or receivable by the Company in
respect of Rights which shall be the total amount received or
receivable by the Company in consideration for the issuance and
sale of such Rights plus the aggregate amount of additional
consideration payable to the Company upon exercise thereof;
provided that the proceeds received or receivable by the Company
shall be the cash proceeds before deducting therefrom any cash
compensation paid or discount allowed in the sale, underwriting
or purchase thereof by underwriters or dealers or others
performing similar services; and
N = the "Number of Shares," which in the case of Rights is the
maximum number of shares of Preferred Stock initially issuable
upon exercise thereof.
(e) Adjustment for Other Distributions. (i) In case the Company shall
distribute to all holders of its shares of Preferred Stock (x)
evidences of indebtedness or assets (excluding cash dividends or
distributions payable out of the consolidated earnings or surplus
legally available for such dividends or distributions and dividends or
distributions referred to in paragraphs (a), (c) or (d) above) of the
Company or any subsidiary or (y) shares of capital stock of a
subsidiary of the Company (such evidences of indebtedness, assets and
securities as set forth in clauses (x) and (y) above, collectively,
"Assets"), then in each case the number of Warrant Shares thereafter
purchasable upon the exercise of each Warrant shall be determined by
multiplying the number of Warrant Shares theretofore purchasable upon
the exercise of each Warrant by a fraction, the
731156.6
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numerator of which shall be the Fair Market Value per share of
Preferred Stock on the date of such distribution and the denominator
of which shall be such Fair Market Value per share of Preferred Stock
less the fair value as of such record date as determined reasonably
and in good faith by the Board of Directors of the Company of the
portion of the Assets applicable to one share of Preferred Stock. Such
adjustment shall be made whenever any such distribution is made, and
shall become effective on the date of distribution retroactive to the
record date for the determination of stockholders entitled to receive
such distribution.
(ii) In case the Company shall issue any shares of Preferred
Stock or Common Stock or rights, options or warrants to acquire
shares of Preferred Stock or Common Stock, other than Exempted
Issuances (as defined below) and other than issuances covered by
other clauses of this Section 11, within the first six months
after the Consummation Date at an Issue Price (as defined below)
which is lower than (A) in the case of issuances of shares of
Preferred Stock or rights, options or warrants to acquire shares
of Preferred Stock, the then current Exercise Price, or (B) in
the case of issuances of shares of Common Stock or rights,
options or warrants to acquire shares of Common Stock, the
quotient of the current Exercise Price divided by the number of
shares of Common Stock (the "Conversion Number") then issuable on
conversion of a share of Preferred Stock, then the Exercise Price
of all outstanding Warrants and Warrants issued thereafter shall
be adjusted to a price equal to the Issue Price, if the
adjustment is triggered by the issuance of shares of Preferred
Stock or of rights, options or warrants to acquire shares of
Preferred Stock, or equal to the product of the Issue Price
multiplied by the Conversion Number, if the adjustment is
triggered by the issuance of shares of Common Stock or of rights,
options or warrants to acquire shares of Common Stock. "Exempted
Issuances" means securities issuances contemplated by the Plan of
Reorganization (including securities issuable on conversion or
exercise of securities contemplated by the Plan of
Reorganization), issuances of shares of Preferred Stock as
dividends on shares of Preferred Stock and issuances pursuant to
employee benefit plans of shares of, and options to acquire
shares of, Common Stock, provided that such issuances pursuant to
employee benefit plans which are vested or scheduled to vest
prior to the Expiration Date do not exceed, in the aggregate, 5%
of the sum of the shares of Common Stock outstanding as of the
Consummation Date and subject to issuance upon conversion of
shares of Preferred Stock outstanding as of the Consummation
Date. "Issue Price" means (i) in the case of the issuance of
Preferred Stock or Common Stock for cash, the amount of the cash
proceeds received or receivable by the Company before deducting
therefrom any cash compensation paid or discount allowed in the
sale, underwriting or purchase thereof by underwriters or dealers
or others
731156.6
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<PAGE>
performing similar services; (ii) in the case of the issuance of
Preferred Stock or Common Stock for a consideration in whole or
in part other than cash, the fair value of such consideration as
determined by the Board of Directors of the Company in good
faith.
(iii) In case the Company shall issue any shares of
Preferred Stock or Common Stock or rights, options or warrants to
acquire shares of Preferred Stock or Common Stock, other than
Exempted Issuances and other than issuances covered by other
clauses of this Section 11, more than six months after the
Consummation Date but prior to the Expiration Date for an Issue
Price which is lower than (A) in the case of issuances of shares
of Preferred Stock or rights, options or warrants to acquire
shares of Preferred Stock, both the then current Exercise Price
and the product of the Conversion Number multiplied by the
Current Market Price of the Common Stock on the date of issuance,
or (B) in the case of issuances of shares of Common Stock or
rights, options or warrants to acquire shares of Common Stock,
both the quotient of the current Exercise Price divided by the
Conversion Number and the Current Market Price of the Common
Stock on the date of issuance, then the Exercise Price of all
outstanding Warrants and Warrants issued thereafter shall be
changed to an amount equal to the Issue Price, if the adjustment
is triggered by the issuance of shares of Preferred Stock or of
rights, options or warrants to acquire shares of Preferred Stock,
or equal to the product of the Issue Price multiplied by the
Conversion Number, if the adjustment is triggered by the issuance
of shares of Common Stock or of rights, options or warrants to
acquire shares of Common Stock.
(f) Carryover. Notwithstanding any other provision of this Section 11,
no adjustment shall be made to the number of Warrant Shares to be
delivered to the Warrantholder (or to the applicable Exercise Price)
if such adjustment represents less than 1% of the number of Warrant
Shares to be so delivered, but any lesser adjustment shall be carried
forward and shall be made at the time and together with the earlier to
occur of (i) the exercise of all or any portion of a Warrant and (ii)
the next subsequent adjustment that, together with any adjustments so
carried forward, shall amount to 1% or more of the number of Warrant
Shares to be so delivered.
(g) Exercise Price Adjustment.
(i) Whenever the number of Warrant Shares purchasable upon the
exercise of the Warrants is adjusted as provided pursuant to this
Section 11, the applicable Exercise Price payable upon the
exercise of a Warrant shall be adjusted by multiplying such
Exercise Price immediately prior to such adjustment by a
fraction, the numerator of which shall be the number of
731156.6
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<PAGE>
Warrant Shares purchasable upon the exercise of the Warrant
immediately prior to such adjustment, and the denominator of
which shall be the number of Warrant Shares purchasable
immediately thereafter; provided, however, that the applicable
Exercise Price for each Warrant Share shall in no event be less
than the par value of such Warrant Share.
(ii) If at any time, the Company shall pay to holders of record
of Preferred Stock any cash dividends or other cash
distributions, then, on the date of the payment of such dividend
or distribution (retroactive to the record date), the applicable
Exercise Price payable upon the exercise of such Warrant shall be
adjusted by reducing the applicable Exercise Price by the amount
of such dividend or distribution applicable to one share of
Preferred Stock; provided, however, that the applicable Exercise
Price for each Warrant Share shall in no event be less than the
par value of such Warrant Share.
(h) Decrease in Exercise Price. The Company, in its sole discretion,
shall have the right at any time, or from time to time, to decrease
the applicable Exercise Price of the Warrants and/or increase the
number of Warrants Shares issuable upon the exercise of the Warrants,
including as it considers to be advisable in order that any event
treated for federal income tax purposes as a dividend of stock or
stock rights shall not be taxable to recipients.
(i) Other Adjustments.
(A) In case the Company shall issue any shares of Preferred
Stock or Common Stock or rights, options or warrants to acquire
shares of Preferred Stock or Common Stock, other than Exempted
Issuances and other than issuances covered by other clauses of
this Section 11, more than six months after the Consummation Date
but prior to the Expiration Date for an Issue Price which is (x)
in the case of issuances of shares of Preferred Stock or rights,
options or warrants to acquire shares of Preferred Stock, equal
to or greater than the then current Exercise Price but less than
the product of the Conversion Number multiplied by the Current
Market Price of the Common Stock on the date of issuance, or (y)
in the case of issuances of shares of Common Stock or rights,
options or warrants to acquire shares of Common Stock, equal to
or greater than the quotient of the current Exercise Price
divided by the Conversion Number but less than the Current Market
Price of the Common Stock on the date of issuance, then the Board
of Directors shall make such adjustments, if any, in the
application of the purchase rights of the Holders pursuant to
this Section 11, in accordance with the essential intent and
principles of the provisions of this Section 11, as shall be
reasonably necessary, in the good faith
731156.6
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<PAGE>
opinion of the Board of Directors, to protect such purchase
rights as aforesaid.
(B) If any event occurs as to which the foregoing provisions
of this Section 11 are not strictly applicable or, if strictly
applicable, would not, in the good faith judgment of the Board of
Directors, fairly protect the purchase rights of the Holders in
accordance with the essential intent and principles of such
provisions, then the Board of Directors shall make such
adjustments in the application of such provisions, in accordance
with such essential intent and principles, as shall be reasonably
necessary, in the good faith opinion of the Board of Directors,
to protect such purchase rights as aforesaid.
(j) Further Equitable Adjustments. If, after one or more adjustments
to the applicable Exercise Price pursuant to this Section 11, the
applicable Exercise Price cannot be reduced further without falling
below the greater of (i) $0.01 or (ii) the lowest positive exercise
price legally permissible for warrants to acquire shares of Preferred
Stock, the Company shall make further adjustments to compensate the
Holder, consistent with the foregoing principles, as the Board of
Directors, acting in good faith, deems necessary, including an
increase in the number of Warrant Shares issuable upon exercise of
outstanding Warrants and/or a cash payment to the Holders.
SECTION 12. Statement on Warrants. Irrespective of any adjustment(s)
in the number or kind of Warrant Shares issuable upon the exercise in whole or
in part of the Warrants or the applicable Exercise Price, Warrants theretofore
or thereafter issued may continue to express the same number and kind of Warrant
Shares as are stated in the Warrants initially issuable from time to time
pursuant to this Agreement, all subject to further adjustment as provided
herein.
SECTION 13. Fractional Interest. The Company shall not be required to
issue fractional shares of Common Stock on the exercise of Warrants. If more
than one Warrant shall be presented for exercise in full at the same time by the
same Holder, the number of full Warrant Shares which shall be issuable upon such
exercise shall be computed on the basis of the aggregate number of shares of
Preferred Stock acquirable on exercise of the Warrants so presented. If any
fraction of a share of Preferred Stock would, except for the provisions of this
Section 13, be issuable on the exercise of any Warrant (or specified portion
thereof), the Company shall (i) direct and deposit with the Transfer Agent an
amount sufficient to pay an amount in cash calculated by it to equal the then
current Fair Market Value per share multiplied by such fraction computed to the
nearest whole cent and (ii) deliver to the Transfer Agent a written certificate
of an officer of the Company setting forth the then current Fair Market Value
per share which certificate shall be conclusive evidence of the correctness of
the matters set forth therein, absent clear error. The Holders, by their
acceptance of the Warrant Certificates, expressly waive any and all rights to
731156.6
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<PAGE>
receive any fraction of a share of Preferred Stock or a stock certificate
representing a fraction of a share of Preferred Stock.
SECTION 14. Notices to Warrantholders. (a) Upon any adjustment of the
applicable Exercise Price or number of Warrant Shares issuable pursuant to
Section 11 hereof, the Company shall as promptly as practicable (x) give a
written certificate of the Company to the Warrant Agent of such adjustment or
adjustments which certificate shall set forth for each series of Warrant (i) the
number of Warrant Shares issuable upon the exercise of a Warrant of such series
and the applicable Exercise Price after such adjustment, (ii) a brief statement
of the facts requiring such adjustment, (iii) the computation by which such
adjustment was made, and (y) cause to be given to each of the registered Holders
of the Warrant Certificates at his address appearing on the Register written
notice of such adjustments by first-class mail, postage prepaid. The Warrant
Agent shall be entitled to rely on the above-referenced certificate(s) and shall
be under no duty or responsibility with respect to any such certificate(s),
except to exhibit the same from time to time to any Holder desiring an
inspection thereof during reasonable business hours. The Warrant Agent shall not
at any time be under any duty or responsibility to any Holder to determine
whether any facts exist that may require any adjustment of the number of Warrant
Shares or other stock or property issuable on exercise of the Warrants or the
applicable Exercise Price, or with respect to the nature or extent of any such
adjustment when made, or with respect to the method employed in making such
adjustment or the validity or value (or the kind or amount) of any Warrant
Shares or other stock or property which may be issuable on exercise of the
Warrants. The Warrant Agent shall not be responsible for any failure of the
Company to make any cash payment or to issue, transfer or deliver any Warrant
Share or stock certificates or other stock, securities or property upon the
exercise of any Warrant.
(b) In addition to the notice requirements in Section 14(a), the
Company will give to the Warrantholder all notices which are required to be
given by the Company under the Restated Certificate of Incorporation to the
holders of Preferred Stock.
(c) With respect to each series of Warrants, prior to the applicable
Expiration Date, and for so long as such series of Warrants have not been
exercised in full, in the event of:
(i) any taking by the Company of a record of the holders of any class
of securities for the purpose of determining the holders thereof who are
entitled to receive any dividend or other distribution, or any right to
subscribe for, purchase or otherwise acquire any shares of stock of any
class or any other securities, indebtedness or property, or to receive any
other right, option or warrant; or
(ii) any capital reorganization of the Company, any reclassification
or recapitalization of the capital stock of the Company (other than a
change in par value, or from par value to no par value, or from no par
value to par value, or as a result of a subdivision or combination), any
consolidation or merger involving the Company and any other party or any
transfer of all or substantially all the assets of the Company to any other
731156.6
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<PAGE>
party or any tender offer or exchange offer by the Company for shares of
Common Stock or Preferred Stock; or
(iii) any voluntary or involuntary dissolution, liquidation or
winding-up of the Company,
then the Company shall cause to be filed with the Warrant Agent and shall cause
to be given to each Warrantholder of such series of Warrant at such
Warrantholder's address appearing on the Warrant Register, at least twenty (20)
days prior to the applicable record date hereinafter specified, or promptly in
the case of events for which there is no record date, by first class mail,
postage prepaid, a written notice stating (i) the date as of which the holders
of record of shares of Common Stock or Preferred Stock are entitled to receive
any such rights, options, warrants or distributions are to be determined, or
(ii) the initial expiration date set forth in any tender offer or exchange offer
for shares of Common Stock or Preferred Stock, or (iii) the date on which any
such reclassification, consolidation, merger, conveyance, transfer, dissolution,
liquidation or winding up is expected to become effective or consummated, as
well as the date as of which it is expected that the holders of record of shares
of Common Stock shall be entitled to exchange such shares for securities or
other property, if any, deliverable upon such reclassification, consolidation,
merger, conveyance, transfer, dissolution, liquidation or winding-up. The
failure to give the notice required by this Section 14 or any defect therein
shall not affect the legality or validity of any distribution, right, option,
warrant, reclassification, consolidation, merger, conveyance, transfer,
dissolution, liquidation, winding up or action, or the vote upon any of the
foregoing.
(d) If there is any conversion adjustment under Section 6 of the
Restated Certificate of Incorporation with respect to the Preferred Stock at any
time from after the date hereof and prior to the Expiration Date, an adjustment
shall be made to the number of shares of Preferred Stock issuable upon exercise
of this Warrant as if this Warrant was exercised for Preferred Stock as of the
date hereof.
SECTION 15. Reservation of Warrant Shares, Etc. (a) The Company hereby
agrees that at all times there shall be reserved for issuance and delivery upon
exercise of the Warrants, free from preemptive rights, liens, security interests
and other encumbrances, such number of shares of authorized but unissued or
treasury shares of Preferred Stock and Common Stock, or other stock or
securities deliverable pursuant to Section 11, as shall be required for issuance
or delivery upon exercise of the Warrants. Without limiting the generality of
the foregoing, the Company agrees that it will not take any action which would
result in Warrant Shares when issued not being validly and legally issued and
fully paid and nonassessable. The Company hereby represents that, as of the date
hereof, it has sufficient shares of Preferred Stock and Common Stock reserved
for issuance upon exercise of all outstanding Warrants.
731156.6
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SECTION 16. Warrant Agent. The Warrant Agent undertakes the duties and
obligations imposed by this Agreement upon the following terms and conditions,
by all of which the Company and the Holders, by their acceptance thereof, shall
be bound:
(a) The statements contained herein and in the Warrant Certificates
shall be taken as statements of the Company, and the Warrant Agent
assumes no responsibility for the correctness of any of the same
except such as describe the Warrant Agent or action taken or to be
taken by it. The Warrant Agent assumes no responsibility with respect
to the distribution of the Warrant Certificates or Warrant Shares or
payment or refund of the applicable Exercise Price except as herein
otherwise provided.
(b) The Warrant Agent may consult at any time with counsel
satisfactory to it and the Warrant Agent shall incur no liability or
responsibility to the Company or to any holder of any Warrant
Certificate in respect to any action taken, suffered or omitted by it
hereunder in good faith and in accordance with the opinion or the
advice of such counsel.
(c) The Company agrees to pay to the Warrant Agent reasonable
compensation for all services rendered by the Warrant Agent in the
execution of this Agreement, to reimburse the Warrant Agent for all
expenses, taxes and governmental charges and other charges of any kind
and nature reasonably incurred by the Warrant Agent in the execution
of this Agreement and to indemnify the Warrant Agent and save it
harmless against any and all liabilities, including judgments,
reasonable costs and counsel fees, for anything done or omitted by the
Warrant Agent in the execution of this Agreement except as a result of
its negligence, bad faith or willful misconduct.
(d) The Warrant Agent shall be under no obligation to institute any
action, suit or legal proceeding or to take any other action likely to
involve expense unless the Company or one or more Holders shall
furnish the Warrant Agent with reasonable security for any costs and
expenses which may be incurred, but this provision shall not affect
the power of the Warrant Agent to take such action as it may consider
proper, whether with or without any such security. All rights of
action under this Agreement or under any of the Warrants may be
enforced by the Warrant Agent without the possession of any of the
Warrant Certificates or the production thereof at any trial or other
proceeding relative thereto, and any such action, suit or proceeding
instituted by the Warrant Agent shall be brought in its name as
Warrant Agent and any recovery of judgment shall be for the ratable
benefit of the Holders, as the respective rights or interests may
appear.
(e) The Warrant Agent, and any stockholder, director, officer or
employee of it, may buy, sell or deal in any of the Warrants or other
securities of the Company
731156.6
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<PAGE>
or become pecuniarily interested in any transaction in which the
Company may be interested, or contract with or lend money to the
Company or otherwise act as fully and freely as though it were not
Warrant Agent under this Agreement. Nothing herein shall preclude the
Warrant Agent from acting in any other capacity for the Company or for
any other legal entity.
(f) The Warrant Agent shall not at any time be under any duty or
responsibility to any Holder or the Company to make or cause to be
made any adjustment of the applicable Exercise Price or number of the
Warrant Shares or other securities or property deliverable as provided
in this Agreement, or to determine whether any facts exist which may
require any of such adjustments, or with respect to the nature or
extent of any such adjustments, when made, or with respect to the
method employed in making the same. The Warrant Agent shall not be
accountable with respect to the validity or value or the kind or
amount of any Warrant Shares or of any securities or property which
may at any time be issued or delivered upon the exercise of any
Warrant or with respect to whether any such Warrant Shares or other
securities will when issued be validly issued and fully paid and
nonassessable, and makes no representation with respect thereto.
SECTION 17. Merger, Consolidation or Change of Name of Warrant Agent.
(a) Any corporation into which the Warrant Agent may be merged or with which it
may be consolidated, or any corporation resulting from any merger or
consolidation to which the Warrant Agent shall be a party, or any corporation
succeeding to the business of the Warrant Agent, shall be the successor to the
Warrant Agent hereunder without the execution or filing of any paper or any
further act on the part of any of the parties hereto. In case at the time such
successor to the Warrant Agent shall succeed to the agency created by this
Agreement, and in case at that time any of the Warrant Certificates shall have
been countersigned but not delivered, any such successor to the Warrant Agent
may adopt the countersignature of the original Warrant Agent; and in case at
that time any of the Warrant Certificates shall not have been countersigned, any
successor to the Warrant Agent may countersign such Warrant Certificates either
in the name of the predecessor Warrant Agent or in the name of the successor to
the Warrant Agent; and in all such cases such Warrant Certificates shall have
the full force and effect provided in the Warrant Certificates and in this
Agreement.
(b) In case at any time the name of the Warrant Agent shall be changed
and at such time any of the Warrant Certificates shall have been countersigned
but not delivered, the Warrant Agent whose name has been changed may adopt the
countersignature under its prior name, and in case at that time any of the
Warrant Certificates shall not have been countersigned, the Warrant Agent may
countersign such Warrant Certificates either in its prior name or in its changed
name, and in all such cases such Warrant Certificates shall have the full force
and effect provided in the Warrant Certificates and in this Agreement.
731156.6
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SECTION 18. Resignation and Removal of Warrant Agent; Appointment of
Successor. (a) No resignation or removal of the Warrant Agent and no appointment
of a successor warrant agent shall become effective until the acceptance of
appointment by the successor warrant agent as provided herein. The Warrant Agent
may resign its duties and be discharged from all further duties and liability
hereunder (except liability arising as a result of the Warrant Agent's own
negligence or willful misconduct) after giving written notice to the Company.
The Company may remove the Warrant Agent upon written notice, and the Warrant
Agent shall thereupon in like manner be discharged from all further duties and
liabilities hereunder, except as aforesaid. The Warrant Agent shall, at the
Company's expense, cause to be mailed (by first class mail, postage prepaid) to
each Holder at his last address as shown on the Register a copy of said notice
of resignation or notice of removal, as the case may be. Upon such resignation
or removal, the Company shall appoint in writing a new warrant agent. If the
Company shall fail to make such appointment within a period of 30 days after it
has been notified in writing of such resignation by the resigning Warrant Agent
or after such removal, then the resigning Warrant Agent or the Holder of any
Warrant may apply to any court of competent jurisdiction for the appointment of
a new warrant agent. Any new warrant agent, whether appointed by the Company or
by such a court, shall be a corporation doing business under the laws of the
United States or any state thereof, in good standing and having a combined
capital and surplus of not less than US$50,000,000. After acceptance in writing
of such appointment by the new warrant agent, it shall be vested with the same
powers, rights, duties and responsibilities as if it had been originally named
herein as the Warrant Agent, without any further assurance, conveyance, act or
deed; but if for any reason it shall be necessary or expedient to execute and
deliver any further assurance, conveyance, act or deed, the same shall be done
at the expense of the Company and shall be legally and validly executed and
delivered by the resigning or removed Warrant Agent. Not later than the
effective date of any such appointment, the Company shall give notice thereof to
the resigning or removed Warrant Agent. Failure to give any notice provided for
in this Section 18(a), however, or any defect therein, shall not affect the
legality or validity of the resignation of the Warrant Agent or the appointment
of a new warrant agent, as the case may be.
(b) Any corporation into which the Warrant Agent or any new warrant
agent may be merged shall be a successor Warrant Agent under this Agreement
without any further act. Any such successor Warrant Agent shall, at the Warrant
Agent's expense, promptly cause notice of its succession as Warrant Agent to be
mailed (by first class mail, postage prepaid) to each Holder at such Holder's
last address as shown on the Register.
SECTION 19. Money and Other Property Deposited with the Warrant Agent.
Any money, securities and other property which at any time shall be deposited by
the Company or on its behalf with the Warrant Agent pursuant to this Agreement
shall be and are hereby assigned, transferred and set over to the Warrant Agent
in trust for the purpose for which such moneys, securities or other property
shall have been deposited, which such purpose shall be stated in writing in
reasonable detail and delivered to the Warrant Agent; but such moneys,
securities or other property need not be segregated from other funds, securities
or other property of the
731156.6
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Warrant Agent except to the extent required by law. The Warrant Agent shall
distribute any money deposited with it for payment and distribution to any
Holder by mailing by first-class mail a check in such amount as is appropriate
to such Holder at the address shown on the Register, or as it may be otherwise
directed in writing by such Holder, upon surrender of such Holder's Warrants.
Any money or other property deposited with the Warrant Agent for payment and
distribution to any Holder that remains unclaimed for two years, less one day
after the date the money was deposited with the Warrant Agent, shall be paid to
the Company upon its request therefor.
SECTION 20. Compliance with Government Regulations; Qualification
under the Securities Laws.
(a) The Company covenants that if the shares of Preferred Stock or
Common Stock required to be reserved for purposes of exercise of
Warrants require, under any federal or state law, registration with or
approval of any governmental authority before such shares may be
issued upon exercise or to allow the resale or transfer thereof by the
Holders generally, the Company will, unless the Company has received
an opinion of counsel to the effect that such registration is not then
permitted by such laws, use reasonable best efforts to cause such
shares to be duly so registered or approved, as the case may be;
provided that in no event shall such shares of Preferred Stock or
Common Stock be issued, and the exercise of all Warrants shall be
suspended, for the period during which any such registration or
approval is required for the issuance of such shares upon exercise but
is not in effect; provided, further, that the Expiration Date shall be
extended one day for each day (or portion thereof) that any such
suspension is in effect. The Company shall promptly notify the Warrant
Agent of any such suspension, and the Warrant Agent shall have no
duty, responsibility or liability in respect of any shares of
Preferred Stock or Common Stock issued or delivered prior to its
receipt of such notice. The Company shall promptly notify the Warrant
Agent of the termination of any such suspension, and such notice shall
set forth the number of days that the applicable Exercise Period shall
be extended as a result of such suspension. The foregoing provisions
of this Section 20 shall not require that the Company effect or obtain
any such registration or approval of such shares of Preferred Stock or
Common Stock in order to allow the resale or transfer thereof by any
Person that may be an underwriter for purposes of Section 1145 of
Chapter 11, Title 11 of the United States Code or to whom such
registration or approval requirement is applicable as a result of that
Person being an Affiliate of the Company or Marvel.
(b) The Company covenants that it shall, until the expiration of one
year after the final Expiration Date of any Warrants, make available
adequate current public information with respect to the Company so as
to satisfy paragraph (c) of Rule 144 under the Securities Act.
731156.6
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(c) The Company covenants that it shall use commercially reasonable
efforts to have the Preferred Stock listed on the New York Stock
Exchange, subject to official notice of issuance and subject to
satisfaction of the Warrants with listing requirements, as soon as
practicable after the date hereof.
SECTION 21. Notices. (a) Any notice pursuant to this Agreement to be
given by the Warrant Agent or by any Holder to the Company shall be deemed given
(x) if delivered personally, then at the time of delivery, (y) if sent by
overnight courier service, then at the time of delivery, or (z) if mailed by
first-class, certified or overnight mail, five (5) Business Days after having
been deposited in the mail with postage prepaid, in each case addressed (until
another address is filed in writing by the Company with the Warrant Agent), as
follows:
Marvel Enterprises, Inc.
685 Third Avenue
New York, New York 10017
Facsimile No.: 212-682-5272
Telephone: 212-588-5100
Attention: Corporate Secretary
(b) In case the Company shall fail to maintain such office or agency
or shall fail to give such notice of the location or of any change in the
location thereof, presentations may be made and notices and demands may be
served at the principal office of the Warrant Agent.
(c) Any notice pursuant to this Agreement to be given by the Company
or by any Holder to the Warrant Agent shall be deemed given (x) if delivered
personally, then at the time of delivery, (y) if sent by overnight courier
service, then at the time of delivery, or (z) if mailed by first-class,
certified or overnight mail, five (5) Business Days after having been deposited
in the mail with postage prepaid, in each case addressed (until another address
is filed in writing by the Warrant Agent with the Company), as follows:
American Stock Transfer & Trust Company
40 Wall Street
New York, New York 10005
(d) Any notice pursuant to this Agreement to be given by the Company
or by the Warrant Agent to any Holder shall be deemed given (x) if delivered
personally, then at the time of delivery, (y) if sent by overnight courier
service, then at the time of delivery, or (z) if mailed by first-class,
certified or overnight mail, five (5) Business Days after having been deposited
in the mail with postage prepaid, in each case addressed to the Holder at such
Holder's address as shown on the Register. Failure to mail a notice or
communication to a Holder or any defect in it shall not affect its sufficiency
with respect to other Holders.
731156.6
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<PAGE>
(e) If a notice or communication is mailed in the manner provided
above within the time prescribed, it is duly given, whether or not the addressee
receives it.
(f) If the Company mails a notice or communication to a Holder or
Holders, it shall deliver a copy of such notice to the Warrant Agent at the same
time.
SECTION 22. Supplements and Amendments. The Company and the Warrant
Agent may from time to time supplement or amend this Agreement without the
approval of any Holders in order to cure any ambiguity or to correct or
supplement any provision contained herein which may be defective or inconsistent
with any other provision herein, or to make any other provisions in regard to
matters or questions arising hereunder which the Company and the Warrant Agent
may deem necessary or desirable and which shall not in any way adversely affect
the interests of the Holders. Any amendment or supplement to this Agreement that
has an adverse effect on the interests of Holders, including supplements or
amendments referred to in the first sentence of this Section 22, shall require
the written consent of Holders representing a majority of the then outstanding
Warrants. The consent of each Holder affected shall be required for any
amendment pursuant to which the applicable Exercise Price would be increased or
number of Warrant Shares purchasable upon exercise of Warrants would be
decreased.
SECTION 23. Successors. All the covenants and provisions of this
Agreement by or for the benefit of the Company or the Warrant Agent shall bind
and inure to the benefit of their respective successors and assigns hereunder.
SECTION 24. Termination. With respect to each series of Warrants, this
Agreement (other than the Company's obligations with respect to Warrants of such
series previously exercised and with respect to indemnification under Section
18) shall terminate at 5:00 p.m., New York City time, on the applicable
Expiration Date.
SECTION 25. Governing Law. This Agreement and each Warrant Certificate
issued hereunder shall be governed by and construed in accordance with the laws
of the State of Delaware.
SECTION 26. Benefits of This Agreement. (a) Nothing in this Agreement
shall be construed to give any person other than the Company, the Warrant Agent
and the Warrantholders (or other respective successors or assigns) any legal or
equitable right, remedy or claim under this Agreement. This Agreement shall be
for the sole and exclusive benefit of the Company, the Warrant Agent and the
Warrantholders (and other respective successors or assigns).
(b) Prior to the exercise of the Warrants, no Holder as such, shall be
entitled to any rights of a stockholder of the Company, including, without
limitation, the right to receive dividends or subscription rights, the right to
vote, to consent, to exercise any preemptive right, to receive any notice of
meetings of stockholders for the election of directors of the Company or any
other matter or to receive any notice of any proceedings of the Company, except
as may be
731156.6
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<PAGE>
specifically provided for herein. No provisions hereof, in the absence of
affirmative action by the Warrantholder hereof to purchase Warrant Shares, and
no enumeration herein of the rights or privileges of the Warrantholder shall
give rise to any liability of such Warrantholder as a stockholder of the
Company.
(c) All rights of action in respect of this Agreement are vested in
the Holders, and any Holder without the consent of the Warrant Agent or the
Holder, may, on such Holder's own behalf and for such Holder's own benefit,
enforce, and may institute and maintain any suit, action or proceeding against
the Company suitable to enforce, or otherwise in respect of, such Holder's
rights hereunder, including the right to exercise, exchange or surrender for
purchase such Holder's Warrants in the manner provided in this Agreement.
SECTION 27. Counterparts. This Agreement may be executed in any number
of counterparts and each of such counterparts shall for all purposes be deemed
to be an original, and all such counterparts shall together constitute but one
and the same instrument.
SECTION 28. Headings. The headings of the Sections of this Agreement
have been inserted for convenience of reference only, are not to be considered a
part hereof and shall in no way modify or restrict any of the terms or
provisions hereof.
SECTION 29. Severability. Any term or provision of this Agreement or
the Warrants which is invalid or unenforceable in any jurisdiction shall, as to
such jurisdiction, be ineffective to the extent of such invalidity or
unenforceability without rendering invalid or unenforceable the other terms and
provisions of this Agreement or the Warrants or affecting the validity or
enforceability of any of the terms or provisions of this Agreement or the
Warrants in any other jurisdiction.
731156.6
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<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to
be duly executed, as of the day and year first above written.
MARVEL ENTERPRISES, INC.
By: /S/ WILLIAM H. HARDIE, III
---------------------------------------
Name: William H. Hardie, III
Title: Executive Vice President, Business Affairs
AMERICAN STOCK TRANSFER & TRUST
COMPANY
By: /s/ HERBERT J. LEMMER
---------------------------------------
Name: Herbert J. Lemmer
Title: Vice President
731156.6
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<PAGE>
EXHIBIT A
EXERCISABLE ON OR BEFORE 5:00 P.M. NEW YORK CITY TIME ON
-----------------.
Class B, Series __ No._______________ Cusip No._______________
_________________Class B, Series __ Warrants
[Form of Class B, Series __ Warrant Certificate]
MARVEL ENTERPRISES, INC.
(Incorporated under the laws of the State of Delaware)
This Warrant Certificate certifies that _________ or its registered
assigns, is the registered holder of Class B, Series __ Warrants expiring
__________ (the "Warrants") to purchase shares of Preferred Stock (the
"Preferred Stock"), of Marvel Enterprises, Inc., a Delaware corporation (the
"Company"). Each Warrant entitles the registered holder upon exercise at any
time during normal business hours after the date hereof and on or before 5:00
p.m., New York City time, on _______________, to receive from the Company
_________ fully paid and nonassessable shares of Preferred Stock (each such
share a "Warrant Share") at the initial exercise price (the "Exercise Price") of
$_______ per share payable in accordance with the terms, provisions and
conditions of the Warrant Agreement referred to on the reverse hereof upon
surrender of this Warrant Certificate and payment of the Exercise Price at the
office or agency of the Warrant Agent, but only subject to the terms, provisions
and conditions set forth herein and in the Warrant Agreement. The Exercise Price
and number of Warrant Shares issuable upon exercise of the Warrants are subject
to adjustment from time to time upon the occurrence of certain events set forth
in the Warrant Agreement.
No Warrant may be exercised after 5:00 p.m., New York City time, on
___________ and, to the extent not exercised by such time, such Warrants shall
become void.
Reference is hereby made to the further provisions of this Warrant
Certificate set forth on the reverse hereof and such further provisions shall
for all purposes have the same effect as though fully set forth at this place.
The terms of this Warrant Certificate are qualified in their entirety
by reference to the Warrant Agreement and, in the event of a conflict between
the terms of this Warrant Certificate and the terms of the Warrant Agreement,
the terms of the Warrant Agreement shall
A-1
731156.6
<PAGE>
control the rights, interests and obligations of the holders of the Warrants,
the Warrant Agent and the Company with respect to the Warrants.
This Warrant Certificate shall not be valid unless countersigned by
the Warrant Agent, as such term is used in the Warrant Agreement.
This Warrant Certificate shall be governed by and construed in
accordance with the laws of the State of Delaware.
IN WITNESS WHEREOF, the Company has caused this Warrant Certificate to
be signed by a duly authorized Officer.
Dated:
MARVEL ENTERPRISES, INC.
By
----------------------------------
Name:
Title:
Countersigned:
AMERICAN STOCK TRANSFER & TRUST COMPANY,
as Warrant Agent
By
------------------------------------
Authorized Signature
A-2
731156.6
<PAGE>
[REVERSE SIDE]
The Warrants evidenced by this Warrant Certificate are part of a duly
authorized issue of Warrants expiring on the Expiration Date entitling the
holder on exercise to receive shares of Preferred Stock of the Company and are
issued or to be issued pursuant to a Warrant Agreement dated as of _________ __,
1998 (the "Warrant Agreement"), duly executed and delivered by the Company to
American Stock Transfer & Trust Company, as Warrant Agent (the "Warrant Agent"),
which Warrant Agreement is hereby incorporated by reference in and made a part
of this instrument and is hereby referred to for a description of the rights,
limitation of rights, obligations, duties and immunities thereunder of the
Warrant Agent, the Company and the holders (the words "holders" or "holder"
meaning the registered holders or registered holders) of the Warrants. A copy of
the Warrant Agreement may be obtained by the holder hereof upon written request
to the Company. By accepting initial delivery, transfer or exchange of this
Warrant, the duly registered holder shall be deemed to have agreed to the terms
of the Warrant Agreement as it may be in effect from time to time, including any
amendments or supplements duly adopted in accordance therewith.
Payment of the Exercise Price may be made, at the option of the
holder, in cash by wire transfer or by certified or official bank check payable
to the order of the Company in immediately available funds in lawful money of
the United States of America.
Upon due presentation for registration of transfer of this Warrant
Certificate, with or without other Warrant Certificates, at the office of the
Warrant Agent, a new Warrant Certificate or Warrant Certificates of like tenor
and evidencing in the aggregate a like number of Warrants shall be issued to the
transferee(s) in exchange for this Warrant Certificate, with or without other
Warrant Certificates, subject to the limitations provided in the Warrant
Agreement, without charge except for any tax or other governmental charge
imposed in connection therewith.
The Company and the Warrant Agent may deem and treat the registered
holder(s) thereof as the absolute owner(s) of this Warrant Certificate
(notwithstanding any notation of ownership or other writing hereon made by
anyone), for the purpose of any exercise hereof, of any distribution to the
holder(s) hereof, and for all other purposes. Neither the Warrants nor this
Warrant Certificate entities any holder hereof to any rights of a stockholder of
the Company.
A-3
731156.6
<PAGE>
SUBSCRIPTION FORM
(To be executed only upon exercise of Warrants represented by this
Warrant Certificate)
To: American Stock Transfer & Trust Company,
as Warrant Agent
40 Wall Street
New York, New York 10005
The undersigned hereby irrevocably exercises [_____________] of the
Class B, Series __ Warrants represented by this Warrant Certificate and herewith
makes payment in accordance with the terms and conditions specified in this
Warrant Certificate and in the Warrant Agreement and surrenders this Warrant
Certificate and all right, title and interest therein to and directs that the
shares of Preferred Stock of Marvel Enterprises, Inc. (the "Warrant Shares")
deliverable upon the exercise of such Class B, Series __ Warrants be registered
or placed in the name and at the address specified below and delivered thereto.
Dated:
---------------------------------------
(Signature of Owner)
---------------------------------------
(Street Address)
---------------------------------------
(City) (State) (Zip Code)
Signature Guaranteed By:
---------------------------------------
Securities and/or check or other property (including, if such number of Class B,
Series __ Warrants exercised shall not be all of the Class B, Series __ Warrants
evidenced by this Warrant Certificate, a new Warrant Certificate for the balance
remaining of such Class B, Series __ Warrants) to be issued or delivered to:
Name:
Street Address:
City, State and Zip Code:
Please insert social security or identifying number:
A-4
731156.6
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FORM OF ASSIGNMENT
For value received from the Assignee(s) named below, the undersigned
registered Holder of this Warrant Certificate hereby sells, assigns, and
transfers unto the Assignee(s) named below (including the undersigned with
respect to any Class B, Series __ Warrants constituting a part of the Class B,
Series __ Warrants evidenced by this Warrant Certificate not being assigned
hereby) all of the right of the undersigned under this Warrant Certificate, with
respect to the number of Class B, Series __ Warrants set forth below:
Social Security
or other
Name of Assignee Address Identifying No. No. of Warrants
- ---------------- ------- --------------- ---------------
and does hereby irrevocably constitute and appoint the undersigned's attorney to
make such transfer on the books of maintained for the purposes, with full power
of substitution in the premises.
Dated:
----------------------------------
(Signature of Owner)
----------------------------------
(Street Address)
----------------------------------
(City) (State) (Zip Code)
Signature Guaranteed By:
----------------------------------
A-5
731156.6
EXHIBIT 4.5
CLASS C WARRANT AGREEMENT
WARRANT AGREEMENT
WARRANT AGREEMENT, dated as of October 1, 1998 (this
"Agreement") between Marvel Enterprises, Inc., a Delaware corporation (the
"Company"), and American Stock Transfer & Trust Company, as warrant agent (the
"Warrant Agent").
WHEREAS, as consideration paid by the Company in connection
with the settlement and resolution of all disputes between stockholders of
Marvel Entertainment Group, Inc., a Delaware corporation ("Marvel"), and the
Debtors (as herein defined), in connection with a Fourth Amended Joint Plan of
Reorganization under Chapter 11, Title 11, United States Code (the "Plan of
Reorganization"), for Marvel, 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. (collectively, the "Debtors"), jointly proposed by the Company and certain
holders of senior secured indebtedness of Marvel, the Company proposes to issue
and deliver warrant certificates (the "Warrant Certificates") as provided in the
Plan of Reorganization to each holder of an Allowed Unsecured Claim, the LaSalle
Claim, an Allowed Equity Interest or Allowed Class Securities Litigation Claim
(as defined in the Plan of Reorganization) evidencing Class C Warrants (the
"Warrants") to acquire, under certain circumstances, an aggregate of 7,000,000
shares of the common stock, $0.01 par value per share, of the Company (the
"Common Stock"), such number of Warrants and shares of Common Stock being
subject to adjustment as set forth herein; and
WHEREAS, the Company desires the Warrant Agent to act on
behalf of the Company, and the Warrant Agent is willing to so act, in connection
with the issuance of the Warrant Certificates and other matters provided herein.
NOW, THEREFORE, in consideration of the premises and the
mutual agreements herein set forth, and for the purpose of defining the
respective rights and obligations of the Company, the Warrant Agent and the
Holders (as defined herein), the parties hereto agree as follows:
SECTION 1. Certain Definitions. As used in this Agreement, the
following terms shall have the following respective meanings:
"Affiliate" means, (i) with respect to any specified Person,
any other Person that, directly or indirectly, controls, is controlled by or is
under direct or indirect common control with such specified Person, or any
executive officer or director of any such specified Person or other Person or
(ii) with respect to any natural Person, any Person
731158.6
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having a relationship with such person by blood, marriage or adoption not more
remote than first cousin. For the purposes of this definition, "control," when
used with respect to any specified Person, means the possession, direct or
indirect, of the power to direct the management and policies of such Person,
directly or indirectly, whether through the ownership of voting securities, by
contract or otherwise; provided, however, that beneficial ownership of 10% or
more of the voting securities of a Person will be deemed to be control. The
terms "controlling" and "controlled" have meanings correlative to the foregoing.
"Board of Directors" means the Company's Board of Directors or
a duly appointed committee of the Company's Board of Directors.
"Business Day" means each Monday, Tuesday, Wednesday, Thursday
and Friday which is not a day on which banking institutions in the City of New
York, or the city in which the principal corporate trust office of the Warrant
Agent is located, are authorized or obligated by law or executive order to be
closed.
"Common Stock" has the meaning set forth in the preamble
hereof.
"Company" means Marvel Enterprises, Inc., a Delaware
corporation, and its successors and assigns.
"Consummation Date" has the meaning set forth in the Plan of
Reorganization.
"Exchange Act" means the Securities Exchange Act of 1934, as
amended, and the rules and regulations of the Securities and Exchange Commission
thereunder.
"Exercise Price" means the purchase price per share of Common
Stock to be paid upon the exercise of each Warrant in accordance with the terms
hereof, which price shall be $18.50 per share of Common Stock, subject to
adjustment from time to time pursuant to Section 11 hereof.
"Expiration Date" means the first business day after the
fourth anniversary of the Consummation Date.
"Fair Market Value" means, with respect to any share of Common
Stock, as of the date of determination the average of the daily Closing Price
for each of the 20 consecutive trading days preceding the date of such
computation. The closing price for each day shall be:
(a) if the Common Stock shall be then listed or admitted to
trading on the New York Stock Exchange, the closing price on
the NYSE-Consolidated Tape (or any successor composite tape
reporting transactions on the New York Stock Exchange)
731158.6
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<PAGE>
or, if such a composite tape shall not be in use or shall not
report transactions in the Common Stock, or if the Common
Stock shall be listed on a stock exchange other that the New
York Stock Exchange, the last reported sales price regular way
or, in case no such reported sale takes place on such day, the
average of the closing bid and asked prices regular way for
such day, in each case on the principal national securities
exchange on which the shares of Common Stock are listed or
admitted to trading (which shall be the national securities
exchange on which the greatest number of shares of the Common
Stock have been traded during such 20 consecutive trading
days); or
(b) if the Common Stock is not listed or admitted to trading,
the average of the closing sale prices as reported by the
NASDAQ National Market System or, if the Common Stock is not
included on such system, the average of the closing bid and
asked prices of the Common Stock in the over-the-counter
market as reported by any system maintained by the NASD or any
comparable system or, if the Common Stock is not included for
quotation in any such system, the average of the closing bid
and asked prices as furnished by two members of the NASD
selected reasonably and in good faith from time to time by the
Board of Directors for that purpose; or
(c) if the Common Stock is not listed or admitted to trading
and in the absence of one or more such quotations, the Fair
Market Value shall be as reasonably determined in good faith
by the Board of Directors (which determination shall be
reasonably described in a written notice delivered to the
Warrantholders) or, if an objection is made to such
determination by a Qualifying Warrantholder (as defined below)
in accordance with the following sentence, as determined by an
Independent Appraiser in accordance with the following
sentence. In the event that any Qualifying Warrantholder shall
object to the determination of the Board of Directors of the
Fair Market Value by delivering written notice to the Company
within ten (10) Business Days following the receipt by such
Qualifying Warrantholder of such determination of the Board of
Directors, the Fair Market Value shall instead be determined
in good faith by an Independent Appraiser. The determination
of the Board of Directors of the Fair Market Value shall be
binding and conclusive if no objection is made to such
determination by a Qualifying Warrantholder in accordance with
the terms set forth above in this paragraph. The fees and
expenses of any Independent Appraiser determining the Fair
Market Value shall be borne by the Company and the
determination by such Independent Appraiser of the Fair Market
Value shall be binding and conclusive.
"Holder" or "Warrantholder" means the registered holder of a
Warrant.
"Independent Appraiser" means any nationally recognized
investment banking firm or accounting firm (other than any investment banking
firm or accounting firm having a
731158.6
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<PAGE>
significant ongoing relationship with the Company or the
Qualifying Warrantholder at the time of the appraisal)
selected jointly in good faith by the Board of Directors and
the Qualifying Warrantholder, whose fees and expenses shall be
paid by the Company.
"Person" means any individual, corporation, limited liability
company, partnership, joint venture, association, joint-stock company, trust,
unincorporated organization, government or any agency or political subdivision
thereof, or other entity.
"Plan of Reorganization" has the meaning set forth in the
preamble hereof.
"Qualifying Warrantholder" means any Warrantholder (or group
of Warrantholders) that, at the time of any objection to the determination of
the Board of Directors of the Fair Market Value, beneficially owns collectively,
together with its Affiliates, at least ten percent (10%) of the Warrants on a
fully diluted basis.
"Register" has the meaning set forth in Section 5(c) hereof.
"Securities Act" means the Securities Act of 1933, as amended,
or any similar Federal statute, and the rules and regulations of the Securities
and Exchange Commission thereunder.
"Transfer Agent" has the meaning set forth in Section 10
hereof.
"Warrant Agent" means American Stock Transfer & Trust Company
or the successor or successors of such Warrant Agent appointed in accordance
with the terms hereof.
"Warrant Certificates" has the meaning set forth in the
preamble hereof.
"Warrants" has the meaning set forth in the preamble hereof.
"Warrants Shares" means the shares of Common Stock issued or
issuable upon the exercise of the Warrants pursuant to the terms of this
Agreement.
SECTION 2. Appointment of Warrant Agent. The Company hereby
appoints the Warrant Agent to act as agent for the Company in accordance with
the terms and conditions set forth in this Agreement, and the Warrant Agent
hereby accepts such appointment.
SECTION 3. Warrant Certificates. (a) The Warrant Certificates
to be delivered pursuant to this Agreement shall be in registered form only,
shall be substantially in the form set forth in Exhibit A attached hereto and
shall have such insertions as are appropriate or required or permitted by this
Agreement and may have such letters, numbers, designations or other marks of
identification and such legends, summaries and endorsements stamped, printed,
lithographed or
731158.6
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<PAGE>
engraved thereon as the Company may deem appropriate and as are not inconsistent
with the provisions of this Agreement, or as may be required to comply with any
law or with any rule or regulation pursuant thereto or with any rule or
regulation of any securities exchange on which the Warrants may from time to
time be listed. Warrant Certificates shall be dated the date of countersignature
by the Warrant Agent.
(b) Pending the preparation of definitive Warrant
Certificates, temporary Warrant Certificates may be issued, which may be
printed, lithographed, typewritten, mimeographed or otherwise produced, and
which will be substantially of the tenor of the definitive Warrant Certificates
in lieu of which they are issued.
(c) If temporary Warrant Certificates are issued, the Company
will cause definitive Warrant Certificates to be prepared without unreasonable
delay. After the preparation of definitive Warrant Certificates, the temporary
Warrant Certificates shall be exchangeable for definitive Warrant Certificates
upon surrender of the temporary Warrant Certificates to the Warrant Agent,
without charge to the Holder. Temporary Warrant Certificates so surrendered for
exchange shall be canceled by the Warrant Agent and disposed of by the Warrant
Agent in a manner satisfactory to the Company. Until so exchanged, the temporary
Warrant Certificates shall in all respects be entitled to the same benefits
under this Agreement as definitive Warrant Certificates.
SECTION 4. Execution of Warrant Certificates. (a) Warrant
Certificates shall be signed on behalf of the Company by its Chairman of the
Board, its Chief Executive Officer, its President or a Vice President of the
Company. Such signature upon the Warrant Certificates may be manual or in the
form of a facsimile signature of the present or any future Chairman of the
Board, Chief Executive Officer, President or Vice President of the Company, and
may be imprinted or otherwise reproduced on the Warrant Certificates and for
that purpose the Company may adopt and use the facsimile signature of any person
who shall have been Chairman of the Board, Chief Executive Officer, President or
Vice President of the Company, notwithstanding the fact that at the time the
Warrant Certificates shall be countersigned and delivered or disposed of he or
she shall have ceased to hold such office.
(b) In case any officer of the Company who shall have signed
any of the Warrant Certificates shall cease to be such officer before the
Warrant Certificates so signed shall have been countersigned by the Warrant
Agent, or delivered to the Holder thereof, such Warrant Certificates
nevertheless shall be countersigned and delivered with the same force and effect
as though such person had not ceased to be such officer of the Company, unless
the Warrant Agent has received written instructions from the Company not to
countersign and deliver such Certificates; and any Warrant Certificate may be
signed on behalf of the Company by any person who, at the actual date of the
execution of such Warrant Certificate, shall be a proper officer of the Company
to sign such Warrant Certificate, although at the date of the execution of this
Warrant Agreement any such person was not such officer.
731158.6
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SECTION 5. Registration and Countersignature. (a) The Company
and the Warrant Agent, on behalf of the Company, shall number and register the
Warrant Certificates in a Register (as hereinafter defined) as they are issued
by the Company which such register shall be maintained in accordance with
Section 5(c) hereof.
(b) Warrant Certificates shall be manually countersigned by
the Warrant Agent and shall not be valid for any purpose unless so
countersigned. The Warrant Agent shall, upon written instructions of the
Chairman of the Board, the Chief Executive Officer, the President or a Vice
President of the Company, initially countersign, issue and deliver Warrants
entitling the Holders thereof to purchase not more than the number of Warrant
Shares referred to above in the first recital hereof and shall countersign and
deliver Warrants as otherwise provided in this Agreement.
(c) The Company shall maintain, or cause to be maintained, a
register (the "Register") of the Warrants at its registered office, at the
principal office of the Warrant Agent or at any other place in the United States
of America designated by the Company, showing (i) the names and the latest known
address of each person who is or has been a Holder; (ii) the number of Warrants
held by each Holder; and (iii) the date and particulars of the issue and
transfer of Warrants. The registered owner on the Register may be deemed and
treated by the Company, the Warrant Agent and all other persons dealing with the
Warrants evidenced thereby as the Holder and absolute owner thereof for any
purpose and as the person entitled to exercise the right represented thereby, or
to the transfer on the books of the Company, any notice to the contrary
notwithstanding, and, until such transfer of the Warrant on such books in
accordance with the provisions of this Agreement, the Company may treat the
registered owner on the Register as the owner for all purposes.
SECTION 6. Registration of Transfers and Exchanges. (a) The
Warrant Agent shall from time to time, subject to the limitations of Section 7
hereof, register the transfer of any outstanding Warrant Certificates upon the
records to be maintained by it for that purpose, upon surrender thereof
accompanied by a written instrument or instruments of transfer in form
satisfactory to the Warrant Agent, duly executed by the Holder or Holders
thereof or by the duly appointed legal representative thereof or by a duly
authorized attorney. Upon any such registration of transfer a new Warrant
Certificate(s) of like tenor and representing in the aggregate the number of
Warrants transferred, shall be issued to the transferee(s), and the surrendered
Warrant Certificate shall be canceled by the Warrant Agent. Upon any partial
transfer, a new Warrant Certificate of like tenor and representing in the
aggregate the number of Warrants which were not so transferred, shall be issued
to, and in the name of, the Warrantholder. Canceled Warrant Certificates shall
thereafter be disposed of in a manner satisfactory to the Company.
(b) Any Warrant Certificate may be exchanged, subdivided or
combined with other Warrant Certificates evidencing the same rights as the
rights evidenced thereby upon presentation and surrender thereof at the
principal office of the Warrant Agent, together with a written notice signed by
the Holder hereof specifying the denominations in which new Warrant
731158.6
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Certificate(s) are to be issued. Upon presentation and surrender of any Warrant
Certificates, together with such written notice, for exchange, subdivision or
combination of such Warrant Certificates, the Company will issue a new Warrant
Certificate or Warrant Certificates, in the denominations requested, of like
tenor entitling the Holder(s) thereof to purchase the same aggregate number of
Warrant Shares as the Warrant Certificate(s) so surrendered. Such new Warrant
Certificate(s) will be registered in the name of the Holder submitting such
request. Any Warrant Certificate surrendered for exchange, subdivision or
combination shall be canceled promptly upon the issuance of such new Warrant
Certificate(s) and then be disposed of by such Warrant Agent in a manner
satisfactory to the Company.
(c) The Warrant Agent is hereby authorized to countersign and
deliver, in accordance with the provisions of this Section 6 and of Section 5
hereof, the new Warrant Certificates required pursuant to the provisions of this
Section 6.
SECTION 7. Terms of Warrants; Exercise of Warrants. (a)
Subject to the terms of this Agreement, each Holder shall have the right, upon
payment of the Exercise Price in accordance with the terms of this Agreement,
from and after the date of issuance of such Warrants until 5:00 p.m., New York
City time, on the Expiration Date, to receive from the Warrant Agent on behalf
of the Company the number of fully paid and nonassessable Warrant Shares which
the Holder may at the time be entitled to receive on exercise of such Warrants.
Each Warrant not exercised on or before 5:00 p.m., New York City time, on the
Expiration Date shall become void and all rights thereunder and all rights in
respect thereof under this Agreement shall cease as of such time.
(b) The Warrants may be exercised during normal business hours
on any Business Day on or prior to the Expiration Date upon surrender to the
Warrant Agent on behalf of the Company at the principal office of the Warrant
Agent of the certificate or certificates evidencing the Warrants to be exercised
with the form of subscription to purchase on the reverse thereof duly completed
and signed, and upon payment to the Warrant Agent for the account of the Company
of the Exercise Price as adjusted as herein provided, for each of the Warrant
Shares in respect of which such Warrants are then exercised. Payment of the
aggregate Exercise Price for the number of Warrant Shares specified in the
subscription form shall be made by wire transfer or by certified or official
bank check payable to the order of the Company in immediately available funds in
lawful money of the United States of America.
(c) Upon surrender of Warrants in accordance with this Section
7, and payment of the Exercise Price as provided above, the Warrant Agent shall
thereupon promptly notify the Company, and the Warrant Agent shall deliver or
cause to be delivered, as promptly as possible thereafter, but in any event
within three (3) Business Days of receipt of such surrender and payment, to the
Holder of such Warrant Certificate appropriate evidence of ownership of any
Warrant Shares or other securities or property (including any money) to which
the Holder is entitled, and, to the extent possible, certificates representing
the Warrant Shares or such other securities shall be in such denomination(s) as
such Holder shall request, and registered or
731158.6
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otherwise placed in, or payable to the order of, such name or names as may be
directed in writing by the Holder, and shall deliver or cause to be delivered
such evidence of ownership and any other securities or property (including any
money) to the person or persons entitled to receive the same, together with an
amount in cash in lieu of any fraction of a share as provided in Section 13
hereof. Any such evidence of ownership shall be deemed to have been issued and
any Person so designated to be named therein shall be deemed to have become a
holder of record of such Warrant Shares as of the date of the surrender of such
Warrants and payment of the Exercise Price, notwithstanding that the stock
transfer books of the Company shall then be closed or that certificates
representing such shares shall not then be actually delivered to the Holder.
(d) The Warrants shall be exercisable either in full or from
time to time in part and, in the event that a Warrant Certificate is surrendered
to the Warrant Agent for exercise of fewer than all of the Warrants represented
by such Warrant Certificate at any time prior to the Expiration Date, a new
certificate evidencing the remaining Warrant or Warrants but otherwise identical
to the surrendered Warrant Certificate will be issued by the Company, and the
Warrant Agent is hereby irrevocably authorized to countersign and to deliver the
required new Warrant Certificate pursuant to the provisions of this Section 7
and of Section 4 hereof as promptly as possible, but in any event within three
(3) Business Days of receipt of the certificate evidencing the Warrants, and the
Company, whenever required by the Warrant Agent, will supply the Warrant Agent
with Warrant Certificates duly executed on behalf of the Company for such
purpose.
(e) All Warrant Certificates surrendered upon exercise of
Warrants shall be canceled by the Warrant Agent. Such canceled Warrant
Certificates shall then be disposed of by the Warrant Agent in a manner
satisfactory to the Company. The Warrant Agent shall account promptly to the
Company with respect to such Warrants exercised and concurrently pay to the
Company as promptly as practicable, but in any event within five (5) Business
Days of receipt, all monies received by the Warrant Agent for the purchase of
the Warrant Shares through the exercise of such Warrants.
(f) The Warrant Agent shall keep copies of this Agreement and
any notices given or received hereunder by or from the Company available for
inspection by the Holders during normal business hours at its office. The
Company shall supply the Warrant Agent from time to time with such numbers of
copies of this Agreement as the Warrant Agent may reasonably request.
SECTION 8. Payment of Taxes. The Company will pay all
documentary stamp taxes and other governmental charges attributable to the
initial issuance of Warrant Shares upon the exercise of Warrants; provided,
however, that the Company shall not be required to pay any tax or taxes which
may be payable in respect of any transfer involved in the issue of any Warrant
Certificates or any certificates for Warrant Shares in a name other than that of
the Holder of a Warrant Certificate surrendered upon the exercise of a Warrant,
and the Company shall not be required to issue or deliver such Warrant
Certificates unless or until the Person or Persons
731158.6
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<PAGE>
requesting the issuance thereof shall have paid to the Company the amount of
such tax or shall have established to the satisfaction of the Company that such
tax has been paid.
SECTION 9. Mutilated, Destroyed, Lost and Stolen Warrant
Certificates. (a) If (i) any mutilated Warrant Certificate is surrendered to the
Warrant Agent or (ii) the Company and the Warrant Agent receive evidence to
their reasonable satisfaction of the destruction, loss or theft of any Warrant
Certificate, and there is delivered to the Company and the Warrant Agent such
certificate or indemnity as may be required by them to save each of them
harmless, then, in the absence of notice to the Company or the Warrant Agent
that such Warrant Certificate has been acquired by a bona fide purchaser, the
Company shall execute and upon the Company's written request the Warrant Agent
shall countersign and deliver, in exchange for any such mutilated Warrant
Certificate or in lieu of and in substitution for any such destroyed, lost or
stolen Warrant Certificate, a new Warrant Certificate of like tenor and for a
like aggregate number of Warrants. An applicant for such a substitute Warrant
Certificate shall also comply with such other reasonable regulations as the
Company may prescribe.
(b) Upon the issuance of any new Warrant Certificate under
this Section 9, the Company may require the payment by the Holder of a sum
sufficient to cover any tax or other governmental charge that may be imposed in
relation thereto and the payment of such other reasonable charges as the Company
may prescribe, including reimbursement of reasonable fees and expenses of the
Company and the Warrant Agent incidental thereto.
(c) The provisions of this Section 9 are exclusive and shall
preclude (to the extent lawful) all other rights or remedies with respect to the
replacement of mutilated, destroyed, lost or stolen Warrant Certificates.
SECTION 10. Issuance of Warrant Shares. The Company will keep
a copy of this Agreement on file with the transfer agent for the Common Stock
(the "Transfer Agent") and with every subsequent transfer agent for any shares
of the Company's capital stock issuable upon the exercise of the rights of
purchase represented by the Warrants. The Warrant Agent is hereby irrevocably
authorized to requisition, from time to time, from such Transfer Agent the
certificates representing shares of the Common Stock and any cash which may be
payable as provided in Section 13 hereof required to honor outstanding Warrants
upon exercise thereof in accordance with the terms of this Agreement. The
Company will supply such Transfer Agent with duly executed certificates
representing shares of Common Stock for such purposes and will provide or
otherwise make available any cash which may be payable as provided in Section 13
hereof. The Company will furnish such Transfer Agent and the Warrant Agent a
copy of all notices of adjustments and certificates related thereto, transmitted
to each Holder of the Warrants pursuant to Section 14 hereof.
SECTION 11. Adjustment of Exercise Price and Number of Warrant
Shares Issuable. The number and kind of Warrant Shares purchasable upon the
exercise of Warrants and the Exercise Price shall be subject to adjustment from
time to time as follows:
731158.6
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(a) Stock Dividends. If at any time after the date of the
issuance of the Warrants and prior to the Expiration Date the
Company shall pay a stock dividend or other distribution
payable in shares of Common Stock or the number of shares of
Common Stock shall have been increased by a subdivision or
split-up of shares of Common Stock, then, on the date of the
payment of such dividend or distribution (retroactive to the
record date) or immediately after the effective date of
subdivision or split-up, as the case may be, the number of
Warrant Shares to be delivered upon exercise of the Warrants
will be increased so that the Warrantholder will be entitled
to receive the number of Warrant Shares that such
Warrantholder would have owned immediately following such
action had the Warrants been exercised immediately prior
thereto or, in the case of a stock dividend or distribution,
prior to the record date for determination of shareholders
entitled thereto, and the Exercise Price will be adjusted as
provided in Section 11(g) hereof.
(b) Combination of Stock. If the number of shares of Common
Stock outstanding at any time after the date of the issuance
of the Warrants shall have been decreased by a combination of
the outstanding shares of Common Stock, then, immediately
after the effective date of such combination, the number of
Warrant Shares to be delivered upon exercise of each Warrant
will be decreased so that the Warrantholder thereafter will be
entitled to receive the number of Warrant Shares that such
Warrantholder would have owned immediately following such
action had such Warrant been exercised immediately prior
thereto, and the Exercise Price will be adjusted as provided
in Section 11(g) hereof.
(c) Reorganization, Etc. If any capital reorganization of the
Company, or any reclassification of the Common Stock, or any
consolidation of the Company with or merger of the Company
with or into any other Person or any sale, lease or other
transfer of all or substantially all of the assets of the
Company to any other Person, shall be effected in such a way
that the holders of Common Stock shall be entitled to receive
stock, other securities, cash or other assets (whether such
stock, other securities, cash or other assets are issued or
distributed by the Company or another Person) with respect to
or in exchange for Common Stock, then, upon exercise of each
Warrant, the Warrantholder shall have the right to receive the
kind and amount of stock, other securities, cash or other
assets receivable upon such reorganization, reclassification,
consolidation, merger or sale, lease or other transfer by a
holder of the number of Warrant Shares that such Warrantholder
would have been entitled to receive upon exercise of such
Warrant had such Warrant been exercised immediately before
such reorganization, reclassification, consolidation, merger
or sale, lease or other transfer, subject to adjustments (as
determined in good faith by the Board of Directors of the
Company). Adjustments for events subsequent to the effective
date of such a reorganization, reclassification,
731158.6
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<PAGE>
consolidation, merger, sale or transfer of assets shall be as
nearly equivalent as may be practicable to the adjustments
provided for in this Agreement. In any such event, effective
provisions shall be made in the certificate or articles of
incorporation of the resulting or surviving corporation, in
any contract of sale, merger, conveyance, lease, transfer or
otherwise so that the provisions set forth herein for the
protection of the rights of the Warrantholders shall
thereafter continue to be applicable; and any such resulting
or surviving corporation shall expressly assume the obligation
to deliver, upon exercise, such shares of stock, other
securities, cash and property. The provisions of this Section
11 shall similarly apply to successive consolidations,
mergers, sales, leases or transfers.
(d) Adjustment for Rights Issue. In case the Company shall
issue rights, options or warrants or other securities
convertible or exchangeable for Common Stock or for any other
such right, option or warrant (collectively, "Rights") to all
holders of its outstanding Common Stock entitling them to
subscribe for, purchase or obtain upon conversion or exchange
to shares of Common Stock at a Price Per Share which is lower
at the record date mentioned below than either (x) the then
current Fair Market Value per share of Common Stock or (y) the
Exercise Price, or both, the number of Warrant Shares
thereafter purchasable upon the exercise of each Warrant shall
be determined by multiplying the number of Warrant Shares
theretofore purchasable upon exercise of each Warrant by a
fraction, the numerator of which shall be the number of shares
of Common Stock outstanding on the date of issuance of such
Rights plus the additional Number of Shares of Common Stock
offered for subscription, purchase or issuance upon conversion
or exchange in connection with such Rights and the denominator
of which shall be the number of shares of Common Stock
outstanding on the date of issuance of such Rights plus the
number of shares which the aggregate Gross Proceeds received
or receivable by the Company upon exercise of such Rights
would purchase at the greater of (x) the Fair Market Value per
share of Common Stock at such record date or (y) the Exercise
Price. Such adjustment shall be made whenever Rights are
issued, and shall become effective immediately after the
record date for the determination of stockholders entitled to
receive Rights. As used herein, "Price Per Share" shall be
defined and determined in accordance with the following
formula:
P = R/N
where
P = Price Per Share;
R = the "Gross Proceeds" received or receivable by
the Company in respect of Rights which shall be the
total amount received or receivable by the Company in
consideration for the issuance and sale of such
Rights plus
731158.6
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the aggregate amount of additional consideration
payable to the Company upon exercise thereof;
provided that the proceeds received or receivable by
the Company shall be the cash proceeds before
deducting therefrom any compensation paid or discount
allowed in the sale, underwriting or purchase thereof
by underwriters or dealers or others performing
similar services; and
N = the "Number of Shares," which in the case of
Rights is the maximum number of shares of Common
Stock initially issuable upon exercise thereof.
(e) Adjustment for Other Distributions. In case the Company
shall distribute to all holders of its shares of Common Stock
(x) evidences of indebtedness or assets (excluding cash
dividends or distributions payable out of the consolidated
earnings or surplus legally available for such dividends or
distributions and dividends or distributions referred to in
paragraphs (a), (c) or (d) above) of the Company or any
subsidiary or (y) shares of capital stock of a subsidiary of
the Company (such evidences of indebtedness, assets and
securities as set forth in clauses (x) and (y) above,
collectively, "Assets"), then in each case the number of
Warrant Shares thereafter purchasable upon the exercise of
each Warrant shall be determined by multiplying the number of
Warrant Shares theretofore purchasable upon the exercise of
each Warrant by a fraction, the numerator of which shall be
the Fair Market Value per share of Common Stock on the date of
such distribution and the denominator of which shall be such
Fair Market Value per share of Common Stock less the fair
value as of such record date as determined reasonably and in
good faith by the Board of Directors of the Company of the
portion of the Assets applicable to one share of Common Stock.
Such adjustment shall be made whenever any such distribution
is made, and shall become effective on the date of
distribution retroactive to the record date for the
determination of stockholders entitled to receive such
distribution.
(f) Carryover. Notwithstanding any other provision of this
Section 11, no adjustment shall be made to the number of
Warrant Shares to be delivered to the Warrantholder (or to the
Exercise Price) if such adjustment represents less than 1% of
the number of Warrant Shares to be so delivered, but any
lesser adjustment shall be carried forward and shall be made
at the time and together with the earlier to occur of (i) the
exercise of all or any portion of a Warrant and (ii) the next
subsequent adjustment that, together with any adjustments so
carried forward, shall amount to 1% or more of the number of
Warrant Shares to be so delivered.
731158.6
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<PAGE>
(g) Exercise Price Adjustment.
(i) Whenever the number of Warrant Shares purchasable
upon the exercise of the Warrants is adjusted as
provided pursuant to this Section 11, the Exercise
Price payable upon the exercise of a Warrant shall be
adjusted by multiplying such Exercise Price
immediately prior to such adjustment by a fraction,
the numerator of which shall be the number of Warrant
Shares purchasable upon the exercise of the Warrant
immediately prior to such adjustment, and the
denominator of which shall be the number of Warrant
Shares purchasable immediately thereafter; provided,
however, that the Exercise Price for each Warrant
Share shall in no event be less than the par value of
such Warrant Share.
(ii) If at any time after the date of the issuance of
a Warrant, the Company shall pay to holders of record
of Common Stock any cash dividends or other cash
distributions, then, on the date of the payment of
such dividend or distribution (retroactive to the
record date), the Exercise Price payable upon the
exercise of such Warrant shall be adjusted by
reducing the Exercise Price by the amount of such
dividend or distribution applicable to one share of
Common Stock; provided, however, that the applicable
Exercise Price for each Warrant Share shall in no
event be less than the par value of such Warrant
Share.
(h) Decrease in Exercise Price. The Company, in its sole
discretion, shall have the right at any time, or from time to
time, to decrease the Exercise Price of the Warrants and/or
increase the number of Warrants Shares issuable upon the
exercise of the Warrants, including as it considers to be
advisable in order that any event treated for federal income
tax purposes as a dividend of stock or stock rights shall not
be taxable to recipients.
(i) Other Adjustments. If any event occurs as to which the
foregoing provisions of this Section 11 are not strictly
applicable or, if strictly applicable, would not, in the good
faith judgment of the Board of Directors, fairly protect the
purchase rights of the Holders in accordance with the
essential intent and principles of such provisions, then the
Board of Directors shall make such adjustments in the
application of such provisions, in accordance with such
essential intent and principles, as shall be reasonably
necessary, in the good faith opinion of the Board of
Directors, to protect such purchase rights as aforesaid.
(j) Further Equitable Adjustments. If, after one or more
adjustments to the Exercise Price pursuant to this Section 11,
the Exercise Price cannot be reduced further without falling
below the greater of (i) $0.01 or (ii) the lowest positive
731158.6
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exercise price legally permissible for warrants to acquire
shares of Common Stock, the Company shall make further
adjustments to compensate the Holder, consistent with the
foregoing principles, as the Board of Directors, acting in
good faith, deems necessary, including an increase in the
number of Warrant Shares issuable upon exercise of outstanding
Warrants and/or a cash payment to the Holders.
SECTION 12. Statement on Warrants. Irrespective of any
adjustment(s) in the number or kind of Warrant Shares issuable upon the exercise
in whole or in part of the Warrants or the Exercise Price, Warrants theretofore
or thereafter issued may continue to express the same number and kind of Warrant
Shares as are stated in the Warrants initially issuable from time to time
pursuant to this Agreement, all subject to further adjustment as provided
herein.
SECTION 13. Fractional Interest. The Company shall not be
required to issue fractional shares of Common Stock on the exercise of Warrants.
If more than one Warrant shall be presented for exercise in full at the same
time by the same Holder, the number of full Warrant Shares which shall be
issuable upon such exercise shall be computed on the basis of the aggregate
number of shares of Common Stock acquirable on exercise of the Warrants so
presented. If any fraction of a share of Common Stock would, except for the
provisions of this Section 13, be issuable on the exercise of any Warrant (or
specified portion thereof), the Company shall (i) direct and deposit with the
Transfer Agent an amount sufficient to pay an amount in cash calculated by it to
equal the then current Fair Market Value per share multiplied by such fraction
computed to the nearest whole cent and (ii) deliver to the Transfer Agent a
written certificate of an officer of the Company setting forth the then current
Fair Market Value per share which certificate shall be conclusive evidence of
the correctness of the matters set forth therein, absent clear error. The
Holders, by their acceptance of the Warrant Certificates, expressly waive any
and all rights to receive any fraction of a share of Common Stock or a stock
certificate representing a fraction of a share of Common Stock.
SECTION 14. Notices to Warrantholders. (a) Upon any adjustment
of the Exercise Price or number of Warrant Shares issuable pursuant to Section
11 hereof, the Company shall as promptly as practicable (x) give a written
certificate of the Company to the Warrant Agent of such adjustment or
adjustments which certificate shall set forth (i) the number of Warrant Shares
issuable upon the exercise of a Warrant and the Exercise Price after such
adjustment, (ii) a brief statement of the facts requiring such adjustment, (iii)
the computation by which such adjustment was made, and (y) cause to be given to
each of the registered Holders of the Warrant Certificates at his address
appearing on the Register written notice of such adjustments by first-class
mail, postage prepaid. The Warrant Agent shall be entitled to rely on the
above-referenced certificate(s) and shall be under no duty or responsibility
with respect to any such certificate(s), except to exhibit the same from time to
time to any Holder desiring an inspection thereof during reasonable business
hours. The Warrant Agent shall not at any time be under any duty or
responsibility to any Holder to determine whether any facts exist that may
require any adjustment of the number of Warrant Shares or other stock or
property issuable on exercise of the Warrants or the Exercise Price, or with
respect to the nature or extent of any such adjustment when made,
731158.6
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<PAGE>
or with respect to the method employed in making such adjustment or the validity
or value (or the kind or amount) of any Warrant Shares or other stock or
property which may be issuable on exercise of the Warrants. The Warrant Agent
shall not be responsible for any failure of the Company to make any cash payment
or to issue, transfer or deliver any Warrant Share or stock certificates or
other stock, securities or property upon the exercise of any Warrant.
(b) Prior to the Expiration Date, and for so long as the
Warrants have not been exercised in full, in the event of:
(i) any taking by the Company of a record of the holders of
any class of securities for the purpose of determining the holders
thereof who are entitled to receive any dividend or other distribution,
or any right to subscribe for, purchase or otherwise acquire any shares
of stock of any class or any other securities, indebtedness or
property, or to receive any other right, option or warrant; or
(ii) any capital reorganization of the Company, any
reclassification or recapitalization of the capital stock of the
Company (other than a change in par value, or from par value to no par
value, or from no par value to par value, or as a result of a
subdivision or combination), any consolidation or merger involving the
Company and any other party or any transfer of all or substantially all
the assets of the Company to any other party or any tender offer or
exchange offer by the Company for shares of Common Stock; or
(iii) any voluntary or involuntary dissolution, liquidation or
winding-up of the Company,
then the Company shall cause to be filed with the Warrant Agent and shall cause
to be given to each Warrantholder at its address appearing on the Warrant
Register, at least twenty (20) days prior to the applicable record date
hereinafter specified, or promptly in the case of events for which there is no
record date, by first class mail, postage prepaid, a written notice stating (i)
the date as of which the holders of record of shares of Common Stock entitled to
receive any such rights, options, warrants or distributions are to be
determined, or (ii) the initial expiration date set forth in any tender offer or
exchange offer for shares of Common Stock, or (iii) the date on which any such
reclassification, consolidation, merger, conveyance, transfer, dissolution,
liquidation or winding up is expected to become effective or consummated, as
well as the date as of which it is expected that the holders of record of shares
of Common Stock shall be entitled to exchange such shares for securities or
other property, if any, deliverable upon such reclassification, consolidation,
merger, conveyance, transfer, dissolution, liquidation or winding-up. The
failure to give the notice required by this Section 14 or any defect therein
shall not affect the legality or validity of any distribution, right, option,
warrant, reclassification, consolidation, merger, conveyance, transfer,
dissolution, liquidation, winding up or action, or the vote upon any of the
foregoing.
731158.6
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<PAGE>
SECTION 15. Reservation of Warrant Shares, Etc. The Company
hereby agrees that at all times there shall be reserved for issuance and
delivery upon exercise of the Warrants, free from preemptive rights, liens,
security interests and other encumbrances, such number of shares of authorized
but unissued or treasury shares of Common Stock, or other stock or securities
deliverable pursuant to Section 11, as shall be required for issuance or
delivery upon exercise of the Warrants. Without limiting the generality of the
foregoing, the Company agrees that it will not take any action which would
result in Warrant Shares when issued not being validly and legally issued and
fully paid and nonassessable. The Company hereby represents that, as of the date
hereof, it has sufficient shares of Common Stock reserved for issuance upon
exercise of all outstanding Warrants.
SECTION 16. Warrant Agent. The Warrant Agent undertakes the
duties and obligations imposed by this Agreement upon the following terms and
conditions, by all of which the Company and the Holders, by their acceptance
thereof, shall be bound:
(a) The statements contained herein and in the Warrant
Certificates shall be taken as statements of the Company, and
the Warrant Agent assumes no responsibility for the
correctness of any of the same except such as describe the
Warrant Agent or action taken or to be taken by it. The
Warrant Agent assumes no responsibility with respect to the
distribution of the Warrant Certificates or Warrant Shares or
payment or refund of the Exercise Price except as herein
otherwise provided.
(b) The Warrant Agent may consult at any time with counsel
satisfactory to it and the Warrant Agent shall incur no
liability or responsibility to the Company or to any holder of
any Warrant Certificate in respect to any action taken,
suffered or omitted by it hereunder in good faith and in
accordance with the opinion or the advice of such counsel.
(c) The Company agrees to pay to the Warrant Agent reasonable
compensation for all services rendered by the Warrant Agent in
the execution of this Agreement, to reimburse the Warrant
Agent for all expenses, taxes and governmental charges and
other charges of any kind and nature reasonably incurred by
the Warrant Agent in the execution of this Agreement and to
indemnify the Warrant Agent and save it harmless against any
and all liabilities, including judgments, reasonable costs and
counsel fees, for anything done or omitted by the Warrant
Agent in the execution of this Agreement except as a result of
its negligence, bad faith or willful misconduct.
(d) The Warrant Agent shall be under no obligation to
institute any action, suit or legal proceeding or to take any
other action likely to involve expense unless the Company or
one or more Holders shall furnish the Warrant Agent with
reasonable security for any costs and expenses which may be
incurred, but this provision shall
731158.6
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<PAGE>
not affect the power of the Warrant Agent to take such action
as it may consider proper, whether with or without any such
security. All rights of action under this Agreement or under
any of the Warrants may be enforced by the Warrant Agent
without the possession of any of the Warrant Certificates or
the production thereof at any trial or other proceeding
relative thereto, and any such action, suit or proceeding
instituted by the Warrant Agent shall be brought in its name
as Warrant Agent and any recovery of judgment shall be for the
ratable benefit of the Holders, as the respective rights or
interests may appear.
(e) The Warrant Agent, and any stockholder, director, officer
or employee of it, may buy, sell or deal in any of the
Warrants or other securities of the Company or become
pecuniarily interested in any transaction in which the Company
may be interested, or contract with or lend money to the
Company or otherwise act as fully and freely as though it were
not Warrant Agent under this Agreement. Nothing herein shall
preclude the Warrant Agent from acting in any other capacity
for the Company or for any other legal entity.
(f) The Warrant Agent shall not at any time be under any duty
or responsibility to any Holder or the Company to make or
cause to be made any adjustment of the Exercise Price or
number of the Warrant Shares or other securities or property
deliverable as provided in this Agreement, or to determine
whether any facts exist which may require any of such
adjustments, or with respect to the nature or extent of any
such adjustments, when made, or with respect to the method
employed in making the same. The Warrant Agent shall not be
accountable with respect to the validity or value or the kind
or amount of any Warrant Shares or of any securities or
property which may at any time be issued or delivered upon the
exercise of any Warrant or with respect to whether any such
Warrant Shares or other securities will when issued be validly
issued and fully paid and nonassessable, and makes no
representation with respect thereto.
SECTION 17. Merger, Consolidation or Change of Name of Warrant
Agent. (a) Any corporation into which the Warrant Agent may be merged or with
which it may be consolidated, or any corporation resulting from any merger or
consolidation to which the Warrant Agent shall be a party, or any corporation
succeeding to the business of the Warrant Agent, shall be the successor to the
Warrant Agent hereunder without the execution or filing of any paper or any
further act on the part of any of the parties hereto. In case at the time such
successor to the Warrant Agent shall succeed to the agency created by this
Agreement, and in case at that time any of the Warrant Certificates shall have
been countersigned but not delivered, any such successor to the Warrant Agent
may adopt the countersignature of the original Warrant Agent; and in case at
that time any of the Warrant Certificates shall not have been countersigned, any
successor to the Warrant Agent may countersign such Warrant Certificates either
in the name of the predecessor Warrant Agent or in the name of the successor to
the Warrant Agent; and in all such
731158.6
17
<PAGE>
cases such Warrant Certificates shall have the full force and effect provided in
the Warrant Certificates and in this Agreement.
(b) In case at any time the name of the Warrant Agent shall be
changed and at such time any of the Warrant Certificates shall have been
countersigned but not delivered, the Warrant Agent whose name has been changed
may adopt the countersignature under its prior name, and in case at that time
any of the Warrant Certificates shall not have been countersigned, the Warrant
Agent may countersign such Warrant Certificates either in its prior name or in
its changed name, and in all such cases such Warrant Certificates shall have the
full force and effect provided in the Warrant Certificates and in this
Agreement.
SECTION 18. Resignation and Removal of Warrant Agent;
Appointment of Successor. (a) No resignation or removal of the Warrant Agent and
no appointment of a successor warrant agent shall become effective until the
acceptance of appointment by the successor warrant agent as provided herein. The
Warrant Agent may resign its duties and be discharged from all further duties
and liability hereunder (except liability arising as a result of the Warrant
Agent's own negligence or willful misconduct) after giving written notice to the
Company. The Company may remove the Warrant Agent upon written notice, and the
Warrant Agent shall thereupon in like manner be discharged from all further
duties and liabilities hereunder, except as aforesaid. The Warrant Agent shall,
at the Company's expense, cause to be mailed (by first class mail, postage
prepaid) to each Holder at his last address as shown on the Register a copy of
said notice of resignation or notice of removal, as the case may be. Upon such
resignation or removal, the Company shall appoint in writing a new warrant
agent. If the Company shall fail to make such appointment within a period of 30
days after it has been notified in writing of such resignation by the resigning
Warrant Agent or after such removal, then the resigning Warrant Agent or the
Holder of any Warrant may apply to any court of competent jurisdiction for the
appointment of a new warrant agent. Any new warrant agent, whether appointed by
the Company or by such a court, shall be a corporation doing business under the
laws of the United States or any state thereof, in good standing and having a
combined capital and surplus of not less than US$50,000,000. After acceptance in
writing of such appointment by the new warrant agent, it shall be vested with
the same powers, rights, duties and responsibilities as if it had been
originally named herein as the Warrant Agent, without any further assurance,
conveyance, act or deed; but if for any reason it shall be necessary or
expedient to execute and deliver any further assurance, conveyance, act or deed,
the same shall be done at the expense of the Company and shall be legally and
validly executed and delivered by the resigning or removed Warrant Agent. Not
later than the effective date of any such appointment, the Company shall give
notice thereof to the resigning or removed Warrant Agent. Failure to give any
notice provided for in this Section 18(a), however, or any defect therein, shall
not affect the legality or validity of the resignation of the Warrant Agent or
the appointment of a new warrant agent, as the case may be.
(b) Any corporation into which the Warrant Agent or any new
warrant agent may be merged shall be a successor Warrant Agent under this
Agreement without any further act.
731158.6
18
<PAGE>
Any such successor Warrant Agent shall, at the Warrant Agent's expense, promptly
cause notice of its succession as Warrant Agent to be mailed (by first class
mail, postage prepaid) to each Holder at such Holder's last address as shown on
the Register.
SECTION 19. Money and Other Property Deposited with the
Warrant Agent. Any money, securities and other property which at any time shall
be deposited by the Company or on its behalf with the Warrant Agent pursuant to
this Agreement shall be and are hereby assigned, transferred and set over to the
Warrant Agent in trust for the purpose for which such moneys, securities or
other property shall have been deposited, which such purpose shall be stated in
writing in reasonable detail and delivered to the Warrant Agent; but such
moneys, securities or other property need not be segregated from other funds,
securities or other property of the Warrant Agent except to the extent required
by law. The Warrant Agent shall distribute any money deposited with it for
payment and distribution to any Holder by mailing by first-class mail a check in
such amount as is appropriate to such Holder at the address shown on the
Register, or as it may be otherwise directed in writing by such Holder, upon
surrender of such Holder's Warrants. Any money or other property deposited with
the Warrant Agent for payment and distribution to any Holder that remains
unclaimed for two years, less one day after the date the money was deposited
with the Warrant Agent, shall be paid to the Company upon its request therefor.
SECTION 20. Compliance with Government Regulations;
Qualification under the Securities Laws.
(a) The Company covenants that if the shares of Common Stock
required to be reserved for purposes of exercise of Warrants
require, under any federal or state law, registration with or
approval of any governmental authority before such shares may
be issued upon exercise or to allow the resale or transfer of
the Warrants or of such shares by the Holders generally, the
Company will, unless the Company has received an opinion of
counsel to the effect that such registration is not then
permitted by such laws, use reasonable best efforts to cause
such shares to be duly so registered or approved, as the case
may be; provided that in no event shall such shares of Common
Stock be issued, and the exercise of all Warrants shall be
suspended, for the period during which any such registration
or approval is required for the issuance of such shares upon
exercise but is not in effect; provided, further, that the
Expiration Date shall be extended one day for each day (or
portion thereof) that any such suspension is in effect. The
Company shall promptly notify the Warrant Agent of any such
suspension, and the Warrant Agent shall have no duty,
responsibility or liability in respect of any shares of Common
Stock issued or delivered prior to its receipt of such notice.
The Company shall promptly notify the Warrant Agent of the
termination of any such suspension, and such notice shall set
forth the number of days that the Exercise Period shall be
extended as a result of such suspension. The foregoing
provisions of this Section 20 shall not require that the
Company effect or obtain any such registration or
731158.6
19
<PAGE>
approval of the Warrants or Warrant Shares in order to allow
the resale or transfer thereof by any Person that may be an
underwriter for purposes of Section 1145 of Chapter 11, Title
11 of the United States Code or to whom such registration or
approval requirement is applicable as a result of that Person
being an Affiliate of the Company or Marvel.
(b) The Company covenants that it shall, until the expiration
of one year after the Expiration Date, make available adequate
current public information with respect to the Company so as
to satisfy paragraph (c) of Rule 144 under the Securities Act.
(c) The Company covenants that it shall use reasonable best
efforts to have the Warrants and the Common Stock listed on
the New York Stock Exchange or the American Stock Exchange,
subject to official notice of issuance and subject to
satisfaction of the Warrants with listing requirements, as
soon as practicable after the date hereof.
SECTION 21. Notices. (a) Any notice pursuant to this Agreement
to be given by the Warrant Agent or by any Holder to the Company shall be deemed
given (x) if delivered personally, then at the time of delivery, (y) if sent by
overnight courier service, then at the time of delivery, or (z) if mailed by
first-class, certified or overnight mail, five (5) Business Days after having
been deposited in the mail with postage prepaid, in each case addressed (until
another address is filed in writing by the Company with the Warrant Agent), as
follows:
Marvel Enterprises, Inc.
685 Third Avenue
New York, New York 10017
Facsimile No.: 212-682-5272
Telephone: 212-588-5100
Attention: Corporate Secretary
(b) In case the Company shall fail to maintain such office or
agency or shall fail to give such notice of the location or of any change in the
location thereof, presentations may be made and notices and demands may be
served at the principal office of the Warrant Agent.
(c) Any notice pursuant to this Agreement to be given by the
Company or by any Holder to the Warrant Agent shall be deemed given (x) if
delivered personally, then at the time of delivery, (y) if sent by overnight
courier service, then at the time of delivery, or (z) if mailed by first-class,
certified or overnight mail, five (5) Business Days after having been deposited
in the mail with postage prepaid, in each case addressed (until another address
is filed in writing by the Warrant Agent with the Company) as follows:
731158.6
20
<PAGE>
American Stock Transfer & Trust Company
40 Wall Street
New York, New York 10005
(d) Any notice pursuant to this Agreement to be given by the
Company or by the Warrant Agent to any Holder shall be deemed given (x) if
delivered personally, then at the time of delivery, (y) if sent by overnight
courier service, then at the time of delivery, or (z) if mailed by first-class,
certified or overnight mail, five (5) Business Days after having been deposited
in the mail with postage prepaid, in each case addressed to the Holder at such
Holder's address as shown on the Register. Failure to mail a notice or
communication to a Holder or any defect in it shall not affect its sufficiency
with respect to other Holders.
(e) If a notice or communication is mailed in the manner
provided above within the time prescribed, it is duly given, whether or not the
addressee receives it.
(f) If the Company mails a notice or communication to a Holder
or Holders, it shall deliver a copy of such notice to the Warrant Agent at the
same time.
SECTION 22. Supplements and Amendments. The Company and the
Warrant Agent may from time to time supplement or amend this Agreement without
the approval of any Holders in order to cure any ambiguity or to correct or
supplement any provision contained herein which may be defective or inconsistent
with any other provision herein, or to make any other provisions in regard to
matters or questions arising hereunder which the Company and the Warrant Agent
may deem necessary or desirable and which shall not in any way adversely affect
the interests of the Holders. Any amendment or supplement to this Agreement that
has an adverse effect on the interests of Holders, including supplements or
amendments referred to in the first sentence of this Section 22, shall require
the written consent of Holders representing a majority of the then outstanding
Warrants. The consent of each Holder affected shall be required for any
amendment pursuant to which the Exercise Price would be increased or the number
of Warrant Shares purchasable upon exercise of Warrants would be decreased.
SECTION 23. Successors. All the covenants and provisions of
this Agreement by or for the benefit of the Company or the Warrant Agent shall
bind and inure to the benefit of their respective successors and assigns
hereunder.
SECTION 24. Termination. This Agreement (other than the
Company's obligations with respect to Warrants previously exercised and with
respect to indemnification under Section 16(c)) shall terminate at 5:00 p.m.,
New York City time, on the Expiration Date.
SECTION 25. Governing Law. This Agreement and each Warrant
Certificate issued hereunder shall be governed by and construed in accordance
with the laws of the State of Delaware.
731158.6
21
<PAGE>
SECTION 26. Benefits of This Agreement. (a) Nothing in this
Agreement shall be construed to give any person other than the Company, the
Warrant Agent and the Warrantholders (or other respective successors or assigns)
any legal or equitable right, remedy or claim under this Agreement. This
Agreement shall be for the sole and exclusive benefit of the Company, the
Warrant Agent and the Warrantholders (and other respective successors or
assigns).
(b) Prior to the exercise of the Warrants, no Holder as such,
shall be entitled to any rights of a stockholder of the Company, including,
without limitation, the right to receive dividends or subscription rights, the
right to vote, to consent, to exercise any preemptive right, to receive any
notice of meetings of stockholders for the election of directors of the Company
or any other matter or to receive any notice of any proceedings of the Company,
except as may be specifically provided for herein. No provisions hereof, in the
absence of affirmative action by the Warrantholder hereof to purchase Warrant
Shares, and no enumeration herein of the rights or privileges of the
Warrantholder shall give rise to any liability of such Warrantholder as a
stockholder of the Company.
(c) All rights of action in respect of this Agreement are
vested in the Holders, and any Holder without the consent of the Warrant Agent
or the Holder, may, on such Holder's own behalf and for such Holder's own
benefit, enforce, and may institute and maintain any suit, action or proceeding
against the Company suitable to enforce, or otherwise in respect of, such
Holder's rights hereunder, including the right to exercise, exchange or
surrender for purchase such Holder's Warrants in the manner provided in this
Agreement.
SECTION 27. Counterparts. This Agreement may be executed in
any number of counterparts and each of such counterparts shall for all purposes
be deemed to be an original, and all such counterparts shall together constitute
but one and the same instrument.
SECTION 28. Headings. The headings of the Sections of this
Agreement have been inserted for convenience of reference only, are not to be
considered a part hereof and shall in no way modify or restrict any of the terms
or provisions hereof.
SECTION 29. Severability. Any term or provision of this
Agreement or the Warrants which is invalid or unenforceable in any jurisdiction
shall, as to such jurisdiction, be ineffective to the extent of such invalidity
or unenforceability without rendering invalid or unenforceable the other terms
and provisions of this Agreement or the Warrants or affecting the validity or
enforceability of any of the terms or provisions of this Agreement or the
Warrants in any other jurisdiction.
731158.6
22
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this
Agreement to be duly executed, as of the day and year first above written.
MARVEL ENTERPRISES, INC.
By: /s/WILLIAM H. HARDIE, III
Name: William H. Hardie, III
Title: Executive Vice President, Business Affairs
AMERICAN STOCK TRANSFER & TRUST
COMPANY
By: /s/HERBERT J. LEMMER
Name:
Title:
731158.6
23
<PAGE>
EXHIBIT A
EXERCISABLE ON OR BEFORE 5:00 P.M. NEW YORK CITY TIME ON
-----------------.
Class C No. Cusip No.
Class C, Warrants
[Form of Class C Warrant Certificate]
MARVEL ENTERPRISES, INC.
(Incorporated under the laws of the State of Delaware)
This Warrant Certificate certifies that _________ or its
registered assigns, is the registered holder of Class C Warrants expiring
__________ (the "Warrants") to purchase shares of Common Stock (the "Common
Stock"), of Marvel Enterprises, Inc., a Delaware corporation (the "Company").
Each Warrant entitles the registered holder upon exercise at any time during
normal business hours after the date hereof and on or before 5:00 p.m., New York
City time, on _______________, to receive from the Company _________ fully paid
and nonassessable shares of Common Stock (each such share a "Warrant Share") at
the initial exercise price (the "Exercise Price") of $18.50 per share payable in
accordance with the terms, provisions and conditions of the Warrant Agreement
referred to on the reverse hereof upon surrender of this Warrant Certificate and
payment of the Exercise Price at the office or agency of the Warrant Agent, but
only subject to the terms, provisions and conditions set forth herein and in the
Warrant Agreement. The Exercise Price and number of Warrant Shares issuable upon
exercise of the Warrants are subject to adjustment from time to time upon the
occurrence of certain events set forth in the Warrant Agreement.
No Warrant may be exercised after 5:00 p.m., New York City
time, on ___________ and, to the extent not exercised by such time, such
Warrants shall become void.
Reference is hereby made to the further provisions of this
Warrant Certificate set forth on the reverse hereof and such further provisions
shall for all purposes have the same effect as though fully set forth at this
place.
The terms of this Warrant Certificate are qualified in their
entirety by reference to the Warrant Agreement and, in the event of a conflict
between the terms of this Warrant Certificate and the terms of the Warrant
Agreement, the terms of the Warrant Agreement shall
A-1
731158.6
<PAGE>
control the rights, interests and obligations of the holders of the Warrants,
the Warrant Agent and the Company with respect to the Warrants.
This Warrant Certificate shall not be valid unless
countersigned by the Warrant Agent, as such term is used in the Warrant
Agreement.
This Warrant Certificate shall be governed by and construed in
accordance with the laws of the State of Delaware.
IN WITNESS WHEREOF, the Company has caused this Warrant
Certificate to be signed by a duly authorized Officer.
Dated:
MARVEL ENTERPRISES, INC.
By
Name:
Title:
Countersigned:
AMERICAN STOCK TRANSFER & TRUST COMPANY,
as Warrant Agent
By
Authorized Signature
A-2
731158.6
<PAGE>
[REVERSE SIDE]
The Warrants evidenced by this Warrant Certificate are part of
a duly authorized issue of Warrants expiring on the Expiration Date entitling
the holder on exercise to receive shares of Common Stock of the Company and are
issued or to be issued pursuant to a Warrant Agreement dated as of _________ __,
1998 (the "Warrant Agreement"), duly executed and delivered by the Company to
American Stock Transfer & Trust Company, as Warrant Agent (the "Warrant Agent"),
which Warrant Agreement is hereby incorporated by reference in and made a part
of this instrument and is hereby referred to for a description of the rights,
limitation of rights, obligations, duties and immunities thereunder of the
Warrant Agent, the Company and the holders (the words "holders" or "holder"
meaning the registered holders or registered holders) of the Warrants. A copy of
the Warrant Agreement may be obtained by the holder hereof upon written request
to the Company. By accepting initial delivery, transfer or exchange of this
Warrant, the duly registered holder shall be deemed to have agreed to the terms
of the Warrant Agreement as it may be in effect from time to time, including any
amendments or supplements duly adopted in accordance therewith.
Payment of the Exercise Price may be made, at the option of
the holder, in cash by wire transfer or by certified or official bank check
payable to the order of the Company in immediately available funds in lawful
money of the United States of America.
Upon due presentation for registration of transfer of this
Warrant Certificate, with or without other Warrant Certificates, at the office
of the Warrant Agent, a new Warrant Certificate or Warrant Certificates of like
tenor and evidencing in the aggregate a like number of Warrants shall be issued
to the transferee(s) in exchange for this Warrant Certificate, with or without
other Warrant Certificates, subject to the limitations provided in the Warrant
Agreement, without charge except for any tax or other governmental charge
imposed in connection therewith.
The Company and the Warrant Agent may deem and treat the
registered holder(s) thereof as the absolute owner(s) of this Warrant
Certificate (notwithstanding any notation of ownership or other writing hereon
made by anyone), for the purpose of any exercise hereof, of any distribution to
the holder(s) hereof, and for all other purposes. Neither the Warrants nor this
Warrant Certificate entities any holder hereof to any rights of a stockholder of
the Company.
A-3
731158.6
<PAGE>
SUBSCRIPTION FORM
(To be executed only upon exercise of Warrants represented by
this Warrant Certificate)
To: American Stock Transfer & Trust Company,
as Warrant Agent
40 Wall Street
New York, New York 10005
The undersigned hereby irrevocably exercises [_____________]
of the Class C Warrants represented by this Warrant Certificate and herewith
makes payment in accordance with the terms and conditions specified in this
Warrant Certificate and in the Warrant Agreement and surrenders this Warrant
Certificate and all right, title and interest therein to and directs that the
shares of Common Stock of Marvel Enterprises, Inc. (the "Warrant Shares")
deliverable upon the exercise of such Class C Warrants be registered or placed
in the name and at the address specified below and delivered thereto.
Dated:
______________________________________
(Signature of Owner)
______________________________________
(Street Address)
______________________________________
(City) (State) (Zip Code)
Signature Guaranteed By:
______________________________________
Securities and/or check or other property (including, if such number of Class C
Warrants exercised shall not be all of the Class C Warrants evidenced by this
Warrant Certificate, a new Warrant Certificate for the balance remaining of such
Class C Warrants) to be issued or delivered to:
Name:
Street Address:
City, State and Zip Code:
Please insert social security or identifying number:
A-4
731158.6
<PAGE>
FORM OF ASSIGNMENT
For value received from the Assignee(s) named below, the
undersigned registered Holder of this Warrant Certificate hereby sells, assigns,
and transfers unto the Assignee(s) named below (including the undersigned with
respect to any Class C Warrants constituting a part of the Class C Warrants
evidenced by this Warrant Certificate not being assigned hereby) all of the
right of the undersigned under this Warrant Certificate, with respect to the
number of Class C Warrants set forth below:
Social Security
or other
Name of Assignee Address Identifying No. No. of Warrants
and does hereby irrevocably constitute and appoint the undersigned's attorney to
make such transfer on the books of maintained for the purposes, with full power
of substitution in the premises.
Dated:
______________________________________
(Signature of Owner)
______________________________________
(Street Address)
______________________________________
(City) (State) (Zip Code)
Signature Guaranteed By:
______________________________________
A-5
731158.6
EXHIBIT 99.1
Execution Copy
$200,000,000
CREDIT AGREEMENT
dated as of
September 28, 1998
among
Toy Biz, Inc.
(to be renamed Marvel Enterprises, Inc.)
The Guarantors Party Hereto
The Lenders Party Hereto
and
UBS AG, Stamford Branch,
as Agent and Collateral Agent
------------------------------------
Warburg Dillon Read LLC,
as Arranger
765748.1 7:17p
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TABLE OF CONTENTS
----------------------
PAGE
ARTICLE 1
DEFINITIONS
SECTION 1.01. Definitions.....................................................1
SECTION 1.02. Accounting Terms and Determinations............................20
ARTICLE 2
THE CREDITS
SECTION 2.01. Commitments to Lend............................................20
SECTION 2.02. Method of Borrowing............................................20
SECTION 2.03. Maturity of Loans, Mandatory Prepayments.......................21
SECTION 2.04. Interest Rates.................................................22
SECTION 2.05. Method of Electing Interest Rates..............................23
SECTION 2.06. [Intentionally omitted].......................................24
SECTION 2.07. Mandatory Termination of Commitments...........................24
SECTION 2.08. Optional Prepayments...........................................24
SECTION 2.09. General Provisions as to Payments..............................25
SECTION 2.10. Funding Losses.................................................25
SECTION 2.11. Computation of Interest and Fees...............................26
SECTION 2.12. Notes..........................................................26
ARTICLE 3
CONDITIONS
SECTION 3.01. Closing............................................ . .........27
SECTION 3.02. The Borrowings...................................... . ........31
ARTICLE 4
REPRESENTATIONS AND WARRANTIES
SECTION 4.01. Corporate Existence and Power................................ 32
SECTION 4.02. Corporate and Governmental Authorization; No Contravention... 32
SECTION 4.03. Binding Effect; Liens........................................ 32
SECTION 4.04. Financial Information........................................ 33
SECTION 4.05. Litigation................................................... 34
SECTION 4.06. Compliance with ERISA........................................ 34
SECTION 4.07. Environmental Matters........................................ 34
SECTION 4.08. Taxes........................................................ 35
SECTION 4.09. Subsidiaries................................................ .36
SECTION 4.10. No Regulatory Restrictions on Borrowing.................... ..36
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PAGE
SECTION 4.11. Full Disclosure...............................................36
SECTION 4.12. Representations in Collateral Documents True and Correct......36
SECTION 4.13. Pro Forma and Projected Financial Information.................37
SECTION 4.14. Labor Matters.................................................38
SECTION 4.15. Intellectual Property.........................................38
SECTION 4.16. Solvency......................................................38
SECTION 4.17. Representations in Transaction Documents True and Correct.....38
SECTION 4.18. Ownership of Properties.......................................38
SECTION 4.19. No Burdensome Restrictions....................................39
SECTION 4.20. No Default....................................................39
SECTION 4.21. Compliance with Laws..........................................39
SECTION 4.22. Year 2000.....................................................39
SECTION 4.23. Limited Liability for Obligations of Panini Entities..........39
ARTICLE 5
COVENANTS
SECTION 5.01. Information...................................................40
SECTION 5.02. Payment of Obligations........................................42
SECTION 5.03. Maintenance of Property; Insurance............................43
SECTION 5.04. Conduct of Business and Maintenance of Existence..............44
SECTION 5.05. Compliance with Laws..........................................44
SECTION 5.06. Inspection of Property, Books and Records.....................44
SECTION 5.07. Mergers and Sales of Assets...................................44
SECTION 5.08. Use of Proceeds...............................................45
SECTION 5.09. Negative Pledge...............................................45
SECTION 5.10. Limitation on Debt............................................46
SECTION 5.11. Minimum EBITDA................................................47
SECTION 5.12. Leverage Ratio................................................47
SECTION 5.13. Interest Coverage Ratio.......................................47
SECTION 5.14. Minimum Current Ratio.........................................47
SECTION 5.15. Minimum Consolidated Net Worth................................47
SECTION 5.16. Limitations on Restricted Payments............................47
SECTION 5.17. Limitation on Capital Expenditures............................47
SECTION 5.18. Lease Payments................................................48
SECTION 5.19. Investments and Acquisitions..................................48
SECTION 5.20. Sale-Leaseback Transactions...................................48
SECTION 5.21. Transactions with Affiliates..................................49
SECTION 5.22. Constitutive Documents........................................49
SECTION 5.23. No Modification of Transaction Documents Without Consent......49
SECTION 5.24. Limitation on Restrictions Affecting Subsidiaries.............50
SECTION 5.25. Fiscal Year...................................................50
SECTION 5.26. Change in Business............................................50
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PAGE
SECTION 5.27. Further Assurances.............................................50
SECTION 5.28. No New Subsidiaries............................................52
SECTION 5.29. Year 2000......................................................53
SECTION 5.30. Permanent Financing............................................53
SECTION 5.31. Bank Accounts..................................................54
ARTICLE 6
DEFAULTS
SECTION 6.01. Events of Default..............................................55
SECTION 6.02. Notice of Default..............................................57
ARTICLE 7
THE AGENT
SECTION 7.01. Appointment and Authorization..................................57
SECTION 7.02. Agent and Affiliates...........................................57
SECTION 7.03. Action by Agent................................................58
SECTION 7.04. Appointment of Co-Agents.......................................58
SECTION 7.05. Consultation with Experts......................................58
SECTION 7.06. Liability of Agent.............................................58
SECTION 7.07. Indemnification................................................59
SECTION 7.08. Credit Decision................................................59
SECTION 7.09. Successor Agent................................................59
SECTION 7.10. Agent's Fee....................................................60
ARTICLE 8
CHANGE IN CIRCUMSTANCES
SECTION 8.01. Basis for Determining Interest Rate Inadequate or Unfair.......60
SECTION 8.02. Illegality.....................................................60
SECTION 8.03. Increased Cost and Reduced Return..............................61
SECTION 8.04. Taxes..........................................................62
SECTION 8.05. Base Rate Loans Substituted for Affected Euro-Dollar Loans.....64
ARTICLE 9
GUARANTY
SECTION 9.01. The Guaranty...................................................64
SECTION 9.02. Guaranty Unconditional.........................................65
SECTION 9.03. Discharge Only upon Payment in Full; Reinstatement in Certain
Circumstances..................................................65
SECTION 9.04. Waiver by Each Guarantor.......................................66
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PAGE
SECTION 9.05. Subrogation and Contribution...................................66
SECTION 9.06. Stay of Acceleration...........................................66
SECTION 9.07. Limit of Liability.............................................66
SECTION 9.08. Release upon Sale..............................................66
ARTICLE 10
MISCELLANEOUS
SECTION 10.01. Notices.......................................................67
SECTION 10.02. No Waivers....................................................67
SECTION 10.03. Expenses; Indemnification.....................................67
SECTION 10.04. Set-offs......................................................68
SECTION 10.05. Amendments and Waivers Release of Collateral..................69
SECTION 10.06. Successors; Participations and Assignments....................69
SECTION 10.07. Designated Lenders............................................71
SECTION 10.08. No Reliance on Margin Stock...................................72
SECTION 10.09. Governing Law; Submission to Jurisdiction
....................................................................72
SECTION 10.10. Counterparts; Integration; Effectiveness......................72
SECTION 10.11. WAIVER OF JURY TRIAL..........................................72
COMMITMENT SCHEDULE
SCHEDULE 1.10 -- Existing Letters of Credit
SCHEDULE 4.09 -- Subsidiaries
SCHEDULE 5.10 -- Outstanding Debt
SCHEDULE 5.19(a) -- Investments
EXHIBIT A -- Note
EXHIBIT B -- Security Agreement
EXHIBIT C -- Opinion of Battle Fowler LLP, counsel for the Obligors
EXHIBIT D -- Opinion of William H. Hardie, III
EXHIBIT E -- Opinion of Davis Polk & Wardwell, special counsel for the Agent
EXHIBIT F -- Opinion of Wolf, Block, Schorr and Solis-Cohen, special
intellectual property counsel for the Obligors
EXHIBIT G -- Opinion of Gallagher & Kennedy, special Arizona counsel for
the Obligors
EXHIBIT H -- Opinion of Smith, Stratton, Wise, Heher & Brennan, special
New Jersey counsel for the Obligors
EXHIBIT I -- Opinion of Stoel Rives LLP, special Washington counsel for
the Obligors
EXHIBIT J -- Assignment and Assumption Agreement
EXHIBIT K -- Designation Agreement
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AGREEMENT dated as of September 28, 1998 among TOY BIZ, INC. (to be
renamed Marvel Enterprises, Inc.), the GUARANTORS party hereto, the LENDERS
party hereto and UBS AG, STAMFORD BRANCH, as Agent and Collateral Agent.
ARTICLE 1
DEFINITIONS
SECTION 1.01. Definitions. The following terms, as used herein, have
the following meanings:
"Acquisition Sub" means MEG Acquisition Corp., a Delaware corporation
and a wholly-owned subsidiary of the Borrower.
"Adjusted London Interbank Offered Rate" has the meaning set forth in
Section 2.04(b).
"Administrative Questionnaire" means, with respect to each Lender, an
administrative questionnaire in the form prepared by the Agent, completed by
such Lender and returned to the Agent (with a copy to the Borrower).
"Affiliate" means (i) any Person that directly, or indirectly through
one or more intermediaries, controls the Borrower (a "Controlling Person") or
(ii) any Person (other than the Borrower or a Guarantor) which is controlled by
or is under common control with a Controlling Person. As used in this definition
only, the term "control" means possession, directly or indirectly, of the power
to vote 10% or more of any class of voting securities of a Person or to direct
or cause the direction of the management or policies of a Person, whether
through the ownership of voting securities, by contract or otherwise.
"Agent" means UBS AG, Stamford Branch, in its capacity as agent for the
Lenders hereunder, and its successors in such capacity.
"Annualized" means (i) with respect to the Fiscal Quarter of the
Borrower ending December 31, 1998, the applicable amount for such Fiscal Quarter
multiplied by four, (ii) with respect to the Fiscal Quarter of the Borrower
ending March 31, 1999, the applicable amount for the period of two consecutive
Fiscal Quarters ending on such date multiplied by two and (iii) with respect to
the Fiscal Quarter of the Borrower ending June 30, 1999, the applicable amount
for the period of three consecutive Fiscal Quarters ending on such date
multiplied by 3/2.
"Applicable Lending Office" means, with respect to any Lender, (i) in
the case of its Base Rate Loans and its participations in Letters of Credit, its
Domestic Lending Office and (ii) in the case of its Euro-Dollar Loans, its
Euro-Dollar Lending Office.
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"Arranger" means Warburg Dillon Read LLC.
"Asset Sale" means any sale, lease or other disposition (including any
such transaction effected by way of merger or consolidation) by the Borrower or
any of its Subsidiaries of any asset, including without limitation any
sale-leaseback transaction, whether or not involving a capital lease, but
excluding (i) sales, leases or other dispositions of inventory, cash, cash
equivalents and other cash management investments and obsolete, unused or
unnecessary equipment and undeveloped real estate, in each case in the ordinary
course of business and (ii) dispositions to the Borrower or a Subsidiary of the
Borrower.
"Assignee" has the meaning set forth in Section 10.06(c).
"Bank Facility" has the meaning set forth in Section 5.30.
"Base Rate" means, for any day, a rate per annum equal to the higher of
(i) the Prime Rate for such day and (ii) the sum of 1/2 of 1% plus the Federal
Funds Rate for such day.
"Base Rate Loan" means a Loan which bears interest at the Base Rate
pursuant to the applicable Notice of Borrowing or Notice of Interest Rate
Election or the provisions of Section 2.05(a) or Article 8.
"Base Rate Margin" means a rate per annum equal to 5.50%, provided that
such rate shall increase to 6.00% on April 30, 1999 and shall increase by 0.50%
on the last day of each three-month period thereafter.
"Borrower" means Toy Biz, Inc. (to be renamed Marvel Enterprises,
Inc.), a Delaware corporation, and its successors.
"Borrower's 1997 Form 10-K" means the Borrower's annual report on Form
10- K for 1997, as filed with the SEC pursuant to the Exchange Act.
"Borrower's Latest Form 10-Q" means the Borrower's quarterly report on
Form 10-Q for the quarter ended June 30, 1998, as filed with the SEC pursuant to
the Exchange Act.
"Borrowing" means a borrowing hereunder consisting of Loans made to the
Borrower pursuant to Article 2, all of which Loans are of the same type (subject
to Article 8) and, except in the case of Base Rate Loans, have the same initial
Interest Period. A Borrowing is a Base Rate Borrowing if such Loans are Base
Rate Loans or a Euro-Dollar Borrowing if such Loans are Euro-Dollar Loans.
"Business Acquisition" means any acquisition, whether in a single
transaction or series of related transactions, by the Borrower or any one or
more Subsidiaries, or any
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combination thereof, of (i) all or a substantial part of the assets, or a going
concern business or division, of any Person, whether through purchase of assets
or securities, by merger or otherwise, (ii) control of securities of an existing
corporation or other Person having ordinary voting power (apart from rights
accruing under special circumstances) to elect a majority of the board of
directors of such corporation or other Person or (iii) control of a greater than
50% ownership interest in any existing partnership, joint venture or other
Person.
"Capital Stock" of any Person means (i) any and all shares or other
equity interests (including without limitation common stock, preferred stock and
partnership interests) in such Person and (ii) all rights to purchase, warrants
or options (whether or not currently exercisable), participations or other
equivalents of or interests in (however designated) such shares or other
interests in such Person.
"Change of Control" means the occurrence of any of the following: (i)
any Person or group (as such terms are used for purposes of Sections 13(d) and
14(d) of the Exchange Act, whether or not applicable, except that for purposes
of this clause (i) such Person or group shall be deemed to have "beneficial
ownership" of all shares that such Person or group has the right to acquire,
whether such right is exercisable immediately or only after the passage of
time), other than an Excluded Person or Excluded Group, is or becomes the
"beneficial owner" (as such term is used in Rule 13d-3 promulgated pursuant to
the Exchange Act), directly or indirectly, of more than 25% of the aggregate
voting power of the Voting Stock of the Borrower or (ii) during any consecutive
two-year period, individuals who at the beginning of such period constituted the
Board of Directors of the Borrower (together with any new directors whose
election by such Board of Directors or whose nomination for election by the
stockholders of the Borrower was approved pursuant to the terms of the
Stockholders' Agreement or by a vote of a majority of the directors then still
in office who were either directors at the beginning of such period or whose
election or nomination for election was previously so approved) cease for any
reason to constitute a majority of the Board of Directors of the Borrower then
in office.
"Closing Date" means the date on or after the Effective Date on which
all of the conditions specified in or pursuant to Section 3.01 shall have been
satisfied.
"Collateral" means collateral subject to the Collateral Documents.
"Collateral Agent" has the meaning set forth in the Security Agreement.
"Collateral Documents" means the Security Agreement, the Mortgages, if
any, any additional pledge agreements, security agreements or mortgages required
to be delivered pursuant to the Loan Documents and any instruments of
assignment, lockbox letters or other instruments or agreements executed pursuant
to the foregoing.
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<PAGE>
"Commitment" means (i) with respect to each Lender listed on the
Commitment Schedule, the amount set forth opposite such Lender's name on the
Commitment Schedule and (ii) with respect to any Assignee which becomes a Lender
pursuant to Section 10.06(c), the amount of the transferor lender's Commitment
assigned to it pursuant to Section 10.06(c), in each case as such amount may be
reduced pursuant to Section 2.07 or increased or reduced by reason of an
assignment to or by such Lender pursuant to Section 10.06(c). At any time after
the Closing Date, the term "Commitment" shall refer to a Lender's Commitment
immediately before such termination, adjusted to reflect any subsequent
assignments pursuant to Section 10.06(c).
"Commitment Schedule" means the Commitment Schedule attached hereto.
"Consolidated Capital Expenditures" means, for any period, the
additions to property, plant and equipment and other capital expenditures
(including capital expenditures in respect of product development and package
design) of the Borrower and its Consolidated Subsidiaries (excluding the Panini
Entities) for such period, as the same are or would be set forth in a
consolidated statement of cash flows of the Borrower and its Consolidated
Subsidiaries (excluding the Panini Entities) for such period.
"Consolidated Current Assets" means at any date the consolidated
current assets of the Borrower and its Consolidated Subsidiaries (excluding the
Panini Entities) determined as of such date.
"Consolidated Current Liabilities" means at any date (i) the
consolidated current liabilities of the Borrower and its Consolidated
Subsidiaries (excluding the Panini Entities) plus (ii) the current liabilities
of any Person (other than the Borrower or any of its Consolidated Subsidiaries
(excluding the Panini Entities)) which are Guaranteed by the Borrower or a
Consolidated Subsidiary (excluding the Panini Entities), all determined as of
such date, but in any event excluding Debt under this Agreement and under the
Revolving Credit Agreement.
"Consolidated Debt" means, at any date, Debt of the Borrower and its
Consolidated Subsidiaries (excluding the Panini Entities), determined on a
consolidated basis of such date.
"Consolidated EBITDA" means, for any period, Consolidated Net Income
for such period plus, to the extent deducted in determining Consolidated Net
Income for such period, the aggregate amount of (i) Consolidated Interest
Expense, (ii) income tax expense and (iii) depreciation, amortization and other
similar non-cash charges.
"Consolidated Interest Expense" means, for any period, the interest
expense of the Borrower and its Consolidated Subsidiaries (excluding the Panini
Entities), determined on a consolidated basis for such period.
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<PAGE>
"Consolidated Net Income" means, for any period, the net income of the
Borrower and its Consolidated Subsidiaries (excluding the Panini Entities),
determined on a consolidated basis for such period, adjusted to exclude the
effect of (i) any extraordinary or other non-recurring gain (but not loss) and
(ii) in the case of the calculation of Consolidated EBITDA only, non-recurring
expenses (and related reserve accruals) and write-offs, in each case under this
clause (ii) related to the Merger and consummation of the Plan of
Reorganization.
"Consolidated Net Worth" means, at any date, the consolidated
stockholders' equity of the Borrower and its Consolidated Subsidiaries
(excluding the Panini Entities) determined as of such date (including the amount
attributable to the Preferred Stock but excluding any other amount attributable
to other stock which is required to be redeemed or is redeemable at the option
of the holder, if certain events or conditions occur or exist or otherwise).
"Consolidated Subsidiary" means, at any date, any Subsidiary or other
entity (including, without limitation, the Panini Entities) the accounts of
which would be consolidated with those of the Borrower in its consolidated
financial statements if such statements were prepared as of such date.
"Credit Exposure" means, as to any Lender, (i) at any time before the
making of the Loans hereunder, the amount of its Commitment at such time or (ii)
at any time after the making of the Loans hereunder, the aggregate outstanding
principal amount of its Loans.
"Current Ratio" means, at any date, the ratio of (i) Consolidated
Current Assets at such date to (ii) Consolidated Current Liabilities at such
date.
"Debt" of any Person means, at any date, without duplication, (i) all
obligations of such Person for borrowed money, (ii) all obligations of such
Person evidenced by bonds, debentures, notes or other similar instruments, (iii)
all obligations of such Person to pay the deferred purchase price of property or
services, except trade accounts payable arising in the ordinary course of
business, (iv) all obligations of such Person as lessee which are capitalized in
accordance with GAAP, (v) all obligations (whether or not contingent) of such
Person to reimburse any bank or other Person in respect of amounts paid under a
letter of credit or similar instrument; provided that the term "Debt" shall not
include any such obligations under an Existing Letter of Credit to the extent
such Existing Letter of Credit has been backstopped by a Letter of Credit issued
by an Issuer under the Revolving Credit Agreement, (vi) all Debt secured by a
Lien on any asset of such Person, whether or not such Debt is otherwise an
obligation of such Person, and (vii) all Guarantees by such Person of Debt of
another Person (each such Guarantee to constitute Debt in an amount equal to the
amount of such other Person's Debt Guaranteed thereby).
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"Default" means any condition or event which constitutes an Event of
Default or which with the giving of notice or lapse of time or both would,
unless cured or waived, become an Event of Default.
"Derivatives Obligations" of any Person means all obligations of such
Person in respect of any rate swap transaction, basis swap, forward rate
transaction, commodity swap, commodity option, equity or equity index swap,
equity or equity index option, bond option, interest rate option, foreign
exchange transaction, cap transaction, floor transaction, collar transaction,
currency swap transaction, cross-currency rate swap transaction, currency option
or any other similar transaction (including any option with respect to any of
the foregoing transactions) or any combination of the foregoing transactions.
"Designated Lender" means, with respect to any Designating Lender, an
Eligible Designee designated by it pursuant to Section 10.07(a) as a Designated
Lender for purposes of this Agreement.
"Designating Lender" means, with respect to each Designated Lender, the
Lender that designated such Designated Lender pursuant to Section 10.07(a).
"Disqualified Capital Stock" means any Capital Stock of any Person or
any of its Subsidiaries that, by its terms, by the terms of any agreement
related thereto or by the terms of any security into which it is convertible,
putable or exchangeable, is, or upon the happening of any event or the passage
of time would be, required to be redeemed or repurchased by such Person or any
of its Subsidiaries, whether or not at the option of the holder thereof, or
matures or is mandatorily redeemable, pursuant to a sinking fund obligation or
otherwise, in whole or in part, on or prior to the tenth anniversary of the
Closing Date.
"Domestic Business Day" means any day except a Saturday, Sunday or
other day on which commercial banks in New York City and Stamford, Connecticut,
are authorized or required by law to close.
"Domestic Lending Office" means, as to each Lender, its office located
at its address set forth in its Administrative Questionnaire (or identified in
its Administrative Questionnaire as its Domestic Lending Office) or such other
office as such Lender may hereafter designate as its Domestic Lending Office by
notice to the Borrower and the Agent.
"Effective Date" means the date this Agreement becomes effective in
accordance with Section 10.10.
"Eligible Designee" means a special purpose corporation that (i) is
organized under the laws of the United States or any state thereof, (ii) is
engaged in making, purchasing or otherwise investing in commercial loans in the
ordinary course of its
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business and (iii) issues (or the parent of which issues) commercial paper rated
as least A- 1 or the equivalent thereof by S&P or P-1 or the equivalent thereof
by Moody's.
"Entertainment" means Marvel Entertainment Group, Inc., a Delaware
corporation.
"Entertainment's Latest Form 10-Q" means Entertainment's quarterly
report on Form 10-Q for the quarter ended June 30, 1998, as filed with the SEC
pursuant to the Exchange Act.
"Entertainment's 1997 Form 10-K/A" means Entertainment's annual report
on Form 10-K/A for 1997, as filed with the SEC pursuant to the Exchange Act.
"Environmental Laws" means any and all federal, state, local and
foreign statutes, laws, judicial decisions, regulations, ordinances, rules,
judgments, orders, decrees, plans, injunctions, permits, concessions, grants,
franchises, licenses, agreements and other governmental restrictions relating to
the environment or the effect of the environment on human health or to
emissions, discharges or releases of pollutants, contaminants, Hazardous
Substances or wastes into the environment, including (without limitation)
ambient air, surface water, ground water or land, or otherwise relating to the
manufacture, processing, distribution, use, treatment, storage, disposal,
transport or handling of pollutants, contaminants, Hazardous Substances or
wastes or the clean-up or other remediation thereof.
"ERISA" means the Employee Retirement Income Security Act of 1974, as
amended, or any successor statute.
"ERISA Group" means the Borrower, any Subsidiary and all members of a
controlled group of corporations and all trades or businesses (whether or not
incorporated) under common control which, together with the Borrower or any
Subsidiary, are treated as a single employer under Section 414 of the Internal
Revenue Code.
"Euro-Dollar Business Day" means any Domestic Business Day on which
commercial banks are open for international business (including dealings in
dollar deposits) in London.
"Euro-Dollar Lending Office" means, as to each Lender, its office,
branch or affiliate located at its address set forth in its Administrative
Questionnaire (or identified in its Administrative Questionnaire as its
Euro-Dollar Lending Office) or such other office, branch or affiliate of such
Lender as it may hereafter designate as its Euro-Dollar Lending Office by notice
to the Borrower and the Agent.
"Euro-Dollar Loan" means a Loan which bears interest at a Euro-Dollar
Rate pursuant to the applicable Notice of Borrowing or Notice of Interest Rate
Election.
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<PAGE>
"Euro-Dollar Margin" means a rate per annum equal to 6.50%, provided
that such rate shall increase to 7.00% on April 30, 1999 and shall increase by
0.50% on the last day of each three-month period thereafter.
"Euro-Dollar Rate" means a rate of interest determined pursuant to
Section 2.04(b) on the basis of a London Interbank Offered Rate.
"Euro-Dollar Reserve Percentage" means, for any day, that percentage
(expressed as a decimal) which is in effect on such day, as prescribed by the
Board of Governors of the Federal Reserve System (or any successor) for
determining the maximum reserve requirement for a member bank of the Federal
Reserve System in New York City with deposits exceeding five billion dollars in
respect of "Eurocurrency liabilities" (or in respect of any other category of
liabilities which includes deposits by reference to which the interest rate on
Euro-Dollar Loans is determined or any category of extensions of credit or other
assets which includes loans by a non-United States office of any Lender to
United States residents).
"Events of Default" has the meaning set forth in Section 6.01.
"Excess Administration Claims Loan" means a cash loan from an affiliate
of Mr. Isaac Perlmutter to the Borrower, in exchange for a five-year, unsecured
note of the Borrower; provided that (i) such loan shall be made only if the
aggregate amount of the administration expense claims incurred in connection
with the bankruptcy cases of Entertainment and its Subsidiaries exceeds
$35,000,000, (ii) the proceeds of such loan are used exclusively to pay such
administration expense claims, (iii) the principal amount of such loan shall be
equal to the amount of such excess, less the aggregate principal amount of Loans
made hereunder the proceeds of which are used to repay such administration
expense claims and (iv) such loan shall bear interest at a rate equal to the
Base Rate applicable to the Base Rate Loans hereunder.
"Exchange Act" means the Securities Exchange Act of 1934, as amended
from time to time.
"Excluded Group" means a "group" (as such term is used in Sections
13(d) and 14(d) of the Exchange Act) that (i) includes one or more Excluded
Persons; provided that the voting power of the Voting Stock of the Borrower
"beneficially owned" (as such term is used in Rule 13d-3 promulgated under the
Exchange Act) by such Excluded Persons (without attribution to such Excluded
Persons of the ownership by other members of the "group") represents a majority
of the voting power of the Voting Stock "beneficially owned" (as such term is
used in Rule 13d-3 promulgated under the Exchange Act) by such group or (ii)
exists solely by virtue of the fact that the members of such group are parties
to the Stockholders' Agreement.
"Excluded Person" means Mr. Isaac Perlmutter or Mr. Avi Arad or any
Person controlled by either or both of them.
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<PAGE>
"Exchange Act" means the Securities Exchange Act of 1934, as amended.
"Existing Letters of Credit" means the letters of credit issued before
the Closing Date pursuant to the Borrower's existing credit agreement and listed
on Schedule 1.01 hereof.
"Existing Panini Indebtedness" means the indebtedness of Panini
outstanding on the date hereof pursuant to the Restructured Panini Loan
Documents (as defined in the Plan of Reorganization).
"Facility Request" has the meaning set forth in Section 5.30.
"Federal Funds Rate" means, for any day, the rate per annum (rounded
upward, if necessary, to the nearest 1/100 of 1%) equal to the weighted average
of the rates on overnight Federal funds transactions with members of the Federal
Reserve System arranged by Federal funds brokers on such day, as published by
the Federal Reserve Bank of New York on the Domestic Business Day next
succeeding such day; provided that (i) if such day is not a Domestic Business
Day, the Federal Funds Rate for such day shall be such rate on such transactions
on the next preceding Domestic Business Day as so published on the next
succeeding Domestic Business Day and (ii) if no such rate is so published on
such next succeeding Domestic Business Day, the Federal Funds Rate for such day
shall be the average rate quoted to UBS AG, Stamford Branch, on such day on such
transactions, as determined by the Agent.
"Fee Letter" means the fee letter with respect to this Agreement dated
as of June 26, 1998 among the Borrower, the Agent and the Arranger.
"Fiscal Quarter" means a fiscal quarter of the Borrower.
"Fiscal Year" means a fiscal year of the Borrower.
"Follow-on Securities Notice" has the meaning specified in Section
5.30.
"Foreign Subsidiary" means any Subsidiary organized under the laws of a
jurisdiction, and conducting substantially all of its operations, outside of the
United States, other than any such Subsidiary that shall have elected to be
treated as a partnership or a branch of the Borrower or any U.S. Subsidiary for
United States income tax purposes.
"GAAP" means generally accepted accounting principles as in effect on
the date hereof, applied on a basis consistent with the financial statements
referred to in Section 4.04(a).
"Government Obligor" means the United States federal government, any
state government, any local government or, in each case, any subdivision thereof
or any agency, department or instrumentality thereof.
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<PAGE>
"Group of Loans" means, at any time, a group of Loans consisting of (i)
all Loans which are Base Rate Loans at such time or (ii) all Euro-Dollar Loans
having the same Interest Period at such time; provided that, if a Loan of any
particular Lender is converted to or made as a Base Rate Loan pursuant to
Article 8, such Loan shall be included in the same Group or Groups of Loans from
time to time as it would have been in if it had not been so converted or made.
"Guarantee" by any Person means any obligation, contingent or
otherwise, of such Person directly or indirectly guaranteeing any Debt or other
obligation of any other Person and, without limiting the generality of the
foregoing, any obligation, direct or indirect, contingent or otherwise, of such
Person (i) to purchase or pay (or advance or supply funds for the purchase or
payment of) such Debt or other obligation (whether arising by virtue of
partnership arrangements, by virtue of an agreement to keep-well, to purchase
assets, goods, securities or services, to take-or-pay, or to maintain financial
statement conditions or otherwise), (ii) to reimburse a bank for amounts drawn
under a letter of credit for the purpose of paying such Debt or other obligation
or (iii) entered into for the purpose of assuring in any other manner the holder
of such Debt or other obligation of the payment thereof or to protect such
holder against loss in respect thereof (in whole or in part); provided that the
term "Guarantee" shall not include endorsements for collection or deposit in the
ordinary course of business. The term "Guarantee" used as a verb has a
corresponding meaning.
"Guarantor" means, subject to Section 9.08, each Person who has
executed this Agreement as a guarantor and each Person that shall have become a
Guarantor pursuant to Section 5.27(d).
"Hazardous Substances" means any toxic, radioactive, caustic or
otherwise hazardous substance, including petroleum, its derivatives and
by-products and other hydrocarbons, or any substance having any constituent
elements displaying any of the foregoing characteristics.
"Indemnitee" has the meaning set forth in Section 10.03(b).
"Initial Securities Request" has the meaning set forth in Section 5.30.
"Interest Coverage Ratio" means at any date the ratio of (i)
Consolidated EBITDA for the four consecutive Fiscal Quarters most recently ended
on or prior to such date to (ii) Consolidated Interest Expense for such period.
"Interest Period" means, with respect to each Euro-Dollar Loan, the
period commencing on the date of borrowing specified in the Notice of Borrowing
or on the date specified in an applicable Notice of Interest Rate Election and
ending one month thereafter, provided that:
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<PAGE>
(a) any Interest Period which would otherwise end on
a day which is not a Euro-Dollar Business Day shall be
extended to the next succeeding Euro-Dollar Business Day
unless such Euro-Dollar Business Day falls in another calendar
month, in which case such Interest Period shall end on the
next preceding Euro-Dollar Business Day;
(b) any Interest Period which begins on the last
Euro-Dollar Business Day of a calendar month (or on a day for
which there is no numerically corresponding day in the
calendar month at the end of such Interest Period) shall,
subject to clause (c) below, end on the last Euro- Dollar
Business Day of a calendar month; and
(c) any Interest Period which would otherwise end
after the Termination Date shall end on the Termination Date.
"Internal Revenue Code" means the Internal Revenue Code of 1986, as
amended, or any successor statute.
"Investment" means any investment in any Person, whether by means of
share purchase, capital contribution, loan, Guarantee, time deposit or otherwise
(but not including any demand deposit).
"Lender" means (i) each Lender listed on the Commitment Schedule, (ii)
each Assignee which becomes a Lender pursuant to Section 10.06(c) and (iii)
their respective successors.
"Lender Parties" means the Lenders and the Agent.
"Leverage Ratio" means, at any date, the ratio of (i) Consolidated Debt
at such date to (ii) Consolidated EBITDA for the period of four consecutive
Fiscal Quarters most recently ended on or prior to such date, provided that if
the Fiscal Quarter most recently ended on or prior to such date ended on
December 31, 1998, March 31, 1999 or June 30, 1999, Consolidated EBITDA shall be
determined on an Annualized basis.
"Lien" means, with respect to any asset, any mortgage, lien, pledge,
charge, security interest or encumbrance of any kind, or any other type of
preferential arrangement that has substantially the same practical effect as a
security interest, in respect of such asset. For purposes hereof, the Borrower
or any Subsidiary shall be deemed to own subject to a Lien any asset which it
has acquired or holds subject to the interest of a vendor or lessor under any
conditional sale agreement, capital lease or other title retention agreement
relating to such asset.
"Loan" means a loan made by a Lender pursuant to Section 2.01; provided
that, if any such loan or loans (or portions thereof) are combined or subdivided
pursuant to a Notice of Interest Rate Election, the term "Loan" shall refer to
the combined principal
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amount resulting from such combination or to each of the separate principal
amounts resulting from such subdivision, as the case may be.
"Loan Documents" means this Agreement, the Notes and the Collateral
Documents.
"Lockbox Account" means a lockbox account that has been irrevocably
assigned to the Collateral Agent pursuant to a Lockbox Letter.
"Lockbox Letter" has the meaning set forth in the Security Agreement.
"London Interbank Offered Rate" has the meaning set forth in Section
2.04(b).
"Major Casualty Proceeds" means (i) the aggregate insurance proceeds
received in connection with one or more related events by the Borrower and its
Subsidiaries and/or the Collateral Agent under any insurance policy maintained
by the Borrower or any of its Subsidiaries or (ii) any award or other
compensation with respect to any condemnation of property (or any transfer or
disposition of property in lieu of condemnation) received by the Borrower and
its Subsidiaries, if the amount of such aggregate insurance proceeds or award or
other compensation exceeds $100,000.
"Material Adverse Effect" means (i) any material adverse effect upon
the condition (financial or otherwise), results of operations, properties,
assets, business or prospects of the Borrower and its Subsidiaries, taken as a
whole; (ii) a material adverse effect on the ability of any Obligor or any other
Person to consummate the transactions contemplated by this Agreement (including
the Permanent Financing); (iii) a material adverse effect on the ability of any
Obligor to perform under this Agreement and the Notes and the other Loan
Documents; or (iv) a material adverse effect on the rights and remedies of the
Agent and the Lenders under this Agreement and the other Loan Documents.
"Material Debt" means Debt (except Debt outstanding hereunder) of the
Borrower and/or one or more of its Subsidiaries, arising in one or more related
or unrelated transactions, in an aggregate principal or face amount exceeding
$2,500,000.
"Material Financial Obligations" means a principal or face amount of
Debt (other than the Loans) and/or payment or collateralization obligations in
respect of Derivatives Obligations of the Borrower and/or one or more of its
Subsidiaries, arising in one or more related or unrelated transactions,
exceeding in the aggregate $2,500,000.
"Material Plan" means, at any time, a Plan or Plans having aggregate
Unfunded Liabilities in excess of $1,000,000.
"Merger" means the merger of Acquisition Sub with and into
Entertainment, with Entertainment as the surviving corporation.
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"Merger Agreement" means the Agreement and Plan of Merger dated as of
August 12, 1998 among Entertainment, the Borrower and Acquisition Sub.
"Moody's" means Moody's Investors Service, Inc. and any successor
thereto.
"Mortgage" means each mortgage or deed of trust, in form and substance
reasonably satisfactory to the Agent, between any Obligor party thereto, as
mortgagor or trustor, and the Agent, as mortgagee or beneficiary, entered into
pursuant hereto, in each case as amended from time to time.
"Multiemployer Plan" means, at any time, an employee pension benefit
plan within the meaning of Section 4001(a)(3) of ERISA to which any member of
the ERISA Group is then making or accruing an obligation to make contributions
or has within the preceding five plan years made contributions, including for
these purposes any Person which ceased to be a member of the ERISA Group during
such five year period.
"Net Cash Proceeds" means, with respect to any Reduction Event, an
amount (not less than zero) equal to the cash proceeds received by the Borrower
or any of its Subsidiaries from or in respect of such Reduction Event (including
any cash proceeds received as interest or similar income or other proceeds of
any noncash proceeds of any Asset Sale), less (a) any fees, costs and expenses
reasonably incurred by such Person in respect of such Reduction Event, (b) if
such Reduction Event is an Asset Sale, (i) the amount of any Debt secured by a
Lien on any asset disposed of in such Asset Sale and required to be, and
actually, discharged from the proceeds thereof and (ii) any taxes actually paid
or to be payable by such Person (as estimated by the senior financial or
accounting officer of the Borrower, giving effect to the overall tax position of
the Borrower) in respect of such Asset Sale and (c) if such Reduction Event is
the receipt of Major Casualty Proceeds and if the Borrower shall have notified
the Agent within 30 days after the receipt of such Major Casualty Proceeds of
its intent to use some or all of such Major Casualty Proceeds to repair or
replace the affected assets within 180 days after the receipt thereof, the
amount so specified by the Borrower; provided that the portion of the Net Cash
Proceeds not so used in such 180-day period shall be deemed to have been
received and shall be applied to prepayments required under Section 2.03(b) on
such 180th day; provided, further, that Major Casualty Proceeds in excess of
$1,000,000 shall be held and dispensed by the Agent in accordance with Section 5
of the Security Agreement.
"Notes" means promissory notes of the Borrower, substantially in the
form of Exhibit A hereto, evidencing the Borrower's obligation to repay the
Loans, and "Note" means any one of such promissory notes issued hereunder.
"Notice of Borrowing" has the meaning set forth in Section 2.02(a).
"Notice of Interest Rate Election" has the meaning set forth in Section
2.05(a).
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"Obligor" means the Borrower and each Guarantor.
"Outstanding Amount" means, with respect to any Lender at any time, the
aggregate outstanding principal amount of its Loans determined at such time
after giving effect to any prior assignments by or to such Lender pursuant to
Section 10.06(c).
"Panini" means Panini S.p.A., an Italian corporation and a wholly-owned
subsidiary of Entertainment.
"Panini Entities" means Panini and its direct and indirect
Subsidiaries.
"Panini Guaranty" means the Guaranty Agreement dated as of the date
hereof by the Panini Guarantors in favor of The Chase Manhattan Bank, as agent
on behalf of the holders of the Restructured Panini Indebtedness, pursuant to
which the Panini Guarantors guarantee payment in full of the Restructured Panini
Indebtedness and are liable in respect of such Restructured Panini Indebtedness
in a maximum aggregate amount of $40,000,000 (before giving effect to the Panini
Guaranty Effective Date Payment).
"Panini Guaranty Effective Date Payment" means the $13,000,000 cash
payment by the Borrower to the holders of the Existing Panini Indebtedness on
the effective date of the Plan of Reorganization, which payment shall be made
pursuant to and in accordance with the Panini Guaranty and shall reduce the
obligations of the Panini Guarantors under the Panini Guaranty.
"Panini Guarantors" means the Borrower, Entertainment, Fleer Corp., The
Asher Candy Company, Frank H. Fleer Corp., Heroes World Distribution, Inc.,
Malibu Comics Entertainment, Inc., Marvel Characters, Inc., Marvel Direct
Marketing, Inc. and Skybox International, Inc.
"Panini Indemnification Agreement" means the Indemnification Agreement
dated as of the date hereof by the Panini Guarantors in favor of the Panini
Entities and their respective successors and assigns.
"Panini Pledge Agreement" means the Pledge Agreement dated as of the
date hereof between the Borrower and The Chase Manhattan Bank, as agent,
pursuant to which Entertainment has pledged 66% of the issued and outstanding
common stock of Panini held by it to secure the Restructured Panini
Indebtedness.
"Parent" means, with respect to any Lender, any Person controlling such
Lender.
"Participant" has the meaning set forth in Section 10.06(b).
"PBGC" means the Pension Benefit Guaranty Corporation or any entity
succeeding to any or all of its functions under ERISA.
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"Permanent Financing" means (i) the Permitted Notes and/or (ii) the
Permitted Bank Facility.
"Permitted Bank Facility" means a loan facility the proceeds of which
are used exclusively to refinance (or together with an issuance of Permitted
Notes, to refinance) the Notes in their entirety and to pay fees and expenses
incurred in connection with such loan facility.
"Permitted Notes" means unsecured notes of the Borrower the proceeds of
which are used exclusively to refinance the Notes or any portion thereof and to
pay fees and expenses incurred in connection with the issuance of such notes.
"Person" means an individual, a corporation, a limited liability
company, a partnership, an association, a trust or any other entity or
organization, including a government or political subdivision or an agency or
instrumentality thereof.
"Pinnacle Acquisition" means the acquisition by the Borrower on or
prior to October 30, 1998 of all or substantially all of the assets of Pinnacle
Brands Inc. and its subsidiaries; provided that the aggregate consideration
therefor does not exceed $3,000,000.
"Plan" means, at any time, an employee pension benefit plan (other than
a Multiemployer Plan) which is covered by Title IV of ERISA or subject to the
minimum funding standards under Section 412 of the Internal Revenue Code and
either (i) is maintained, or contributed to, by any member of the ERISA Group
for employees of any member of the ERISA Group or (ii) has at any time within
the preceding five years been maintained, or contributed to, by any Person which
was at such time a member of the ERISA Group for employees of any Person which
was at such time a member of the ERISA Group.
"Plan of Reorganization" means the Fourth Amended Joint Plan of
Reorganization Proposed by the Secured Lenders and Toy Biz, Inc. approved by the
United States District Court for the District of Delaware on July 31, 1998, as
amended by the Order Approving Technical Amendments to the Fourth Amended Joint
Plan of Reorganization Proposed by the Secured Lenders and the Toy Biz, Inc.
approved by the United States District Court for the District of Delaware on
September 17, 1998.
"Preferred Stock" means the Borrower's 8% Cumulative Convertible
Exchangeable Preferred Stock, par value $.01 per share.
"Prime Rate" means the rate of interest publicly announced by UBS AG,
Stamford Branch in Stamford, Connecticut from time to time as its Prime Rate.
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"Property Insurance Policy" means any insurance policy maintained by
the Borrower or any of its Subsidiaries covering losses with respect to tangible
real or personal property or improvements or losses from business interruption.
"Quarterly Payment Dates" means each March 31, June 30, September 30
and December 31.
"Reduction Event" means (i) any Asset Sale; (ii) receipt of Major
Casualty Proceeds; (iii) incurrence after the Closing Date of any Debt by the
Borrower or any of its Subsidiaries (including the Permanent Financing), other
than Debt referred to in clauses (i) through (iv), inclusive, and clause (vi) of
Section 5.10 or (iv) any Securities Issuance after the Closing Date.
"Registration Rights Agreement" means the Registration Rights Agreement
dated as of the Closing Date among the Borrower and certain holders of its
capital stock.
"Regulation U" means Regulation U of the Board of Governors of the
Federal Reserve System, as in effect from time to time.
"Required Lenders" means, at any time, Lenders having at least a
majority in aggregate amount of the Credit Exposures at such time.
"Restricted Payment" means (i) any dividend or other distribution on
any shares of the Borrower's capital stock (except dividends payable solely in
shares of its capital stock of the same class, and having the same terms, as the
capital stock on which such dividends are paid), (ii) any payment on account of
the purchase, redemption, retirement or acquisition of (a) any shares of the
Borrower's capital stock or (b) any option, warrant or other right to acquire
shares of the Borrower's capital stock (but not including payments of principal,
premium (if any) or interest made pursuant to the terms of convertible debt
securities prior to conversion) or (iii) any repayment or prepayment of the
principal of, or any purchase, redemption, retirement or acquisition of, all or
any portion of the Excess Administration Claims Loan.
"Restructured Panini Indebtedness" means the Existing Panini
Indebtedness, as such indebtedness is restructured in accordance with, and upon
the consummation of, the Plan of Reorganization.
"Reuters Screen LIBO Page" has the meaning set forth in Section
2.04(b).
"Revolving Credit Agreement" means the $50,000,000 Credit Agreement
dated as of the date hereof among the Borrower, the Guarantors, the lenders
party thereto, the issuers referred to therein and UBS AG, Stamford Branch, as
agent for such lenders, as amended from time to time.
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"Revolving Documents" means the Revolving Credit Agreement, the
Revolving Notes and all other agreements and documents entered into by the
Borrower or any Subsidiary in connection therewith.
"Revolving Loans" means loans made to the Borrower under the Revolving
Credit Agreement.
"Revolving Notes" means notes issued by the Borrower under the
Revolving Credit Agreement.
"Sale-Leaseback Transaction" means any arrangement with any Person
providing for the leasing by the Borrower or any Subsidiary of any property
that, or of any property similar to and used for substantially the same purposes
as any other property that, has been or is to be sold, assigned, transferred or
otherwise disposed of by the Borrower or any of its Subsidiaries to such Person
with the intention of entering into such a lease.
"S&P" means Standard and Poor's Ratings Services, a division of The
McGraw Hill Companies or any successor thereto.
"SEC" means the Securities and Exchange Commission.
"Secured Parties" has the meaning set forth in the Security Agreement.
"Securities Act" means the Securities Act of 1933, as amended.
"Securities Issuance" means (i) any issuance and sale in a public or
private offering or in a private placement of (x) debt securities (whether
senior, senior subordinated, subordinated or otherwise), including the Permanent
Financing, or (y) equity securities, in each case by the Borrower or any of its
Subsidiaries and (ii) any exercise by any party of warrants to acquire any
securities of the Borrower or any of its Subsidiaries.
"Security Agreement" means the Security Agreement dated as of the
Closing Date among the Borrower, the Guarantors and the Agent, substantially in
the form of Exhibit B hereto, as amended from time to time.
"Stockholders' Agreement" means the agreement, dated as of the Closing
Date, among the Company, the secured creditors of Entertainment party thereto,
Mr. Isaac Perlmutter and certain of his affiliates, Mr. Avi Arad and the
affiliates of Mr. Mark Dickstein party thereto.
"Subsidiary" means, as to any Person, any corporation or other entity
of which securities or other ownership interests having ordinary voting power to
elect a majority of the board of directors or other persons performing similar
functions are at the time directly or indirectly owned by such Person. Unless
otherwise specified, "Subsidiary" means a
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Subsidiary of the Borrower; provided that none of the Panini Entities shall be
considered to be a Subsidiary of the Borrower for any purpose hereunder.
"Take-Out Banks" means one or more banks, reasonably satisfactory to
the Lenders, engaged by the Borrower to place the Take-Out Securities, the
proceeds of which will be used to prepay in whole or in part the Loans pursuant
to Section 2.03.
"Take-Out Securities" has the meaning set forth in Section 5.30.
"Temporary Cash Investment" means any Investment in (i) direct
obligations of the United States or any agency thereof or obligations guaranteed
by the United States or any agency thereof, (ii) commercial paper rated at least
A-1 by S&P's Ratings Services and at least P-1 by Moody's, (iii) time deposits
with, including certificates of deposit issued by, any office located in the
United States of any bank or trust company which is organized or licensed under
the laws of the United States or any State thereof and has capital, surplus and
undivided profits aggregating at least $1,000,000,000 or (iv) repurchase
agreements with respect to securities described in clause (i) above entered into
with an office of a bank or trust company meeting the criteria specified in
clause (iii) above; provided in each case that such Investment matures within
one year after it is acquired by the Borrower or a Subsidiary.
"Termination Date" means the earlier of (i) September 27, 1999 or, if
such day is not a Euro-Dollar Business Day, the next preceding Euro-Dollar
Business Day or (ii) the closing date of the Permanent Financing.
"Transaction Documents" means the Merger Agreement, the Panini
Guarantee, the Panini Indemnification Agreement, the Stockholders' Agreement,
the Warrant Agreements, the Preferred Stock and all related or ancillary
documents, instruments or
agreements to be executed in connection therewith.
"Unfunded Liabilities" means, with respect to any Plan at any time, the
amount (if any) by which (i) the value of all benefit liabilities under such
Plan, determined on a plan termination basis using the assumptions prescribed by
the PBGC for purposes of Section 4044 of ERISA, exceeds (ii) the fair market
value of all Plan assets allocable to such liabilities under Title IV of ERISA
(excluding any accrued but unpaid contributions), all determined as of the then
most recent valuation date for such Plan, but only to the extent that such
excess represents a potential liability of a member of the ERISA Group to the
PBGC or any other Person under Title IV of ERISA.
"United States" means the United States of America.
"U.S. Subsidiary" means a Subsidiary other than a Foreign Subsidiary.
"Voting Stock" means, with respect to any Person, securities of any
class of Capital Stock of such Person entitling the holders thereof (whether at
all times or only so
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long as no senior class of stock or other relevant equity interest has voting
power by reason of any contingency) to vote in the election of members of the
board of directors of such Person.
"Warrant Agreements" means (i) the Warrant Agreement dated as of the
Closing Date relating to four-year warrants (referred to in the Plan of
Reorganization as "Plan Warrants") to purchase up to 1,750,000 shares of common
stock of the Borrower; (ii) the Warrant Agreement dated as the Closing Date
relating to three-year warrants (referred to in the Plan of Reorganization as
"Stockholder Series A Warrants") to purchase 4,000,000 shares of common stock of
the Borrower; (iii) the Warrant Agreement dated as of the Closing Date relating
to six-month warrants (referred to in the Plan of Reorganization as "Stockholder
Series B Warrants") to purchase 3,000,000 shares of Preferred Stock of the
Borrower; and (iv) the Warrant Agreement dated as of the Closing Date relating
to four-year warrants (referred to in the Plan of Reorganization as "Stockholder
Series C. Warrants") to purchase 7,000,000 shares of common stock of the
Borrower.
SECTION 1.02. Accounting Terms and Determinations. Unless otherwise
specified herein, all accounting terms used herein shall be interpreted, all
accounting determinations hereunder shall be made, and all financial statements
required to be delivered hereunder shall be prepared in accordance with GAAP.
ARTICLE 2
THE CREDITS
SECTION 2.01. Commitments to Lend. Subject to the terms and conditions
set forth in this Agreement, each Lender severally agrees to make Loans to the
Borrower pursuant to this Section on the Closing Date in an aggregate principal
amount not to exceed such Lender's Commitment. Each Borrowing hereunder shall be
in an aggregate amount of $25,000,000 or any larger multiple of $5,000,000 and
shall be made from the Lenders ratably in proportion to their respective
Commitments. The Loans are not revolving in nature and any Loans repaid or
prepaid may not be reborrowed.
SECTION 2.02. Method of Borrowing. (a) The Borrower shall give the
Agent notice (the "Notice of Borrowing") not later than 10:30 A.M. (Stamford,
Connecticut time) on (x) the Closing Date, if all Loans are to be made as Base
Rate Loans and (y) the third Euro-Dollar Business Day before the Closing Date,
if any Loans are to be made as Euro-Dollar Loans, specifying:
(i) the Closing Date, which shall be a Domestic Business
Day, if all Loans are to be made as Base Rate Loans, or a
Euro-Dollar Business Day, if any Loans are to be made as
Euro-Dollar Loans;
(ii) the aggregate amount of each Borrowing; and
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(iii) whether the Loans comprising such Borrowing are to
bear interest initially at the Base Rate or the Euro-Dollar
Rate.
In no event shall the total number of Groups of Loans comprised of Euro-Dollar
Borrowings at any one time outstanding exceed three.
(b) Promptly after receiving the Notice of Borrowing, the Agent shall
notify each Lender of the contents thereof and of such Lender's ratable share of
each Borrowing and such Notice of Borrowing shall not thereafter be revocable by
the Borrower.
(c) Not later than 12:00 Noon (Stamford, Connecticut time) on the
Closing Date, each Lender shall make available its ratable share of each
Borrowing, in Federal or other funds immediately available in New York City, to
the Agent at its address specified in or pursuant to Section 10.01. Unless the
Agent determines that any applicable condition specified in Section 3.01 or 3.02
has not been satisfied, the Agent will make the funds so received from the
Lenders available to the Borrower at the Agent's aforesaid address.
(d) Unless the Agent shall have received notice from a Lender before
the date of the Borrowings that such Lender will not make available to the Agent
such Lender's share of the Borrowings, the Agent may assume that such Lender has
made such share available to the Agent on the date of the Borrowings in
accordance with Section 2.02(c) and the Agent may, in reliance upon such
assumption, make available to the Borrower on such date a corresponding amount.
If and to the extent that such Lender shall not have so made such share
available to the Agent, such Lender and the Borrower severally agree to repay to
the Agent forthwith on demand such corresponding amount together with interest
thereon, for each day from the date such amount is made available to the
Borrower until the date such amount is repaid to the Agent, at (i) if such
amount is repaid by the Borrower, a rate per annum equal to the higher of the
Federal Funds Rate and the interest rate applicable to such Borrowing pursuant
to Section 2.04 and (ii) if such amount is repaid by such Lender, the Federal
Funds Rate. If such Lender shall repay to the Agent such corresponding amount,
the Borrower shall not be required to repay such amount and the amount so repaid
by such Lender shall constitute such Lender's Loan included in such Borrowing
for purposes of this Agreement.
SECTION 2.03. Maturity of Loans, Mandatory Prepayments. (a) Each Loan
shall mature, and the principal amount thereof shall be due and payable
(together with interest accrued thereon), on the Termination Date.
(b) If the Borrower or any of its Subsidiaries receives any Net Cash
Proceeds in respect of any Reduction Event, the Borrower shall (i) immediately
upon receipt of Net Cash Proceeds of the Permanent Financing (or any portion
thereof) or any Securities Issuance or (ii) as soon as possible but, in any
event, within two days of the Borrower's receipt of Net Cash Proceeds from
sources other than those referred to in clause (i),
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prepay Loans in an amount equal to such Net Cash Proceeds; provided that such
Net Cash Proceeds shall be applied first, to the prepayment of Base Rate Loans
and second, to the prepayment of Euro-Dollar Loans and, provided further that if
any prepayment of Euro- Dollar Loans on account of any Asset Sale would
otherwise be required to be made under this subsection (b) on a day other than
the last day of the Interest Period then applicable to such Euro-Dollar Loans,
then the Borrower may pay the amount required to be paid in respect of such
Euro-Dollar Loans to the Agent, to be held in escrow by the Agent and invested
in Temporary Cash Investments as the Borrower may direct, until the last day of
such Interest Period, at which time such prepayment shall be made. The Borrower
shall give the Agent at least one Domestic Business Day's notice of each
prepayment of Base Rate Loans and at least three Euro-Dollar Business Day's
notice of each prepayment of Euro-Dollar Loans required to be made pursuant to
this subsection (b).
(c) Promptly after receiving a notice of prepayment pursuant to this
Section, the Agent shall notify each Lender of the contents thereof and of such
Lender's ratable share of such prepayment, and such notice shall not thereafter
be revocable by the Borrower.
SECTION 2.04. Interest Rates. (a) Each Base Rate Loan shall bear
interest on the outstanding principal amount thereof, for each day from the date
such Loan is made until it becomes due, at a rate per annum equal to the sum of
(x) the Base Rate Margin for such day plus (y) the Base Rate for such day. Such
interest shall be payable quarterly in arrears on each Quarterly Payment Date.
Any overdue principal of or interest on any Base Rate Loan shall bear interest,
payable on demand, for each day until paid at a rate per annum equal to the sum
of 2% plus the rate otherwise applicable to such Base Rate Loan for such day.
(b) Each Euro-Dollar Loan shall bear interest on the outstanding
principal amount thereof, for each day during each Interest Period applicable
thereto, at a rate per annum equal to the sum of (x) the Euro-Dollar Margin for
such day plus (y) the Adjusted London Interbank Offered Rate applicable to such
Interest Period. Such interest shall be payable for each Interest Period on the
last day thereof.
The "Adjusted London Interbank Offered Rate" applicable to any Interest
Period means a rate per annum equal to the quotient obtained (rounded upward, if
necessary, to the next higher 1/100 of 1%) by dividing (i) the applicable London
Interbank Offered Rate by (ii) 1.00 minus the Euro-Dollar Reserve Percentage.
The "London Interbank Offered Rate" means, for any Interest Period, the
arithmetic mean (rounded upward, if necessary, to the nearest 1/100 of 1%) of
the offered rates for deposits in Dollars, for a period approximately equal to
such Interest Period (or Overdue Period) and in an amount approximately equal to
the average principal amount of the applicable Loans, quoted on the second
Euro-Dollar Business Day prior to the first day of such Interest Period (or
Overdue Period) as such rates appear on the display designated as page "LIBO" on
the Reuters Monitor Money Rates Service (or such other page as may replace the
"LIBO" page on that service for the purpose of displaying
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London interbank offered rates of major banks) ("Reuters Screen LIBO Page") as
of 11:00 A.M. (London time) on such date.
(c) Any overdue principal of or interest on any Euro-Dollar Loan shall
bear interest, payable on demand, for each day until paid at a rate per annum
equal to the higher of (i) the sum of 2% plus the Euro-Dollar Margin for such
day plus the Adjusted London Interbank Offered Rate applicable to such Loan on
the day before such payment was due and (ii) the sum of 2% plus the rate
applicable to Base Rate Loans for such day (or, if the circumstances described
in clause 8.01(a) or (b) shall exist, at a rate per annum equal to the sum of 2%
plus the rate applicable to Base Rate Loans for such day).
(d) The Agent shall determine each interest rate applicable to the
Loans hereunder. The Agent shall promptly notify the Borrower and the
participating Lenders of each rate of interest so determined, and its
determination thereof shall be conclusive in the absence of manifest error.
SECTION 2.05. Method of Electing Interest Rates. (a) The Loans shall
bear interest initially at the type of rate specified by the Borrower in the
Notice of Borrowing. Thereafter, the Borrower may from time to time elect to
change or continue the type of interest rate borne by a Group of Loans (subject
to subsection (d) and the provisions of Article 8), as follows:
(i) if such Loans are Base Rate Loans, the Borrower may
elect to convert them to Euro-Dollar Loans as of any
Euro-Dollar Business Day, and
(ii) if such Loans are Euro-Dollar Loans, the Borrower
may elect to convert such Loans to Base Rate Loans as of any
Domestic Business Day or elect to continue such Loans as
Euro-Dollar Loans for an additional Interest Period, subject
to Section 2.10 if any such conversion is effective on any day
other than the last day of an Interest Period applicable to
such Loans.
Each such election shall be made by delivering a notice (a "Notice of Interest
Rate Election") to the Agent not later than 10:30 A.M. (Stamford, Connecticut
time) on the third Euro-Dollar Business Day before the conversion or
continuation selected in such notice is to be effective. A Notice of Interest
Rate Election may, if it so specifies, apply to only a portion of the aggregate
principal amount of the relevant Group of Loans; provided that (i) such portion
is allocated ratably among the Loans comprising such Group and (ii) the portion
to which such Notice applies, and the remaining portion to which it does not
apply, are each at least $25,000,000 (unless such portion is comprised of Base
Rate Loans). If no such notice is timely received before the end of an Interest
Period for any Group of Euro-Dollar Loans, the Borrower shall be deemed to have
elected that such Group of Loans be converted to Base Rate Loans at the end of
such Interest Period.
(b) Each Notice of Interest Rate Election shall specify:
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(i) the Group of Loans (or portion thereof) to which such
notice applies;
(ii) the date on which the conversion or continuation
selected in such notice is to be effective, which shall comply
with the applicable clause of subsection (a) above;
(iii) if the Loans comprising such Group are to be
converted, the new type of Loans.
(c) Promptly after receiving a Notice of Interest Rate Election from
the Borrower pursuant to subsection (a) above, the Agent shall notify each
Lender of the contents thereof and such notice shall not thereafter be revocable
by the Borrower.
(d) The Borrower shall not be entitled to elect to convert any Loans
to, or continue any Loans for an additional Interest Period as, Euro-Dollar
Loans if (i) the aggregate principal amount of the Group of Euro-Dollar Loans
created or continued as a result of such election would be less than $25,000,000
or (ii) a Default shall have occurred and be continuing when the Borrower
delivers notice of such election to the Agent.
(e) If any Loan is converted to a different type of Loan, the Borrower
shall pay, on the date of such conversion, the interest accrued to such date on
the principal amount being converted.
SECTION 2.06. [Intentionally omitted].
SECTION 2.07. Mandatory Termination of Commitments. The Commitments
shall terminate on the earlier of (i) the Closing Date, immediately after giving
effect to the making of the Loans to be made on the Closing Date and (ii) the
close of business (New York City Time) on October 4, 1998.
SECTION 2.08. Optional Prepayments. (a) Subject in the case of
Euro-Dollar Loans to Section 2.10, the Borrower may (i) upon at least one
Domestic Business Day's notice to the Agent, prepay any Group of Base Rate Loans
or (ii) upon at least three Euro-Dollar Business Days' notice to the Agent,
prepay any Group of Euro-Dollar Loans, in each case in whole at any time, or
from time to time in part in amounts aggregating $2,000,000 or any larger
multiple of $1,000,000, by paying the principal amount to be prepaid together
with interest accrued thereon to the date of prepayment. Each such optional
prepayment shall be applied to prepay ratably the Loans of the several Lenders
included in such Group of Loans. Loans (or portions thereof) that are prepaid
may not be reborrowed.
(b) Promptly after receiving a notice of prepayment pursuant to this
Section, the Agent shall notify each Lender of the contents thereof and of such
Lender's ratable share of such prepayment, and such notice shall not thereafter
be revocable by the Borrower.
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SECTION 2.09. General Provisions as to Payments. (a) The Borrower shall
make each payment of principal of, and interest on, the Loans not later than
12:00 Noon (Stamford, Connecticut time) on the date when due, in Federal or
other funds immediately available in Stamford, Connecticut, to the Agent at its
address specified in or pursuant to Section 10.01. The Agent will promptly
distribute to each Lender its ratable share of each such payment received by the
Agent for the account of the Lenders. Whenever any payment of principal of, or
interest on, the Base Rate Loans or any payment of fees shall be due on a day
which is not a Domestic Business Day, the date for payment thereof shall be
extended to the next succeeding Domestic Business Day. Whenever any payment of
principal of, or interest on, the Euro-Dollar Loans shall be due on a day which
is not a Euro-Dollar Business Day, the date for payment thereof shall be
extended to the next succeeding Euro-Dollar Business Day unless such Euro-Dollar
Business Day falls in another calendar month, in which case the date for payment
thereof shall be the next preceding Euro-Dollar Business Day. If the date for
any payment of principal is extended by operation of law or otherwise, interest
thereon shall be payable for such extended time.
(b) Unless the Borrower notifies the Agent before the date on which
any payment is due to the Lenders hereunder that the Borrower will not make such
payment in full, the Agent may assume that the Borrower has made such payment in
full to the Agent on such date and the Agent may, in reliance on such
assumption, cause to be distributed to each Lender on such due date an amount
equal to the amount then due such Lender. If and to the extent that the Borrower
shall not have so made such payment, each Lender shall repay to the Agent
forthwith on demand such amount distributed to such Lender together with
interest thereon, for each day from the date such amount is distributed to such
Lender until the date such Lender repays such amount to the Agent, at the
Federal Funds Rate.
SECTION 2.10. Funding Losses. If the Borrower makes any payment of
principal with respect to any Euro-Dollar Loan or any Euro-Dollar Loan is
converted to a Base Rate Loan (whether such payment or conversion is pursuant to
Article 2, 6 or 8 or otherwise) on any day other than the last day of an
Interest Period applicable thereto, or the last day of an applicable period
fixed pursuant to Section 2.04(c), or if the Borrower fails to borrow, prepay,
convert or continue any Euro-Dollar Loan after notice has been given to any
Lender in accordance with Section 2.02(a), or 2.09, the Borrower shall reimburse
each Lender within 15 days after written demand for any resulting loss or
expense incurred by it (or by an existing or prospective Participant in the
related Loan), including (without limitation) any loss incurred in obtaining,
liquidating or employing deposits from third parties, but excluding loss of
margin for the period after such payment or conversion or failure to borrow,
prepay, convert or continue; provided that such Lender shall have delivered to
the Borrower a certificate setting forth in reasonable detail calculations of
the amount of such loss or expense, which certificate shall be conclusive in the
absence of manifest error.
SECTION 2.11. Computation of Interest and Fees. Interest based on the
Prime Rate hereunder shall be computed on the basis of a year of 365 days (or
366 days in a leap
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year) and paid for the actual number of days elapsed (including the first day
but excluding the last day). All other interest and fees shall be computed on
the basis of a year of 360 days and paid for the actual number of days elapsed
(including the first day but excluding the last day).
SECTION 2.12. Notes. (a) The Borrower's obligation to repay the Loans
of each Lender shall be evidenced by a single Note payable to the order of such
Lender for the account of its Applicable Lending Office.
(b) Each Lender may, by notice to the Borrower and the Agent, request
that the Borrower's obligation to repay such Lender's Loans of a particular type
be evidenced by a separate Note. Each such Note shall be in substantially the
form of Exhibit A hereto with appropriate modifications to reflect the fact that
it relates solely to Loans of the relevant type. Each reference in this
Agreement to the "Note" of such Lender shall be deemed to refer to and include
any or all of such Notes, as the context may require.
(c) Promptly after it receives each Lender's Note pursuant to Section
3.01(a), the Agent shall forward such Note to such Lender. Each Lender shall
record the date, amount and type of each Loan made by it and the date and amount
of each payment of principal made by the Borrower with respect thereto, and may,
if such Lender so elects in connection with any transfer or enforcement of its
Note, endorse on the schedule forming a part thereof appropriate notations to
evidence the foregoing information with respect to each such Loan then
outstanding; provided that a Lender's failure to make (or any error in making)
any such recordation or endorsement shall not affect the Borrower's obligations
hereunder or under the Notes. Each Lender is hereby irrevocably authorized by
the Borrower so to endorse its Note and to attach to and make a part of its Note
a continuation of any such schedule as and when required.
ARTICLE 3
CONDITIONS
SECTION 3.01. Closing. The Closing Date shall occur on the first date
on which all the following conditions have been satisfied (or waived in
accordance with Section 10.05), it being understood that with respect to the
conditions set forth in clauses (b), (c), (g), (j), (k), (q) through (s) and (v)
through (x), each Lender shall be deemed to have determined that such conditions
have been satisfied unless the Agent shall have received notice from such Lender
prior to the Closing Date that such Lender does not consider such conditions to
have been satisfied (or, solely with respect to the conditions set forth in
clauses (b), (c), (g), (s), (v) and (x), the Lenders shall not have received any
documents referred to therein):
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<PAGE>
(a) the Agent shall have received a duly executed Note for the account
of each Lender dated on or before the Closing Date and complying with the
provisions of Section 2.12;
(b) the Agent shall have received (i) an opinion of Battle Fowler LLP,
counsel for the Obligors, substantially in the form of Exhibit C hereto and (ii)
an opinion of William H. Hardie, III, General Counsel of the Borrower,
substantially in the form of Exhibit D hereto, each dated the Closing Date and
covering such additional matters relating to the transactions contemplated
hereby as the Required Lenders may reasonably request;
(c) the Agent shall have received an opinion of Davis Polk & Wardwell,
special counsel for the Agent, substantially in the form of Exhibit E hereto,
dated the Closing Date and covering such additional matters relating to the
transactions contemplated hereby as the Required Lenders may reasonably request;
(d) the Agent shall have received duly executed counterparts of each of
the Collateral Documents, together with (i) evidence satisfactory to the Agent
of the effectiveness and perfection (to the extent required thereby) of the
Liens contemplated thereby, including the filing of UCC-1's and the delivery of
any promissory notes and stock certificates comprising the Collateral and (ii)
opinions of Wolf, Block, Schorr and Solis-Cohen, special intellectual property
counsel for the Obligors; Gallagher & Kennedy, special Arizona counsel for the
Obligors; Smith, Stratton, Wise, Heher & Brennan, special New Jersey counsel for
the Obligors; and Stoel Rives LLP, special Washington counsel for the Obligors,
substantially in the forms of Exhibits F, G. H and I;
(e) the Agent shall have received a true, complete and correct copy of
each Transaction Document as in effect on the Closing Date, certified as such by
a senior officer of the Borrower;
(f) all conditions to the closing of the transactions contemplated by
the Transaction Documents and the Plan of Reorganization to be consummated on
the Closing Date as set forth in the Transaction Documents and the Plan of
Reorganization shall have been satisfied (without waiver, amendment or
modification, unless consented to by the Lenders), and all such transactions
(including, without limitation, the consummation of the Merger) shall have been,
or are being, consummated prior to or simultaneously with the Closing Date;
(g) the Agent shall have received each opinion, report and other
document required to be delivered by any Person pursuant to the Transaction
Documents on the Closing Date, with a letter from each Person delivering any
such opinion, report and other document authorizing reliance thereon by the
Agent and the Lenders, all in form and substance satisfactory to the Lenders;
765748.1 10/9/98 7:17p
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<PAGE>
(h) the fact that, and receipt by the Agent of a certificate of the
chief executive officer or chief financial officer of the Borrower to the effect
that, (x) the Borrower shall have received cash proceeds of not less than
$90,000,000 from the issuance of the Preferred Stock, (y) the Revolving Credit
Agreement and the other Revolving Documents shall have been executed and
delivered by the parties thereto and shall be in full force and effect and all
conditions to the closing thereunder shall have been satisfied and (z) on the
Closing Date, after giving effect to the consummation of transactions
contemplated by the Transaction Documents and the Plan of Reorganization, to be
consummated on the Closing Date (1) no Default shall have occurred and be
continuing and (2) the representations and warranties of the Obligors contained
in the Loan Documents are true and correct on and as of the Closing Date;
(i) There shall not have occurred a material adverse change in the
business, assets, liabilities, operations, condition (financial or otherwise) or
prospects of Borrower and its Subsidiaries, taken as a whole, since June 30,
1998;
(j) the Agent shall have received evidence satisfactory to the Lenders
of the insurance coverage required by Section 5.03(b) and the Collateral
Documents;
(k) there shall be no litigation or administrative proceedings or other
legal or regulatory developments, actual or threatened in writing, that, in the
judgment of the Lenders, (i) could reasonably be expected to have a Material
Adverse Effect, or (ii) would be materially inconsistent with the assumptions
underlying the forecasts provided to the Agent prior to June 26, 1998;
(l) (i) all outstanding Debt and other obligations owed by the Borrower
or any of its Subsidiaries contemplated by the Plan of Reorganization or the
Transaction Documents to be repaid on or prior to the Closing Date shall have
been repaid or arrangements satisfactory to the Agent for the repayment thereof
shall have been made, (ii) all commitments in respect thereof shall have been
terminated or arrangements satisfactory to the Agent for the termination thereof
shall have been made and (iii) all Liens securing such obligations and all
Guarantees thereof shall have been released or arrangements satisfactory to the
Agent for such release shall have been made;
(m) the Lenders shall be reasonably satisfied in all respects (i) with
the terms and conditions of any Debt or other obligations owed by the Borrower
or any of its Subsidiaries to remain outstanding after the Closing Date and (ii)
that the Borrower and its Subsidiaries are not subject to contractual or other
restrictions that would be violated by the contemplated transactions, including
the granting of security interests and guarantees and payment of dividends by
Subsidiaries;
(n) (i) all anti-trust and other governmental, shareholder and third
party consents and approvals necessary or, to the extent requested by the Agent
in writing, reasonably desirable, in connection with the Plan of Reorganization
and the related transactions contemplated hereby shall have been obtained and
all applicable waiting periods shall have
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<PAGE>
expired without any action to affect the Plan of Reorganization and (ii) the
confirmation order with respect to the Plan of Reorganization shall have been
duly entered, shall not have been modified except as disclosed in writing to the
Lenders prior to the date hereof and shall be in full force and effect;
(o) the fact that (i) there shall not be any disruption or change in
financial, banking or capital markets or in the regulatory environment after
September 15, 1998 that in the good faith judgment of the Agent or the Arranger
could adversely affect the syndication of the Commitments or the Loans and (ii)
the Borrower shall have cooperated with syndication efforts, including, without
limitation, by promptly providing the Agent, the Arranger, their respective
affiliates and the Lenders with all information reasonably deemed necessary to
complete successfully such syndication;
(p) receipt by the Agent and the Lenders of all reasonable costs, fees,
expenses and other amounts (including, without limitation, reasonable legal fees
and expenses and other compensation payable to any of the foregoing on or prior
to the Closing Date in connection with the Loan Documents;
(q) there shall be no facts, events or circumstances which are
inconsistent with the written information provided to the Agent or the Arranger
prior to June 26, 1998 that come to the attention of the Lenders after such date
and which, in their good faith determination, materially adversely affect the
business, debt service capacity, tax position, or financial condition,
operations or prospects of the Borrower and its Subsidiaries, taken as a whole,
or the consummation of the transactions contemplated hereby;
(r) the Lenders shall be reasonably satisfied with the status of all
labor, tax, employee benefit and health and safety matters involving the
Borrower and its Subsidiaries;
(s) (i) the Lenders shall have received the most recently completed
audited consolidated and unaudited consolidating balance sheets of, and related
audited consolidated and unaudited consolidating statements of income,
stockholders' equity and cash flows for the Borrower and Entertainment, which
financial statements shall not be materially inconsistent with the forecasts for
such periods provided to the Agent prior to June 26, 1998;
(ii) the Lenders shall have received (x) a pro forma consolidated
balance sheet and the related pro forma consolidated statements of
income and cash flows of the Borrower and its Consolidated Subsidiaries
as of June 30, 1998 and for the six months then ended and (y) pro forma
consolidated statements of income and cash flows of the Borrower and
its Consolidated Subsidiaries for the Fiscal Year ended December 31,
1997, in each case giving effect to the consummation of the
transactions contemplated by the Plan of Reorganization and the
Transaction Documents to be consummated on or prior to the Closing Date
and all related
765748.1 10/9/98 7:17p
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transactions, which pro forma financial statements shall be reasonably
satisfactory to the Lenders;
(iii) the Lenders shall have received projected consolidated
balance sheets of the Borrower and its Subsidiaries as of December 31,
1998, December 31, 1999, December 31, 2000 and December 31, 2001 and
projected quarterly statements of income and cash flow for each of the
Fiscal Years then to be ended, which projections shall (A) be prepared
by the Borrower in good faith on the basis of information and
assumptions that the Borrower believes to be reasonable as of the date
of such projections, (B) be reasonably satisfactory to the Lenders and
(C) demonstrate that the financial covenants set forth in Sections 5.11
through 5.15 shall be satisfied;
(iv) the Lenders shall have received a detailed financial model
for the Fiscal Years through 2001, which shall be in form and substance
satisfactory to the Lenders; and
(v) the Lenders shall be satisfied after the receipt of the
information provided pursuant to clauses (i), (ii) and (iii) above that
in their reasonable judgment the amount of committed and existing
financing available to the Borrower shall be sufficient to meet the
ongoing financing needs of the Borrower;
(t) there shall exist no event of default (or condition which would
constitute an event of default with the giving of notice or the passage of time
or both) under any capital stock, financing agreements, lease agreements or
other contracts which could reasonably be expected to have a Material Adverse
Effect;
(u) All material contracts of the Borrower and its Subsidiaries
(including, without limitation, material licensing contracts) and the treatment
thereof (including, without limitation, any rejection, assumption or
renegotiation thereof) in connection with the consummation of the Plan of
Reorganization shall be reasonably satisfactory to the Lenders;
(v) the Lenders shall have completed their due diligence inspection,
testing and review of the assets and liabilities of the Borrower and its
Subsidiaries and shall be reasonably satisfied with the results thereof in all
respects;
(w) the Borrower shall have engaged the Take-Out Banks and shall have
used its best efforts to prepare an offering memorandum relating to the issuance
and sale of the Take-Out Securities;
(x) all other documentation, including, without limitation, any
employment agreement, management compensation arrangement, insurance or other
financing arrangement of the Borrower and its Subsidiaries shall be reasonably
satisfactory in form and substance to the Lenders;
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(y) the Agent shall have received all documents the Agent may
reasonably request relating to the existence of the Obligors, the corporate
authority for and the validity of the Loan Documents, and any other matters
relevant hereto, all in form and substance satisfactory to the Agent;
Promptly upon the occurrence of the Closing Date, the Agent shall notify the
Borrower and the Lenders thereof, and such notice shall be conclusive and
binding on all parties hereto.
SECTION 3.02. The Borrowings. The obligation of any Lender to make a
Loan on the Closing Date, is subject to the satisfaction of the following
conditions:
(a) the fact that the Closing Date shall have occurred on or before
October 4, 1998:
(b) receipt by the Agent of the Notice of Borrowing as required by
Section 2.02;
(c) the fact that, immediately before and after the Borrowings, no
Default shall have occurred and be continuing; and
(d) the fact that the representations and warranties of the Obligors
contained the Loan Documents shall be true on and as of the Closing Date.
The Borrowings hereunder shall be deemed to be a representation and warranty by
the Borrower and, with respect to itself only, each Guarantor on the Closing
Date as to the facts specified in the foregoing clauses 3.02(c) and 3.02(d).
ARTICLE 4
REPRESENTATIONS AND WARRANTIES
The Borrower represents and warrants, and each Guarantor represents and
warrants, with respect to itself only, that:
SECTION 4.01. Corporate Existence and Power. The Borrower (i) is a
corporation duly incorporated, validly existing and in good standing under the
laws of its jurisdiction of incorporation, (ii) has all corporate powers and
(iii) has all material governmental licenses, consents, authorizations and
approvals required to carry on its business as now conducted.
SECTION 4.02. Corporate and Governmental Authorization; No
Contravention. The execution, delivery and performance by each Obligor of each
Loan Document to
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which it is a party are within such Obligor's corporate powers, have been duly
authorized by all necessary corporate action, require no action by or in respect
of, or filing with, any governmental body, agency or official (other than as
have been obtained) and do not contravene, or constitute a default under, any
material provision of applicable law or regulation or any provision of such
Obligor's certificate of incorporation or by-laws or of any agreement, judgment,
injunction, order, decree or other instrument binding upon the Borrower or any
Subsidiary or result in the creation or imposition of any Lien on any asset of
the Borrower or any Subsidiary.
SECTION 4.03. Binding Effect; Liens. (a) (i) Each Loan Document (other
than the Notes) to which any Obligor is a party constitutes a valid and binding
agreement of such Obligor and (ii) each Note, when executed and delivered in
accordance with this Agreement, will constitute a valid and binding obligation
of the Borrower, in the case of both clause (i) and clause (ii) enforceable in
accordance with its terms subject to applicable bankruptcy, insolvency or
similar laws affecting creditors' rights generally and to equitable principles
of general applicability.
(b) The Collateral Documents create valid security interests in, and,
in the case of the Mortgages, if any, first mortgage Liens on, the Collateral
purported to be covered thereby, which security interests and mortgage Liens are
and will remain perfected security interests and mortgage Liens, prior to all
other Liens (other than Liens permitted hereunder that do not secure Debt which
ranks senior to such security interests and mortgage Liens arising by operation
of law).
SECTION 4.04. Financial Information. (a) The consolidated and
consolidating balance sheets of Entertainment and its Consolidated Subsidiaries
as of December 31, 1997 and the related consolidated and consolidating
statements of income, cash flows and changes in stockholders' equity for the
Fiscal Year then ended, which consolidated statements have been reported on by
Ernst & Young and set forth in Entertainment's 1997 Form 10-K/A, and which
consolidating statements have been delivered to the Lenders prior to the date
hereof, fairly present, in conformity with GAAP, the consolidated and
consolidating financial position of Entertainment and its Consolidated
Subsidiaries as of such date and their consolidated and consolidating results of
operations and cash flows for such Fiscal Year.
(b) The unaudited consolidated and consolidating balance sheets of
Entertainment and its Consolidated Subsidiaries as of June 30, 1998 and the
related unaudited consolidated and consolidating statements of income, cash
flows and changes in stockholders' equity for the six months then ended, which
consolidated statements have been set forth in Entertainment's Latest Form 10-Q,
and which consolidating statements have been delivered to the Lenders prior to
the date hereof, fairly present, on a basis consistent with the financial
statements referred to in Section 4.04(a), the consolidated and consolidating
financial position of Entertainment and its Consolidated Subsidiaries as of such
date and their consolidated and consolidating results of operations and cash
flows for such six month period (subject to normal year-end adjustments).
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(c) The consolidated and consolidating balance sheets of the Borrower
and its consolidated Subsidiaries as of December 31, 1997 and the related
consolidated and consolidating statements of income, cash flows and changes in
stockholders' equity for the Fiscal Year then ended, which consolidated
statements have been reported on by Ernst & Young and set forth in the
Borrower's 1997 Form 10-K, and which consolidating statements have been
delivered to the Lenders prior to the date hereof, fairly present, in conformity
with GAAP, the consolidated and consolidating financial position of the Borrower
and its Consolidated Subsidiaries as of such date and their consolidated and
consolidating results of operations and cash flows for such Fiscal year.
(d) The unaudited consolidated and consolidating balance sheets of the
Borrower and its consolidated Subsidiaries as of June 30, 1998 and the related
unaudited consolidated and consolidating statements of income, cash flows and
changes in stockholders' equity for the six months then ended, which
consolidated statements have been set forth in the Borrower's Latest Form 10-Q,
and which consolidating statements have been delivered to the Lenders prior to
the date hereof, fairly present, on a basis consistent with the financial
statements referred to Section 4.04(c), the consolidated and consolidating
financial position of the Borrower and its Consolidated Subsidiaries as of such
date and their consolidated and consolidating results of operations and cash
flows for such six month period (subject to normal year-end adjustments).
(e) Since June 30, 1998 there has been no material adverse change in
the business, financial position, results of operations or prospects of the
Borrower and its Consolidated Subsidiaries, considered as a whole.
SECTION 4.05. Litigation. There is no action, suit or proceeding
pending against, or to the Borrower's knowledge threatened against or affecting,
the Borrower or any Subsidiary before any court or arbitrator or any
governmental body, agency or official in which there is a reasonable possibility
of an adverse decision which (i) could have a Material Adverse Effect or (ii) in
any manner draws into question the validity or enforceability of the Loan
Documents or the Transaction Documents.
SECTION 4.06. Compliance with ERISA. Each member of the ERISA Group has
fulfilled its obligations under the minimum funding standards of ERISA and the
Internal Revenue Code with respect to each Plan and is in compliance in all
material respects with the presently applicable provisions of ERISA and the
Internal Revenue Code with respect to each Plan. No member of the ERISA Group
has (i) sought a waiver of the minimum funding standard under Section 412 of the
Internal Revenue Code in respect of any Plan, (ii) failed to make any
contribution or payment to any Plan or Multiemployer Plan, or made any amendment
to any Plan, which has resulted or could reasonably be expected to result in the
imposition of a Lien or the posting of a bond or other security under ERISA or
the Internal Revenue Code or (iii) incurred liabilities in an aggregate amount
in excess of $1,000,000 under Title IV of ERISA other than a liability to the
PBGC for premiums under Section 4007 of ERISA.
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SECTION 4.07. Environmental Matters. (a) Except to the extent that the
liabilities of the Borrower and its Subsidiaries, taken as a whole, relating to
or resulting from the matters referred to in clauses (i) through (vi) below,
inclusive, would not reasonably be expected to exceed $250,000 for any one
occurrence or $1,000,000 in the aggregate:
(i) no notice, notification, demand, request for information,
citation, summons, complaint or order has been issued, no complaint has
been filed, no penalty has been assessed and no investigation or review
is pending, or to the Borrower's knowledge threatened by any
governmental or other entity, relating to the Borrower or any
Subsidiary and relating to or arising out of any Environmental Law;
(ii) there are no liabilities of the Borrower or any Subsidiary of
any kind whatsoever, whether accrued, contingent, absolute, determined,
determinable or otherwise, arising under or relating to any
Environmental Law, and there are no facts, conditions, situations or
set of circumstances which could reasonably be expected to result in or
be the basis for any such liability;
(iii) no polychlorinated biphenyls, radioactive material, lead,
lead paint, asbestos-containing material, incinerator, sump, surface
impoundment, lagoon, landfill, septic, wastewater treatment or other
disposal system or underground storage tank (active or inactive) is or
has been present at any property now or previously owned, operated or
leased by the Borrower or any Subsidiary;
(iv) no Hazardous Substance has been discharged, disposed of,
dumped, injected, pumped, deposited, spilled, leaked, emitted or
released at, on or under any property now or previously owned, operated
or leased by the Borrower or any Subsidiary;
(v) no property now or previously owned, leased or operated by the
Borrower or any Subsidiary nor any property to which the Borrower or
any Subsidiary has, directly or indirectly, transported or arranged for
the transportation of any Hazardous Substances, is listed or, to the
Borrower's knowledge, proposed for listing, on the National Priorities
List promulgated pursuant to CERCLA, on CERCLIS (as defined in CERCLA)
or on any similar federal, state or foreign list of sites requiring
investigation or clean-up; and
(vi) the Borrower and its Subsidiaries are in compliance with all
Environmental Laws and have obtained and are in compliance with all
permits, licenses, authorizations, certificates and approvals of
governmental authorities relating to or required by Environmental Laws
and necessary or proper for the business of the Borrower or any
Subsidiary as currently conducted.
(b) There has been no environmental investigation, study, audit, test,
review or other analysis conducted of which the Borrower has knowledge in
relation to the current
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or prior business of the Borrower or any Subsidiary or any property or facility
now or previously owned, leased or operated by the Borrower or any Subsidiary,
which has not been delivered to the Lenders at least five days prior to the date
hereof.
(c) For purposes of this Section, the terms "Borrower" and "Subsidiary"
shall include any business or business entity (including a corporation) which
is, in whole or in part, a predecessor of the Borrower or any Subsidiary.
SECTION 4.08. Taxes. The Borrower and its Subsidiaries have filed all
United States Federal income tax returns and all other material tax returns
which are required to be filed (other than any returns for which an unexpired
extension has been granted) by them and have paid all taxes due pursuant to such
returns (or extensions) or pursuant to any assessment received by the Borrower
or any Subsidiary, except to the extent that any such assessment is being
contested in good faith by appropriate proceedings. The charges, accruals and
reserves on the books of the Borrower and its Subsidiaries in respect of taxes
or other governmental charges are, in the Borrower's opinion, adequate.
SECTION 4.09. Subsidiaries. (a) Schedule 4.09 sets forth a list of all
the Subsidiaries of the Borrower on the Closing Date, after giving effect to the
consummation of the transaction contemplated by the Plan of Reorganization and
the Transaction Documents to be consummated on or prior to the Closing Date.
Each of the Borrower's corporate Subsidiaries is a corporation duly
incorporated, validly existing and in good standing under the laws of its
jurisdiction of incorporation, has all corporate powers and has all material
governmental licenses, authorizations, consents and approvals required to carry
on its business as now conducted.
(b) After giving effect to the consummation of the transactions
contemplated by the Plan of Reorganization and the Transaction Documents to be
consummated on or prior to the Closing Date, neither the Borrower nor any of its
Subsidiaries has or will have any U.S. Subsidiaries with assets having a fair
market value of $1,000 or more that are not Guarantors.
SECTION 4.10. No Regulatory Restrictions on Borrowing. No Obligor is
(i) an "investment company" within the meaning of the Investment Company Act of
1940, as amended, (ii) a "holding company" or a "subsidiary company" of a
holding company within the meaning of the Public Utility Holding Company Act of
1935, as amended, or (iii) otherwise subject to any regulatory scheme which
restricts its ability to incur debt.
SECTION 4.11. Full Disclosure. All information heretofore furnished by
any Obligor to the Agent or any Lender for purposes of or in connection with
this Agreement or any transaction contemplated hereby is, and all such
information hereafter furnished by any Obligor to the Agent or any Lender will
be, true and accurate in all material respects on the date as of which such
information is stated or certified. The Borrower has disclosed or made available
to the Lenders in writing any and all facts which have materially and adversely
affected, or could reasonably be expected to materially and
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adversely affect (to the extent the Borrower can now reasonably foresee), the
business, operations or financial condition of the Borrower and its Consolidated
Subsidiaries, taken as a whole, or the Obligors' ability to perform their
obligations under the Loan Documents.
SECTION 4.12. Representations in Collateral Documents True and Correct.
Each of the representations and warranties of any Obligor contained in any
Collateral Document is true and correct.
SECTION 4.13. Pro Forma and Projected Financial Information. (a) The
pro forma consolidated balance sheet of the Borrower and its Subsidiaries as of
June 30, 1998 and the related pro forma consolidated statements of income and
cash flows for the six months then ended, in each case delivered to the Lenders
pursuant to Section 3.01(s)(ii) hereof, fairly present, in conformity with GAAP
applied on a basis consistent with the financial statements referred to in
Section 4.04(c), the pro forma consolidated financial position of the Borrower
and its Subsidiaries as of such date and their pro forma consolidated results of
operations and cash flows for the six months then ended (subject to normal
year-end adjustments), adjusted to give effect (as if such events had occurred
on such date, in the case of such balance sheet, or on the first day of such
period, in the case of such statements of income and cash flows) to (i) the
transactions contemplated by this Agreement, the Plan of Reorganization and the
Transaction Documents to occur on or prior to the Closing Date, (ii) the
application of the proceeds therefrom as contemplated by this Agreement, the
Plan of Reorganization and the Transaction Documents and (iii) the payment of
all legal, accounting and other fees related thereto.
(b) The pro forma consolidated statements of income and cash flows of
the Borrower and its Subsidiaries for the Fiscal Year ended December 31, 1997
delivered to the Lenders pursuant to Section 3.01(s)(ii) hereof fairly present,
in conformity with GAAP applied on a basis consistent with the financial
statements referred to in Section 4.04(c), the pro forma consolidated results of
operations and cash flows of the Borrower and its Subsidiaries for such Fiscal
Year, adjusted to give effect (as if such events had occurred at the beginning
of such Fiscal Year) to (i) the transactions contemplated by this Agreement, the
Plan of Reorganization and the Transaction Documents to occur on the Closing
Date, (ii) the application of the proceeds therefrom as contemplated by this
Agreement, the Plan of Reorganization and the Transaction Documents and (iii)
the payment of all legal, accounting and other fees related thereto.
(c) As of June 30, 1998 and the Closing Date, after giving effect to
(i) the transactions contemplated by this Agreement, the Plan of Reorganization
and the Transaction Documents to occur on the Closing Date, (ii) the application
of the proceeds therefrom as contemplated by this Agreement, the Plan of
Reorganization and the Transaction Documents and (iii) the payment of all legal,
accounting and other fees related thereto, the Borrower and its Subsidiaries had
and have no material liabilities, contingent or otherwise, including liabilities
for taxes, long-term leases or forward or long-term commitments, which are not
properly reflected on the balance sheet referred to in clause
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(a) above, as delivered to the Lenders pursuant to Section 3.01(s)(ii) hereof,
or described in Borrower's Latest 10-Q or Entertainment's Latest 10-Q.
(d) The projections delivered to the Lenders pursuant to Section
3.01(s)(iii) hereof (the "Projections") were based on assumptions believed by
the Borrower in good faith to be reasonable when made and as of their date
represented the Borrower's good faith estimate of future performance of the
Borrower and its Subsidiaries.
(e) Since June 30, 1998, no event has occurred and no condition has
come into existence which has had, or is reasonably likely to have, a Material
Adverse Effect.
SECTION 4.14. Labor Matters. There are no strikes or other labor
disputes pending, or to the best knowledge of the Borrower threatened, against
the Borrower or any of its Subsidiaries. Hours worked and payments made to the
employees of the Borrower and its Subsidiaries have not been in material
violation of the Fair Labor Standards Act or any other applicable law dealing
with such matters. All payments due from the Borrower or any of its
Subsidiaries, or for which any claim may be made against any of them, on account
of wages and employee health and welfare insurance and other benefits have been
paid or accrued as a liability on their books.
SECTION 4.15. Intellectual Property. The Borrower and each of its
Subsidiaries owns or possesses or holds under valid licenses all patents,
trademarks, service marks, trade names, copyrights, licenses and other
intellectual property rights that are necessary for the operation of their
respective properties and businesses, and neither the Borrower nor any of its
Subsidiaries is in material violation of any material provision thereof. The
Borrower and its Subsidiaries conduct their business without material
infringement or claim of material infringement of any material license, patent,
trademark, trade name, service mark, copyright, trade secret or any other
intellectual property right of others and there is no material infringement or
claim of material infringement by others of any material license, patent,
trademark, trade name, service mark, copyright, trade secret or other
intellectual property right of the Borrower and its Subsidiaries.
SECTION 4.16. Solvency. As of the Closing Date after giving effect to
the transactions contemplated hereby, by the Plan of Reorganization and by the
Transaction Documents to occur on the Closing Date, and at all times thereafter:
(i) the aggregate fair market value of the assets of each Obligor will exceed
its liabilities (including contingent, subordinated, unmatured and unliquidated
liabilities), (ii) each Obligor will have sufficient cash flow to enable it to
pay its debts as they mature and (iii) no Obligor will have unreasonably small
capital for the business in which it is engaged.
SECTION 4.17. Representations in Transaction Documents True and
Correct. As of the dates when made and as of the Closing Date, each
representation and warranty of any Obligor party thereto contained in any
Transaction Documents is true and correct. The Transaction Documents have not as
of the Closing Date been modified or amended in
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any respect and no provision or condition contained therein has been waived,
except with the express written consent of the Required Lenders.
SECTION 4.18. Ownership of Properties. On and as of the Closing Date,
the Borrower and its Subsidiaries are the lawful owners of, have good and
marketable title to and are in lawful possession of, or have valid leasehold
interests in, or, to the extent such properties constitute intellectual
property, have the rights therein described in Section 4.15 hereof, in all
properties and other assets (real or personal, tangible, intangible or mixed)
purported to be owned or leased (as the case may be) by them on the pro forma
balance sheet referred to in Section 4.13(a). None of the properties and assets
of the Borrower and its Subsidiaries is subject to any Lien (other than the
Liens created under the Collateral Documents and other Liens permitted under
Section 5.09).
SECTION 4.19. No Burdensome Restrictions. No contract, lease, agreement
or other instrument to which the Borrower or any of its Subsidiaries is a party
or by which any of their property is bound or affected, no charge, corporate
restriction, judgment, decree or order and no provision of applicable law or
governmental regulation could reasonably be expected to have Material Adverse
Effect.
SECTION 4.20. No Default. No Default has occurred and is continuing.
SECTION 4.21. Compliance with Laws. The Borrower and its Subsidiaries
are in compliance, in all material respects, with all applicable laws,
ordinances, rules, regulations and requirements of governmental authorities
(including, without limitation, Environmental Laws and ERISA and the rules and
regulations thereunder), except where the necessity of compliance therewith is
being contested in good faith by appropriate proceedings.
SECTION 4.22. Year 2000. Any reprogramming required to permit the
proper functioning, in and following the year 2000, of the computer systems of
the Borrower and its Subsidiaries and material equipment containing embedded
microchips (including systems and material equipment supplied by others) and the
testing of all such systems and equipment, as so reprogrammed, will be completed
by October 1, 1999. The cost to the Borrower and its Subsidiaries of such
reprogramming and testing and of the reasonably foreseeable consequences of the
year 2000 to the Borrower and its Subsidiaries (including, without limitation,
reprogramming errors and the failure of others' systems or equipment) will not
result in a Default or a Material Adverse Effect. Except for such of the
reprogramming referred to in the preceding sentence as may be necessary, the
computer and management information systems of the Borrower and its Subsidiaries
are and, with ordinary course upgrading and maintenance, will continue for the
term of this Agreement, to be sufficient to permit the Borrower and its
Subsidiaries to conduct their businesses without Material Adverse Effect.
SECTION 4.23. Limited Liability for Obligations of Panini Entities.
Except as expressly set forth in the Panini Guaranty and the Panini
Indemnification Agreement and
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except for transactions in the ordinary course of business after the Closing
Date on an arms-length basis on terms as favorable to the Borrower or its
Subsidiary as terms that could have been obtained from a third party who was not
an Affiliate, none of the Borrower and its Subsidiaries has any liability in
respect of any debt instrument, contract, agreement or other obligation of any
of the Panini Entities.
ARTICLE 5
COVENANTS
The Borrower agrees that, so long as any Lender has any Credit Exposure
hereunder or any interest or fees accrued hereunder remain unpaid:
SECTION 5.01. Information. The Borrower will deliver to each of the
Lenders:
(a) as soon as available and in any event within 90 days after the
end of each Fiscal Year (or if such 90th day is not a Domestic Business
Day, the next succeeding Domestic Business Day), consolidated and
consolidating balance sheets of the Borrower and its Consolidated
Subsidiaries as of the end of such Fiscal Year and the related
consolidated and consolidating statements of income, cash flows and
changes in stockholders' equity for such Fiscal Year, setting forth in
each case in comparative form the figures for the previous Fiscal Year,
such consolidated financial statements to be reported on in a manner
acceptable to the SEC by Ernst & Young or other independent public
accountants of nationally recognized standing, and such consolidating
financial statements to be certified as to fairness of presentation and
consistency with GAAP by the Borrower's chief financial officer or
chief accounting officer;
(b) as soon as available and in any event within 45 days after the
end of each of the first three Fiscal Quarters of each Fiscal Year (or
if such 45th day is not a Domestic Business Day, the next succeeding
Domestic Business Day), consolidated and consolidating balance sheets
of the Borrower and its Consolidated Subsidiaries as of the end of such
Fiscal Quarter, the related consolidated and consolidating statements
of income for such Fiscal Quarter and the related consolidated and
consolidating statements of income, cash flows and changes in
stockholders' equity for the portion of the Fiscal Year ended at the
end of such Fiscal Quarter, setting forth in the case of each such
statement of income, cash flows and changes in stockholders' equity in
comparative form the figures for the corresponding period in the
previous Fiscal Year, all certified (subject to normal year-end
adjustments) as to fairness of presentation and consistency with GAAP
by the Borrower's chief financial officer or chief accounting officer;
(c) simultaneously with the delivery of each set of financial
statements referred to in clauses 5.01(a) and 5.01(b) above, a
certificate of the Borrower's chief financial officer or chief
accounting officer (i) setting forth in reasonable detail (x) the
calculations required to establish whether the Borrower was in
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compliance with the requirements of Sections 5.09 to 5.18, inclusive,
on the date of such financial statements and (y) a calculation of the
Leverage Ratio as of the date of such financial statements and (ii)
stating whether any Default exists on the date of such certificate and,
if any Default then exists, setting forth the details thereof and the
action which the Borrower is taking or proposes to take with respect
thereto;
(d) simultaneously with the delivery of each set of financial
statements referred to in clause 5.01(a) above, a statement of the firm
of independent public accountants which reported on such statements (i)
stating whether anything has come to their attention to cause them to
believe that any Event of Default existed on the date of such
statements and (ii) confirming the calculations set forth in the
officer's certificate delivered simultaneously therewith pursuant to
clause 5.01(c) above;
(e) prior to the end of each Fiscal Year, copies of monthly
operating budgets for the next Fiscal Year and quarterly operating
budgets for all succeeding Fiscal Years through the Fiscal Year ending
December 31, 2001;
(f) [Intentionally Omitted].
(g) within five days after any officer of the Borrower obtains
knowledge of any Default, if such Default is then continuing, a
certificate of the Borrower's chief financial officer or chief
accounting officer setting forth the details thereof and the action
which the Borrower is taking or proposes to take with respect thereto;
(h) as soon as reasonably practicable after any officer of the
Borrower obtains knowledge thereof, notice of any event or condition
which has had or threatens to have a Material Adverse Effect and the
nature of such Material Adverse Effect;
(i) as soon as reasonably practicable after any officer of the
Borrower obtains knowledge of the commencement of, or of a threat of
the commencement of, an action, suit or proceeding against the Borrower
or any of its Subsidiaries before any court or arbitrator or any
governmental body, agency or official in which there is a reasonable
likelihood of an adverse decision which could have a Material Adverse
Effect or which questions the validity of the Loan Documents, a
certificate of a senior financial officer of the Borrower setting forth
the nature of such pending or threatened action, suit or proceeding and
such additional information with respect thereto as may be reasonably
requested by any Lender;
(j) promptly after the mailing thereof to the Borrower's
shareholders generally, copies of all financial statements, reports and
proxy statements so mailed;
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(k) promptly after the filing thereof, copies of all registration
statements (other than the exhibits thereto and any registration
statements on Form S-8 or its equivalent) and reports on Forms 10-K,
10-Q and 8-K (or their equivalents) filed by the Borrower with the SEC;
(l) promptly after any member of the ERISA Group (i) gives or is
required to give notice to the PBGC of any "reportable event" (as
defined in Section 4043 of ERISA) with respect to any Plan which could
reasonably be expected to constitute grounds for a termination of such
Plan under Title IV of ERISA, or knows that the plan administrator of
any Plan has given or is required to give notice of any such reportable
event, a copy of the notice of such reportable event given or required
to be given to the PBGC; (ii) receives notice of complete or partial
withdrawal liability under Title IV of ERISA or notice that any
Multiemployer Plan is in reorganization, is insolvent or has been
terminated, a copy of such notice; (iii) receives notice from the PBGC
under Title IV of ERISA of an intent to terminate, impose liability
(other than for premiums under Section 4007 of ERISA) in respect of, or
appoint a trustee to administer any Plan, a copy of such notice; (iv)
applies for a waiver of the minimum funding standard under Section 412
of the Internal Revenue Code, a copy of such application; (v) gives
notice of intent to terminate any Plan under Section 4041(c) of ERISA,
a copy of such notice and other information filed with the PBGC; (vi)
gives notice of withdrawal from any Plan pursuant to Section 4063 of
ERISA, a copy of such notice; or (vii) fails to make any payment or
contribution to any Plan or Multiemployer Plan or makes any amendment
to any Plan which has resulted or could reasonably be expected to
result in the imposition of a Lien or the posting of a bond or other
security, a certificate of the Borrower's chief financial officer or
chief accounting officer setting forth details as to such occurrence
and the action, if any, which the Borrower or applicable member of the
ERISA Group is required or proposes to take; and
(m) from time to time such additional information regarding the
financial position or business of the Borrower and its Subsidiaries or
any Guarantor as the Agent, at the request of any Lender, may
reasonably request.
SECTION 5.02. Payment of Obligations. The Borrower will pay and
discharge, and will cause each Subsidiary to pay and discharge, at or before
maturity, all their respective material obligations and liabilities (including,
without limitation, tax liabilities and claims of materialmen, warehousemen and
the like which if unpaid might by law give rise to a Lien), except where the
same are contested in good faith by appropriate proceedings, and will maintain,
and will cause each Subsidiary to maintain, in accordance with GAAP, appropriate
reserves for the accrual thereof.
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<PAGE>
SECTION 5.03. Maintenance of Property; Insurance. (a) The Borrower will
keep, and will cause each Subsidiary to keep, all property useful and necessary
in its business in good working order and condition, ordinary wear and tear
excepted.
(b) The Borrower will, and will cause each Subsidiary to, maintain
(either in the Borrower's name or in such Subsidiary's own name) with
financially sound and responsible insurance companies, insurance on all their
respective real and personal property including, without limitation, inventory
and equipment in at least such amounts, with no greater risk retention and
against at least such risks as are usually maintained, retained or insured
against in the same general area by companies of established repute engaged in
the same or a similar business. The Borrower will furnish to the Lenders, upon
request from the Agent, information presented in reasonable detail as to the
insurance so carried.
(c) On or prior to the Closing Date, the Borrower shall cause the
Collateral Agent to be named as an additional insured and loss payee on each
insurance policy required to be maintained pursuant to this Section. The
Borrower will deliver to the Lenders (i) on the Closing Date, a certificate from
the Borrower's insurance broker dated such date showing the amount of coverage
as of such date, and certifying that, in the opinion of such broker, such
policies will include effective waivers (whether under the terms of any such
policy or otherwise) by the insurer of all claims for insurance premiums against
all loss payees and additional insureds, and that if all or any part of such
policy is canceled, terminated or expires, the insurer will forthwith give
notice thereof to each additional insured and loss payee and that no
cancellation, reduction in amount or material change in coverage thereof shall
be effective until at least 30 days after notice is sent to each additional
insured and loss payee, (ii) upon the request of any Lender through the Agent
from time to time, full information as to the insurance carried, (iii) within
five days of receipt of notice from any insurer, a copy of any notice of
cancellation, nonrenewal or material change in coverage from that existing on
the date of this Agreement and (iv) forthwith, notice of any cancellation or
nonrenewal of coverage by the Borrower.
(d) Any proceeds in excess of $1,000,000 from any Property Insurance
Policy which are payable to the insured in respect of any claim, or any
condemnation award or other compensation in respect of a condemnation (or any
transfer or disposition of property in lieu of condemnation) for which the
Borrower or any of its Subsidiaries receives a condemnation award or other
compensation in excess of $1,000,000, shall be paid to the Agent to be held,
applied or released for application in accordance with Section 5 of the Security
Agreement and each Property Insurance Policy shall provide that all insurance
proceeds in excess of $1,000,000 per claim which are payable to the insured
shall be adjusted with and payable to the Agent. The Borrower hereby appoints
the Agent as its attorney-in-fact to make proof of loss, claim for insurance and
adjustments with insurers, and to execute or endorse all documents, checks or
drafts in connection with payments under Property Insurance Policies.
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SECTION 5.04. Conduct of Business and Maintenance of Existence. The
Borrower and its Subsidiaries will continue to engage in business of the same
general type (excluding the production of motion pictures, videos, television
programming or other similar activities, except such activities as are in the
ordinary course of business and in accordance with the Borrower's and its
Subsidiaries' past practice) as now conducted by the Borrower and its
Subsidiaries, and will preserve, renew and keep in full force and effect their
respective corporate existences and their respective rights, privileges and
franchises necessary or desirable in the normal conduct of business; provided
that nothing in this Section shall prohibit (i) any merger or consolidation
expressly permitted by Section 5.07 or (ii) the termination of the corporate
existence of a Subsidiary if the Borrower in good faith determines that such
termination is in the best interest of the Borrower and is not materially
disadvantageous to the Lenders.
SECTION 5.05. Compliance with Laws. The Borrower will comply, and will
cause each Subsidiary to comply, in all material respects with all applicable
laws, ordinances, rules, regulations and requirements of governmental
authorities (including, without limitation, Environmental Laws and ERISA and the
rules and regulations thereunder), except where the necessity of compliance
therewith is contested in good faith by appropriate proceedings.
SECTION 5.06. Inspection of Property, Books and Records. The Borrower
will keep, and will cause each Subsidiary to keep, proper books of record and
account in which full and correct entries shall be made of all dealings and
transactions in relation to its business and activities; and will permit, and
will cause each Subsidiary to permit, representatives of any Lender at such
Lender's expense to visit and inspect any of their respective properties, to
examine and make abstracts from any of their respective books and records and to
discuss their respective affairs, finances and accounts with their respective
officers, employees and independent public accountants, all at such reasonable
times and as often as may reasonably be requested.
SECTION 5.07. Mergers and Sales of Assets. (a) The Borrower will not,
and will not permit any Subsidiary to, consolidate or merge with or into any
other Person, provided that nothing in this Section shall prohibit (i) the
Borrower from merging with any Subsidiary if the Borrower is the entity
surviving such merger, (ii) any Subsidiary from merging with any Guarantor if
the corporation surviving the merger is the Borrower or a Guarantor or (iii) any
Subsidiary that is not a Guarantor from merging with any Subsidiary that is not
a Guarantor if the entity surviving such merger is a wholly-owned Subsidiary, so
long as, in each case, immediately after giving effect to such merger, no Event
of Default shall have occurred and be continuing. The Borrower will not, and
will not permit any of its Subsidiaries to, make any Asset Sale unless (i) with
respect to any Asset Sale the consideration for which exceeds $100,000, (x) the
consideration therefor is not less than the fair market value of the related
asset (as determined in good faith by the chief financial officer of the
Borrower) and (y) the consideration therefor consists solely of cash, (ii) after
giving effect thereto, the aggregate fair market value of the assets disposed of
in all Asset
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Sales effected after the Closing Date would not exceed $2,500,000 and (iii) the
Net Cash Proceeds of such Asset Sale shall be applied in accordance with Section
2.03(b) hereof.
SECTION 5.08. Use of Proceeds. The proceeds of the Loans will be used
by the Borrower to consummate the Merger and Plan of Reorganization. No proceeds
of the Loans will be used, directly or indirectly, for the purpose, whether
immediate, incidental or ultimate, of buying or carrying any "margin stock"
within the meaning of Regulation U.
SECTION 5.09. Negative Pledge. Neither the Borrower nor any Subsidiary
will create, assume or suffer to exist any Lien on any asset now owned or
hereafter acquired by it, except:
(a) Liens arising in the ordinary course of its business which (i)
do not secure Debt or Derivatives Obligations and (ii) do not secure
any single obligation (or class of obligations having a common cause)
in an amount exceeding $1,000,000;
(b) Liens created by (i) the Panini Guaranty and any debt
securities issued in satisfaction thereof and (ii) the Panini Pledge
Agreement;
(c) Liens created by the Collateral Documents;
(d) Liens existing on the Closing Date securing Debt outstanding
on the Closing Date and reflected in Schedule 5.10 hereto;
(e) any Lien arising out of the refinancing, extension, renewal or
refunding of any Debt secured by any Lien permitted by any of the
foregoing clauses of this Section, provided that such Debt is not
increased and is not secured by any additional assets;
(f) any Lien granted by any Subsidiary of the Borrower in favor of
the Borrower or in favor of another Subsidiary, except any Lien granted
by a Guarantor to a Subsidiary that is not a Guarantor;
(g) Liens to secure the performance of statutory obligations,
surety or appeal bonds, performance bonds or other obligations of a
like nature incurred in the ordinary course of business; and
(h) Liens for taxes, assessments or governmental charges or claims
that are not yet delinquent or that are being contested in good faith
by appropriate proceedings promptly instituted and diligently
concluded, provided that adequate reserves with respect thereto are
maintained on the books of the Borrower or its Subsidiaries, as the
case may be.
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SECTION 5.10. Limitation on Debt. (a) The Borrower will not, and will
not permit any of its Subsidiaries to, incur or at any time be liable with
respect to any Debt except:
(i) Debt under the Loan Documents and the Revolving Documents;
(ii) Debt outstanding on the Closing Date and identified on
Schedule 5.10 and refinancings thereof, provided that the principal
amount thereof is not increased;
(iii) the Excess Administration Claims Loan;
(iv) the Panini Guaranty and any debt securities issued in
satisfaction thereof;
(v) the Permitted Notes and Guarantees thereof by the Guarantors;
and
(vi) Debt of any Subsidiary of the Borrower to the Borrower or any
other Subsidiary of the Borrower.
(b) The Borrower will not, and will not permit any of its Subsidiaries
to, incur or at any time be liable with respect to any Guarantee other than
Guarantees under the Loan Documents and the Revolving Documents and Guarantees
permitted under Sections 5.10(a)(iv) and 5.10(a)(v).
(c) The Borrower will not enter into any amendment or other
modification of the Revolving Documents without the prior written consent of the
Required Lenders if such amendment or other modification would (i) increase the
maximum principal amount of loans and letters of credit available thereunder to
an amount exceeding $50,000,000, (ii) increase the applicable interest rate
margins, (iii) shorten the maturity thereof or (iv) require any additional
consent by the lenders thereunder in order to consummate the Permanent
Financing.
SECTION 5.11. Minimum EBITDA. Consolidated EBITDA (i) for the period
from October 1, 1998 through December 31, 1998 shall not be less than
$17,500,000, (ii) for the period from October 1, 1998 through March 31, 1999
shall not be less than $25,000,000 and (iii) for the period from October 1, 1998
through June 30, 1999 shall not be less than $36,700,000.
SECTION 5.12. Leverage Ratio. The Leverage Ratio shall at no time on or
after March 31, 1999 exceed 4.00:1.00.
SECTION 5.13. Interest Coverage Ratio. The Interest Coverage Ratio
shall at no time on or after December 31, 1998 be less than 2.5:1.0.
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SECTION 5.14. Minimum Current Ratio. The Current Ratio shall at no time
on or after December 31, 1998 be less than 1.35:1.00.
SECTION 5.15. Minimum Consolidated Net Worth. Consolidated Net Worth
will not at any time be less than an amount equal to the sum of (i) $350,000,000
plus (ii) an amount equal to 50% of Consolidated Net Income for each Fiscal
Quarter ending after June 30, 1998 and on or prior to the date of determination,
in each case, for which Consolidated Net Income is positive (but with no
deduction on account of negative Consolidated Net Income for any Fiscal Quarter)
plus (iii) 100% of the aggregate net proceeds, including the fair market value
of property other than cash (as determined in good faith by the Board of
Directors of the Borrower), received by the Borrower from the issuance and sale
after the Closing Date of any capital stock of the Borrower (other than the
proceeds of any issuance and sale of any capital stock (x) to a Subsidiary of
the Borrower or (y) which is required to be redeemed, or is redeemable at the
option of the holder, at any time) or in connection with the conversion or
exchange of any Debt of the Borrower into capital stock of the Borrower after
the Closing Date.
SECTION 5.16. Limitations on Restricted Payments. The Borrower will
not, and will not permit any of its Subsidiaries to, directly or indirectly,
make any Restricted Payment.
SECTION 5.17. Limitation on Capital Expenditures. Consolidated Capital
Expenditures for the period from the Closing Date through December 31, 1998 will
not exceed $10,000,000 and Consolidated Capital Expenditures for Fiscal Year
1999 shall not exceed $30,000,000; provided that if the aggregate amount of
Consolidated Capital Expenditures actually made in the period from the Closing
Date through December 31, 1998 shall be less than the limit with respect thereto
set forth above (before giving effect to any increase therein pursuant to this
proviso) (the "Base Amount"), then the amount of such shortfall may be added to
the amount of such Consolidated Capital Expenditures permitted for Fiscal Year
1999 (such shortfall amount in any Fiscal Year, the "Rollover Amount").
SECTION 5.18. Lease Payments. Neither the Borrower nor any Subsidiary
will incur or assume (whether pursuant to a Guarantee or otherwise) any
liability for rental payments under a real property lease with a lease term (as
defined in Financial Accounting Standards Board Statement No. 13, as in effect
on the date hereof) of one year or more if, immediately after giving effect
thereto, the aggregate amount of minimum lease payments for which the Borrower
and its Subsidiaries are liable will exceed $4,000,000 for any Fiscal Year under
all such leases (excluding capital leases).
SECTION 5.19. Investments and Acquisitions. (a) Neither the Borrower
nor any Subsidiary will hold, make or acquire any Investment in any Person other
than:
(i) Investments existing on the Closing Date and set forth on
Schedule 5.19 hereto;
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(ii) Investments in the Borrower or any Guarantor;
(iii) Temporary Cash Investments;
(iv) the Merger;
(v) the Panini Guaranty;
(vi) Investments in any Subsidiary that was a Foreign Subsidiary
on the Closing Date if, immediately after such Investment is made or
acquired, the aggregate net book value of all Investments permitted by
this clause does not exceed $2,500,000;
(vii) Investments by Foreign Subsidiaries in Foreign Subsidiaries;
and
(viii) trade accounts receivable arising in the ordinary course of
business on customary terms.
(b) Neither the Borrower nor any Subsidiary will consummate any
Business Acquisition other than the Merger and the Pinnacle Acquisition.
SECTION 5.20. Sale-Leaseback Transactions. Neither the Borrower nor any
of its Subsidiaries will engage in any Sale-Leaseback Transaction unless the
Borrower or such Subsidiary would be entitled, pursuant to the other provisions
of Article 5, to incur Debt with a principal amount equal to or exceeding the
Value of such Sale-Leaseback Transaction secured by a Lien on the property to be
leased (after giving similar effect to all other Sale-Leaseback Transactions in
effect at such time). For purposes of this Section, "Value" means, with respect
to a Sale-Leaseback Transaction, at any time, the amount equal to the greater of
(i) the net proceeds of the sale or transfer of the property leased pursuant to
such Sale-Leaseback Transaction and (ii) the fair value in the opinion of the
Board of Directors of the Borrower of such property at the time of entering into
such Sale-Leaseback Transaction, in either case divided first by the number of
full years of the term of the lease and then multiplied by the number of full
years of such term remaining at the time of determination, without regard to any
renewal or extension options contained in the lease.
SECTION 5.21. Transactions with Affiliates. The Borrower will not, and
will not permit any Subsidiary to, directly or indirectly, (i) pay any funds to
or for the account of any Affiliate, (ii) make any investment in any Affiliate
(whether by acquisition of stock or indebtedness, by loan, advance, transfer of
property, guarantee or other agreement to pay, purchase or service, directly or
indirectly, any Debt, or otherwise), (iii) lease, sell, transfer or otherwise
dispose of any assets, tangible or intangible, to any Affiliate, or (iv)
participate in, or effect, any transaction with any Affiliate, except in each
case on an arms-length basis on terms at least as favorable to the Borrower or
such Subsidiary as could
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have been obtained from a third party that was not an Affiliate; provided that
the foregoing provisions of this Section shall not prohibit (A) any such Person
from declaring or paying any lawful dividend or other payment ratably in respect
of all its capital stock of the relevant class so long as, after giving effect
thereto, no Default shall have occurred and be continuing, (B) transactions
between the Borrower or any of its Subsidiaries and any qualified employee stock
ownership plan established for the benefit of the Borrower's employees, or the
establishment or maintenance of any such plan, (C) reasonable director, officer,
employee compensation and other benefits, and indemnification arrangements
entered into by the Borrower or any of its Subsidiaries in the ordinary course
of business and consistent with the past practices of the Borrower and its
Subsidiaries, (D) transactions pursuant to and in accordance with (1) the
agreement dated as of January 1, 1998 between the Borrower and Tangible Media,
Inc., (2) the Employment Agreement dated as of September 30, 1998 between the
Borrower and Avi Arad, (3) the Master License Agreement dated April 30, 1993, as
amended through the date hereof, between the Borrower and Avi Arad & Associates,
(4) the Cost Sharing Agreement dated as of January 1, 1998 between the Borrower
and Tangible Media, Inc., (5) the Stockholders' Agreement and (6) the
Registration Rights Agreement and (E) any Restricted Payment permitted by
Section 5.16.
SECTION 5.22. Constitutive Documents. The Borrower will not, and will
not permit any Subsidiary to, amend any material provision of its charter or
by-laws or other constitutive documents without the prior written consent of the
Required Lenders.
SECTION 5.23. No Modification of Transaction Documents Without Consent.
The Borrower will not, and will not permit any of its Subsidiaries to, consent
to or solicit any amendment or supplement to, or any waiver or other
modification of, any material term of any Transaction Document or any of the
ancillary agreements referred to therein without the prior written consent of
the Required Lenders.
SECTION 5.24. Limitation on Restrictions Affecting Subsidiaries.
Neither the Borrower nor any of its Subsidiaries will enter into, or suffer to
exist, any agreement with any Person, other than the Loan Documents, the
Revolving Documents and the documents governing the Permitted Notes, which
prohibits or limits the ability of any Subsidiary to (a) pay dividends or make
other distributions or pay any Debt owed to the Borrower or any Subsidiary, (b)
make loans or advances to the Borrower or any Subsidiary (c) transfer any of its
properties or assets to the Borrower or any Subsidiary or (d) create, incur,
assume or suffer to exist any Lien upon any of its property, assets or revenues,
whether now owned or hereafter acquired (other than with respect to assets
subject to consensual liens permitted under Section 5.09); provided that the
foregoing shall not apply to restrictions in effect on the date of this
Agreement contained in agreements governing Debt outstanding on the date of this
Agreement that is permitted under Section 5.10(a) and, if such Debt is renewed,
extended or refinanced, restrictions in the agreements governing the renewed,
extended or refinancing Debt (and successive renewals, extensions and
refinancings thereof) if such restrictions are no more restrictive
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than those contained in the agreements governing the Debt being renewed,
extended or refinanced.
SECTION 5.25. Fiscal Year. The Borrower will not change its Fiscal Year
from a fiscal year ending December 31.
SECTION 5.26. Change in Business. The Borrower will not, and will not
permit any of its Subsidiaries to, engage in any material line of business
substantially different from those lines of business carried on by the Borrower
and its Subsidiaries as a whole on the Closing Date.
SECTION 5.27. Further Assurances. (a) The Borrower will, and will cause
each of the other Obligors to, at the Borrower's sole cost and expense, do,
execute, acknowledge and deliver all such further acts, deeds, conveyances,
mortgages, assignments, notices of assignment and transfers as the Agent shall
from time to time request, which may be necessary in the reasonable judgment of
the Agent shall from time to time to assure, perfect, convey, assign and
transfer to the Agent the property and rights conveyed or assigned pursuant to
the Collateral Documents, or which may facilitate the performance of the terms
of the Collateral Documents, or the filing, registering or recording of the
Collateral Documents.
(b) All costs and expenses in connection with the grant of any security
interests under the Collateral Documents, including without limitation
reasonable legal fees and other reasonable costs and expenses in connection with
the granting, perfecting and maintenance of any security interests under the
Collateral Documents or the preparation, execution, delivery, recordation or
filing of documents and any other acts as the Agent may reasonably request in
connection with the grant of such security interests shall be paid by the
Borrower promptly upon demand.
(c) The Borrower will not, and will not permit any of its Subsidiaries
to, enter into or become subject to any agreement which would materially impair
their ability to comply, or which is intended to prohibit them from complying in
any material respect, with the provisions of this Section.
(d) The Borrower will:
(i) cause each Person which (x) is an existing U.S. Subsidiary and
not a Guarantor on the Closing Date or (y) becomes a U.S. Subsidiary
after the Closing Date to (A) become a party to this Agreement as a
Guarantor by executing a supplement hereto in form and substance
satisfactory to the Agent and (B) enter into the Security Agreement and
any other agreements, each in form and substance satisfactory to the
Agent, as may be necessary or desirable in order to grant perfected,
first priority security interests upon (I) all of its assets
(including, without limitation, assets acquired by such Person after it
becomes a U.S. Subsidiary) and (II) all of the capital stock and equity
interests acquired by such
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Person after it becomes a U.S. Subsidiary), to secure its obligations
under the Loan Documents, provided that not more than 65% of the voting
stock of any Foreign Subsidiary will be required to be so pledged;
(ii) pledge, or cause to be pledged, pursuant to the Security
Agreement, (x) in the case of any Subsidiary described in clause (i)
above, all of the capital stock or other equity interests of such
Subsidiary owned directly or indirectly by the Borrower, (y) in the
case of any Foreign Subsidiary which becomes a Subsidiary of the
Borrower after the Closing Date, 65% of the voting stock or other
voting equity interests of such Foreign Subsidiary, and 100% of any
other capital stock or other equity interest, owned directly or
indirectly by the Borrower and (z) in the case of the Borrower's
Mexican Subsidiary, 65% of the voting stock or other voting equity
interests of such Mexican Subsidiary;
(iii) take, and cause its Subsidiaries to take, such actions as
may be necessary or desirable to effect the foregoing within 30 days
(or in the case of clause (d)(ii)(z) above, 10 days) after (x) the
Closing Date in respect of existing U.S. Subsidiaries or the Borrower's
Mexican Subsidiary or (y) such Subsidiary is acquired or becomes a U.S.
Subsidiary, including without limitation (A) executing and delivering,
or causing such Subsidiary to execute and deliver, to the Agent such
number of copies as the Agent may specify of such supplements, Security
Agreement and other documents creating security interests and (B)
delivering, or causing Subsidiaries to deliver, such certificates,
evidences of corporate action, legal opinions or other documents as the
Agent may reasonably request, all in form and substance satisfactory to
the Agent, relating to the satisfaction of the Borrower's obligations
under this Section;
(iv) for each lease to which the Borrower or any of its
Subsidiaries becomes a party after the Closing Date and for each
existing lease that is amended, renewed or extended after the Closing
Date, (x) deliver, and cause each Subsidiary to deliver, to the Agent a
collateral assignment in favor of the Agent, in form and substance
satisfactory to the Agent, of each such lease and (y) use, and cause
each Subsidiary to use, its best efforts to obtain agreement by each
landlord party to any such lease that such landlord, in the event of
any breach thereunder, will provide prompt written notice to the Agent
of such breach and will grant the Agent a reasonable period during
which it may arrange to cure such breach prior to any termination of
such lease; and
(v) execute and deliver, and cause each U.S. Subsidiary to execute
and deliver a Mortgage and such other security documents as may be
necessary, or as the Agent may reasonably request, to subject either
(x) so long as the aggregate fair market value (including improvements
thereon) of all interests in real property owned by the Borrower and
its U.S. Subsidiaries for which Mortgages have not been executed and
delivered does not exceed $5,000,000, all fee, leaseholder or other
interests in real property with a fair market value (including
improvements
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thereon) in excess of $1,000,000 owned by the Borrower or a U.S.
Subsidiary or (y) on and after the date upon which the aggregate fair
market value (including improvements thereon) of all interests in real
property owned by the Borrower and its U.S. Subsidiaries for which
Mortgages have not been executed and delivered exceeds $5,000,000, all
fee, leasehold or other interests in real property, in each case to a
first priority Lien on such real property interests securing its
obligations under the Loan Documents and provide, with respect to each
parcel of real property subject to such a Mortgage, (A) policies of
title insurance, on forms issued by the American Land Title Association
and otherwise in form and substance reasonably satisfactory to the
Agent and issued by such title insurance company or companies as are
acceptable to the Agent, with all premiums, expenses and fees paid or
caused to be paid by the Borrower, insuring the Liens created under
such Mortgage, in such amounts as the Agent shall request, subject only
to Liens permitted under the Loan Documents, containing such
endorsements and affirmative assurances as are satisfactory to the
Agent, and reinsured in amounts and under reinsurance agreements in
form and substance satisfactory to the Agent, (B) current "as-built"
surveys that comply with the current Minimum Standard Detail
Requirements for ALTA/ACSM Land Title Surveys and that are otherwise in
form and substance satisfactory to the Agent, and (C) appraisals
complying with all applicable bank regulatory requirements.
SECTION 5.28. No New Subsidiaries. (a) The Borrower will not have any
Subsidiaries other than (i) Subsidiaries that are (x) in existence on the
Closing Date after giving effect to the consummation of the transactions
contemplated by the Plan of Reorganization and the Transaction Documents to be
consummated on or prior to the Closing Date and (y) Guarantors on the Closing
Date or Foreign Subsidiaries; (ii) U.S. Subsidiaries having assets with a fair
market value of less than $1,000, which, not later than the thirtieth day
following the Closing Date, subject to applicable requirements of law, are wound
up and dissolved pursuant to subsection (b) hereof or have become Guarantors and
are in compliance with Section 5.27(d) hereof and (iii) U.S. Subsidiaries which
become Guarantors and are in compliance with Section 5.27(d) hereof.
(b) Not more than 30 days after the Closing Date, the Borrower will (i)
take, and cause its Subsidiaries to take, such actions as may be necessary or
desirable to wind up and dissolve any U.S. Subsidiaries that are not Guarantors
on the Closing Date or have not become Guarantors in compliance with Section
5.27(d) hereof and (ii) deliver to the Agent a certificate of the chief
executive officer or chief financial officer of the Borrower certifying to, and
providing evidence satisfactory to the Agent of, the fact that the Borrower and
its Subsidiaries have complied in all respects with the requirements of this
Section 5.28.
SECTION 5.29. Year 2000. The Borrower shall take all actions necessary
to ensure that its and its Subsidiaries' computers and computer-based systems
are able to operate and effectively process data, including without limitation
dates, on and after January 1, 2000. The Borrower shall promptly provide to the
Agent such information as
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the Agent may reasonably request from time to time in order to verify the
Borrower's and its Subsidiaries' compliance with this Section 5.29 as well as
the accuracy of the representation in Section 4.22.
SECTION 5.30. Permanent Financing. (a) Upon a request (an "Initial
Securities Request") made by the Take-Out Banks at any time after the Closing
Date, the Borrower shall take all reasonable actions necessary or desirable, to
the extent within its power, to (x) issue Permitted Notes for the purposes of
refinancing all (or a portion) of the Loans (the "Take-Out Securities") and (y)
enable the Take-Out Banks, as soon as practicable after such Initial Securities
Request to place such Take-Out Securities. Thereafter, at any time and from time
to time after the Initial Securities Request, upon notice by the Take- Out Banks
of their desire to place additional Take-Out Securities (a "Follow-on Securities
Notice"), the Borrower will issue and sell such additional Take-Out Securities
upon the terms and subject to the conditions specified in such Follow-on
Securities Notice. The Borrower will enter into such agreements as are customary
in connections with financings similar to the Take-Out Securities. The Borrower
agrees that the Take- Out Banks shall determine the interest rates for such
Take-Out Securities in light of then prevailing market conditions. The Borrower
shall provide the Take-Out Banks with audited, unaudited and pro forma financial
statements meeting the requirements of Regulation S-X under the Securities Act
for the periods required of a registrant on Form S-1 under the Securities Act
and shall make such filings and public disclosures as may be necessary to cause
such filings to become effective and to permit the Take-Out Securities to be
sold.
(b) (i) Upon a request (a "Facility Request") made by the Required
Lenders at any time after the Closing Date, the Borrower shall take all
reasonable actions necessary or desirable, to the extent within its power, to
arrange for a bank facility (the "Bank Facility"), the proceeds of which shall
be used to refinance, in whole, the Loans. The Borrower shall enter into such
agreements as are customary in connection with credit facilities similar to the
Bank Facility. The Borrower shall cooperate with the agent, arranger and lenders
in the syndication of the Bank Facility by taking actions including, without
limitation, promptly providing the agent, the arranger, their respective
affiliates and the lenders with all information reasonably deemed necessary to
complete successfully such syndication.
(ii) The Borrower agrees that (x) the Arranger shall have the
option, in its sole discretion, to act as exclusive arranger of the
Bank Facility and (y) the Agent shall have the option, in its sole
discretion, to act as exclusive administrative agent for the Bank
Facility.
(c) The Borrower hereby covenants and agrees that all proceeds from the
Permanent Financing will be applied to repay the Loans.
SECTION 5.31. Bank Accounts. (a) Not later than (i) the day that is 60
days after the Closing Date, in the case of Entertainment and the other U.S.
Subsidiaries, and (ii)
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January 31, 1999, in the case of the Borrower, the Borrower and each of its U.S.
Subsidiaries shall (x) execute and deliver each Lockbox Letter required by
Section 9(B) of the Security Agreement and (y) provide evidence satisfactory to
the Agent and the Collateral Agent of compliance with the other requirements of
such Section.
(b) Not later than (i) the day that is 60 days after the Closing Date,
in the case of Entertainment and the other U.S. Subsidiaries, and (ii) January
31, 1999, in the case of the Borrower, the Borrower and each of its U.S.
Subsidiaries shall cease to maintain any accounts (other than payroll accounts)
with any bank or other financial institution except the applicable Lockbox
Accounts, the applicable Insurance Account or another account with respect to
which any Obligor has entered into arrangements (including the execution of
agreements and the delivery of an opinion, in each case, in form and substance
reasonably satisfactory to the Agent) providing for a Lien in favor of the
Collateral Agent on substantially the same terms as those contained in the
applicable Lockbox Agreements.
ARTICLE 6
DEFAULTS
SECTION 6.01. Events of Default. If one or more of the following events
("Events of Default") shall have occurred and be continuing:
(a) the Borrower shall fail to pay when due any principal of any
Loan or shall fail to pay any interest, fee or other amount payable by
it hereunder or under any other Loan Document within four days of the
date when due;
(b) the Borrower shall fail to observe or perform any covenant
contained in Section 5.01(g) or Sections 5.07 through 5.31, inclusive;
(c) any Obligor shall fail to observe or perform any covenant or
agreement (other than those covered by clause 6.01(a) or 6.01(b) above)
contained in the Loan Documents for 15 days after the Agent gives
notice thereof to the Borrower at the request of any Lender;
(d) any representation, warranty, certification or statement made
by any Obligor in any Loan Document or in any certificate, financial
statement or other document delivered pursuant to any Loan Document
shall prove to have been incorrect in any material respect when made
(or deemed made);
(e) the Borrower or any Subsidiary shall fail to make one or more
payments in respect of Material Financial Obligations when due or
within any applicable grace period (provided that any such Event of
Default shall cease to be continuing upon the waiver or extension of
such payment);
(f) any event or condition shall occur which results in the
acceleration of the maturity of any Material Debt or enables (or,
except in the case of the
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Revolving Loans, with the giving of notice or lapse of time or both,
would enable) the holder of such Debt or any Person acting on such
holder's behalf to accelerate the maturity thereof;
(g) the Borrower or any Subsidiary shall commence a voluntary case
or other proceeding seeking liquidation, reorganization or other relief
with respect to itself or its debts under any bankruptcy, insolvency or
other similar law now or hereafter in effect or seeking the appointment
of a trustee, receiver, liquidator, custodian or other similar official
of it or any substantial part of its property, or shall consent to any
such relief or to the appointment of or taking possession by any such
official in an involuntary case or other proceeding commenced against
it, or shall make a general assignment for the benefit of creditors, or
shall fail generally to pay its debts as they become due, or shall take
any corporate action to authorize any of the foregoing;
(h) an involuntary case or other proceeding shall be commenced
against the Borrower or any Subsidiary seeking liquidation,
reorganization or other relief with respect to it or its debts under
any bankruptcy, insolvency or other similar law now or hereafter in
effect or seeking the appointment of a trustee, receiver, liquidator,
custodian or other similar official of it or any substantial part of
its property, and such involuntary case or other proceeding shall
remain undismissed and unstayed for a period of 90 days; or an order
for relief shall be entered against the Borrower or any Subsidiary
under the federal bankruptcy laws as now or hereafter in effect;
(i) any member of the ERISA Group shall fail to pay when due an
amount or amounts aggregating in excess of $1,000,000 which it shall
have become liable to pay under Title IV of ERISA; or notice of intent
to terminate a Material Plan shall be filed under Title IV of ERISA by
any member of the ERISA Group, any plan administrator or any
combination of the foregoing; or the PBGC shall institute proceedings
under Title IV of ERISA to terminate, to impose liability (other than
for premiums under Section 4007 of ERISA) in respect of, or to cause a
trustee to be appointed to administer, any Material Plan; or a
condition shall exist by reason of which the PBGC would be entitled to
obtain a decree adjudicating that any Material Plan must be terminated;
or there shall occur a complete or partial withdrawal from, or a
default, within the meaning of Section 4219(c)(5) of ERISA, with
respect to, one or more Multiemployer Plans which could be reasonably
likely to cause one or more members of the ERISA Group to incur a
current payment obligation in excess of $1,000,000;
(j) judgments or orders for the payment of money exceeding
$2,500,000 in aggregate amount shall be rendered against the Borrower
or any Subsidiary and such judgments or orders shall continue
unsatisfied and unstayed for a period of 20 days;
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(k) any Lien created by any of the Collateral Documents shall at
any time fail to constitute a valid and (to the extent required by the
Collateral Documents) perfected Lien on all of the Collateral purported
to be subject thereto, securing the obligations purported to be secured
thereby, with the priority required by the Loan Documents, or any
Obligor shall so assert in writing;
(l) a Change of Control shall occur; or
(m) any Guarantee by any Guarantor hereunder shall cease for any
reason (other than the merger out of existence of such Guarantor
pursuant to a transaction permitted hereunder) to be in full force and
effect, or any Obligor shall so assert in writing;
then, and in every such event, the Agent shall:
(i) if requested by Lenders having more than 50% in aggregate
amount of the Commitments, by notice to the Borrower terminate the
Commitments and they shall thereupon terminate; and
(ii) if requested by Lenders holding Notes evidencing more than
50% in aggregate outstanding principal amount of the Loans, by notice
to the Borrower declare the Loans (together with accrued interest
thereon) to be, and the Loans (together with accrued interest thereon)
shall thereupon become, immediately due and payable without
presentment, demand, protest or other notice of any kind, all of which
are hereby waived by the Borrower;
provided that, if any Event of Default specified in clause 6.01(g) or 6.01(h)
occurs with respect to the Borrower, then without any notice to the Borrower or
any other act by the Agent or the Lenders, the Commitments shall thereupon
terminate and the Loans (together with accrued interest thereon) shall become
immediately due and payable without presentment, demand, protest or other notice
of any kind, all of which are hereby waived by the Borrower.
SECTION 6.02. Notice of Default. The Agent shall give notice to the
Borrower under Section 6.01(c) promptly upon being requested to do so by any
Lender and shall thereupon notify all the Lenders thereof.
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ARTICLE 7
THE AGENT
SECTION 7.01. Appointment and Authorization. Each Lender irrevocably
appoints and authorizes the Agent to enter into and act as its agent in
connection with the Loan Documents (whether therein referred to as the Agent, a
Bank Agent, the Collateral Agent or otherwise) and to take such action as agent
on its behalf and to exercise such powers under the Loan Documents as are
delegated to the Agent by the terms hereof or thereof, together with all such
powers as are reasonably incidental thereto.
SECTION 7.02. Agent and Affiliates. UBS AG, Stamford Branch, shall have
the same rights and powers under the Loan Documents as any other Lender and may
exercise or refrain from exercising the same as though it were not the Agent or
the Collateral Agent and UBS AG, Stamford Branch, and its affiliates may accept
deposits from, lend money to and generally engage in any kind of business with
the Borrower or any Subsidiary or affiliate of the Borrower as if it were not
the Agent or the Collateral Agent.
SECTION 7.03. Action by Agent. The obligations of the Agent hereunder
and of the Collateral Agent under the Collateral Documents are only those
expressly set forth herein and therein respectively. Without limiting the
generality of the foregoing, the Agent shall not be required to take any action
with respect to any Default, except as expressly provided in Article 6.
SECTION 7.04. Appointment of Co-Agents. At any time or times, in order
to comply with any legal requirement in any jurisdiction, the Agent or
Collateral Agent may appoint another bank or trust company or one or more other
persons, either to act as co-agent or co-agents, jointly with the Agent or
Collateral Agent, as the case may be, or to act as separate agent or agents on
behalf of the Lenders or the Secured Parties with such power and authority as
may be necessary for the effectual operation of the provisions hereof and may be
specified in the instrument of appointment (which may, in the discretion of the
Agent or the Collateral Agent, as the case may be, include provisions for the
protection of such co-agent or separate agent similar to the provisions of this
Article 7).
SECTION 7.05. Consultation with Experts. The Agent or the Collateral
Agent may consult with legal counsel (who may be counsel for any Obligor),
independent public accountants and other experts selected by it and shall not be
liable for any action taken or omitted to be taken by it in good faith in
accordance with the advice of such counsel, accountants or experts.
SECTION 7.06. Liability of Agent. None of the Agent, the Collateral
Agent, their respective affiliates and their and their affiliates' respective
directors, officers, agents and employees shall be liable for any action taken
or not taken by it in connection herewith (i) with the consent or at the request
of the Required Lenders (or such different number of Lenders (and Lenders under
the Revolving Documents, where applicable) as any provision hereof or of any
Loan Document expressly requires for such consent or request) or (ii) in
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the absence of its own gross negligence or willful misconduct. None of the
Agent, the Collateral Agent, their respective affiliates and their and their
affiliates' directors, officers, agents and employees shall be responsible for
or have any duty to ascertain, inquire into or verify (w) any statement,
warranty or representation made in connection with the Loan Documents or any
borrowing hereunder; (x) the performance or observance of any of the covenants
or agreements of any Obligor; (y) the satisfaction of any condition specified in
Article 3, except receipt of items required to be delivered to the Agent or the
Collateral Agent; or (z) the validity, effectiveness or genuineness of the Loan
Documents or any other instrument or writing furnished in connection herewith.
Neither the Agent nor the Collateral Agent shall incur any liability by acting
in reliance upon any notice, consent, certificate, statement or other writing
(which may be a bank wire, telex, facsimile or similar writing) believed by it
to be genuine or to be signed by the proper party or parties. Without limiting
the generality of the foregoing, the use of the term "agent" in this Agreement
or any other Loan Document with reference to the Agent or the Collateral Agent
is not intended to connote any fiduciary or other implied (or express)
obligations arising under agency doctrine of any applicable law. Instead, such
term is used merely as a matter of market custom and is intended to create or
reflect only an administrative relationship between independent contracting
parties.
SECTION 7.07. Indemnification. The Lenders shall, ratably in proportion
to their Credit Exposures (in the case of the Agent) or their Secured
Obligations (as defined in the Security Agreement) (in the case of the
Collateral Agent), indemnify the Agent and the Collateral Agent, their
respective affiliates and their and their affiliates' respective directors,
officers, agents and employees (to the extent not reimbursed by the Borrower)
against any cost, expense (including counsel fees and disbursements), claim,
demand, action, loss or liability (except such as result from such Indemnitees'
gross negligence or willful misconduct) that such Indemnitees may suffer or
incur in connection with the Loan Documents or any action taken or omitted by
such indemnitees thereunder.
SECTION 7.08. Credit Decision. Each Lender acknowledges that it has,
independently and without reliance on the Agent, the Collateral Agent or any
other Lender, and based on such documents and information as it has deemed
appropriate, made its own credit analysis and decision to enter into this
Agreement. Each Lender also acknowledges that it will, independently and without
reliance on the Agent, the Collateral Agent or any other Lender, and based on
such documents and information as it shall deem appropriate at the time,
continue to make its own credit decisions in taking or not taking any action
under the Loan Documents.
SECTION 7.09. Successor Agent. The Agent or the Collateral Agent may
resign at any time by giving notice thereof to the Lenders and the Borrower.
Upon any such resignation, the Required Lenders shall have the right to appoint
a successor Agent or Collateral Agent, subject to, so long as no Event of
Default has occurred and is continuing, the consent of the Borrower (such
consent not to be unreasonably withheld or delayed). If no successor Agent or
Collateral Agent shall have been so appointed by the Required Lenders, and shall
have accepted such appointment, within 30 days after the
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retiring Agent or Collateral Agent gives notice of resignation, then the
retiring Agent or Collateral Agent may, on behalf of the Lenders, appoint a
successor Agent or Collateral Agent, which shall be a commercial bank organized
or licensed under the laws of the United States or of any State thereof and
having a combined capital and surplus of at least $100,000,000. Upon the
acceptance of its appointment as Agent or Collateral Agent hereunder by a
successor Agent or Collateral Agent, such successor Agent or Collateral Agent
shall thereupon succeed to and become vested with all the rights and duties of
the retiring Agent, and the retiring Agent or Collateral Agent shall be
discharged from its duties and obligations hereunder. After any retiring Agent
or Collateral Agent resigns as Agent or Collateral Agent hereunder, the
provisions of this Article shall inure to its benefit as to actions taken or
omitted to be taken by it while it was Agent or Collateral Agent.
SECTION 7.10. Agent's Fee. The Borrower shall pay to the Agent for its
own account fees in the amounts and at the times previously agreed upon by the
Borrower and the Agent.
ARTICLE 8
CHANGE IN CIRCUMSTANCES
SECTION 8.01. Basis for Determining Interest Rate Inadequate or Unfair.
If on or before the first day of any Interest Period for any Euro-Dollar Loans:
(a) if fewer than two offered rates for deposits in Dollars are
available on the Reuters Screen LIBO Page as of 11:00 A.M. (London
time) on the second Euro-Dollar Business Day prior to the first day of
any Interest Period, or
(b) Lenders having at least 50% in aggregate amount of the
Commitments advise the Agent that the Adjusted London Interbank Offered
Rate as determined by the Agent will not adequately and fairly reflect
the cost to such Lenders of funding their Euro-Dollar Loans for such
Interest Period,
the Agent shall forthwith give notice thereof to the Borrower and the Lenders,
whereupon until the Agent notifies the Borrower that the circumstances giving
rise to such suspension no longer exist, (i) the obligations of the Lenders to
make Euro-Dollar Loans or to continue or convert outstanding Loans as or into
Euro-Dollar Loans shall be suspended and (ii) each outstanding Euro-Dollar Loan
shall be converted into a Base Rate Loan on the last day of the then current
Interest Period applicable thereto. Unless the Borrower notifies the Agent at
least two Domestic Business Days before the date of any affected Borrowing for
which a Notice of Borrowing has previously been given that it elects not to
borrow on such date, such Borrowing shall instead be made as a Base Rate
Borrowing.
SECTION 8.02. Illegality. If, on or after the date hereof, the adoption
of any applicable law, rule or regulation, or any change in any applicable law,
rule or regulation,
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or any change in the interpretation or administration thereof by any
governmental authority, central bank or comparable agency charged with the
interpretation or administration thereof, or compliance by any Lender (or its
Euro-Dollar Lending Office) with any request or directive (whether or not having
the force of law) of any such authority, central bank or comparable agency,
shall make it unlawful or impossible for any Lender (or its Euro-Dollar Lending
Office) to make, maintain or fund its Euro-Dollar Loans and such Lender shall so
notify the Agent, the Agent shall forthwith give notice thereof to the other
Lenders and the Borrower, whereupon until such Lender notifies the Borrower and
the Agent that the circumstances giving rise to such suspension no longer exist,
the obligation of such Lender to make Euro-Dollar Loans, or to convert
outstanding Loans into Euro-Dollar Loans or continue outstanding Loans as
Euro-Dollar Loans, shall be suspended. Before giving any notice to the Agent
pursuant to this Section, such Lender shall designate a different Euro-Dollar
Lending Office if such designation will avoid the need for giving such notice
and will not, in the judgment of such Lender, be otherwise disadvantageous to
such Lender. If such notice is given, each Euro-Dollar Loan of such Lender then
outstanding shall be converted to a Base Rate Loan either (a) on the last day of
the then current Interest Period applicable to such Euro-Dollar Loan if such
Lender may lawfully continue to maintain and fund such Loan as a Euro-Dollar
Loan to such day or (b) immediately if such Lender shall determine that it may
not lawfully continue to maintain and fund such Loan as a Euro-Dollar Loan to
such day. Interest and principal on any such Base Rate Loan shall be payable on
the same dates as, and on a pro rata basis with, the interest and principal
payable on the related Euro-Dollar Loans of the other Lenders.
SECTION 8.03. Increased Cost and Reduced Return. (a) If on or after the
date hereof, the adoption of any applicable law, rule or regulation, or any
change in any applicable law, rule or regulation, or any change in the
interpretation or administration thereof by any governmental authority, central
bank or comparable agency charged with the interpretation or administration
thereof, or compliance by any Lender (or its Applicable Lending Office) with any
request or directive (whether or not having the force of law) of any such
authority, central bank or comparable agency, shall impose, modify or deem
applicable any reserve (including, without limitation, any such requirement
imposed by the Board of Governors of the Federal Reserve System, but excluding
any such requirement included in an applicable Euro-Dollar Reserve Percentage),
special deposit, insurance assessment or similar requirement against assets of,
deposits with or for the account of, or credit (including letters of credit and
participations therein) extended by, any Lender (or its Applicable Lending
Office) or shall impose on any Lender (or its Applicable Lending Office) or the
London interbank market any other condition affecting its Euro-Dollar Loans, its
Notes or its obligation to make Euro-Dollar Loans or its obligations hereunder
in respect of Letters of Credit and the result of any of the foregoing is to
increase the cost to such Lender (or its Applicable Lending Office), or to
reduce the amount of any sum received or receivable by such Lender (or its
Applicable Lending Office) under this Agreement or under its Note with respect
thereto, by an amount deemed by such Lender to be material, then, within 15 days
after demand by such Lender
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(with a copy to the Agent), the Borrower shall pay to such Lender such
additional amount or amounts as will compensate such Lender for such increased
cost or reduction.
(b) If any Lender shall have determined that, after the date hereof,
the adoption of any applicable law, rule or regulation regarding capital
adequacy, or any change in any such law, rule or regulation, or any change in
the interpretation or administration thereof by any governmental authority,
central bank or comparable agency charged with the interpretation or
administration thereof, or any request or directive regarding capital adequacy
(whether or not having the force of law) of any such authority, central bank or
comparable agency, has or would have the effect of reducing the rate of return
on capital of such Lender (or its Parent) as a consequence of such Lender's
obligations hereunder to a level below that which such Lender (or its Parent)
could have achieved but for such adoption, change, request or directive (taking
into consideration its policies with respect to capital adequacy) by an amount
deemed by such Lender to be material, then from time to time, within 15 days
after demand by such Lender (with a copy to the Agent), the Borrower shall pay
to such Lender such additional amount or amounts as will compensate such Lender
(or its Parent) for such reduction.
(c) Each Lender will promptly notify the Borrower and the Agent of any
event of which it has knowledge, occurring after the date hereof, which will
entitle such Lender to compensation pursuant to this Section and will designate
a different Applicable Lending Office if such designation will avoid the need
for, or reduce the amount of, such compensation and will not, in the judgment of
such Lender, be otherwise disadvantageous to it. A certificate of any Lender
claiming compensation under this Section and setting forth the additional amount
or amounts to be paid to it hereunder shall be conclusive in the absence of
manifest error. In determining such amount, such Lender may use any reasonable
averaging and attribution methods.
SECTION 8.04. Taxes. (a) For the purposes of this Section, the
following terms have the following meanings:
"Taxes" means any and all present or future taxes, duties, levies,
imposts, deductions, charges or withholdings with respect to any payment by the
Borrower or any Guarantor, as the case may be, pursuant to this Agreement or
under any Note, and all liabilities with respect thereto, excluding (i) in the
case of each Lender Party, taxes imposed on its net income, and franchise or
similar taxes imposed on it, by a jurisdiction under the laws of which it is
organized or in which its principal executive office is located or in which its
Applicable Lending Office is located and (ii) in the case of each Lender, any
United States withholding tax imposed on such payment, but not excluding any
portion of such tax that exceeds the United States withholding tax which would
have been imposed on such a payment to such Lender under the laws and treaties
in effect when such Lender first becomes a party to this Agreement.
"Other Taxes" means any present or future stamp or documentary taxes
and any other excise or property taxes, or similar charges or levies, which
arise from any payment
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made pursuant to this Agreement or under any Note or from the execution,
delivery, registration or enforcement of, or otherwise with respect to, any Loan
Document.
(b) All payments by the Borrower or any Guarantor to or for the account
of any Lender Party hereunder or under any Note shall be made without deduction
for any Taxes or Other Taxes; provided that, if the Borrower or any Guarantor
shall be required by law to deduct any Taxes or Other Taxes from any such
payment, (i) the sum payable shall be increased as necessary so that after
making all required deductions (including deductions applicable to additional
sums payable under this Section) such Lender Party receives an amount equal to
the sum it would have received had no such deductions been made, (ii) the
Borrower or any Guarantor, as the case may be, shall make such deductions, (iii)
the Borrower or such Guarantor, as the case may be, shall pay the full amount
deducted to the relevant taxation authority or other authority in accordance
with applicable law and (iv) the Borrower shall promptly furnish to the Agent,
at its address specified in or pursuant to Section 10.01, the original or a
certified copy of a receipt evidencing payment thereof.
(c) The Borrower agrees to indemnify each Lender Party for the full
amount of Taxes and Other Taxes (including, without limitation, any Taxes or
Other Taxes imposed or asserted (whether or not correctly) by any jurisdiction
on amounts payable under this Section) paid by such Lender Party and any
liability (including penalties, interest and expenses) arising therefrom or with
respect thereto. This indemnification shall be paid within 15 days after such
Lender Party makes demand therefor.
(d) Each Lender Party organized under the laws of a jurisdiction
outside the United States, before it signs and delivers this Agreement in the
case of each Lender Party listed on the signature pages hereof and before it
becomes a Lender Party in the case of each other Lender Party, and from time to
time thereafter if requested in writing by the Borrower (but only so long as
such Lender Party remains lawfully able to do so), shall provide each of the
Borrower and the Agent with Internal Revenue Service Form 1001 or 4224, as
appropriate, or any successor form prescribed by the Internal Revenue Service,
certifying that such Lender Party is entitled to benefits under an income tax
treaty to which the United States is a party which exempts such Lender Party
from United States withholding tax or reduces the rate of withholding tax on
payments of interest for the account of such Lender Party or certifying that the
income receivable by it pursuant to this Agreement is effectively connected with
the conduct of a trade or business in the United States.
(e) For any period with respect to which a Lender Party has failed to
provide the Borrower or the Agent with the appropriate form referred to in
Section 8.04(d)(unless such failure is due to a change in treaty, law or
regulation occurring after the date on which such form originally was required
to be provided), such Lender Party shall not be entitled to indemnification
under Section 8.04(b) or 8.04(c) with respect to Taxes imposed by the United
States; provided that if a Lender Party, that is otherwise exempt from or
subject to a reduced rate of withholding tax, becomes subject to Taxes because
of its
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failure to deliver a form required hereunder, the Borrower shall take such steps
as such Lender Party shall reasonably request to assist such Lender Party to
recover such Taxes.
(f) If the Borrower or any Guarantor is required to pay additional
amounts to or for the account of any Lender pursuant to this Section as a result
of a change in law or treaty occurring after such Lender first became a party to
this Agreement, then such Lender will, at the Borrower's request, change the
jurisdiction of its Applicable Lending Office if, in the judgment of such
Lender, such change (i) will eliminate or reduce any such additional payment
which may thereafter accrue and (ii) is not otherwise disadvantageous to such
Lender.
SECTION 8.05. Base Rate Loans Substituted for Affected Euro-Dollar
Loans. If (i) the obligation of any Lender to make, or to continue or convert
outstanding Loans as or to, Euro-Dollar Loans has been suspended pursuant to
Section 8.02 or (ii) any Lender has demanded compensation under Section 8.03 or
8.04 with respect to its Euro-Dollar Loans , and in any such case the Borrower
shall, by at least five Euro-Dollar Business Days' prior notice to such Lender
through the Agent, have elected that the provisions of this Section shall apply
to such Lender, then, unless and until such Lender notifies the Borrower that
the circumstances giving rise to such suspension or demand for compensation no
longer exist, all Loans which would otherwise be made by such Lender as (or
continued as or converted to) Euro-Dollar Loans shall instead be Base Rate Loans
on which interest and principal shall be payable contemporaneously with the
related CD Loans or Euro-Dollar Loans of the other Lenders. If such Lender
notifies the Borrower that the circumstances giving rise to such suspension or
demand for compensation no longer exist, the principal amount of each such Base
Rate Loan shall be converted into a Euro-Dollar Loan on the first day of the
next succeeding Interest Period applicable to the related Euro-Dollar Loans of
the other Lenders.
ARTICLE 9
GUARANTY
SECTION 9.01. The Guaranty. Each Guarantor hereby jointly and severally
unconditionally guarantees the full and punctual payment (whether at stated
maturity, upon acceleration or otherwise) of the principal of and interest on
each Note issued by the Borrower pursuant to this Agreement, and the full and
punctual payment of all other amounts payable by the Borrower or any other
Guarantor under the Loan Documents. Upon failure by the Borrower or any other
Guarantor to pay punctually any such amount, each Guarantor shall forthwith on
demand pay the amount not so paid at the place and in the manner specified in
this Agreement or the other Loan Documents.
SECTION 9.02. Guaranty Unconditional. The obligations of each Guarantor
hereunder shall be joint and several, unconditional and absolute and, without
limiting the generality of the foregoing, shall not be released, discharged or
otherwise affected by:
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(i) any extension, renewal, settlement, compromise, waiver or
release in respect of any obligation of the Borrower or any other
Guarantor under the Loan Documents, by operation of law or otherwise;
(ii) any modification or amendment of or supplement to the Loan
Documents;
(iii) any release, impairment, non-perfection or invalidity of any
direct or indirect security for any obligation of the Borrower or any
other Guarantor under the Loan Documents;
(iv) any change in the corporate existence, structure or ownership
of the Borrower or any other Guarantor, or any insolvency, bankruptcy,
reorganization or other similar proceeding affecting the Borrower, any
other Guarantor or their respective assets or any resulting release or
discharge of any obligation of the Borrower or any other Guarantor
contained in the Loan Documents;
(v) the existence of any claim, set-off or other rights which the
Guarantor may have at any time against the Borrower, any other
Guarantor, the Agent, any Lender or any other Person, whether in
connection herewith or any unrelated transactions, provided that
nothing herein shall prevent the assertion of any such claim by
separate suit or compulsory counterclaim;
(vi) any invalidity or unenforceability relating to or against the
Borrower or any other Guarantor for any reason of the Loan Documents,
or any provision of applicable law or regulation purporting to prohibit
the payment by the Borrower or any other Guarantor of the principal of
or interest on any Note or any other amount payable by the Borrower or
any other Guarantor under the Loan Documents; or
(vii) any other act or omission to act or delay of any kind by the
Borrower, any other Guarantor, the Agent, any Lender or any other
Person or any other circumstance whatsoever which might, but for the
provisions of this paragraph, constitute a legal or equitable discharge
of the Guarantor's obligations hereunder.
SECTION 9.03. Discharge Only upon Payment in Full; Reinstatement in
Certain Circumstances. Each Guarantor's obligations hereunder shall remain in
full force and effect until the Commitments shall have terminated and the
principal of and interest on the Notes and all other amounts payable by the
Obligors under the Loan Documents shall have been paid in full. If at any time
any payment of the principal of or interest on any Note or any other amount
payable by the Obligors under the Loan Documents is rescinded or must be
otherwise restored or returned upon the insolvency, bankruptcy or reorganization
of any Obligor or otherwise, each Guarantor's obligations hereunder with
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respect to such payment shall be reinstated at such time as though such payment
had been due but not made at such time.
SECTION 9.04. Waiver by Each Guarantor. Each Guarantor irrevocably
waives acceptance hereof, presentment, demand, protest and any notice not
provided for herein, as well as any requirement that at any time any action be
taken by any Person against the Borrower or any other Guarantor or any other
Person.
SECTION 9.05. Subrogation and Contribution. Upon making any payment
with respect to the Borrower hereunder, a Guarantor shall be subrogated to the
rights of the payee against the Borrower with respect to such payment; provided
that such Guarantor shall not enforce any payment by way of subrogation, or in
the nature of contribution, until all amounts of principal of and interest on
the Loans and all other amounts payable by the Obligors hereunder and under the
other Loan Documents have been paid in full.
SECTION 9.06. Stay of Acceleration. If acceleration of the time for
payment of any amount payable by any Obligor under the Loan Documents is stayed
upon insolvency, bankruptcy or reorganization of the Borrower, all such amounts
otherwise subject to acceleration under the terms of this Agreement shall
nonetheless be payable by each Guarantor hereunder forthwith on demand by the
Agent made at the request of the requisite proportion of the Lenders specified
in Article 6.01 of the Agreement.
SECTION 9.07. Limit of Liability. The obligations of each Guarantor
hereunder shall be limited to an aggregate amount equal to the largest amount
that would not render its obligations hereunder subject to avoidance under
Section 548 of the United States Bankruptcy Code or any comparable provisions of
any applicable state law.
SECTION 9.08. Release upon Sale. Upon any sale by the Borrower of a
Subsidiary permitted by this Agreement, such Subsidiary shall automatically and
without further action by any Lender or the Agent be released from its
obligations, if any, as a Guarantor hereunder.
ARTICLE 10
MISCELLANEOUS
SECTION 10.01. Notices. All notices, requests and other communications
to any party hereunder shall be in writing (including bank wire, telex,
facsimile or similar writing) and shall be given to such party: (a) in the case
of the Borrower or the Agent, at its address or facsimile number set forth on
the signature pages hereof, (b) in the case of any Guarantor, in care of the
Borrower, (c) in the case of any Lender, at its address or facsimile number set
forth in its Administrative Questionnaire or (d) in the case of any party, at
such other address or facsimile number as such party may hereafter specify for
the purpose by notice to the Agent and the Borrower. Each such notice, request
or other
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communication shall be effective (i) if given by facsimile, when transmitted to
the facsimile number referred to in this Section and confirmation of receipt is
received, (ii) if given by mail, 72 hours after such communication is deposited
in the mails with first class postage prepaid, addressed as aforesaid or (iii)
if given by any other means, when delivered at the address referred to in this
Section; provided that notices to the Agent under Article 2 or Article 8 shall
not be effective until received.
SECTION 10.02. No Waivers. No failure or delay by any Lender Party in
exercising any right, power or privilege hereunder or under any Note shall
operate as a waiver thereof nor shall any single or partial exercise thereof
preclude any other or further exercise thereof or the exercise of any other
right, power or privilege. The rights and remedies herein provided shall be
cumulative and not exclusive of any rights or remedies provided by law.
SECTION 10.03. Expenses; Indemnification. (a) The Borrower shall pay
(i) all out-of-pocket expenses of the Agent and the Arranger, including
reasonable fees and disbursements of special counsel for the Agent and the
Arranger, in connection with the preparation and administration of the Loan
Documents, any waiver or consent thereunder or any amendment thereof or any
Default or alleged Default thereunder and (ii) if an Event of Default occurs,
all out-of-pocket expenses incurred by each Lender Party, including (without
duplication) the fees and disbursements of outside counsel and the allocated
cost of inside counsel, in connection with such Event of Default and collection,
bankruptcy, insolvency and other enforcement proceedings resulting therefrom.
(b) The Borrower agrees to indemnify each Lender Party, their
respective affiliates and the respective directors, officers, agents and
employees of the foregoing (each an "Indemnitee") and hold each Indemnitee
harmless from and against any and all liabilities, losses, damages, costs and
expenses of any kind, including, without limitation, the reasonable fees and
disbursements of counsel, which may be incurred by such Indemnitee in connection
with any investigative, administrative or judicial proceeding (whether or not
such Indemnitee shall be designated a party thereto) brought or threatened
relating to or arising out of the Loan Documents or any actual or proposed use
of any proceeds of Loans hereunder; provided that no Indemnitee shall have the
right to be indemnified hereunder for such Indemnitee's own gross negligence or
willful misconduct as determined by a court of competent jurisdiction.
SECTION 10.04. Set-offs. (a) If (i) an Event of Default has occurred
and is continuing and (ii) Lenders holding more than 50% in aggregate unpaid
principal amount of the Loans have requested the Agent to declare the Loans to
be immediately due and payable pursuant to Section 6.01, or the Loans have
become immediately due and payable without notice as provided in Section 6.01,
then each Lender is hereby authorized by the Borrower at any time and from time
to time, to the extent permitted by applicable law, without notice to the
Borrower (any such notice being expressly waived by the Borrower), to set off
and apply all deposits (general or special, time or demand, provisional or
final) at any time held and other indebtedness at any time owing by such Lender
to or for the
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account of the Borrower against any obligations of the Borrower to such Lender
now or hereafter existing under this Agreement, regardless of whether any such
deposit or other obligation is then due and payable or is in the same currency
or is booked or otherwise payable at the same office as the obligation against
which it is set off and regardless of whether such Lender shall have made any
demand for payment under this Agreement. Each Lender agrees promptly to notify
the Borrower after any such set-off and application made by such Lender;
provided that any failure to give such notice shall not affect the validity of
such setoff and application. The rights of the Lenders under this subsection are
in addition to any other rights and remedies which the Lenders may have.
(b) Each Lender agrees that if it shall, by exercising any right of
set-off or counterclaim or otherwise, receive payment of a proportion of the
aggregate amount of principal and interest then due with respect to the Loans
held by it which is greater than the proportion received by any other Lender in
respect of the aggregate amount of principal and interest then due with respect
to the Loans held by such other Lender, the Lender receiving such
proportionately greater payment shall purchase such participations in the Loans
held by the other Lenders, and such other adjustments shall be made, as may be
required so that all such payments of principal and interest with respect to the
Loans held by the Lenders shall be shared by the Lenders pro rata; provided that
nothing in this Section shall impair the right of any Lender to exercise any
right of set-off or counterclaim it may have and to apply the amount subject to
such exercise to the payment of indebtedness of any Obligor other than its
indebtedness in respect of the Loans. Each Obligor agrees, to the fullest extent
it may effectively do so under applicable law, that any holder of a
participation in a Loan, whether or not acquired pursuant to the foregoing
arrangements, may exercise rights of set-off or counterclaim and other rights
with respect to such participation as fully as if such holder of a participation
were a direct creditor of such Obligor in the amount of such participation.
SECTION 10.05. Amendments and Waivers Release of Collateral. (a) Any
provision of this Agreement or the Notes may be amended or waived if, but only
if, such amendment or waiver is in writing and is signed by the Borrower and the
Required Lenders (and, if the rights or duties of the Agent are affected
thereby, by the Agent); provided that no such amendment or waiver shall:
(i) unless signed by all the Lenders, (v) increase or decrease the
Commitment of any Lender (except for a ratable decrease in the
Commitments of all the Lenders) or subject any Lender to any additional
obligation, (w) reduce the principal of or rate of interest on any Loan
or any interest thereon or any fees hereunder, (x) postpone the date
fixed for any payment of principal of or interest on any Loan or any
interest thereon or any fees hereunder or for the termination of any
Commitment, (y) release any Guarantor from its obligations hereunder or
(z) change the percentage of the Commitments or of the aggregate unpaid
principal amount of the Loans, or the number of Lenders, which shall be
required for the Lenders or any of them to take any action under this
Section or any other provision of this Agreement; or
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<PAGE>
(ii) unless signed by a Designated Lender or its Designating
Lender, subject such Designated Lender to any additional obligation or
affect its rights hereunder (unless the rights of all the Lenders
hereunder are similarly affected).
(b) Any provision of the Collateral Documents may be amended or waived
if, but only if, such amendment or waiver is in writing and is signed by the
relevant Obligor and the Agent with the consent of the Required Lenders;
provided that no such amendment or waiver shall, unless signed by all the
Lenders, effect or permit a release of all or substantially all of the
Collateral. Notwithstanding the foregoing, Collateral shall be released from the
Lien of the Collateral Documents from time to time as necessary to effect any
sale or pledge of assets permitted by the Loan Documents, and the Agent shall
execute and deliver all release documents reasonably requested to evidence such
release.
SECTION 10.06. Successors; Participations and Assignments. (a) The
provisions of this Agreement shall be binding upon and inure to the benefit of
the parties hereto. the Collateral Agent and their respective successors and
assigns, except that the Borrower may not assign or otherwise transfer any of
its rights under this Agreement without the prior written consent of all the
Lender Parties.
(b) Any Lender may at any time grant to one or more banks or other
institutions (each a "Participant") participating interests in its Commitment or
any or all of its Loans and participations in Letters of Credit. If a Lender
grants any such participating interest to a Participant, whether or not upon
notice to the Borrower and the Agent, such Lender shall remain responsible for
the performance of its obligations hereunder, and the Borrower and the Agent
shall continue to deal solely and directly with such Lender in connection with
such Lender's rights and obligations under this Agreement. Any agreement
pursuant to which any Lender may grant such a participating interest shall
provide that such Lender shall retain the sole right and responsibility to
enforce the obligations of the Borrower hereunder including, without limitation,
the right to approve any amendment, modification or waiver of any provision of
this Agreement; provided that such participation agreement may provide that such
Lender will not agree to any modification, amendment or waiver of this Agreement
or any Collateral Document described in clause (v), (w) or (x) of Section
10.05(a)(i) or the proviso in the first sentence of Section 10.05(a)(b) without
the consent of the Participant. The Borrower agrees that each Participant shall,
to the extent provided in its participation agreement, be entitled to the
benefits of Article 8 with respect to its participating interest. An assignment
or other transfer which is not permitted by Section 10.06(c) or 10.06(d) below
shall be given effect for purposes of this Agreement only to the extent of a
participating interest granted in accordance with this subsection.
(c) Any Lender may at any time assign to one or more banks or other
institutions (each an "Assignee") all, or a proportionate part (equivalent to an
initial Commitment of not less than $5,000,000) of all, of its rights and
obligations under this Agreement and its Note, and such Assignee shall assume
such rights and obligations, pursuant to an
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<PAGE>
Assignment and Assumption Agreement substantially in the form of Exhibit J
hereto signed by such Assignee and such transferor Lender, with (and subject to)
the written consent of the Agent and (so long as no Event of Default shall have
occurred and be continuing) the Borrower (which consent shall not, in any such
case, be unreasonably withheld or delayed); provided that if an Assignee is an
affiliate of such transferor Lender or was a Lender immediately before such
assignment, no such consent shall be required. When such instrument has been
signed and delivered by the parties thereto and such Assignee has paid to such
transferor Lender the purchase price agreed between them, such Assignee shall be
a Lender party to this Agreement and shall have all the rights and obligations
of a Lender with a Commitment as set forth in such instrument of assumption, and
the transferor Lender shall be released from its obligations hereunder to a
corresponding extent, and no further consent or action by any party shall be
required. Upon the consummation of any assignment pursuant to this subsection,
the transferor Lender, the Agent and the Borrower shall make appropriate
arrangements so that, if required, a new Note is issued to the Assignee. In
connection with any such assignment, the transferor Lender shall pay to the
Agent an administrative fee for processing such assignment in the amount of
$3,500. If the Assignee is not incorporated under the laws of the United States
or a State thereof, it shall deliver to the Borrower and the Agent certification
as to exemption from deduction or withholding of United States federal income
taxes in accordance with Section 8.04.
(d) Any Lender may at any time assign all or any portion of its rights
under this Agreement and its Note to a Federal Reserve Bank. No such assignment
shall release the transferor Lender from its obligations hereunder.
(e) No Assignee, Participant or other transferee of any Lender's rights
shall be entitled to receive any greater payment under Section 8.03 or 8.04 than
such Lender would have been entitled to receive with respect to the rights
transferred, unless such transfer is made with the Borrower's prior written
consent or by reason of the provisions of Section 8.02, 8.03 or 8.04 requiring
such Lender to designate a different Applicable Lending Office under certain
circumstances or at a time when the circumstances giving rise to such greater
payment did not exist.
SECTION 10.07. Designated Lenders. (a) Subject to the provisions of
this Section, any Lender may from time to time elect to designate an Eligible
Designee to provide all or a portion of the Loans to be made by such Lender
pursuant to this Agreement; provided that such designation shall not be
effective unless the Borrower and the Agent consent thereto. When a Lender and
its Eligible Designee shall have signed an agreement substantially in the form
of Exhibit K hereto (a "Designation Agreement") and the Borrower and the Agent
shall have signed their respective consents thereto, such Eligible Designee
shall become a Designated Lender for purposes of this Agreement. The Designating
Lender shall thereafter have the right to permit such Designated Lender to
provide all or a portion of the Loans to be made by such Designating Lender
pursuant to Section 2.01 and the making of such Loans or portions thereof shall
satisfy the obligation of the Designating Lender to the same extent, and as if,
such Loans or portion thereof
765748.1 10/9/98 7:17p
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<PAGE>
were made by the Designating Lender. As to any Loans or portion thereof made by
it, each Designated Lender shall have all the rights that a Lender making such
Loans or portion thereof would have had under the Loan Documents and otherwise;
provided that (x) its voting rights under this Agreement shall be exercised
solely by its Designating Lender and (y) its Designating Lender shall remain
solely responsible to the other parties hereto for the performance of its
obligations under this Agreement, including its obligations in respect of the
Loans or portion thereof made by it. No additional Note shall be required to
evidence Loans or portions thereof made by a Designated Lender; and the
Designating Lender shall be deemed to hold its Note as agent for its Designated
Lender to the extent of the Loans or portion thereof funded by such Designated
Lender. Each Designating Lender shall act as the agent for its Designated Lender
and give and receive notices and other communications on its behalf. Any
payments for the account of any Designated Lender shall be paid to its
Designating Lender as the agent for such Designated Lender and neither the
Borrower nor the Agent shall be responsible for any Designating Lender's
application of such payments. In addition, any Designated Lender may, with
notice to, but without the prior written consent of, the Borrower or the Agent,
assign all or portions of its interest in any Loans to its Designating Lender or
to any financial institutions consented to by the Borrower and the Agent
providing liquidity and/or credit facilities to or for the account of such
Designated Lender to support the funding of Loans or portions thereof made by
such Designated Lender and disclose on a confidential basis any non-public
information relating to its Loans or portions thereof to any rating agency,
commercial paper dealer or provider of any guarantee, surety, credit or
liquidity enhancement to such Designated Lender.
(b) Each party to this Agreement agrees that it will not institute
against, or join any other person in instituting against, any Designated Lender
any bankruptcy, reorganization, arrangement, insolvency or liquidation
proceeding or other proceeding under any federal or state bankruptcy or similar
law, for one year and a day after all outstanding senior indebtedness of such
Designated Lender is paid in full. The Designating Lender for each Designated
Lender agrees to indemnify, save, and hold harmless each other party hereto for
any loss, cost, damage and expense arising out of its inability to institute any
such proceeding against such Designated Lender. This Section shall survive the
termination of this Agreement.
SECTION 10.08. No Reliance on Margin Stock. Each of the Lenders
represents to the Agent and each of the other Lenders that it in good faith is
not relying upon any "margin stock" (as defined in Regulation U) as collateral
in the extension or maintenance of the credit provided for in this Agreement.
SECTION 10.09. Governing Law; Submission to Jurisdiction. This
Agreement and each Note shall be governed by and construed in accordance with
the laws of the State of New York. Each Obligor hereby submits to the
nonexclusive jurisdiction of the United States District Court for the Southern
District of New York and of any New York State court sitting in New York City
for purposes of all legal proceedings arising out of or relating to this
Agreement or the transactions contemplated hereby. Each Obligor
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<PAGE>
irrevocably waives, to the fullest extent permitted by law, any objection which
it may now or hereafter have to the laying of the venue of any such proceeding
brought in such a court and any claim that any such proceeding brought in such a
court has been brought in an inconvenient forum.
SECTION 10.10. Counterparts; Integration; Effectiveness. This Agreement
may be signed in any number of counterparts, each of which shall be an original,
with the same effect as if the signatures thereto and hereto were upon the same
instrument. This Agreement, the Collateral Documents and the Fee Letter dated as
of June 26, 1998 among the Borrower, the Agent and the Arranger with respect to
this Agreement constitute the entire agreement and understanding among the
parties hereto and supersede any and all prior agreements and understandings,
oral or written, relating to the subject matter hereof and thereof. This
Agreement shall become effective when the Agent has received, from each of the
parties listed on the signature pages hereof, a counterpart hereof signed by
such party or facsimile or other written confirmation satisfactory to the Agent
confirming that such party has signed a counterpart hereof.
SECTION 10.11. WAIVER OF JURY TRIAL. EACH PARTY HERETO HEREBY
IRREVOCABLY WAIVES ANY AND ALL RIGHT TO TRIAL BY JURY IN ANY LEGAL PROCEEDING
ARISING OUT OF OR RELATING TO THIS AGREEMENT OR THE TRANSACTIONS CONTEMPLATED
HEREBY.
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<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
duly executed by their respective authorized officers as of the day and year
first above written.
TOY BIZ, INC.
(to be renamed Marvel Enterprises, Inc.)
By: ____________________
Name:
Title:
Address:
Facsimile:
Web Site:
MARVEL ENTERTAINMENT GROUP, INC.,
as Guarantor
By: ____________________
Name:
Title:
Address:
Facsimile:
THE ASHER CANDY COMPANY, as Guarantor
By: ____________________
Name:
Title:
Address:
Facsimile:
FLEER CORP., as Guarantor
By: ____________________
Name:
Title:
Address:
Facsimile:
FRANK H. FLEER CORP., as Guarantor
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<PAGE>
By: ____________________
Name:
Title:
Address:
Facsimile:
HEROES WORLD DISTRIBUTION, INC.,
as Guarantor
By: ____________________
Name:
Title:
Address:
Facsimile:
MALIBU COMICS ENTERTAINMENT, INC.,
as Guarantor
By: ____________________
Name:
Title:
Address:
Facsimile:
MARVEL CHARACTERS, INC.,
as Guarantor
By: ____________________
Name:
Title:
Address:
Facsimile:
MARVEL DIRECT MARKETING, INC.,
as Guarantor
765748.1 10/9/98 7:17p
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<PAGE>
By: ____________________
Name:
Title:
Address:
Facsimile:
SKYBOX INTERNATIONAL, INC.,
as Guarantor
By: ____________________
Name:
Title:
Address:
Facsimile:
MARVEL RESTAURANT VENTURE CORP.,
as Guarantor
By:_____________________________
Name:
Title:
Address:
Facsimile:
MRV, INC., as Guarantor
By:_____________________________
Name:
Title:
Address:
Facsimile:
765748.1 10/9/98 7:17p
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<PAGE>
UBS AG, STAMFORD BRANCH, as Agent
and Collateral Agent
By: ___________________________
Name:
Title:
Address:
Facsimile:
By: ___________________________
Name:
Title:
Address:
Facsimile:
UBS AG, STAMFORD BRANCH, as Lender
By: ___________________________
Name:
Title:
Address:
Facsimile:
By: __________________________
Name:
Title:
Address:
Facsimile:
765748.1 10/9/98 7:17p
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<PAGE>
COMMITMENT SCHEDULE
Lender Commitment
UBS AG, Stamford Branch $ 200,000,000
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<PAGE>
EXHIBIT A- Note
Note
New York, New York
----------- --, -----
For value received, TOY BIZ, INC., a Delaware corporation (to be
renamed Marvel Enterprises, Inc.) (the "Borrower"), promises to pay to the order
of ______________________ (the "Lender"), for the account of its Applicable
Lending Office, the unpaid principal amount of the Loan made by the Lender to
the Borrower pursuant to the Credit Agreement referred to below on the maturity
date provided for in the Credit Agreement. The Borrower promises to pay interest
on the unpaid principal amount of such Loan on the dates and at the rate or
rates provided for in the Credit Agreement. All such payments of principal and
interest shall be made in lawful money of the United States in Federal or other
immediately available funds at the office of UBS AG, Stamford Branch, 677
Washington Boulevard, Stamford, Connecticut.
The Loans made by the Lender, the applicable interest rates thereon and
all repayments of the principal thereof shall be recorded by the Lender and, if
the Lender so elects in connection with any transfer or enforcement hereof,
appropriate notations to evidence the foregoing information with respect to such
Loan may be endorsed by the Lender on the schedule attached hereto, or on a
continuation of such schedule attached to and made a part hereof; provided that
the failure of the Lender to make (or any error in making) any such recordation
or endorsement shall not affect the Borrower's obligations hereunder or under
the Credit Agreement.
This note is one of the Notes referred to in the Credit Agreement dated
as of September 28, 1998 among the Borrower, the Guarantors and the Lenders
party thereto and UBS AG, Stamford Branch, as Agent and Collateral Agent (as the
same may be amended from time to time, the "Credit Agreement"). Terms defined in
the Credit Agreement are used herein with the same meanings. Reference is made
to the Credit Agreement for provisions for the prepayment hereof and the
acceleration of the maturity hereof.
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<PAGE>
The payment in full of the principal and interest on this note has,
pursuant to the provisions of the Credit Agreement, been unconditionally
guaranteed by certain Guarantors.
TOY BIZ, INC.
(to be renamed Marvel Enterprises, Inc.)
By: ____________________
Name:
Title:
765748.1 10/9/98 7:17p
A-2
<PAGE>
Loans and Payments of Principal
Amount Type Amount of
of of Principal Notation
Date Loan Loan Repaid Made By
765748.1 10/9/98 7:17p
A-2
<PAGE>
EXHIBIT J - Assignment and Assumption
Agreement
Assignment and Assumption Agreement
AGREEMENT dated as of _________, 19__ among <NAME OF ASSIGNOR> (the
"Assignor") and [NAME OF ASSIGNEE] (the "Assignee").
WHEREAS, this Assignment and Assumption Agreement (the "Agreement")
relates to the Credit Agreement dated as of September 28, 1998 among Toy Biz,
Inc., a Delaware corporation (to be renamed Marvel Enterprises, Inc.) (the
"Borrower"), the Guarantors party thereto, the Assignor and the other Lenders
party thereto and UBS AG, Stamford Branch, as Agent (the "Agent") (as amended
from time to time, the "Credit Agreement");
WHEREAS, as provided under the Credit Agreement, the Assignor has a
Commitment to make Loans to the Borrower in an aggregate principal amount at any
time outstanding not to exceed $____________;
WHEREAS, the Loans made to the Borrower by the Assignor under the
Credit Agreement in an aggregate principal amount of $__________ are outstanding
at the date hereof;
WHEREAS, the Assignor proposes to assign to the Assignee all of the
rights of the Assignor under the Credit Agreement in respect of a portion of its
Commitment thereunder in an amount equal to $_____________ (the "Assigned
Amount"), together with a corresponding portion of each of its outstanding
Loans, and the Assignee proposes to accept such assignment and assume the
corresponding obligations of the Assignor under the Credit Agreement;
NOW, THEREFORE, in consideration of the foregoing and the mutual
agreements contained herein, the parties hereto agree as follows:
SECTION 1. Definitions. All capitalized terms not otherwise defined
herein have the respective meanings set forth in the Credit Agreement.
SECTION 2. Assignment. The Assignor hereby assigns and sells to the
Assignee all of the rights of the Assignor under the Credit Agreement to the
extent of the Assigned Amount, and the Assignee hereby accepts such assignment
from the Assignor and assumes all of the obligations of the Assignor under the
Credit Agreement to the extent of the Assigned Amount. Upon the execution and
delivery hereof by the Assignor and the
765748.1 10/9/98 7:17p
<PAGE>
Assignee and the execution of the consent attached hereto by [the Borrower and]1
the Agent and the payment of the amounts specified in Section 3 required to be
paid on the date hereof (i) the Assignee shall, as of the date hereof, succeed
to the rights and be obligated to perform the obligations of a Lender under the
Credit Agreement with a Commitment in an amount equal to the Assigned Amount and
acquire the rights of the Assignor with respect to a corresponding portion of
each of its outstanding Loans and (ii) the Commitment of the Assignor shall, as
of the date hereof, be reduced by the Assigned Amount, and the Assignor shall be
released from its obligations under the Credit Agreement to the extent such
obligations have been assumed by the Assignee. The assignment provided for
herein shall be without recourse to the Assignor.
SECTION 3. Payments. As consideration for the assignment and sale
contemplated in Section 2 hereof, the Assignee shall pay to the Assignor on the
date hereof in Federal funds the amount heretofore agreed between them.2 Fees
accrued before the date hereof are for the account of the Assignor and such fees
accruing on and after the date hereof with respect to the Assigned Amount are
for the account of the Assignee. Each of the Assignor and the Assignee agrees
that if it receives any amount under the Credit Agreement which is for the
account of the other party hereto, it shall receive the same for the account of
such other party to the extent of such other party's interest therein and
promptly pay the same to such other party.
[SECTION 4. Consent of [the Borrower and] the Agent. This Agreement is
conditioned upon the consent of [the Borrower] and the Agent pursuant to Section
10.06(c) of the Credit Agreement.] 3
[SECTION 5. Note. Pursuant to Section 10.06(c) the Credit Agreement,
the Borrower has agreed to execute and deliver a Note payable to the order of
the Assignee to evidence the assignment and assumption provided for herein.] 4
SECTION 6. Non-Reliance on Assignor. The Assignor makes no
representation or warranty in connection with, and shall have no responsibility
with respect to, the solvency, financial condition or statements of any Obligor,
or the validity and enforceability of any Obligor's obligations under the Credit
Agreement or any other Loan Document. The Assignee acknowledges that it has,
independently and without reliance on the Assignor, and based on such documents
and information as it has deemed appropriate, made its own credit analysis and
decision to enter into this Agreement and will continue to
- ----------------------------
1 Delete if consent is not required.
2 Amount should combine principal together with accrued interest and
breakage compensation, if any, to be paid by the Assignee, net of any portion of
any upfront fee to be paid by the Assignor to the Assignee. It may be preferable
in an appropriate case to specify these amounts generically or by formula rather
than as a fixed sum.
3 Delete if consent is not required.
4 Delete if the Assignee is already a Lender, since it already has a Note.
765748.1 10/9/98 7:17p
J-2
<PAGE>
be responsible for making its own independent appraisal of the business,
affairs and financial condition of the Obligors.
SECTION 7. Governing Law. This Agreement shall be governed by and
construed in accordance with the laws of the State of New York.
SECTION 8. Counterparts. This Agreement may be signed in any number of
counterparts, each of which shall be an original, with the same effect as if the
signatures thereto and hereto were upon the same instrument.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed and delivered by their duly authorized officers as of the date first
above written.
[NAME OF ASSIGNOR]
By: _________________________
Name:
Title:
[NAME OF ASSIGNEE]
By: __________________________
Name:
Title:
765748.1 10/9/98 7:17p
J-3
<PAGE>
The undersigned consent to the foregoing assignment.
[TOY BIZ, INC.]/[MARVEL ENTERPRISES, INC.]
By: _________________________
Name:
Title:
UBS AG, STAMFORD BRANCH, as Agent
By: __________________________
Name:
Title:
By: __________________________
Name:
Title:
765748.1 10/9/98 7:17p
J-4
<PAGE>
EXHIBIT K - Designation Agreement
DESIGNATION AGREEMENT
dated as of ________________, _____
Reference is made to the Credit Agreement dated as of September 28,
1998 (as amended from time to time, the "Credit Agreement") among Toy Biz, Inc.,
a Delaware corporation [to be renamed]/[predecessor of] Marvel Enterprises, Inc.
(the "Borrower"), the Guarantors party thereto, the lenders party thereto (the
"Lenders") and UBS AG, Stamford Branch, as Agent (the "Agent"). Terms defined in
the Credit Agreement are used herein with the same meaning.
_________________ (the "Designator") and ________________ (the
"Designee") agree as follows:
1. The Designator designates the Designee as its Designated Lender
under the Credit Agreement and the Designee accepts such designation.
2. The Designator makes no representations or warranties and assumes no
responsibility with respect to the financial condition of any Obligor or the
performance or observance by any Obligor of any of its obligations under the
Credit Agreement, any other Loan Document or any other instrument or document
furnished pursuant thereto.
3. The Designee confirms that it is an Eligible Designee; appoints and
authorizes the Designator as its agent and attorney-in-fact and grants the
Designator an irrevocable power of attorney to receive payments made for the
benefit of the Designee under the Credit Agreement and to deliver and receive
all communications and notices under the Credit Agreement, if any, that the
Designee is obligated to deliver or has the right to receive thereunder; and
acknowledges that the Designator retains the sole right and responsibility to
vote under the Credit Agreement, including, without limitation, the right to
approve any amendment or waiver of any provision of the Credit Agreement, and
agrees that the Designee shall be bound by all such votes, approvals, amendments
and waivers and all other agreements of the Designator pursuant to or in
connection with the Credit Agreement, all subject to Section 10.05(b) of the
Credit Agreement.
4. The Designee confirms that it has received a copy of the Credit
Agreement, together with copies of the most recent financial statements referred
to in Article 4 or delivered pursuant to Article 5 thereof and such other
documents and information as it has deemed appropriate to make its own credit
analysis and decision to enter into this Designation Agreement; agrees that it
will, independently and without reliance upon the Agent, the Designator or any
other Lender and based on such documents and information as it shall deem
appropriate at the time, continue to make its own credit decisions in taking or
not taking any action it may be permitted to take under the Credit Agreement.
The Designee acknowledges that it is subject to and bound by the confidentiality
provisions of the Credit Agreement (except as provided in Section 10.07(a)
thereof).
765748.1
J-1
<PAGE>
5. Following the execution of this Designation Agreement by the
Designator and the Designee and the consent hereto by the Borrower, it will be
delivered to the Agent for its consent. This Designation Agreement shall become
effective when the Agent consents hereto or on any later date specified on the
signature page hereof.
6. Upon the effectiveness hereof, the Designee shall have the right to
make Loans or portions thereof as a Lender pursuant to Section 2.01 of the
Credit Agreement and the rights of a Lender related thereto and the making of
any such Loans or portions thereof by the Designee shall satisfy the obligations
of the Designator under the Credit Agreement to the same extent, and as if, such
Loans or portions thereof were made by the Designator.
7. This Designation Agreement shall be governed by, and construed in
accordance with, the laws of the State of New York.
IN WITNESS WHEREOF, the parties have caused this Designation Agreement
to be executed by their respective officers hereunto duly authorized, as of the
date first above written.
Effective Date:______, ____
[NAME OF DESIGNATOR]
By: _________________________
Name:
Title:
[NAME OF DESIGNEE]
By: _________________________
Name:
Title:
765748.1 10/9/98 7:17p
K-2
<PAGE>
The undersigned consent to the foregoing designation.
[TOY BIZ, INC.]/[MARVEL ENTERPRISES, INC.]
By: __________________________
Name:
Title:
UBS AG, STAMFORD BRANCH, as Agent
By: __________________________
Name:
Title:
By: __________________________
Name:
Title:
765748.1
K-3
EXHIBIT 99.2
Execution Copy
SECURITY AGREEMENT
dated as of
September 28, 1998
among
TOY BIZ, INC.
(to be renamed Marvel Enterprises, Inc.)
THE SUBSIDIARY GUARANTORS PARTY HERETO
and
UBS AG, Stamford Branch,
as Collateral Agent
765749.1
<PAGE>
TABLE OF CONTENTS
----------------------
PAGE
SECTION 1. Definitions........................................................2
SECTION 2. Representations and Warranties....................................12
SECTION 3. The Security Interests............................................14
SECTION 4. Delivery of Certain Collateral....................................15
SECTION 5. Further Assurances; Covenants.....................................16
SECTION 6. Record Ownership of Pledged Equity Securities.....................20
SECTION 7. Right to Vote Pledged Equity Interests............................21
SECTION 8. Right to Receive Distributions on Collateral......................21
SECTION 9. Collateral Accounts...............................................22
SECTION 10. General Authority................................................24
SECTION 11. Remedies upon Event of Default...................................25
SECTION 12. Limitation on Duty of Collateral Agent in Respect of
Collateral.......................................................28
SECTION 13. Application of Proceeds..........................................28
SECTION 14. Concerning the Collateral Agent..................................30
SECTION 15. Appointment of Co-Agents.........................................30
SECTION 16. Expenses.........................................................31
SECTION 17. Termination of Security Interests; Release of Collateral.........31
SECTION 18. Additional Subsidiary Guarantors.................................32
SECTION 19. Notices..........................................................32
SECTION 20. Waivers, Non-Exclusive Remedies..................................33
SECTION 21. Successors and Assigns...........................................33
SECTION 22. Changes in Writing...............................................33
SECTION 23. New York Law.....................................................33
SECTION 24. Severability.....................................................33
SECTION 25. Counterparts.....................................................33
Schedule 1 -- Equity Interests
Exhibit A -- Form of Perfection Certificate
Exhibit B -- Form of Lockbox Letter
Exhibit C -- Form of Security Agreement Supplement
Exhibit D -- Form of Copyright Security Agreement
Exhibit E -- Form of Patent Security Agreement
Exhibit F -- Form of Trademark Security Agreement
765749.1 10/9/98 7:28p
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SECURITY AGREEMENT
AGREEMENT dated as of September 28, 1998 among TOY BIZ, INC. (to be
renamed Marvel Enterprises, Inc.), a Delaware corporation, the SUBSIDIARY
GUARANTORS party hereto and UBS AG, Stamford Branch, as Collateral Agent (the
"Collateral Agent").
W I T N E S S E T H :
WHEREAS the Borrower, the Subsidiary Guarantors, certain Lenders (the
"Revolving Lenders") and the Issuers referred to therein and the Collateral
Agent are parties to a $50,000,000 Credit Agreement of even date herewith (as
the same may be amended from time to time, the "Revolving Credit Agreement");
WHEREAS the Borrower, the Subsidiary Guarantors, certain Lenders (the
"Bridge Lenders" and, together with the Revolving Lenders, the "Lenders") are
parties to a $200,000,000 Bridge Loan Agreement of even date herewith (as the
same may be amended from time to time, the "Bridge Credit Agreement" and,
together with the Revolving Credit Agreement, the "Credit Agreements");
WHEREAS, the Borrower is willing to secure its obligations under the
Credit Agreements and the other Loan Documents by granting Liens on its assets
to the Collateral Agent as provided in this Agreement and the other Collateral
Documents;
WHEREAS, each of the Borrower's U.S. Subsidiaries has guaranteed the
foregoing obligations of the Borrower pursuant to the Credit Agreements and is
willing to secure its obligations under such the Credit Agreements by granting
Liens on its assets to the Collateral Agent as provided in this Agreement and
the other Collateral Documents; and
WHEREAS, the Lenders and the Issuers are not willing to make loans or
maintain, issue or participate in letters of credit under the Credit Agreements
unless the foregoing obligations of the Borrower are secured by Liens on its
assets as provided in the Collateral Documents.
NOW THEREFORE in consideration of the premises and other good and
valuable consideration, the receipt and sufficiency of which are hereby
acknowledged, the parties hereto agree as follows:
SECTION 1. Definitions. Terms defined in the Credit Agreements and not
otherwise defined herein have, as used herein, the respective meanings provided
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for therein. The following additional terms, as used herein, have the following
respective meanings:
"Accounts" means, with respect to any Lien Grantor, all "accounts" (as
defined in the UCC) now owned or hereafter acquired by such Lien Grantor, and
shall also mean and include all accounts receivable, contract rights, book
debts, notes, drafts and other obligations or indebtedness owing to such Lien
Grantor arising from the sale, lease or exchange of goods or other property by
it and/or the performance of services by it (including, without limitation, any
such obligation which might be characterized as an account, contract right or
general intangible under the Uniform Commercial Code in effect in any
jurisdiction) and all of such Lien Grantor's rights in, to and under all
purchase orders for goods, services or other property, and all of such Lien
Grantor's rights to any goods, services or other property represented by any of
the foregoing (including returned or repossessed goods and unpaid sellers'
rights of rescission, replevin, reclamation and rights to stoppage in transit)
and all monies due to or to become due to such Lien Grantor under all contracts
for the sale, lease or exchange of goods or other property and/or the
performance of services by it (whether or not yet earned by performance on the
part of such Lien Grantor), in each case whether now in existence or hereafter
arising or acquired, including, without limitation, the right to receive the
proceeds of said purchase orders and contracts and all collateral security and
guarantees of any kind given by any Person with respect to any of the foregoing.
"Bank Agents" means the Revolving Agent and the Bridge Agent, and "Bank
Agent" means either of the foregoing.
"Bridge Agent" has the meaning ascribed to the term "Agent" in the
Bridge Credit Agreement.
"Bridge Credit Agreement" has the meaning set forth in the recitals
hereto.
"Bridge Loan" has the meaning ascribed to the term "Loan" in the Bridge
Credit Agreement.
"Bridge Loan Documents" has the meaning ascribed to the term "Loan
Documents" in the Bridge Credit Agreement.
"Collateral" has the meaning set forth in Section 3.
"Collateral Accounts" means the General Collateral Account and the
Insurance Account.
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"Collateral Documents" means this Agreement, the Security Agreement
Supplements, the Intellectual Property Security Agreements and all other
supplemental or additional security agreements, mortgages or similar instruments
delivered pursuant hereto or thereto.
"Contingent Secured Obligation" means, at any time, any Secured
Obligation (or portion thereof) that is contingent in nature at such time,
including (without limiting the generality of the foregoing) any obligation to
reimburse the Issuer for drawings not yet made under a Letter of Credit.
"Commodity Account" means an account maintained by a commodity
intermediary in which a commodity contract is carried for a commodity customer.
"Commodity Contract" means a commodity futures contract, an option on a
commodity futures contract, a commodity option, or other contract that, in each
case, is:
(i) traded on or subject to the rules of a board of trade that has been
designated as a contract market for such a contract pursuant to the federal
commodities laws; or
(ii) traded on a foreign commodity board of trade, exchange or market,
and is carried on the books of a commodity intermediary for a commodity
customer.
"Copyright License" means any agreement now or hereafter in existence
(i) granting to any Lien Grantor (except to the extent that the granting of a
security interest therein would result in a breach of, or default under, such
agreement) or (ii) pursuant to which any Lien Grantor has granted to any other
Person, in each case, any right to use, copy, reproduce, distribute, prepare
derivative works, display or publish any records or other materials on which a
Copyright is in existence or may come into existence, including, without
limitation, any agreement identified in Schedule 1 to a Copyright Security
Agreement.
"Copyrights" means all of the following: (i) all copyrights under the
laws of the United States or any other country (whether or not the underlying
works of authorship have been published), all registrations and recordings
thereof, all copyrightable works of authorship (whether or not published), and
all applications for copyrights under the laws of the United States or any other
country, including, without limitation, registrations, recordings and
applications in the United States Copyright Office or in any similar office or
agency of the United States, any State thereof or any other country or any
political subdivision thereof, (ii) all renewals thereof, (iii) all claims for,
and rights to sue for, past or future infringements of any of the foregoing, and
(iv) all income, royalties, damages and payments now or hereafter due or payable
with respect to any of the foregoing, including, without limitation, damages and
payments for past or future infringements thereof.
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"Copyright Security Agreement" means a Copyright Security Agreement
executed and delivered by a Lien Grantor in favor of the Collateral Agent, for
the benefit of the Secured Parties, substantially in the form of Exhibit C to
this Agreement, as the same may be amended from time to time.
"Documents" means, with respect to any Lien Grantor, all "documents"
(as defined in the UCC) or other receipts covering, evidencing or representing
goods, now owned or hereafter acquired by such Lien Grantor.
"Equipment" means, with respect to any Lien Grantor, all "equipment"
(as defined in the UCC) now owned or hereafter acquired by it, and including
without limitation all motor vehicles, trucks, trailers, railcars and barges
other than motor vehicles the perfection of a security interest in which is
excluded from the Uniform Commercial Code in the relevant jurisdiction.
"Equity Interest" means (i) in the case of a corporation, any shares of
its capital stock, (ii) in the case of a limited liability company, any
membership interest therein, (iii) in the case of a partnership, any partnership
interest (whether general or limited) therein, (iv) in the case of any other
business entity, any participation or other interest in the equity or profits
thereof or (v) any warrant, option or other right to acquire any Equity Interest
described in the foregoing clauses (i), (ii), (iii) and (iv).
"Event of Default" has the meaning ascribed to such term in either
Credit Agreement.
"Financial Asset" means:
(i) a security;
(ii) an obligation of a person or a share, participation, or other
interest in a person or in property or an enterprise of a person, which is, or
is of a type, dealt in or traded on financial markets, or which is recognized in
any area in which it is issued or dealt in as a medium for investment; or
(iii) any property that is held by a securities intermediary for
another person in a Securities Account if the securities intermediary has
expressly agreed with the other person that the property is to be treated as a
financial asset under Article 8 of the UCC.
As the context requires, Financial Asset means either the interest itself or the
means by which a person's claim to it is evidenced, including a certificated or
uncertificated Security, a Security certificate, or a Security Entitlement.
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"Foreign Person" means any Person organized under the laws of a
jurisdiction, and conducting substantially all of its operations, outside of the
United States, other than any such Person that is, whether as a matter of law,
pursuant to an election by such Person or otherwise, treated as a partnership in
which any Lien Grantor is a partner or a branch of any Lien Grantor for United
States income tax purposes.
"General Collateral Account" has the meaning set forth in Section 9(A).
"General Intangibles" means, with respect to any Lien Grantor, all
"general intangibles" (as defined in the UCC) now owned or hereafter acquired by
such Lien Grantor, including without limitation (i) all obligations or
indebtedness owing to such Lien Grantor (other than Accounts) from whatever
source arising, (ii) all Intellectual Property and any rights or interests of
such Lien Grantor in any Intellectual Property (including without limitation any
rights therein by way of collateral assignment or collateral security), rights
in other intellectual property, goodwill, service marks, trade secrets, permits
and licenses, (iii) all rights or claims in respect of refunds for taxes paid
and (iv) all rights in respect of any pension plan or similar arrangement
maintained for employees of any member of the ERISA Group.
"Instruments" means, with respect to any Lien Grantor, all
"instruments", "chattel paper" or "letters of credit" (each as defined in the
UCC), including those evidencing, representing, arising from or existing in
respect of, relating to, securing or otherwise supporting the payment of, any of
the Accounts, including (but not limited to) promissory notes, drafts, bills of
exchange and trade acceptances, now owned or hereafter acquired by such Lien
Grantor.
"Insurance Account" has the meaning set forth in Section 9(C).
"Insurance Proceeds" has the meaning set forth in Section 9(C).
"Intellectual Property" means (i) Patents, (ii) Patent Licenses, (iii)
Trademarks, (iv) Trademark Licenses, (v) Copyrights and (vi) Copyright Licenses.
"Intellectual Property Filing" means (i) with respect to any Patent,
Patent License, Trademark or Trademark License, the filing of the applicable
Patent Security Agreement or Trademark Security Agreement with the United States
Patent and Trademark Office, together with an appropriately completed
recordation form, and (ii) with respect to any Copyright or Copyright License,
the filing of the applicable Copyright Security Agreement with the United States
Copyright Office, together with an appropriately completed recordation form, in
each case sufficient to record the Security Interest granted to the Collateral
Agent in such Intellectual Property.
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"Intellectual Property Security Agreement" means a Copyright Security
Agreement, a Patent Security Agreement or a Trademark Security Agreement.
"Inventory" means, with respect to any Lien Grantor, all "inventory"
(as defined in the UCC), now owned or hereafter acquired by it, wherever
located, and shall also mean and include all raw materials and other materials
and supplies, work-in-process and finished goods and any products made or
processed therefrom and all substances, if any, commingled therewith or added
thereto.
"Investment Property" means (i) a Security, whether certificated or
uncertificated, (ii) a Security Entitlement, (iii) a Securities Account, (iv) a
Commodities Contract, or (v) a Commodities Account.
"Letter of Credit" has the meaning set forth in the Revolving Credit
Agreement.
"Lien Grantor" means the Borrower or any Subsidiary Guarantor and "Lien
Grantors" means all of the foregoing.
"Liquid Investments" has the meaning set forth in Section 9(G).
"Loans" means the Bridge Loans and the Revolving Loans and "Loan" means
any of the foregoing.
"Lockbox Letter" means a lockbox letter substantially in the form of
Exhibit A hereto, delivered to a bank or financial institution, pursuant to
which a lockbox account is irrevocably assigned to the Collateral Trustee.
"Loan Documents" means the Revolving Loan Documents and the Bridge Loan
Documents, and "Loan Document" means any of the foregoing.
"Non-Contingent Secured Obligation" means at any time any Secured
Obligation (or portion thereof) that is not a Contingent Secured Obligation at
such time.
"Opinion of Counsel" means a written opinion of legal counsel (who may
be counsel to a Lien Grantor or other counsel, in either case approved by the
Bank Agents or the Required Lenders in a writing delivered to the Collateral
Agent) addressed and delivered to the Collateral Agent.
"Original Lien Grantor" means the Borrower or any Subsidiary Guarantor
that grants a Lien on any of its assets hereunder on the Closing Date, and
"Original Lien Grantors" means all of the foregoing.
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"Other Investment Property" means, with respect to any Lien Grantor,
all Investment Property now owned or hereafter acquired by it, other than any
such Investment Property constituting an Equity Interest.
"Other Pledged Securities" means, with respect to any Lien Grantor, all
"securities" (as such term is defined in Article 8 of the UCC) now owned or
hereafter acquired by such Lien Grantor, other than any Pledged Equity Interests
of such Lien Grantor.
"Patent License" means any agreement now or hereafter in existence
granting any Lien Grantor, or pursuant to which any Lien Grantor has granted to
any other Person, any right with respect to any Patent or any invention now or
hereafter in existence, whether patentable or not, whether a patent or
application for patent is in existence on such invention or not, and whether a
patent or application for patent on such invention may come into existence or
not, including, without limitation, any agreement identified in Schedule 1 to a
Patent Security Agreement.
"Patents" means all of the following: (i) all letters patent of the
United States or any other country, all registrations and recordings thereof,
and all applications for letters patent of the United States or any other
country, including registrations, recordings and applications in the United
States Patent and Trademark Office or in any similar office or agency of the
United States or any other country or any political subdivision thereof, (ii)
all reissues, continuations, continuations-in-part or extensions thereof, (iii)
all claims for, and rights to sue for, past or future infringements of any of
the foregoing and (iv) all income, royalties, damages and payments now or
hereafter due or payable with respect to any of the foregoing, including,
without limitation, damages and payments for past or future infringements
thereof.
"Patent Security Agreement" means a Patent Security Agreement executed
and delivered by a Lien Grantor in favor of the Collateral Agent, for the
benefit of the Secured Parties, substantially in the form of Exhibit D to this
Agreement, as the same may be amended from time to time.
"Perfection Certificate" means, with respect to any Lien Grantor, a
certificate substantially in the form of Exhibit A, completed and supplemented
with the schedules and attachments contemplated thereby to the satisfaction of
the Collateral Agent, and duly executed by a duly authorized officer of such
Lien Grantor.
"Permitted Liens" means the Security Interests and the Liens on the
Collateral permitted to be created, to be assumed or to exist pursuant to
Section 5.09 of each Credit Agreement.
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"Pledged Certificates" means at any time all "certificated securities"
(as such term is defined in Article 8 of the UCC) that evidence or represent
Pledged Equity Interests or Other Pledged Securities at such time.
"Pledged Equity Interests" means at any time all Equity Interests
included in the Collateral at such time.
"Pledged Instruments" means at any time all Instruments included in the
Collateral at such time.
"Pledged LLC Interest" means at any time any membership interest or
similar interest in a limited liability company that is included in the Pledged
Equity Interests at such time.
"Pledged Partnership Interest" means at any time any partnership
interest (whether general or limited) that is included in the Pledged Equity
Interests at such time.
"Post-Petition Interest" means any interest which accrues after the
commencement of any case, proceeding or other action relating to the bankruptcy,
insolvency or reorganization of the Borrower or would accrue but for the
operation of applicable bankruptcy or insolvency laws, whether or not such
interest is allowed or allowable as a claim in any such proceeding.
"Proceeds" means, with respect to any Lien Grantor, all proceeds of,
and all other profits, products, rents or receipts, in whatever form, arising
from the collection, sale, lease, exchange, assignment, licensing or other
disposition of, or other realization upon, collateral, including, without
limitation, all claims of such Lien Grantor against third parties for loss of,
damage to or destruction of, or for proceeds payable under, or unearned premiums
with respect to, policies of insurance in respect of, any collateral, and any
condemnation or requisition payments with respect to any collateral, in each
case whether now existing or hereafter arising.
"Required Lenders" means (i) at any time at which Loans or Letters of
Credit and/or commitments to make Loans or issue Letters of Credit are
outstanding under both Credit Agreements, both of (x) the Required Lenders (as
defined in the Revolving Credit Agreement) and (y) the Required Lenders (as
defined in the Bridge Credit Agreement) and (ii) at any time at which Loans or
Letters of Credit and/or commitments to make Loans or issue Letters of Credit
are outstanding under only one Credit Agreement Required Lenders (as defined in
such Credit Agreement).
"Revolving Agent" has the meaning ascribed to the term "Agent" in the
Revolving Credit Agreement.
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"Revolving Credit Agreement" has the meaning set forth in the recitals
hereto.
"Revolving Loan" has the meaning ascribed to the term "Loan" in the
Revolving Credit Agreement.
"Revolving Loan Documents" has the meaning ascribed to the term "Loan
Documents" in the Revolving Credit Agreement.
"Secured Obligations" means:
(A) with respect to the Borrower, all principal of all Loans and LC
Reimbursement Obligations outstanding from time to time under either Credit
Agreement, all interest (including, without limitation, Post-Petition Interest)
on such Loans and LC Reimbursement Obligations and all other amounts now or
hereafter payable by the Borrower pursuant to any Loan Document;
(B) with respect to any Subsidiary Guarantor, all obligations of such
Subsidiary Guarantor under either Credit Agreement or any other Loan Document
(including, without limitation, obligations in respect of Post-Petition
Interest); and
(C) with respect to any Lien Grantor, any renewals or extensions of any
Secured Obligations.
"Secured Parties" means the Collateral Agent, the Lenders and the
Issuers.
"Securities Account" means an account to which a Financial Asset is or
may be credited in accordance with an agreement under which the person
maintaining the account undertakes to treat the person for whom the account is
maintained as entitled to exercise the rights that comprise the Financial Asset.
"Security" means an obligation of an issuer or a share, participation,
or other interest in an issuer or in property or an enterprise of an issuer:
(i) which is represented by a security certificate in bearer or
registered form, or the transfer of which may be registered upon books
maintained for that purpose by or on behalf of the issuer;
(ii) which is one of a class or series or by its terms is divisible
into a class or series of shares, participations, interests, or obligations; and
(iii) which:
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(A) is, or is of a type, dealt in or traded on securities
exchanges or securities markets; or
(B) is a medium for investment and by its terms expressly
provides that it is a security governed by Article 8 of the
Uniform Commercial Code as in effect in any jurisdiction;
provided that any share or similar equity interest issued by a corporation,
business trust, joint stock company or similar entity or by an entity that is
registered as an investment company under the federal investment company laws,
any interest in a unit trust that is so registered and any face-amount
certificate that is issued by a fact-amount certificate company that is so
registered, is a "Security".
"Security Agreement Supplement" means a letter substantially in the
form of Exhibit A hereto, executed and delivered to the Collateral Agent
pursuant to Section 18 for the purpose of adding a new Subsidiary Guarantor as a
party hereto and/or adding additional property to the Collateral.
"Security Entitlement" means a "security entitlement" (as defined in
the UCC).
"Security Interests" means the security interests in the Collateral
granted hereunder securing the Secured Obligations.
"Subsidiary Guarantors" means each Person listed on the signature pages
hereof under the caption "Subsidiary Guarantors" and each Person that shall, at
any time after the date hereof, become a party hereto and a "Subsidiary
Guarantor" as provided in Section 18.
"Trademarks" means: (i) all trademarks, trade names, corporate names,
company names, business names, fictitious business names, trade styles, service
marks, logos, brand names, trade dress, prints and labels on which any of the
foregoing have appeared or appear, package and other designs, and any other
source or business identifiers, and general intangibles of like nature, and the
rights in any of the foregoing which arise under applicable law, (ii) the
goodwill of the business symbolized thereby or associated with each of them,
(iii) all registrations and applications in connection therewith, including,
without limitation, registrations and applications in the United States Patent
and Trademark Office or in any similar office or agency of the United States,
any State thereof or any other country or any political subdivision thereof,
including, without limitation, those described in Schedule 1 to any Trademark
Security Agreement, (iv) all renewals thereof, (v) all claims for, and rights to
sue for, past or future infringements of any of the foregoing and (vi) all
income, royalties, damages and payments now or hereafter due or payable with
respect to any of the foregoing, including, without limitation, damages and
payments for past or future infringements thereof.
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"Trademark License" means any agreement now or hereafter in existence
granting to any Lien Grantor. or pursuant to which any Lien Grantor has granted
to any other Person, any right to use any Trademark.
"Trademark Security Agreement" means a Trademark Security Agreement
executed and delivered by a Lien Grantor in favor of the Collateral Agent, for
the benefit of the Secured Parties, substantially in the form of Exhibit E to
this Agreement, as the same may be amended from time to time.
"UCC" means the Uniform Commercial Code as in effect on the date hereof
in the State of New York; provided that if by reason of mandatory provisions of
law, the perfection or the effect of perfection or non-perfection of the
Security Interest in any Collateral is governed by the Uniform Commercial Code
as in effect in a jurisdiction other than New York, "UCC" means the Uniform
Commercial Code as in effect in such other jurisdiction for purposes of the
provisions hereof relating to such perfection or effect of perfection or
non-perfection.
"U.S. Person" means any Person other than a Foreign Person.
SECTION 2. Representations and Warranties. Each Lien Grantor represents
and warrants as follows:
(A) Such Lien Grantor owns the Equity Interests listed as being
owned by it in Schedule 1 hereto or to any Security Agreement
Supplement to which it is a party, free and clear of any Lien other
than the Security Interests. All shares of capital stock identified in
any such Schedule as being beneficially owned by such Lien Grantor have
been duly authorized and validly issued, are fully paid and
non-assessable, and are subject to no option to purchase or similar
right of any Person. Such Lien Grantor is not and will not become a
party to or otherwise bound by any agreement, other than the Loan
Documents, which restricts in any manner the rights of any present or
future holder of any Equity Interest with respect thereto.
(B) Such Lien Grantor has good and marketable title to all of the
Collateral, free and clear of any Liens other than the Permitted Liens.
Such Lien Grantor has taken all actions necessary under the UCC to
perfect its interest in any Accounts purchased or otherwise acquired by
it, as against its assignors and creditors of its assignors.
(C) Such Lien Grantor has not entered into any agreement which is
reasonably likely to, or taken any action which is reasonably likely
to, prevent the Collateral Agent from enforcing any of the terms of
this Agreement or which would limit the Collateral Agent in any such
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enforcement. Other than financing statements or other similar or
equivalent documents or instruments with respect to the Security
Interests and Permitted Liens, no financing statement, mortgage,
security agreement or similar or equivalent document or instrument
covering all or any part of the Collateral is on file or of record in
any jurisdiction in which such filing or recording would be effective
to perfect a Lien on such Collateral. No Collateral is in the
possession of any Person (other than such Lien Grantor or a bailee or
warehouseman of such Lien Grantor) asserting any claim thereto or
security interest therein, except that the Collateral Agent or its
designee may have possession of Collateral as contemplated hereby.
(D) Such Lien Grantor has delivered a Perfection Certificate to
the Collateral Agent. The information set forth therein is correct and
complete as of the Closing Date. Not later than 30 days following the
Closing Date, such Lien Grantor shall furnish to the Collateral Agent
file search reports from each UCC filing office set forth in Schedule 6
to such Perfection Certificate confirming the filing information set
forth in such Schedule.
(E) The Security Interests constitute, under the UCC, valid
security interests in all Collateral owned by such Lien Grantor,
securing its Secured Obligations other than any Collateral the grant of
a security in which is excluded from Section 9-104 of the UCC.
(F) Upon the delivery of actual possession of the Pledged
Instruments (if any) and the Pledged Certificates, if any, owned by
such Lien Grantor to the Collateral Agent in accordance with Section 4,
the Security Interests in such Collateral will be perfected, subject to
no prior Lien and, in the case of any Pledged Certificates evidencing
"securities" (as defined in the UCC) the Collateral Agent will have
"control" (as defined in Section 8-106 of the UCC) thereof and will be
a "protected purchaser" (as defined in Section 8-303 of the UCC) of
such Security Interests therein.
(G) When UCC financing statements in the form specified in Exhibit
5(A) to such Lien Grantor's Perfection Certificate shall have been
filed in the offices specified in such Lien Grantor's Perfection
Certificate, the Security Interests will constitute perfected security
interests in the Collateral (except Inventory in transit and
Intellectual Property) owned by such Lien Grantor to the extent that a
security interest therein may be perfected by filing pursuant to the
UCC, prior to all Liens and rights of others therein except Permitted
Liens. When, in addition to the filing of such UCC financing
statements, the applicable Intellectual Property Filings have been made
with respect to such Lien Grantor's Intellectual Property (including
any future filings required pursuant to Section 5(C) and 5(D)), the
Security Interests will constitute perfected security interests in all
right,
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title and interest of such Lien Grantor in its Intellectual Property to
the extent that security interests therein may be perfected by such
filings, prior to all other Liens and rights of others therein except
Permitted Liens. Except for the filing of such UCC financing statements
and such Intellectual Property Filings, no registration, recordation or
filing with any governmental body, agency or official is required in
connection with the execution or delivery of the Collateral Documents
or is necessary for the validity or enforceability thereof or for the
perfection or due recordation of the Security Interests or for the
enforcement of the Security Interests.
(H) Such Lien Grantor's Collateral is insured in accordance with
the requirements of the Credit Agreements.
(I) All of such Lien Grantor's Inventory has or will have been
produced in compliance with the applicable requirements, if any, of the
Fair Labor Standards Act, as amended.
(J) The "securities intermediary's jurisdiction" (as defined in
the UCC) in respect of each of such Lien Grantor's Securities Accounts
and Security Entitlements, the "commodity intermediary's jurisdiction"
(as defined in the UCC) in respect of each of such Lien Grantor's
Commodity Accounts and Commodity Contracts, and the location of such
Lien Grantor's chief executive office, is a jurisdiction that has
adopted, in substantial part, Uniform Commercial Code, Revised Article
8, Investment Securities (with Conforming and Miscellaneous Amendments
to Articles 1, 3, 4, 5, 9 and 10) 1994 Official Text.
SECTION 3. The Security Interests. (A) In order to secure the full and
punctual payment and performance of the Secured Obligations in accordance with
the terms thereof, each Lien Grantor hereby grants to the Collateral Agent for
the ratable benefit of the Secured Parties a continuing security interest in and
to all of the following property of such Lien Grantor, whether now owned or
existing or hereafter acquired or arising and regardless of where located (all
being collectively referred to as the "Collateral"):
(i) Accounts;
(ii) Inventory;
(iii) General Intangibles;
(iv) Documents;
(v) Instruments;
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(vi) Equipment;
(vii) (x) Equity Interests in any U.S. Person now owned or hereafter
beneficially owned by such Lien Grantor, (y) the lesser of all voting
Equity Interests in any Foreign Person now owned or hereafter
beneficially acquired by such Lien Grantor and 65% of all voting Equity
Interests in such Foreign Person held by any Person and (z) all
non-voting Equity Interests in any Foreign Person now owned or
hereafter beneficially acquired by such Lien Grantor and, in each case,
all rights and privileges of such Lien Grantor with respect to such
Equity Interests, and all dividends, distributions and other payments
with respect thereto;
(viii) Other Investment Property;
(ix) The Collateral Accounts, all cash deposited therein from time to
time, the Liquid Investments made pursuant to Section 5(F) and other
monies and property of any kind of any Lien Grantor in the possession
or under the control of the Collateral Agent;
(x) All books and records (including, without limitation, customer
lists, credit files, computer programs, printouts and other computer
materials and records) of such Lien Grantor pertaining to any of the
Collateral; and
(xi) All Proceeds of all or any of the Collateral described in Clauses
3(A)(i) through 3(A)(x) hereof.
(B) The Security Interests are granted as security only and shall not
subject any Secured Party to, or transfer or in any way affect or modify, any
obligation or liability of any Lien Grantor with respect to any of the
Collateral or any transaction in connection therewith.
SECTION 4. Delivery of Certain Collateral. (A) On the Closing Date,
each Original Lien Grantor is delivering to the Collateral Agent as Collateral
hereunder (i) with respect to each U.S. Person, all stock certificates or other
certificates, if any, representing Equity Interests in such U.S. Person then
owned by such Original Lien Grantor, (ii) with respect to each Foreign Person,
stock certificates or other certificates, if any, representing (a) the lesser of
(1) all voting Equity Interests in such Foreign Person then owned by such
Original Lien Grantor and (2) 65% of all voting Equity Interests in such Foreign
Person and (b) all non-voting equity Interests in such Foreign Person then owed
by such Original Lien Grantor and (iii) all Instruments and all certificates
evidencing Other Pledged Securities then owned by such Person.
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(B) On the date it signs and delivers its Security Agreement
Supplement, each Lien Grantor (other than an Original Lien Grantor) will deliver
to the Collateral Agent as Collateral hereunder (i) with respect to each U.S.
Person, all stock certificates or other certificates, if any, representing
Equity Interests in such U.S. Person then owned by it, (ii) with respect to each
Foreign Person stock certificates or other certificates representing (a) the
lesser of (1) all voting Equity Interests in such Foreign Person then owned by
such Original Lien Grantor and (2) 65% of all voting Equity Interests in such
Foreign Person and (b) all non-voting equity Interests in such Foreign Person
then owed by such Original Lien Grantor and (iii) all Instruments and all
certificates evidencing Other Pledged Securities then owned by such Person.
(C) After the Closing Date (in the case of an Original Lien Grantor) or
the date of its Security Agreement Supplement (in the case of any other Lien
Grantor), if any Lien Grantor receives (i) any stock certificate or other
certificate representing Equity Interests in another Person then owned by it
(provided that no Lien Grantor shall be required to pledge more than 65% of the
voting Equity Interests in any Foreign Person), (ii) any certificate
representing any Other Pledged Securities then owned by it or (iii) any
Instrument, in which a security interest is granted pursuant to Section 3 hereof
or pursuant to the Security Agreement Supplement signed by it, such Lien Grantor
will immediately deliver such certificate or Instrument to the Collateral Agent
to be held by it as Collateral hereunder.
(D) Notwithstanding the foregoing, so long as no Event of Default shall
have occurred and be continuing, each Lien Grantor may retain for collection in
the ordinary course any Instruments (other than checks and drafts constituting
payments in respect of Accounts as to which the provisions of Section 9(B) shall
apply) received by it in the ordinary course of business, and the Collateral
Agent shall, promptly upon request by such Lien Grantor, make appropriate
arrangements for making any other Instrument pledged by such Lien Grantor
hereunder available to it for purposes of presentation, collection or renewal
(any such arrangement to be effected, to the extent deemed appropriate by the
Collateral Agent, against trust receipt or like document).
(E) All Pledged Certificates delivered to the Collateral Agent
hereunder will be delivered in suitable form for transfer by delivery, or
accompanied by duly executed instruments of transfer or assignment in blank and
accompanied by any required transfer tax stamps, all in form and substance
satisfactory to the Collateral Agent. All Pledged Instruments delivered to the
Collateral Agent hereunder will be endorsed to the order of the Collateral Agent
and accompanied by any required transfer tax stamps, all in form and substance
satisfactory to the Collateral Agent.
SECTION 5. Further Assurances; Covenants. Each Lien Grantor covenants
as follows:
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(A) It will not change its name, identity or corporate structure in any
manner unless such Lien Grantor shall have given the Collateral Agent notice of
such proposed action not more than six months nor less than 30 days prior to the
date on which such Lien Grantor proposes to take such action and delivered an
Opinion of Counsel with respect thereto in accordance with Section 5(E).
(B) It will not change the location of (i) its chief executive office
or chief place of business or (ii) the locations where it keeps or holds any
Collateral or any records relating thereto from the applicable location
described in its Perfection Certificate, unless such Lien Grantor shall have
given the Collateral Agent prior notice thereof and delivered an Opinion of
Counsel with respect thereto in accordance with Section 5(D). It will not in any
event change the location of any Collateral owned by it if such change would
cause the Security Interests in such Collateral to lapse or cease to be
perfected.
(C) It will, from time to time, at its expense, execute, deliver, file
and record any statement, assignment, instrument, document, agreement or other
paper and take any other action (including, without limitation, any filings of
financing or continuation statements under the UCC and any Intellectual Property
Filings) that from time to time may be necessary or desirable, or that the
Collateral Agent may reasonably request, in order to create, preserve, perfect,
confirm or validate the Security Interests in such Lien Grantor's Collateral or
to enable the Collateral Agent and the other Secured Parties to obtain the full
benefits of the Collateral Documents, or to enable the Collateral Agent to
exercise and enforce any of its rights, powers and remedies thereunder with
respect to any of such Lien Grantor's Collateral. To the extent permitted by
applicable law, such Lien Grantor authorizes the Collateral Agent to execute and
file such financing statements or continuation statements without such Lien
Grantor's signature appearing thereon. Such Lien Grantor agrees that a carbon,
photographic, photostatic or other reproduction of this Agreement or of a
financing statement is sufficient as a financing statement. Such Lien Grantor
shall pay the costs of, or incidental to, any recording or filing of any such
financing or continuation statements in which it is named as the debtor. Such
Lien Grantor hereby constitutes the Collateral Agent its attorney-in-fact to
execute and file all Intellectual Property Filings required or so requested for
the foregoing purposes, all acts of such attorney being hereby ratified and
confirmed; and such power, being coupled with an interest, shall be irrevocable
until such Lien Grantor's Collateral is released pursuant to Section 17.
(D) On the Closing Date (in the case of an Original Lien Grantor) or
the date of its Security Agreement Supplement (in the case of any other Lien
Grantor), it will sign and deliver to the Collateral Agent Intellectual Property
Security Agreements with respect to all Intellectual Property owned by it on
such date. Within 30 days of each January 1, it will sign and deliver to the
Collateral Agent Intellectual Property Security Agreements with respect to all
Intellectual Property owned by it on such January 1 that is not covered by
Intellectual Property Security
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Agreements previously so signed and delivered by it. In each case, it will make
all Intellectual Property Filings necessary to record the Security Interests in
such Intellectual Property.
(E) At least 30 days before it takes any action contemplated by Section
5(A) or 5(B), such Lien Grantor will, at its expense, cause to be delivered to
the Collateral Agent an Opinion of Counsel, in form and substance satisfactory
to the Collateral Agent, to the effect that all financing statements and
amendments or supplements thereto, continuation statements and other documents
required to be recorded or filed in order to perfect the Security Interests
against all creditors of and purchasers from such Lien Grantor (except any
continuation statements specified in such Opinion of Counsel that are to be
filed more than six months after the date thereof) have been filed in each
filing office necessary for such purpose and that all filing fees and taxes, if
any, payable in connection with such filings have been paid in full.
(F) If any Collateral is at any time in the possession or control of
any warehouseman, bailee or any agent or processor (other than the Borrower or
any of its Subsidiaries), such Lien Grantor will notify such warehouseman,
bailee, agent or processor of the Security Interests created hereby and instruct
it to hold all such Collateral for the Collateral Agent's account subject to the
Collateral Agent's instructions.
(G) It shall keep full and accurate books and records relating to the
Collateral, and, if requested, stamp or otherwise mark such books and records in
such manner as the Collateral Agent may reasonably require in order to reflect
the Security Interests.
(H) It shall use its best efforts to cause to be collected from its
account debtors, as and when due, any and all amounts owing under or on account
of each of its Accounts (including, without limitation, Accounts which are
delinquent, such Accounts to be collected in accordance with lawful collection
procedures) and shall apply forthwith upon receipt thereof all such amounts as
are so collected to the outstanding balance of such Account for credit to the
subaccounts of the applicable Lien Grantor. Subject to the rights of the
Collateral Agent and the other Secured Parties hereunder if an Event of Default
shall have occurred and be continuing, such Lien Grantor may allow in the
ordinary course of business as adjustments to amounts owing under its Accounts
(i) an extension or renewal of the time or times of payment, or settlement for
less than the total unpaid balance, which such Lien Grantor finds appropriate in
accordance with sound business judgment and (ii) a refund or credit due in
accordance with such Lien Grantor's ordinary course of business consistent with
its historical collection practices. The costs and expenses (including, without
limitation, attorney's fees) of collection, whether incurred by such Lien
Grantor or the Collateral Agent, shall be borne by such Lien Grantor.
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(I) Upon the occurrence and during the continuance of any Event of
Default, such Lien Grantor will, upon the request of the Collateral Agent,
promptly notify (and such Lien Grantor hereby authorizes the Collateral Agent so
to notify) each account debtor in respect of any Accounts or Instruments that
such Collateral has been assigned to the Collateral Agent hereunder, and that
any payments due or to become due in respect of such Collateral are to be made
directly to the Collateral Agent or its designee.
(J) It will, (i) on or prior to the date of the first Borrowing under
either Credit Agreement, in the case of Equipment (other than motor vehicles)
now owned and (ii) within 10 days of acquiring any other Equipment, deliver to
the Collateral Agent any and all certificates of title, applications for title
or similar evidence of ownership of such Equipment and shall cause the
Collateral Agent to be named as lienholder on any such certificate of title or
other evidence of ownership. The Grantor shall promptly inform the Collateral
Agent of any additions to or deletions from the Equipment and shall not permit
any such items to become a fixture to real estate or an accession to other
personal property.
(K) Without the prior written consent of the Required Lenders, such
Lien Grantor will not sell, lease, exchange, assign or otherwise dispose of, or
grant any option with respect to, any Collateral except, subject to the rights
of the Secured Parties hereunder if an Event of Default shall have occurred and
be continuing, as permitted under the Credit Agreements. Upon any such permitted
sale, exchange, assignment or other disposition of any asset (other than any
such sale, exchange, assignment or other disposition to a Subsidiary), the
Security Interests created hereby in such asset (but not in any Proceeds arising
therefrom) shall cease immediately without any further action on the part of the
Collateral Agent or any other Secured Party, but the Collateral Agent shall
comply with Section 17(C) hereof.
(L) On or prior to the Closing Date, such Lien Grantor will cause the
Collateral Agent to be named as an additional insured and loss payee on each
insurance policy required to be maintained pursuant to Section 5.03 of the
Credit Agreements, including, without limitation, policies relating to any of
its Inventory and Equipment. Such Lien Grantor will deliver to the Collateral
Agent, upon request of the Collateral Agent, the insurance policies for such
insurance or certificates of insurance evidencing such coverage. Each such
insurance policy shall (i) include effective waivers by the insurer of all
claims for insurance premiums against the Collateral Agent or any Lender, (ii)
provide for coverage to the Collateral Agent regardless of the breach by such
Lien Grantor of any warranty or representation made therein, (iii) not be
subject to co-insurance, (iv) provide that all insurance proceeds in excess of
$1,000,000 per claim shall be adjusted with and payable to the Collateral Agent
and (v) provide that no cancellation, termination or material modification
thereof shall be effective until at least 30 days
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after receipt by the Collateral Agent of notice thereof. Such Lien Grantor
hereby appoints the Collateral Agent as its attorney-in-fact to make proof of
loss, claim for insurance and adjustments with insurers, and to execute or
endorse all documents, checks or drafts in connection with payments made as a
result of any insurance policies.
(M) It will, promptly upon request, provide to the Collateral Agent all
information and evidence it may reasonably request concerning the Collateral to
enable the Collateral Agent to enforce the provisions of this Agreement.
(N) It will notify the Collateral Agent promptly if any application or
registration relating to any material Intellectual Property owned or licensed by
it is reasonably likely to become abandoned or dedicated to the public, or of
any materially adverse determination or development (including, without
limitation, the institution of, or any such determination or development in, any
proceeding in the United States Copyright Office, the United States Patent and
Trademark Office or any court) regarding such Lien Grantor's ownership of such
material Intellectual Property, its right to register or patent the same or its
right to keep and maintain the same and (i) if any of such Lien Grantor's rights
to any material Intellectual Property are infringed, misappropriated or diluted
by a third party, such Lien Grantor shall notify the Collateral Agent within 30
days after it learns thereof and shall, unless such Lien Grantor shall
reasonably determine that any such action would be of negligible value, economic
or otherwise, promptly sue for infringement, misappropriation or dilution and to
recover any and all damages for such infringement, misappropriation or dilution,
and take such other actions as such Lien Grantor shall reasonably deem
appropriate under the circumstances to protect such Intellectual Property.
SECTION 6. Record Ownership of Pledged Equity Securities. The
Collateral Agent may on and after the occurrence and continuance of an Event of
Default, in its sole discretion, cause the Pledged Equity Interests (or any
portion thereof) to be transferred of record into the name of the Collateral
Agent or its nominee. Each Lien Grantor will promptly give to the Collateral
Agent copies of any notices and other communications received by it with respect
to Pledged Equity Interests registered in its name, and the Collateral Agent
will promptly give to such Lien Grantor copies of any notices and other
communications received by the Collateral Agent with respect to such Lien
Grantor's Pledged Equity Interests registered in the name of the Collateral
Agent or its nominee.
SECTION 7. Right to Vote Pledged Equity Interests. (A) Unless an Event
of Default shall have occurred and be continuing, each Lien Grantor shall have
the right, from time to time, to vote and to give consents, ratifications and
waivers with respect to the Pledged Equity Interests owned by it, and the
Collateral Agent shall, upon receiving a written request from such Lien Grantor,
deliver to such Lien Grantor as specified in such request such proxies, powers
of attorney,
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consents, ratifications and waivers in respect of any of such Pledged Equity
Interests which are registered in the name of the Collateral Agent or its
nominee as shall be specified in such request and be in form and substance
satisfactory to the Collateral Agent. Unless an Event of Default shall have
occurred and be continuing, the Collateral Agent shall have no right to take any
action which the owner of a Pledged Partnership Interest or Pledged LLC Interest
is entitled to take with respect thereto, except the right to receive and retain
payments and other distributions to the extent provided in Section 8.
(B) If an Event of Default shall have occurred and be continuing, the
Collateral Agent shall have the right, to the extent permitted by law (and, in
the case of a Pledged Partnership Interest or Pledged LLC Interest, by the
relevant partnership agreement, limited liability company agreement, operating
agreement or other governing document), and each Lien Grantor shall take all
such action as may be necessary or appropriate to give effect to such right, to
vote and to give consents, ratifications and waivers and take any other action
with respect to any or all of the Pledged Equity Interests with the same force
and effect as if the Collateral Agent were the absolute and sole owner thereof.
SECTION 8. Right to Receive Distributions on Collateral. Subject to
Section 17, the Collateral Agent shall have the right to receive and to retain
as Collateral hereunder all dividends, interest and other payments and
distributions made upon or with respect to the Pledged Equity Interests and the
Other Investment Property and each Lien Grantor shall take all such action as
the Collateral Agent may deem necessary or appropriate to give effect to such
right; provided that, unless an Event of Default shall have occurred and be
continuing, this sentence shall not apply to dividends, interest and other
payments and distributions made in cash or cash equivalents ("Cash
Distributions"). All such dividends, interest and other payments and
distributions which are received by any Lien Grantor (except Cash Distributions
received when no Event of Default shall have occurred and be continuing) shall
be received in trust for the benefit of the Secured Parties and shall be
segregated from other assets of such Lien Grantor and shall, promptly upon such
Lien Grantor's receipt thereof, be delivered or paid over to the Collateral
Agent in the same form as received (with any necessary endorsements or executed
assignments in blank), together with a statement identifying the source of such
Collateral and stating that it is being delivered to the Collateral Agent to be
held as Collateral under this Agreement.
SECTION 9. Collateral Accounts. (A) There is hereby established with
the Collateral Agent a cash collateral account (the "General Collateral
Account") in the name and under the control of the Collateral Agent into which
there shall be deposited from time to time the cash proceeds of the Collateral
required to be delivered to the Collateral Agent pursuant to Section 9(B) or any
other provision of this Agreement for credit to subaccounts therein of the
respective Lien Grantors. Any income received by the Collateral Agent with
respect to the balance
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from time to time standing to the credit of the General Collateral Account,
including any interest or capital gains on Liquid Investments, shall remain, or
be deposited, in the General Collateral Account for credit to the subaccount of
the applicable Lien Grantor. All right, title and interest in and to the cash
amounts on deposit from time to time in the General Collateral Account for
credit to the subaccount of the applicable Lien Grantor, together with any
Liquid Investments from time to time made pursuant to subsection 9(G) hereof,
shall constitute part of the Collateral hereunder but shall not constitute
payment of the Secured Obligations until applied thereto as hereinafter
provided.
(B) Each Lien Grantor shall (x) not more than 60 days after the Closing
Date, in the case of any Subsidiary Guarantor and (y) not later than January 31,
1999, in the case of the Borrower, instruct all account debtors and other
Persons obligated in respect of all Accounts of such Lien Grantor to make all
payments in respect of such Accounts either (i) directly to the Collateral Agent
(by instructing that such payments be remitted to a post office box which shall
be in the name and under the control of the Collateral Agent) or (ii) to one or
more other banks in any state (other than Louisiana) in the United States (by
instructing that such payments be remitted to a post office box which shall be
in the name and under the control of such bank) under a Lockbox Letter
substantially in the form of Exhibit B hereto duly executed by such Lien Grantor
and such bank or under other arrangements, in form and substance satisfactory to
the Collateral Agent, pursuant to which such Lien Grantor shall have irrevocably
instructed such other bank (and such other bank shall have agreed) to remit all
proceeds of such payments directly to the Collateral Agent for deposit into the
General Collateral Account or as the Collateral Agent may otherwise instruct
such bank. All such payments made to the Collateral Agent shall be deposited in
the General Collateral Account. In addition to the foregoing, each Lien Grantor
agrees that if the proceeds of any Collateral hereunder (including the payments
made in respect of Accounts) shall be received by it, such Lien Grantor shall as
promptly as possible deposit such proceeds into the General Collateral Account.
Until so deposited, all such proceeds shall be held in trust by such Lien
Grantor for and as the property of the Collateral Agent and the Lenders and
shall not be commingled with any other funds or property of any Lien Grantor.
(C) There is hereby established with the Collateral Agent a cash
collateral account (the "Insurance Account") in the name and under the control
of the Collateral Agent into which there shall be deposited any amounts required
to be paid to the Collateral Agent pursuant to Section 5.03 of the Credit
Agreement (the "Insurance Proceeds") for credit to subaccounts therein of the
respective Lien Grantors. Each Lien Grantor hereby agrees, to the extent
required under Section 5.03(d) of the Credit Agreements, to cause any Insurance
Proceeds received by it to be deposited in the Insurance Account for credit to
such Lien Grantor's subaccount therein. Any income received with respect to the
balance from time to time standing to the credit of the Insurance Account,
including any interest or
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capital gains on Liquid Investments, shall remain, or be deposited, in the
Insurance Account for credit to the subaccount of the applicable Lien Grantor,
subject to the rights of such Lien Grantor to receive any amounts on deposit in
such Insurance Account in accordance with Section 9(E). All right, title and
interest in and to the cash amounts on deposit from time to time in the
Insurance Account together with any Liquid Investments from time to time made
pursuant to Section 9(G) hereof shall vest in the Collateral Agent, shall
constitute part of the Collateral hereunder and shall not constitute payment of
the Secured Obligations until applied thereto as hereinafter provided, subject
to the rights of such Lien Grantor to receive any such amounts in accordance
with Section 9(E).
(D) The balance from time to time standing to the credit of the General
Collateral Account shall, except upon the occurrence and continuance of an Event
of Default, be distributed to the Borrower or the applicable Lien Grantor upon
its order. If immediately available cash on deposit in the General Collateral
Account is not sufficient to make any distribution to the Borrower referred to
in the previous sentence of this Section (D), the Collateral Agent shall
liquidate as promptly as practicable Liquid Investments as required to obtain
sufficient cash to make such distribution and, notwithstanding any other
provision of this Section 9, such distribution shall not be made until such
liquidation has taken place.
(E) The balance from time to time standing to the credit of the
Insurance Account shall be subject to withdrawal only upon the instructions of
the Collateral Agent. Except upon the occurrence and continuance of an Event of
Default, the Collateral Agent agrees to give instructions to distribute such
amounts to the Borrower at such times and in such amounts as the Borrower shall
request for the purpose of repairing, reconstructing or replacing the property
in respect of which such Insurance Proceeds were received. Any such request
shall be accompanied by a certificate of the chief executive officer, chief
financial officer or treasurer of the Borrower setting forth in detail
reasonably satisfactory to the Required Lenders the repair, reconstruction or
replacement for which such funds will be expended.
(F) Upon the occurrence and during the continuation of an Event of
Default, the Collateral Agent shall, if so instructed by the Required Lenders,
apply or cause to be applied (subject to collection) any or all of the balance
from time to time standing to the credit of the Collateral Accounts in the
manner specified in Section 13.
(G) Amounts on deposit in the Collateral Accounts shall be invested and
re-invested from time to time in such Liquid Investments as the Borrower shall
determine, which Liquid Investments shall be held in the name and be under the
control of the Collateral Agent; provided that, if an Event of Default has
occurred and is continuing, the Collateral Agent shall, if instructed by the
Required Lenders, cause such Liquid Investments to be liquidated and apply or
cause to be applied
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the proceeds thereof allocable to any Lien Grantor to the payment of the Secured
Obligations of such Lien Grantor in the manner specified in Section 13. For this
purpose, "Liquid Investments" means Temporary Cash Investments; provided that
(i) each Liquid Investment shall mature within 30 days after it is acquired by
the Collateral Agent and (ii) in order to provide the Collateral Agent, for the
benefit of the Secured Parties, with a perfected Security Interest therein, each
Liquid Investment shall be either:
(i) evidenced by negotiable certificates or instruments, or if
non-negotiable then issued in the name of the Collateral Agent, which
(together with any appropriate instruments of transfer) are delivered
to, and held by, the Collateral Agent or an agent thereof (which shall
not be the Grantor or any of its Affiliates) in the State of New York;
or
(ii) in book-entry form and issued by the United States and
subject to pledge under applicable state law and Treasury regulations
and as to which (in the opinion of counsel to the Collateral Agent)
appropriate measures shall have been taken for perfection of the
Security Interests.
SECTION 10. General Authority. Each Lien Grantor hereby irrevocably
appoints the Collateral Agent its true and lawful attorney, with full power of
substitution, in the name of such Lien Grantor, any Secured Party or otherwise,
for the sole use and benefit of the Secured Parties, but at the expense of such
Lien Grantor, to the extent permitted by law to exercise, at any time and from
time to time while an Event of Default has occurred and is continuing, all or
any of the following powers with respect to all or any of such Lien Grantor's
Collateral:
(a) to demand, sue for, collect, receive and give acquittance for
any and all monies due or to become due thereon or by virtue thereof,
(b) to settle, compromise, compound, prosecute or defend any
action or proceeding with respect thereto,
(c) to sell, transfer, assign or otherwise deal in or with the
same or the proceeds or avails thereof, as fully and effectually as if
the Collateral Agent were the absolute owner thereof, and
(d) to extend the time of payment of any or all thereof and to
make any allowance and other adjustments with reference thereto;
provided that the Collateral Agent shall give such Lien Grantor not less than
ten days' prior written notice of the time and place of any sale or other
intended disposition of any of the Collateral, except any Collateral which is
perishable or threatens to decline speedily in value or is of a type customarily
sold on a recognized market. The Collateral Agent and each Lien Grantor agree
that such
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notice constitutes "reasonable notification" within the meaning of Section
9-504(3) of the UCC.
SECTION 11. Remedies upon Event of Default. (A) If any Event of Default
has occurred and is continuing, the Collateral Agent may exercise on behalf of
the Secured Parties all rights of a secured party under the UCC (whether or not
in effect in the jurisdiction where such rights are exercised) and, in addition,
the Collateral Agent may, without being required to give any notice, except as
herein provided or as may be required by mandatory provisions of law, (i)
withdraw all cash held in the Collateral Accounts and apply such cash and other
cash, if any, then held by it as Collateral as specified in Section 13 and (ii)
if there shall be no such cash or if such cash shall be insufficient to pay all
the Secured Obligations of any Lien Grantor in full, sell the Collateral of such
Lien Grantor or any part thereof at public or private sale or any broker's board
or on any securities exchange, for cash, upon credit or for future delivery, and
at such price or prices as the Collateral Agent may deem satisfactory. The
Collateral Agent or any other Secured Party may be the purchaser of any or all
of the Collateral so sold at any public sale (or, if the Collateral is of a type
customarily sold in a recognized market or is of a type which is the subject of
widely distributed standard price quotations, at any private sale). The
Collateral Agent is authorized, in connection with any such sale, if it deems it
advisable so to do, to restrict the prospective bidders on or purchasers of any
of the securities included in the Collateral to a limited number of
sophisticated investors who will represent and agree that they are purchasing
for their own account for investment and not with a view to the distribution or
sale of any of such securities, to cause to be placed on any security included
in the Collateral a legend to the effect that such security has not been
registered under the Securities Act of 1933 and may not be disposed of in
violation of the provisions of said Act, and to impose such other limitations or
conditions in connection with any such sale as the Collateral Agent deems
necessary or advisable in order to comply with said Act or any other law. Each
Lien Grantor agrees that it will execute and deliver such documents and take
such other action as the Collateral Agent deems necessary or advisable in order
that any such sale may be made in compliance with law. Upon any such sale the
Collateral Agent shall have the right to deliver, assign and transfer to the
purchaser thereof the Collateral so sold. Each purchaser at any such sale shall
hold the Collateral so sold to it absolutely and free from any claim or right of
whatsoever kind, including any equity or right of redemption of any Lien Grantor
which may be waived, and each Lien Grantor, to the extent permitted by law,
hereby specifically waives all rights of redemption, stay or appraisal which it
has or may have under any law now existing or hereafter adopted. The notice (if
any) of such sale required by Section 10 shall (1) in the case of a public sale,
state the time and place fixed for such sale, (2) in the case of sale at a
broker's board or on a securities exchange, state the board or exchange at which
such sale is to be made and the day on which the Collateral or the portion
thereof so being sold, will first be offered for sale at such board or exchange
and (3) in the case of a private sale, state the day after
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<PAGE>
which such sale may be consummated. Any such public sale shall be held at such
time or times within ordinary business hours and at such place or places as the
Collateral Agent may fix in the notice of such sale. At any such sale the
Collateral may be sold in one lot as an entirety or in separate parcels, as the
Collateral Agent may determine. The Collateral Agent shall not be obligated to
make any such sale pursuant to any such notice. The Collateral Agent may,
without notice or publication, adjourn any public or private sale or cause the
same to be adjourned from time to time by announcement at the time and place
fixed for the sale, and such sale may be made at any time or place to which the
same may be so adjourned. In case of any sale of all or any part of the
Collateral on credit or for future delivery, the Collateral so sold may be
retained by the Collateral Agent until the selling price is paid by the
purchaser thereof, but the Collateral Agent shall not incur any liability in
case of the failure of such purchaser to take up and pay for the Collateral so
sold and, in case of any such failure, such Collateral may again be sold upon
like notice. The Collateral Agent, instead of exercising the power of sale
herein conferred upon it, may proceed by a suit or suits at law or in equity to
foreclose the Security Interests and sell the Collateral, or any portion
thereof, under a judgment or decree of a court or courts of competent
jurisdiction.
(B) For the purpose of enforcing any and all rights and remedies under
this Agreement the Collateral Agent may (i) require each Lien Grantor to, and
each Lien Grantor agrees that it will, at its expense and upon the request of
the Collateral Agent, forthwith assemble all or any part of the Collateral as
directed by the Collateral Agent and make it available at a place designated by
the Collateral Agent which is, in its opinion, reasonably convenient to the
Collateral Agent and such Lien Grantor, whether at the premises of such Lien
Grantor or otherwise, (ii) to the extent permitted by applicable law, enter,
with or without process of law and without breach of the peace, any premise
where any of the Collateral is or may be located, and without charge or
liability to it seize and remove such Collateral from such premises, (iii) have
access to and use such Lien Grantor's books and records relating to the
Collateral and (iv) prior to the disposition of the Collateral, store or
transfer it without charge in or by means of any storage or transportation
facility owned or leased by such Lien Grantor, process, repair or recondition it
or otherwise prepare it for disposition in any manner and to the extent the
Collateral Agent deems appropriate and, in connection with such preparation and
disposition, use without charge any trademark, trade name, copyright, patent or
technical process used by the Grantor. The Collateral Agent may also render any
or all of the Collateral unusable at the Grantor's premises and may dispose of
such Collateral on such premises without liability for rent or costs.
(C) Without limiting the generality of the foregoing, if any Event of
Default has occurred and is continuing,
(i) the Collateral Agent may license, or sublicense, whether
general, special or otherwise, and whether on an exclusive or
non-exclusive
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<PAGE>
basis, any Intellectual Property included in the Collateral throughout
the world for such term or terms, on such conditions and in such manner
as the Collateral Agent shall in its sole discretion determine;
(ii) the Collateral Agent may (without assuming any obligations or
liability thereunder), at any time and from time to time, enforce (and
shall have the exclusive right to enforce) against any licensor,
licensee or sublicensee all rights and remedies of any Lien Grantor in,
to and under any Patent Licenses, Trademark Licenses or Copyright
Licenses and take or refrain from taking any action under any thereof,
and each Lien Grantor hereby releases the Collateral Agent and each of
the other Secured Parties from, and agrees to hold the Collateral Agent
and each of the other Secured Parties free and harmless from and
against, any claims arising out of any lawful action so taken or
omitted to be taken with respect thereto, except any such claim to the
extent that it arises solely as the result of the gross negligence or
willful misconduct of any Secured Party; and
(iii) upon request by the Collateral Agent, each Lien Grantor will
execute and deliver to the Collateral Agent a further power of
attorney, in form and substance satisfactory to the Collateral Agent,
for the implementation of any lease, assignment, license, sublicense,
grant of option, sale or other disposition of any Intellectual
Property. In the event of any such disposition pursuant to this
Section, such Lien Grantor shall supply its know-how and expertise
relating to the products or services made or rendered in connection
with its Intellectual Property, and its customer lists and other
records relating to such Intellectual Property and to the distribution
of said products and services, to the Collateral Agent.
SECTION 12. Limitation on Duty of Collateral Agent in Respect of
Collateral. Beyond the exercise of reasonable care in the custody thereof, the
Collateral Agent shall have no duty as to any Collateral in its possession or
control or in the possession or control of any agent or bailee or any income
thereon or as to the preservation of rights against prior parties or any other
rights pertaining thereto. The Collateral Agent shall be deemed to have
exercised reasonable care in the custody of the Collateral in its possession if
the Collateral is accorded treatment substantially equal to that which it
accords its own property, and shall not be liable or responsible for any loss or
damage to any of the Collateral, or for any diminution in the value thereof, by
reason of the act or omission of any warehouseman, carrier, forwarding agency,
consignee or other agent or bailee selected by the Collateral Agent in good
faith.
SECTION 13. Application of Proceeds. (A) Upon the occurrence and during
the continuance of an Event of Default, the proceeds of any sale of, or other
realization upon, all or any part of the Collateral and any cash held in the
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Collateral Accounts shall be applied by the Collateral Agent in the following
order of priorities:
first, to payment of the expenses of such sale or other
realization, including reasonable compensation to agents and counsel
for the Collateral Agent, and all expenses, liabilities and advances
incurred or made by the Collateral Agent in connection therewith, and
any other unreimbursed expenses for which the Collateral Agent or any
other Secured Party is to be reimbursed pursuant to Section 10.03 of
either Credit Agreement or Section 16 hereof and unpaid fees owing to
Bank Agents and the Collateral Agent under the Loan Documents;
second, to the ratable payment of unpaid principal of, and any
unpaid LC Reimbursement Obligations constituting, Secured Obligations;
third, to the ratable payment of accrued but unpaid interest
on the Secured Obligations in accordance with the provisions of the
Credit Agreements;
fourth, to the ratable payment of all other Secured
Obligations, until all Secured Obligations shall have been paid in
full; and
finally, to pay to the relevant Lien Grantor or its successors
or assigns, or as a court of competent jurisdiction may direct, of any
surplus then remaining from such proceeds of the Collateral owned by
it; provided that Collateral owned by a Subsidiary Guarantor (and any
proceeds thereof) shall be applied pursuant to the foregoing clauses
first, second, third and fourth only to the extent of the Secured
Obligations of such Subsidiary Guarantor (and subject to the limitation
in Section 9.07 of each Credit Agreement). The Collateral Agent may
make such distributions hereunder in cash or in kind or, on a ratable
basis, in any combination thereof.
(B) If at any time any portion of any monies collected or received by
the Collateral Agent would, but for the provisions of this subsection (B), be
payable pursuant to subsection (A) of this Section in respect of a Contingent
Secured Obligation, the Collateral Agent shall not apply any monies to pay such
Contingent Secured Obligation but (i) in the case of any Contingent Secured
Obligations other than contingent LC Reimbursement Obligations, shall request
the holder thereof, at least three Domestic Business Days before each proposed
distribution hereunder, to notify the Collateral Agent as to the maximum amount
of such Contingent Secured Obligation if then ascertainable and if the holder of
such Contingent Secured Obligation does not notify the Collateral Agent of the
maximum ascertainable amount thereof at least two Domestic Business Days before
such distribution, such holder shall not be entitled to share in such
distribution. In the
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case of any holder of Contingent Secured Obligations consisting of contingent LC
Reimbursement Obligations or other Contingent Secured Obligations as to which
the Collateral Agent shall have received notice from the holder thereof in
accordance with the preceding sentence, the Collateral Agent will allocate to
such holder a portion of the monies to be distributed in such distribution,
calculated as if such Contingent Secured Obligation were outstanding in such
maximum ascertainable amount. However, the Collateral Agent shall not apply such
portion of such monies to pay such Contingent Secured Obligation, but instead
shall hold such monies or invest such monies in Temporary Cash Investments at
the direction of the holder of such Contingent Secured Obligation. All such
monies and Temporary Cash Investments shall constitute collateral hereunder and
shall be subject to the Security Interests, but shall be subject to distribution
in accordance with this subsection (B) rather than subsection (A) above. The
Collateral Agent shall hold all such monies and all such Temporary Cash
Investments and the net proceeds thereof in trust until such time as all or part
of such Contingent Secured Obligation becomes a Non-Contingent Secured
Obligation, whereupon the Collateral Agent at the request of the relevant
Secured Party shall apply the amount so held in trust to pay such Non-Contingent
Secured Obligation; provided that, if the other Secured Obligations theretofore
paid pursuant to the same clause of subsection (A) (i.e., clause second or
fourth) were not paid in full, the Collateral Agent shall apply the amount so
held in trust to pay the same percentage of such Non-Contingent Secured
Obligation as the percentage of such other Secured Obligations theretofore paid
pursuant to the same clause of subsection (A). If (i) the holder of such
Contingent Secured Obligation shall advise the Collateral Agent that no portion
thereof remains in the category of a Contingent Secured Obligation and (ii) the
Collateral Agent still holds any amount held in trust pursuant to this
subsection (B) in respect of such Contingent Secured Obligation (after paying
all amounts payable pursuant to the preceding sentence with respect to any
portions thereof that became Non-Contingent Secured Obligations), such remaining
amount shall be applied by the Collateral Agent in the order of priorities set
forth in subsection (A) of this Section.
(C) All distributions made by the Collateral Agent pursuant to this
Section shall be final (except in the event of manifest error) and the
Collateral Agent shall have no duty to inquire as to the application by the
Secured Parties of any amount distributed to them.
SECTION 14. Concerning the Collateral Agent. The provisions of Article
7 of each Credit Agreements shall inure to the benefit of the Collateral Agent
in respect of this Agreement and shall be binding upon the parties to the Credit
Agreements in such respect. In furtherance and not in derogation of the rights,
privileges and immunities of the Collateral Agent therein set forth:
(A) The Collateral Agent is authorized to take all such action as
is provided to be taken by it as Collateral Agent hereunder and all
other
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<PAGE>
action reasonably incidental thereto. As to any matters not expressly
provided for herein (including, without limitation, the timing and
methods of realization upon the Collateral) the Collateral Agent shall
act or refrain from acting in accordance with written instructions from
the Required Lenders or, in the absence of such instructions, in
accordance with its discretion.
(B) The Collateral Agent shall not be responsible for the
existence, genuineness or value of any of the Collateral or for the
validity, perfection, priority or enforceability of the Security
Interests in any of the Collateral, whether impaired by operation of
law or by reason of any action or omission to act on its part
hereunder. The Collateral Agent shall have no duty to ascertain or
inquire as to the performance or observance of any of the terms of this
Agreement by the Grantor.
SECTION 15. Appointment of Co-Agents. At any time or times, in order to
comply with any legal requirement in any jurisdiction, the Collateral Agent may
appoint another bank or trust company or one or more other persons, either to
act as co-agent or co-agents, jointly with the Collateral Agent, or to act as
separate agent or agents on behalf of the Secured Parties with such power and
authority as may be necessary for the effectual operation of the provisions
hereof and may be specified in the instrument of appointment (which may, in the
discretion of the Collateral Agent, include provisions for the protection of
such co-agent or separate agent similar to the provisions of Section 14).
SECTION 16. Expenses. In the event that a Lien Grantor fails to comply
with the provisions of the Credit Agreements or this Agreement, such that the
value of any Collateral or the validity, perfection, rank or value of any
Security Interest is thereby diminished or potentially diminished or put at
risk, the Collateral Agent if requested by the Required Lenders may, but shall
not be required to, effect such compliance on behalf of such Lien Grantor, and
such Lien Grantor shall reimburse the Collateral Agent for the costs thereof on
demand. All insurance expenses and all expenses of protecting, storing,
warehousing, appraising, insuring, handling, maintaining, and shipping the
Collateral, any and all excise, property, sales, and use taxes imposed by any
state, federal, or local authority on any of the Collateral, or in respect of
periodic appraisals and inspections of the Collateral to the extent the same may
be requested by the Required Lenders from time to time or in respect of the sale
or other disposition thereof shall be borne and paid by the applicable Lien
Grantor; and if the applicable Lien Grantor fails to promptly pay any portion
thereof when due, the Collateral Agent or any other Secured Party may, at its
option, but shall not be required to, pay the same and charge such Lien
Grantor's account therefor, and such Lien Grantor agrees to reimburse the
Collateral Agent or such other Secured Party therefor on demand. All sums so
paid or incurred by the Collateral Agent or any other Secured Party for any of
the foregoing and any and all other sums for which a Lien Grantor may become
liable
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<PAGE>
hereunder and all costs and expenses (including attorneys' fees, legal expenses
and court costs (including the reasonable allocation of the compensation, costs
and expenses of in-house counsel, based upon time spent)) reasonably incurred by
the Collateral Agent or any other Secured Party in enforcing or protecting the
Security Interests or any of their rights or remedies under this Agreement,
shall, together with interest thereon until paid at the rate applicable to Base
Rate Loans plus 2%, in each case for each day until paid, be additional Secured
Obligations hereunder.
SECTION 17. Termination of Security Interests; Release of Collateral.
(A) When (i) all the Commitments (as defined in either Credit Agreement) shall
have expired or been terminated, (ii) all Letters of Credit shall have expired
or been canceled or been secured with cash collateral in an amount and on terms
satisfactory to the relevant Issuer and (iii) all outstanding Secured
Obligations shall have been paid in full, the Security Interests shall terminate
and all rights to the Collateral shall revert to the Lien Grantor that owns such
item of Collateral.
(B) At any time before the Security Interests terminate pursuant to
subsection (A) of this Section, the Collateral Agent may, upon the written
request of the Borrower, release any of the Collateral with the prior written
consent of the Required Lenders; provided that any release of all or
substantially all of the Collateral (for purposes of this proviso, as defined in
the Credit Agreements) shall require the prior written consent of all the
Lenders.
(C) In addition, so long as no Event of Default shall have occurred and
be continuing, upon the consummation of any sale, exchange, assignment or other
disposition of any asset included in the Collateral (other than any such sale,
exchange, assignment or other disposition to a Subsidiary) that is permitted
under the Credit Agreements, the Security Interests in the Collateral subject to
such transaction (but not any Proceeds arising from such transaction) shall
cease immediately without any further action on the part of the Collateral Agent
or any Lender. The Collateral Agent shall be fully protected in relying on a
certificate of the Borrower certifying that any Asset Sale is permitted by the
terms of the Credit Agreements and that no Event of Default has occurred and is
continuing. Upon any termination of the Security Interests or release of
Collateral in accordance with this Section, the Collateral Agent will, at the
expense of the Borrower, execute and deliver to the applicable Lien Grantor such
documents as such Lien Grantor shall reasonably request to evidence the
termination of the Security Interests or the release of such Collateral, as the
case may be.
SECTION 18. Additional Subsidiary Guarantors. Any Subsidiary of the
Borrower which is not a party hereto may become a party hereto by executing and
delivering to the Collateral Agent a Security Agreement Supplement, whereupon
such Subsidiary shall become a "Subsidiary Guarantor", a "Lien Grantor" and a
party hereto.
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<PAGE>
SECTION 19. Notices. All notices, requests and other communications to
any party hereunder shall be in writing (including facsimile transmission or
similar writing) and shall be given to such party (i) in the case of any Lien
Grantor, to it at the address, telex number or facsimile number of the Borrower
set forth or referred to in or pursuant to Section 10.01 of the Credit
Agreements or (ii) in the case of any Lender Party, at its address or facsimile
number specified in or pursuant to Section 10.01 of the Credit Agreements. Each
such notice, request or other communication shall be effective in accordance
with Section 10.01 of the Credit Agreements.
SECTION 20. Waivers, Non-Exclusive Remedies. No failure on the part of
the Collateral Agent to exercise, and no delay in exercising and no course of
dealing with respect to, any right under this Agreement shall operate as a
waiver thereof; nor shall any single or partial exercise by the Collateral Agent
or any Secured Party of any right under the Credit Agreements, this Agreement or
any of the other Loan Documents preclude any other or further exercise thereof
or the exercise of any other right. The rights in this Agreement, the Credit
Agreements and the other Loan Documents are cumulative and are not exclusive of
any other remedies provided by law.
SECTION 21. Successors and Assigns. This Agreement is for the benefit
of the Collateral Agent and the Secured Parties and their successors and
assigns, and in the event of an assignment of all or any of the Secured
Obligations, the rights hereunder, to the extent applicable to the indebtedness
so assigned, may be transferred with such indebtedness. This Agreement shall be
binding on the Lien Grantors and their respective successors and assigns.
SECTION 22. Changes in Writing. Neither this Agreement nor any
provision hereof may be changed, waived, discharged or terminated orally, but
only in writing signed by the Lien Grantors and the Collateral Agent with the
consent of the Required Lenders.
SECTION 23. New York Law. THIS AGREEMENT SHALL BE CONSTRUED IN
ACCORDANCE WITH AND GOVERNED BY THE LAWS OF THE STATE OF NEW YORK (WITHOUT
REFERENCE TO PRINCIPLES OF CONFLICTS OF LAW), EXCEPT AS OTHERWISE REQUIRED BY
MANDATORY PROVISIONS OF LAW AND EXCEPT TO THE EXTENT THAT REMEDIES PROVIDED BY
THE LAWS OF ANY JURISDICTION OTHER THAN NEW YORK ARE GOVERNED BY THE LAWS OF
SUCH JURISDICTION.
SECTION 24. Severability. If any provision hereof is invalid or
unenforceable in any jurisdiction, then, to the fullest extent permitted by law,
(i) the other provisions hereof shall remain in full force and effect in such
jurisdiction and shall be liberally construed in favor of the Collateral Agent
and the
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<PAGE>
other Secured Parties in order to carry out the intentions of the parties hereto
as nearly as may be possible; and (ii) the invalidity or unenforceability of any
provision hereof in any jurisdiction shall not affect the validity or
enforceability of such provision in any other jurisdiction.
SECTION 25. Counterparts. This Agreement may be signed in any number of
counterparts, each of which shall be an original, with the same effect as if the
signatures thereto and hereto were upon the same instrument.
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<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
duly executed by their respective authorized officers as of the day and year
first above written.
TOY BIZ, INC. (to be renamed Marvel
Enterprises, Inc.), as Borrower
By:_____________________________
Name:
Title:
MARVEL ENTERTAINMENT
GROUP, INC., as Subsidiary Guarantor
By:_____________________________
Name:
Title:
THE ASHER CANDY COMPANY, as
Subsidiary Guarantor
By:_____________________________
Name:
Title:
FLEER CORP., as Subsidiary Guarantor
By:_____________________________
Name:
Title:
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<PAGE>
FRANK H. FLEER CORP., as Subsidiary
Guarantor
By:_____________________________
Name:
Title:
HEROES WORLD DISTRIBUTION,
INC. as Subsidiary Guarantor
By:_____________________________
Name:
Title:
MALIBU COMICS ENTERTAINMENT,
INC., as Subsidiary Guarantor
By:_____________________________
Name:
Title:
MARVEL CHARACTERS, INC.
as Subsidiary Guarantor
By:_____________________________
Name:
Title:
MARVEL DIRECT MARKETING, INC.
as Subsidiary Guarantor
By:_____________________________
Name:
Title:
SKYBOX INTERNATIONAL INC.
765749.1 10/9/98 7:28p
<PAGE>
as Subsidiary Guarantor
By:_____________________________
Name:
Title:
MARVEL RESTAURANT VENTURE
CORP., as Subsidiary Guarantor
By:_____________________________
Name:
Title:
MRV, INC., as Subsidiary Guarantor
By:_____________________________
Name:
Title:
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<PAGE>
UBS AG, STAMFORD BRANCH, as
Collateral Agent
By:_____________________________
Name:
Title:
By:_____________________________
Name:
Title:
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<PAGE>
DISCLOSURE SCHEDULE TO SECURITY AGREEMENT
AMONG TOY BIZ, INC
(TO BE RENAMED MARVEL ENTERPRISES, INC.)
THE SUBSIDIARY GUARANTORS PARTY THERETO AND
UBS AG, STAMFORD BRANCH, AS COLLATERAL AGENT
SCHEDULE 1 -- Equity Interests
Toy Biz, Inc. (to be renamed Marvel Enterprises, Inc.)
Marvel Enterprises, Inc.
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<PAGE>
EXHIBIT A
PERFECTION CERTIFICATE
The undersigned, the chief executive officer and chief legal officer of
[Borrower] [Subsidiary Guarantor], a ________ corporation (the "Lien Grantor"),
hereby certify with reference to the Security Agreement dated as of September
28, 1998 among Toy Biz, Inc. (to be renamed Marvel Enterprises, Inc.), the
Subsidiary Guarantors party thereto and UBS AG, New York Branch, as Collateral
Agent (the "Collateral Agent") (terms defined therein being used herein as
therein defined), to the Collateral Agent and each Lender (as defined in either
Credit Agreement) as follows:
(A). Names. (i) The exact corporate name of the Lien Grantor as it
appears in its certificate of incorporation is as follows:
(ii) Set forth below is each other corporate name the Lien Grantor has
had since its organization, together with the date of the relevant change:
(iii) Except as set forth in Schedule 1, the Lien Grantor has not
changed its identity or corporate structure in any way within the past five
years.
(iv) The following is a list of all other names (including trade names
or similar appellations) used by the Lien Grantor or any of its divisions or
other business units at any time during the past five years:
(B). Current Locations. (i) The chief executive office of the Lien
Grantor is located at the following address:
Mailing Address Country State
- ----------------------------- --------------- -----------------
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A-1
<PAGE>
(ii) The following are all the locations where the Lien Grantor
maintains any books or records relating to any Accounts:
Mailing Address Country State
- ----------------------------- --------------- -----------------
(iii) The following are all the places of business of the Lien Grantor
not identified above:
Mailing Address Country State
- ----------------------------- --------------- -----------------
(iv) The following are all the locations where the Lien Grantor
maintains any Inventory not identified above:
Mailing Address Country State
- ----------------------------- --------------- -----------------
(v) The following are the names and addresses of all Persons other than
the Lien Grantor which have possession of any of the Lien Grantor's Inventory:
Mailing Address Country State
- ----------------------------- --------------- -----------------
(C). Prior Locations. (i) Set forth below is the information required
by paragraphs (B)(i), (B)(ii) and (B)(iii) hereof with respect to each location
or place of business maintained by the Lien Grantor at any time during the past
five years:
Mailing Address Country State
- ----------------------------- --------------- -----------------
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<PAGE>
(ii) Set forth below is the information required by paragraphs (B)(iv)
and (B)(v) hereof with respect to each location or bailee where or with whom
Inventory has been lodged at any time during the past four months:
(D). Unusual Transactions. All Accounts have been originated by the
Lien Grantor and all Inventory and Equipment has been acquired by the Lien
Grantor in the ordinary course of its business.
(E). UCC Filings. A duly signed financing statement on Form UCC-1 in
substantially the form of Schedule 5(A) hereto has been delivered to the
Collateral Agent for filing in the Uniform Commercial Code filing office in each
jurisdiction identified in paragraph (B) hereof.
(F). Schedule of Filings. Attached hereto as Schedule 6 is a schedule
setting forth filing information with respect to the filings described in
paragraph (E) above.
(G). Filing Fees. All filing fees and taxes payable in connection with
the filings described in paragraph (E) above will be promptly paid.
IN WITNESS WHEREOF, we have hereunto set our hands this ____ day of
________, 1998.
By:_____________________________
Name:
Title:
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<PAGE>
SCHEDULE 5(A)
DESCRIPTION OF COLLATERAL
All accounts, chattel paper, securities, instruments, contract rights,
general intangibles, goods, inventory, equipment, documents and investment
property, now owned or hereafter acquired, wherever located, and all proceeds
thereof.
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<PAGE>
SCHEDULE 6
SCHEDULE OF FILINGS
Grantor Filing Officer File Number Date of Filing 1
- ------------- ------------------ -------------- --------------------
- ------------
1 Indicate lapse date, if other than fifth anniversary.
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<PAGE>
EXHIBIT B
FORM OF LOCKBOX LETTER
-------------
[Lockbox Bank]
[Address]
Attention: _____________
Re: [Borrower] [Subsidiary Guarantor]
Ladies and Gentlemen:
We hereby notify you that effective ____________, we have transferred
exclusive ownership and control of our lockbox account No. _________________
(the "Lockbox Account") maintained with you under the terms of the Lockbox
Account Agreement attached hereto as Exhibit A (the "Lockbox Account Agreement")
to UBS AG, Stamford Branch, as Collateral Agent (the "Collateral Agent").
We hereby irrevocably instruct you to make all payments to be made by
you out of or in connection with the Lockbox Account as you may be instructed by
the Collateral Agent.
We also hereby notify you that the Collateral Agent shall be
irrevocably entitled to exercise any and all rights in respect of or in
connection with the Lockbox Account, including, without limitation, the right to
specify when payments are to be made out of or in connection with the Lockbox
Account.
All funds deposited into the Lockbox Account will not be subject to
deductions, set-off, banker's lien or any other right in favor of any other
person than the Collateral Agent, except that you may set-off against the
Lockbox Account the face amount of any check deposited in and credited to such
Lockbox Account which is subsequently returned for any reason. Your compensation
for providing the services contemplated herein shall be as mutually agreed
between you and us from time to time and we will continue to pay such
compensation.
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B-1
<PAGE>
Please confirm your acknowledgment of and agreement to the foregoing
instructions by signing in the space provided below.
Very truly yours,
[Borrower] [Subsidiary Guarantor]
By:--------------------------------
Name:
Title:
Acknowledged and agreed to
as of this ____ day of _________
[LOCKBOX BANK]
By:-----------------------------------
Name:
Title:
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<PAGE>
EXHIBIT C
to Security Agreement
SECURITY AGREEMENT SUPPLEMENT
SECURITY AGREEMENT SUPPLEMENT dated as of _______, ____, between [name
of Subsidiary Guarantor] (the "New Lien Grantor") and UBS AG, Stamford Branch,
as Collateral Agent.
WHEREAS, Toy Biz, Inc. (to be renamed Marvel Enterprises, Inc.), the
Lien Grantors party thereto and UBS AG, Stamford Branch, as Collateral Agent,
are parties to a Security Agreement dated as of September 28, 1998 (as
heretofore amended, supplemented or otherwise modified, the "Security
Agreement");
WHEREAS, terms defined in the Security Agreement (or whose definitions
are incorporated by reference in Section 1 of the Security Agreement) and not
otherwise defined herein have, as used herein, the respective meanings provided
for therein; and
WHEREAS, [name of New Lien Grantor] desires to become a party to the
Security Agreement as an additional Lien Grantor thereunder;
NOW, THEREFORE, in consideration of the premises and other good and
valuable consideration, the receipt and sufficiency of which are hereby
acknowledged, the parties hereto agree as follows:
1. Grant of Security Interest. (a) In order to secure the full and
punctual payment of the Secured Obligations of the New Lien Grantor in
accordance with the terms thereof, the New Lien Grantor grants to the Collateral
Agent for the benefit of the Secured Parties a continuing security interest in
all of the following assets of the New Lien Grantor, whether now owned or
existing or hereafter acquired or arising and regardless of where located (the
"New Collateral"):
(i) Accounts;
(ii) Inventory;
(iii) General Intangibles;
(iv) Documents;
(v) Instruments;
(vi) Equipment;
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<PAGE>
(vii) (x) Equity Interests in any U.S. Person now owned or
hereafter beneficially owned by such New Lien Grantor, (y) the lesser
of all voting Equity Interests in any Foreign Person now owned or
hereafter beneficially acquired by such New Lien Grantor and 65% of all
voting Equity Interests in such Foreign Person held by any Person and
(z) all non-voting Equity Interests in any Foreign Person now owned or
hereafter beneficially acquired by such New Lien Grantor and, in each
case, all rights and privileges of such New Lien Grantor with respect
to such Equity Interests, and all dividends, distributions and other
payments with respect thereto;
(viii) Other Investment Property;
(ix) The Collateral Accounts, all cash deposited therein from time
to time, the Liquid Investments made pursuant to Section 5(F) of the
Security Agreement and other monies and property of any kind of the New
Lien Grantor in the possession or under the control of the Collateral
Agent;
(x) All books and records (including, without limitation, customer
lists, credit files, computer programs, printouts and other computer
materials and records) of such New Lien Grantor pertaining to any of
the Collateral; and
(xi) All Proceeds of all or any of the Collateral described in
Clauses 1(A)(i) through 1(A)(ix) hereof.
(b) The Security Interests are granted as security only and shall not
subject the Collateral Agent or any other Secured Party to, or transfer or in
any way affect or modify, any obligation or liability of the New Lien Grantor
with respect to any of the Collateral or any transaction in connection
therewith.
2. Delivery of Collateral. Concurrently with delivering this Security
Agreement Supplement to the Collateral Agent, the New Lien Grantor is complying
with the provisions of Section 4 of the Security Agreement with respect to all
stock certificates and other certificates representing Equity Interests or Other
Pledged Securities (if any) included in the New Collateral and all Instruments
(if any) included in the New Collateral.
3. Party to Security Agreement. Upon delivery of this Security
Agreement Supplement to the Collateral Agent, the New Lien Grantor will become a
party to the Security Agreement and will thereafter have all of the rights and
obligations of a Lien Grantor thereunder and be bound by all of the provisions
thereof as fully as if the New Lien Grantor were one of the original parties
thereto.
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<PAGE>
4. Representations and Warranties. 2 (a) The New Lien Grantor is a
corporation duly incorporated, validly existing and in good standing under the
laws of [jurisdiction of incorporation].
(b) The New Lien Grantor has delivered a Perfection Certificate to the
Collateral Agent. The information set forth therein is correct and complete as
of the date hereof. Within 60 days of the date hereof, the New Lien Grantor
shall furnish to the Collateral Agent file search reports from each UCC filing
office confirming the filing information set forth in such Perfection
Certificate.
(c) The execution and delivery of this Security Agreement Supplement by
the New Lien Grantor and the performance by it of its obligations under
theSecurity Agreement as supplemented hereby are within its corporate or other
powers, have been duly authorized by all necessary corporate or other action,
require no action by or in respect of, or filing with, any governmental body,
agency or official and do not contravene, or constitute a default under, any
provision of applicable law or regulation or of its articles or certificate of
incorporation or by-laws or other constitutive documents, or of any agreement,
judgment, injunction, order, decree or other instrument binding upon it or
result in the creation or imposition of any Lien (other than the Liens created
by the Collateral Documents) on any of its assets.
(d) The Security Agreement as supplemented hereby constitutes a valid
and binding agreement of the New Lien Grantor, enforceable in accordance with
its terms, subject to applicable bankruptcy, insolvency or other similar laws
affecting creditors' rights generally and general principles of equity.
(e) Each of the representations and warranties set forth in Section 2
of the Security Agreement is true and correct as applied to the New Lien Grantor
and the New Collateral.
5. Governing Law. This Security Agreement Supplement shall be construed
in accordance with and governed by the laws of the State of New York.
- ----------------------
2 Modify as needed for any Subsidiary Guarantor that is not a
corporation.
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<PAGE>
IN WITNESS WHEREOF, the parties hereto have cause this Security
Agreement Supplement to be duly executed by their respective authorized officers
as of the day and year first above written.
[Name of New Lien Grantor]
By:___________________________
Name:
Title:
UBS AG, Stamford Branch,
as Collateral Agent
By:___________________________
Name:
Title:
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<PAGE>
SCHEDULE 1
to Security Agreement
Supplement
EQUITY INTERESTS OWNED BY
NEW LIEN GRANTOR
Number of
State of Percentage Shares-or-Units
Name Organization Owner (if certificated)
- ------------ ----------------- -------------- -------------------
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<PAGE>
EXHIBIT D
to Security Agreement
COPYRIGHT SECURITY AGREEMENT
(Copyrights, Copyright Registrations, Copyright
Applications and Copyright Licenses)
WHEREAS, [Name of Lien Grantor], a _____________ corporation1 (herein
referred to as the "Lien Grantor"), owns, or in the case of licenses is a party
to, the Copyright Collateral (as defined below);
WHEREAS, pursuant to the terms of the Security Agreement dated as of
September 28, 1998 (as amended, supplemented or otherwise modified from time to
time, the "Security Agreement") among Toy Biz, Inc. (to be renamed Marvel
Enterprises, Inc.), the Subsidiary Guarantors party thereto and UBS AG, Stamford
Branch, as Collateral Agent for the Secured Parties referred to therein (in such
capacity, together with its successors in such capacity, the "Grantee"), the
Lien Grantor has granted to the Grantee for the benefit of such Secured Parties
a continuing security interest in or other Lien on substantially all the
personal property of the Lien Grantor, including all right, title and interest
of the Lien Grantor in, to and under the Copyright Collateral (as defined
below), whether now owned or existing or hereafter acquired or arising, to
secure the Secured Obligations (as defined in the Security Agreement) of the
Lien Grantor;
NOW, THEREFORE, for good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, the Lien Grantor does hereby grant
to the Grantee, to secure the Secured Obligations of the Lien Grantor, a
continuing security interest in all of the Lien Grantor's right, title and
interest in, to and under the following (all of the following items or types of
property being herein collectively referred to as the "Copyright Collateral"),
whether now owned or existing or hereafter acquired or arising:
(i) each Copyright (as defined in the Security Agreement) owned by
the Lien Grantor, including, without limitation, each Copyright
registration or application therefor referred to in Schedule 1 hereto;
- ------------------
1 Modify as needed for any Lien Grantor that is not a corporation.
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<PAGE>
(ii) each Copyright License (as defined in the Security Agreement)
to which the Lien Grantor is a party, including, without limitation,
each Copyright License identified in Schedule 1 hereto; and
(iii) all proceeds of and revenues from, and accounts and general
intangibles arising out of, the foregoing, including, without
limitation, all proceeds of and revenues from any claim by the Lien
Grantor against third parties for past, present or future infringement
of any Copyright, including, without limitation, any Copyright owned by
the Lien Grantor referred to in Schedule 1, and all rights and benefits
of the Lien Grantor under any Copyright License, including, without
limitation, any Copyright License identified in Schedule 1 hereto.
The Lien Grantor hereby irrevocably constitutes and appoints the
Grantee and any officer or agent thereof, with full power of substitution, as
its true and lawful attorney-in-fact with full power and authority in the name
of the Lien Grantor or in its name, from time to time, in the Grantee's
discretion, so long as any Event of Default shall have occurred and be
continuing, to take with respect to the Copyright Collateral any and all
appropriate action which the Lien Grantor might take with respect to the
Copyright Collateral and to execute any and all documents and instruments which
may be necessary or desirable to carry out the terms of this Copyright Security
Agreement and to accomplish the purposes hereof.
Except to the extent permitted in the Security Agreement or the Credit
Agreements, the Lien Grantor agrees not to sell, license, exchange, assign or
otherwise transfer or dispose of, or grant any rights with respect to, or
mortgage or otherwise encumber, any of the foregoing Copyright Collateral.
The foregoing security interest is granted in conjunction with the
security interests granted by the Lien Grantor to the Grantee pursuant to the
Security Agreement. The Lien Grantor does hereby further acknowledge and affirm
that the rights and remedies of the Grantee with respect to the security
interest in the Copyright Collateral granted hereby are more fully set forth in
the Security Agreement, the terms and provisions of which are incorporated by
reference herein as if fully set forth herein.
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<PAGE>
IN WITNESS WHEREOF, the Lien Grantor has caused this Copyright Security
Agreement to be duly executed by its officer thereunto duly authorized as of the
____ day of _______, ____.
[NAME OF LIEN GRANTOR]
By:_______________________________
Title:
Acknowledged:
UBS AG, Stamford Branch,
as Collateral Agent
By:____________________________
Title:
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<PAGE>
STATE OF ____________ )
) ss.:
COUNTY OF __________ )
I, ______________________, a Notary Public in and for said County, in
the State aforesaid, DO HEREBY CERTIFY, that _________________________,
_______________ of [NAME OF LIEN GRANTOR] (the "Company"), personally known to
me to be the same person whose name is subscribed to the foregoing instrument as
such _________________, appeared before me this day in person and acknowledged
that (s)he signed, executed and delivered the said instrument as her/his own
free and voluntary act and as the free and voluntary act of said Company, for
the uses and purposes therein set forth being duly authorized so to do.
GIVEN under my hand and Notarial Seal this ___ day of ---------------,
- ----.
[Seal]
Signature of notary public
My Commission expires __________
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<PAGE>
Schedule 1
to Copyright
Security Agreement
[NAME OF LIEN GRANTOR]
COPYRIGHT REGISTRATIONS
Registration Registration Expiration
-------------- ---------------- -----------
No. Date Title Date
----- ------ ------- ------
COPYRIGHT LICENSES
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<PAGE>
EXHIBIT E
to Security Agreement
PATENT SECURITY AGREEMENT
(Patents, Patent Applications and Patent Licenses)
WHEREAS, [Name of Lien Grantor], a _____________ corporation 1 (herein
referred to as the "Lien Grantor"), owns, or in the case of licenses is a party
to, the Patent Collateral (as defined below);
WHEREAS, pursuant to the terms of the Security Agreement dated as of
September 28, 1998 (as such agreement may be amended from time to time, the
"Security Agreement") among Toy Biz, Inc. (to be renamed Marvel Enterprises,
Inc.), the Subsidiary Guarantors party thereto and UBS AG, Stamford Branch, as
Collateral Agent for the Secured Parties referred to therein (in such capacity,
together with its successors in such capacity, the "Grantee"), the Lien Grantor
has granted to the Grantee for the benefit of such Secured Parties a continuing
security interest in or other Lien on substantially all the personal property of
Lien Grantor, including all right, title and interest of the Lien Grantor in, to
and under the Patent Collateral (as defined below), whether now owned or
existing or hereafter acquired or arising, to secure the Secured Obligations (as
defined in the Security Agreement) of the Lien Grantor;
NOW, THEREFORE, for good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, the Lien Grantor does hereby grant
to the Grantee, to secure the Secured Obligations of the Lien Grantor, a
continuing security interest in all of the Lien Grantor's right, title and
interest in, to and under the following (all of the following items or types of
property being herein collectively referred to as the "Patent Collateral"),
whether now owned or existing or hereafter acquired or arising:
(i) each Patent (as defined in the Security Agreement) owned by
the Lien Grantor, including, without limitation, each Patent referred
to in Schedule 1 hereto;
(ii) each Patent License (as defined in the Security Agreement) to
which the Lien Grantor is a party, including, without limitation, each
Patent License identified in Schedule 1 hereto; and
(iii) all proceeds of and revenues from, and accounts and general
intangibles arising out of, the foregoing, including, without
limitation, all
- ----------------------------
1 Modify as needed for any Lien Grantor that is not a corporation.
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<PAGE>
proceeds of and revenues from any claim by the Lien Grantor against
third parties for past, present or future infringement of any Patent
owned by the Lien Grantor, including, without limitation, any Patent
referred to in Schedule 1 hereto, and all rights and benefits of the
Lien Grantor under any Patent License, including, without limitation,
any Patent License identified in Schedule 1 hereto.
The Lien Grantor hereby irrevocably constitutes and appoints the
Grantee and any officer or agent thereof, with full power of substitution, as
its true and lawful attorney-in-fact with full power and authority in the name
of the Lien Grantor or in its name, from time to time, in the Grantee's
discretion, so long as an Event of Default shall have occurred and be
continuing, to take with respect to the Patent Collateral any and all
appropriate action which the Lien Grantor might take with respect to the Patent
Collateral and to execute any and all documents and instruments which may be
necessary or desirable to carry out the terms of this Patent Security Agreement
and to accomplish the purposes hereof.
Except to the extent permitted in the Security Agreement or the Credit
Agreements, the Lien Grantor agrees not to sell, license, exchange, assign or
otherwise transfer or dispose of, or grant any rights with respect to, or
mortgage or otherwise encumber, any of the Patent Collateral.
The foregoing security interest is granted in conjunction with the
security interests granted by the Lien Grantor to the Grantee pursuant to the
Security Agreement. The Lien Grantor does hereby further acknowledge and affirm
that the rights and remedies of the Grantee with respect to the security
interest in the Patent Collateral granted hereby are more fully set forth in the
Security Agreement, the terms and provisions of which are incorporated by
reference herein as if fully set forth herein.
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<PAGE>
IN WITNESS WHEREOF, the Lien Grantor has caused this Patent Security
Agreement to be duly executed by its officer thereunto duly authorized as of the
____ day of ____________, ____.
[NAME OF LIEN GRANTOR]
By:_____________________________
Title:
Acknowledged:
UBS AG, Stamford Branch,
as Collateral Agent
By:_________________________
Title:
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<PAGE>
STATE OF __________ )
) ss.:
COUNTY OF __________ )
I, ______________________, a Notary Public in and for said County, in
the State aforesaid, DO HEREBY CERTIFY, that _________________________,
_______________ of [NAME OF LIEN GRANTOR] (the "Company"), personally known to
me to be the same person whose name is subscribed to the foregoing instrument as
such _________________, appeared before me this day in person and acknowledged
that (s)he signed, executed and delivered the said instrument as her/his own
free and voluntary act and as the free and voluntary act of said Company, for
the uses and purposes therein set forth being duly authorized so to do.
GIVEN under my hand and Notarial Seal this ___ day of
- ---------------, ----.
[Seal]
Signature of notary public
My Commission expires __________
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<PAGE>
Schedule 1
to Patent
Security Agreement
[NAME OF LIEN GRANTOR]
PATENTS AND PATENT APPLICATIONS
Issue or Filing
---------------
Patent No. or Date or Expected
------------- ----------------
Country Serial No. Filing Date Inventor Title
- ---------- ----------- ------------- ---------- -------
PATENT LICENSES
Effective Expiration Subject
--------- ---------- -------
Country Licensor Licensee Date Date Matter
- -------- --------- ---------- -------- ------- ------
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<PAGE>
EXHIBIT F
to Security Agreement
TRADEMARK SECURITY AGREEMENT
(Trademarks, Trademark Registrations, Trademark
Applications and Trademark Licenses)
WHEREAS, [Name of Lien Grantor], a _____________ corporation 1 (herein
referred to as the "Lien Grantor"), owns, or in the case of licenses is a party
to, the Trademark Collateral (as defined below);
WHEREAS, pursuant to the terms of the Security Agreement dated as of
September 28, 1998 (as such agreement may be amended from time to time, the
"Security Agreement") among Toy Biz, Inc. (to be renamed Marvel Enterprises,
Inc.), the Subsidiary Guarantors party thereto and UBS AG, Stamford Branch, as
Collateral Agent for the Secured Parties referred to therein (in such capacity,
together with its successors in such capacity, the "Grantee"), the Lien Grantor
has granted to the Grantee for the benefit of such Secured Parties a continuing
security interest in or other Lien on substantially all the personal property of
the Lien Grantor, including all right, title and interest of Lien Grantor in, to
and under the Trademark Collateral (as defined below), whether now owned or
existing or hereafter acquired or arising, to secure the Secured Obligations (as
defined in the Security Agreement) of the Lien Grantor;
NOW, THEREFORE, for good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, the Lien Grantor does hereby grant
to the Grantee, to secure the Secured Obligations of the Lien Grantor, a
continuing security interest in all of the Lien Grantor's right, title and
interest in, to and under the following (all of the following items or types of
property being herein collectively referred to as the "Trademark Collateral"),
whether now owned or existing or hereafter acquired or arising:
(i) each Trademark (as defined in the Security Agreement) owned by
Lien Grantor, including, without limitation, each Trademark
registration and application referred to in Schedule 1 hereto, and all
of the goodwill of the business connected with the use of, or
symbolized by, each Trademark;
- ----------------
1 Modify as needed for any Lien Grantor that is not a corporation.
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<PAGE>
(ii) each Trademark License (as defined in the Security Agreement)
to which the Lien Grantor is a party, including, without limitation,
each Trademark License identified in Schedule 1 hereto, and all of the
goodwill of the business connected with the use of, or symbolized by,
each Trademark licensed pursuant thereto; and
(iii) all proceeds of and revenues from, and accounts and general
intangibles arising out of, the foregoing, including, without
limitation, all proceeds of and revenues from any claim by the Lien
Grantor against third parties for past, present or future unfair
competition with, or violation of intellectual property rights in
connection with or injury to, or infringement or dilution of, any
Trademark owned by the Lien Grantor, including, without limitation, any
Trademark referred to in Schedule 1 hereto, and all rights and benefits
of the Lien Grantor under any Trademark License, including, without
limitation, any Trademark License identified in Schedule 1 hereto, or
for injury to the goodwill associated with any of the foregoing.
The Lien Grantor hereby irrevocably constitutes and appoints the
Grantee and any officer or agent thereof, with full power of substitution, as
its true and lawful attorney-in-fact with full power and authority in the name
of the Lien Grantor or in its name, from time to time, in the Grantee's
discretion, so long as any Event of Default shall have occurred and be
continuing, to take with respect to the Trademark Collateral any and all
appropriate action which the Lien Grantor might take with respect to the
Trademark Collateral and to execute any and all documents and instruments which
may be necessary or desirable to carry out the terms of this Trademark Security
Agreement and to accomplish the purposes hereof.
Except to the extent permitted in the Security Agreement or the Credit
Agreements, the Lien Grantor agrees not to sell, license, exchange, assign or
otherwise transfer or dispose of, or grant any rights with respect to, or
mortgage or otherwise encumber, any of the foregoing Trademark Collateral.
The foregoing security interest is granted in conjunction with the
security interests granted by the Lien Grantor to the Grantee pursuant to the
Security Agreement. The Lien Grantor does hereby further acknowledge and affirm
that the rights and remedies of the Grantee with respect to the security
interest in the Trademark Collateral granted hereby are more fully set forth in
the Security Agreement, the terms and provisions of which are incorporated by
reference herein as if fully set forth herein.
IN WITNESS WHEREOF, the Lien Grantor has caused this Trademark Security
Agreement to be duly executed by its officer thereunto duly authorized as of the
____ day of __________, ____.
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<PAGE>
[NAME OF LIEN GRANTOR]
By:_____________________________
Title:
Acknowledged:
UBS AG, Stamford Branch,
as Collateral Agent
By:_________________________
Title:
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<PAGE>
STATE OF _____________ )
) ss.:
COUNTY OF ___________ )
I, ______________________, a Notary Public in and for said County, in
the State aforesaid, DO HEREBY CERTIFY, that _________________________,
_______________ of [NAME OF LIEN GRANTOR] (the "Company"), personally known to
me to be the same person whose name is subscribed to the foregoing instrument as
such _________________, appeared before me this day in person and acknowledged
that (s)he signed, executed and delivered the said instrument as her/his own
free and voluntary act and as the free and voluntary act of said Company, for
the uses and purposes therein set forth being duly authorized so to do.
GIVEN under my hand and Notarial Seal this ___ day of
- ---------------, ----.
[Seal]
Signature of notary public
My Commission expires __________
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<PAGE>
Schedule 1
to Trademark
Security Agreement
[NAME OF LIEN GRANTOR]
U.S. TRADEMARK REGISTRATIONS
TRADEMARK REG. NO. REG. DATE
U.S. TRADEMARK APPLICATIONS
TRADEMARK REG. NO. REG. DATE
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<PAGE>
EXCLUSIVE TRADEMARK LICENSES
Name of Parties Date of Subject
Agreement Licensor/Licensee Agreement Matter
--------- ----------------- ----------- --------
