<PAGE>
UNITED STATES SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
[ X ] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the quarterly period ended March 31, 1998
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the transition period from __________ to __________
Commission file number 1-13638
TOY BIZ, INC.
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(Exact name of registrant as specified in its charter)
DELAWARE 13-3711775
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(STATE OR OTHER JURISDICTION OF (I.R.S. EMPLOYER
INCORPORATION OR ORGANIZATION) IDENTIFICATION NO.)
685 THIRD AVENUE, NEW YORK, NY 10017
- -------------------------------------------------------------------------------
(ADDRESS OF PRINCIPAL EXECUTIVE OFFICES) (ZIP CODE)
212-588-5100
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(Registrant's telephone number, including area code)
- -------------------------------------------------------------------------------
(Former name, former address and former fiscal year, if changed since last
report)
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports) and (2) has been subject to such
filing requirements for the past 90 days. Yes X No
--- ---
At May 1, 1998, the number of outstanding shares of the registrant's common
stock, par value $.01 per share, was 27,746,127 shares of Class A Common Stock.
<PAGE>
TOY BIZ, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
(Dollars in thousands)
<TABLE>
<CAPTION>
March 31, December 31,
1998 1997 *
(unaudited)
------------ -------------
<S> <C> <C>
ASSETS
Current Assets:
Cash and cash equivalents............. $ 7,910 $ 7,596
Accounts receivable, net.............. 46,012 50,395
Inventories, net...................... 17,269 22,685
Colorforms assets held for resale..... 4,136
Income tax receivable................. 17,542 17,542
Deferred income taxes................. 7,494 7,494
Prepaid expenses and other............ 10,694 6,584
------------ -------------
Total current assets............... 106,921 116,432
Notes receivable - long term............ 375 -
Molds, tools and equipment, net......... 18,323 17,013
Product and package design costs, net... 7,895 7,616
Goodwill and other intangibles, net..... 10,107 9,305
------------ -------------
Total assets....................... $143,621 $150,366
============ =============
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable ..................... $ 4,431 $ 5,354
Accrued expenses and other............ 12,133 25,031
Borrowings under credit facility...... 18,000 12,000
------------ -------------
Total current liabilities.......... 34,564 42,385
------------ -------------
Stockholders' equity:
Common stock.......................... 277 277
Additional paid-in capital............ 70,578 70,578
Retained earnings..................... 38,202 37,126
------------ -------------
Total stockholders' equity......... 109,057 107,981
------------ -------------
Total liabilities and stockholders' $143,621 $150,366
============ =============
</TABLE>
*Derived from the audited Financial Statements for the year ended December 31,
1997
The accompanying Notes to Condensed Consolidated Financial Statements are
an integral part of these statements.
2
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TOY BIZ, INC.
CONDENSED CONSOLIDATED STATEMENTS OF INCOME
(Dollars in thousands, except per share data
(unaudited)
Three Months
Ended March 31,
---------------------
1998 1997
-------- --------
Net sales............................... $42,641 $34,414
Cost of sales........................... 23,233 19,901
-------- ---------
Gross profit............................ 19,408 14,513
Operating expenses:
Selling, general and administrative... 14,222 10,854
Depreciation and amortization......... 3,304 2,894
-------- ---------
Total operating expenses........... 17,526 13,748
-------- ---------
Operating income........................ 1,882 765
Interest expense (income), net.......... 67 (27)
-------- ---------
Income before provision for income tax 1,815 792
Provision for income taxes............ 739 317
-------- ---------
Net income.............................. $ 1,076 $ 475
======== =========
Basic and dilutive earnings per share... $0.04 $0.02
======== =========
Weighted average number of common and common
equivalent shares outstanding......... 27,746 27,756
======== =========
The accompanying Notes to Condensed Consolidated Financial Statement are an
integral part of these statements.
3
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TOY BIZ, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Dollars in thousands)
(unaudited)
Three Months
Ended March 31,
-----------------------
1998 1997
---------- ----------
Cash flows from operating activities:
Net income..................................... $ 1,076 $ 475
Adjustments to reconcile net income to net cash
(used in) provided by operating activities:
Depreciation and amortization............... 3,304 2,894
Changes in assets and liabilities:
Decrease in accounts receivable, net....... 5,358 17,694
Decrease (increase) in inventories,........ 5,416 (3,042)
Increase in prepaid expenses and other..... (4,110) (2,748)
Decrease in accounts payable............... (923) (2,001)
Decrease in accrued expenses and other
activities ............................... (12,898) (10,079)
---------- ----------
Total adjustments.............................. (3,853) 2,718
---------- ----------
Net cash (used in) provided by operating.. (2,777) 3,193
---------- ----------
Cash flows from investing activities:
Purchases of molds, tools and equipment ..... (3,501) (3,930)
Expenditures for product and package design
costs ...................................... (1,226) (960)
Sale (acquisiton) of Colorforms assets....... 2,786 (4,160)
Other investments............................ (968) (22)
---------- ----------
Net cash used in investing activities .... (2,909) (9,072)
---------- ----------
Cash flows from financing activities:
Exercise of stock options.................... - 60
Net borrowings under credit agreement........ 6,000 5,000
---------- ----------
Net cash provided by financing activities. 6,000 5,060
---------- ----------
Net increase (decrease) in cash................ 314 (819)
Cash and cash equivalents, at beginning of
period ....................................... 7,596 6,022
---------- ----------
Cash and cash equivalents, at end of period.... $7,910 $5,203
========== ==========
Supplemental disclosures of cash flow
information:
Interest paid during the period............. $ 221 $ 26
Income taxes, net paid during the period.... $1,951 $1,394
Other non-cash transactions:
Accretion of preferred dividend.............. - $ 23
The accompanying Notes to Condensed Consolidated Financial Statements are an
integral part of these statements.
4
<PAGE>
TOY BIZ, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA)
(UNAUDITED)
1. BASIS OF FINANCIAL STATEMENT PRESENTATION
The accompanying unaudited condensed consolidated financial statements
of Toy Biz, Inc. and its subsidiaries (collectively, the "Company") have been
prepared in accordance with generally accepted accounting principles for
interim financial information and with the instructions to Form 10-Q and
Article 10 of Regulation S-X. Accordingly, they do not include all of the
information and footnotes required by generally accepted accounting principles
for complete financial statements. In the opinion of management, all
adjustments (consisting of normal recurring accruals) considered necessary for
a fair presentation have been included. The results of operations for the three
months ended March 31, 1998 are not necessarily indicative of those for the
full year ending December 31, 1998. For further information on the Company's
historical financial results, refer to the consolidated financial statements
and footnotes thereto contained in the Company's Annual Report on Form 10-K for
the fiscal year ended December 31, 1997, as filed with the Securities and
Exchange Commission.
2. ACQUISITION & SALE OF COLORFORMS
On March 25, 1997, pursuant to an Asset Purchase Agreement between the
Company and Colorforms, Inc. ("Colorforms"), the Company acquired certain
assets and assumed certain liabilities of Colorforms (the "Acquisition"). The
purchase price was approximately $5.0 million, excluding fees and expenses. The
Company utilized cash available under its credit facility to finance the
Acquisition. The Acquisition was accounted for as a purchase.
During 1997, the Company concluded that Colorforms did not fit the
Company's long-term strategy and the Company decided to dispose of this
operation. On January 30, 1998, the Company sold Colorforms for approximately
$4.35 million, of which $3.0 million was paid in cash and used to reduce the
amounts due under the credit facility, with a promissory note representing the
remainder of $1.35 million due in August, 1998 through May, 1999. The results
of Colorforms are included in the Company's consolidated financial statements
from the date of acquisition to the date of sale.
5
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TOY BIZ, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA)
(UNAUDITED)
3. DETAIL OF CERTAIN BALANCE SHEET ACCOUNTS
<TABLE>
<CAPTION>
MARCH 31, DECEMBER 31,
1998 1997
---------------- ----------------
<S> <C> <C>
Accounts receivable, net:
Accounts receivable............................... $73,008 $80,212
Less allowances................................... (26,996) (29,817)
---------------- ----------------
Total................................... $46,012 $50,395
================ ================
Inventories, net:
Finished goods.................................... $13,241 $17,518
Component parts, raw materials and
work-in-process................................. 4,028 5,167
---------------- ----------------
Total................................... $17,269 $22,685
================ ================
Goodwill and other intangibles, net:
Goodwill.......................................... $9,453 $9,453
Patents and other intangibles..................... 1,786 818
Less accumulated amortization..................... (1,132) (966)
---------------- ----------------
Total................................... $10,107 $9,305
================ ================
Accrued expenses and other:
Accrued advertising costs......................... $3,155 $11,544
Income taxes payable.............................. 2,283 3,495
Accrued inventory purchases....................... 2,584 4,909
Other accrued expenses............................ 4,111 5,083
---------------- ----------------
Total................................... $12,133 $25,031
================ ================
4. EARNINGS PER SHARE
In 1997, the Financial Accounting Standards Board issued Statement No.
128, Earnings Per Share ("Statement 128"). Statement 128 replaced the
calculation of primary and fully diluted earnings per share with basic and
diluted earnings per share. Unlike primary earnings per share, basic earnings
per share excludes any dilutive effects of options, warrants and convertible
securities. Diluted earnings per share is very similar to the previously
reported fully diluted earnings per share. Net income per common share is
computed by dividing net income, less the amount applicable to preferred
dividends in the case of the first quarter of 1997, by the weighted average
common shares outstanding during the year. All income per share amounts for all
periods have been presented, and where appropriate, restated to conform to
Statement 128 requirements.
6
<PAGE>
TOY BIZ, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
5. CHANGE OF CONTROL
On June 20, 1997, as a result of proceedings in the bankruptcy cases
of Marvel Holdings Inc. ("Marvel Holdings"), Marvel (Parent) Holdings Inc.
("Marvel (Parent)"), Marvel III Holdings Inc. ("Marvel III" and together with
Marvel Holdings and Marvel (Parent), the "Marvel Holding Companies") and Marvel
and certain of its subsidiaries, all of which are currently pending in the
United States Bankruptcy Court for the District of Delaware, creditors of the
Marvel Holding Companies (the "Marvel Holding Companies Creditors") obtained
the right to vote the shares of the common stock of Marvel which had been
pledged to secure indebtedness held by them to replace Marvel's board of
directors with persons nominated by the Marvel Holding Companies Creditors.
Accordingly, on June 20, 1997, the board of directors of Marvel Holdings, which
was previously elected by the Marvel Holding Companies Creditors, voted its
majority of Marvel's common stock to elect a new board of directors of Marvel.
As a result of the proceedings in those bankruptcy cases, culminating in the
election of nine new members to Marvel's board of directors replacing Ronald O.
Perelman and the other then incumbent directors of Marvel, Marvel's voting
power as a stockholder of the Company was reduced from approximately 78.4% to
approximately 26.6%. With this reduction in voting power, Marvel lost the
ability to control, subject to the terms of the Stockholders' Agreement, dated
as of March 2, 1995 (the "Stockholders' Agreement"), the election of directors
to the Company's board of directors and to control the affairs and operations
of the Company.
The reduction in Marvel's stockholder voting power from 78.4% to 26.6%
resulted from the automatic conversion of all of the shares of class B common
stock, par value $.01 per share ("Class B Common Stock"), of the Company held
by Marvel into shares of class A common stock, par value $.01 per share ("Class
A Common Stock" and together with the Class B Common Stock, the "Common
Stock"), of the Company. Under the Stockholders' Agreement, by and among the
Company, Marvel and the Company's two other principal stockholders, Isaac
Perlmutter (including two affiliates of Mr. Perlmutter) and Avi Arad, the loss
of control of Marvel by Mr. Perelman triggered the automatic conversion of the
shares of Class B Common Stock held by Marvel into an equal number of shares of
Class A Common Stock. Prior to the conversion of its shares of Class B Common
Stock, which afforded Marvel ten votes per share, Marvel held approximately
78.4% of the voting power of the Company's Common Stock. As a result of the
conversion, Marvel holds approximately 26.6% of the voting power of the
Company, while Mr. Perlmutter and Mr. Arad each hold approximately 33.4% and
15%, respectively, of the voting power of the Company.
The enforceability of the conversion provisions of the Stockholders'
Agreement has been disputed by the bankruptcy trustee appointed in the
bankruptcy cases of the Marvel Holding Companies and by the equity committee of
Marvel Holdings. Those parties maintain that Marvel continues to own shares of
Class B Common Stock. On June 20, 1997, Marvel purported to exercise the 78.4%
voting power associated with those shares to remove a majority of the Company's
directors and to replace them with Marvel nominees. On June 23, 1997, the
Company, Mr. Perlmutter, the two affiliates of Mr. Perlmutter
7
<PAGE>
TOY BIZ, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
5. CHANGE OF CONTROL (CONTINUED)
who were parties to the Stockholders' Agreement and Avi Arad commenced
adversary proceedings in the Marvel bankruptcy cases against Marvel and Marvel
Holding Companies for a declaration that the Class B Common Stock owned of
record by Marvel converted to Class A Common Stock on or before June 20, 1997,
and that the incumbent board of the Company is the Company's duly constituted
board and for an injunction enjoining those defendants from interfering with
the proper and orderly functioning of the Company's incumbent board of
directors. On March 30, 1998, the United States District Court for the District
of Delaware (the "District Court") granted the Company's motion for summary
judgement and directed the entry of a judgement declaring that as a result of
the June 20, 1997 change of control of Marvel, the Class B Common Stock owned
by Marvel converted, as of that date, into Class A Common Stock. Marvel filed
an appeal of this determination to the United States Court of Appeals for the
Third Circuit. This appeal is scheduled for hearing on June 11, 1998. On
May 12, 1998, an agreement, which is subject to the approval of the District
Court, was reached among the Company, John J. Gibbons, Chapter 11 trustee
of Marvel (the "Trustee"), representatives of Marvel's senior secured
lenders and certain other parties to settle this litigation as well as
certain litigation commenced by Marvel against the Company, Marvel's senior
secured lenders and such other parties. (See Part II Item 1).
6. COMBINATION WITH MARVEL
The Company and certain creditors of Marvel have announced a
proposal for the combination of the Company and Marvel (the "Combined
Company"). In connection with the Joint Plan of Reorganization proposing
the combination of the Company and Marvel (as since amended, the "Plan"),
the Company stockholders, other than Marvel, would receive approximately 41%
of the common stock of the Combined Company (assuming the conversion of all
preferred stock to be issued by the Combined Company pursuant to the Plan
but not assuming any exercise of warrants to be issued pursuant to the Plan
and without regard to shares held by the Combined Company or its
subsidiaries) and the senior secured lenders of Marvel would receive a
combination of cash and common and preferred securities issued by the Combined
Company which (under the same assumptions) would represent approximately 40%
of the common stock of the Combined Company. An investor group, in which
Mr. Perlmutter is expected to be a participant, would purchase securities
that (under the same assumptions) would represent approximately 19% of the
common stock of the Combined Company. Under the Plan, holders of allowed
unsecured claims of Marvel ("Unsecured Creditors") will receive (i) up to
$8.0 million in cash and (ii) between 1. 0 million and 1.75 million warrants
having a term of four years and entitling the holders to purchase common
stock of the Combined Company at $17.25 per share. The exact amount of cash
and warrants to be distributed to the Unsecured Creditors will be determined
by reference to the aggregate amount of allowed unsecured claims. In addition,
Unsecured Creditors will be entitled to receive distributions from any future
recovery on certain litigation. The Plan is being proposed by in excess of
two-thirds in amount of Marvel's senior secured lenders and is supported by
the Official. Committee of the Unsecured Creditors of Marvel. Consummation of
the Plan is subject to a number of conditions including approval of the
Company's stockholders and the District Court. A hearing had been ordered by
the District Court for May 4, 1998 to consider a motion by the Company to
confirm the Plan; however, the hearing has been postponed pending the
resolution of the hearing of the appeal on the corporate governance litigation
commenced by the Company. In connection with the proposed settlement of this
litigation as well as certain litigation brought by Marvel against the Company
and others, a further amendment to the Plan has been proposed. (See Note 5 and
Part II Item 1). The Company currently anticipates a meeting of the
stockholders of the Company will be held in the third quarter of 1998 for the
purpose of considering and voting upon approval of the Plan.
In connection with any such meeting, the Company will distribute
separate proxy materials describing the transactions contemplated by the Plan
and the other circumstances in connection therewith. As part of the agreements
setting forth the terms of the Plan, Messrs. Perlmutter and Arad have agreed to
vote all shares of Common Stock owned by them in favor of the Plan.
8
<PAGE>
TOY BIZ, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
6. COMBINATION WITH MARVEL (CONTINUED)
The Plan contemplates that for a period of 30 days after the
confirmation of the Plan, the Company will cooperate in efforts to sell Marvel
and the Company on a combined basis and that if a transaction can be arranged
which would result in stockholders of the Company (other than Marvel) receiving
approximately $13.75 in exchange for each share of Common Stock held by them,
the Company will be sold in that transaction. The Plan provides that any excess
proceeds payable by the buyer in that transaction will not increase the amount
to be received by holders of Common Stock, but instead will inure to the
benefit of claimants in the Marvel bankruptcy.
9
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
CAUTIONARY STATEMENT FOR PURPOSES OF THE "SAFE HARBOR" PROVISIONS OF THE
PRIVATE SECURITIES LITIGATION REFORM ACT OF 1995
The Private Securities Litigation reform Act of 1995 provides a "safe
harbor" for certain forward-looking statements. The factors discussed under
"Management's Discussion and Analysis of Financial Condition and Results of
Operations" could cause actual results to differ materially from those
contained in forward-looking statements made in this Form 10-Q Quarterly Report
and in oral statements made by authorized officers of the Company. When used in
this Form 10-Q, the words "intend", "estimate", "believe", expect" and similar
expressions are intended to identify forward-looking statements. In addition,
the following factors, among others, could cause the Company's financial
performance to differ materially from that expressed in any forward-looking
statements made by, or on behalf of, the Company: (i) developments in the
Marvel bankruptcy proceedings (including the Company's proposal with respect
thereto); (ii) a decrease in the level of media exposure or popularity of
Marvel characters resulting in declining revenues of toys based on such
characters; (iii) the lack of continued commercial success of properties owned
by major entertainment companies that have granted the Company toy licenses;
(iv) consumer acceptance of new toy product introductions; (v) the impositon of
quotas or tariffs on toys manufactured in China as a result of a deterioration
in trade relations between the U.S. and China; (vi) changing consumer
preferences; (vii) production delays or shortfalls; and (viii) general economic
conditions.
GENERAL
The Company designs, markets and distributes in the United States and
internationally new and traditional toys in the boys', girls', preschool,
activity and electronic toy categories featuring major entertainment and
consumer brand name properties. The Company also designs, markets, and
distributes its own line of proprietary toys in certain of these categories.
The Company believes that its business in the boys' toys category domestically
and internationally continues to be negatively impacted as a result of the
proceedings surrounding Marvel's bankruptcy. This includes decreased retailer
interest in Marvel brand products and reduced consumer interest in these
products due to reduced promotional activity by Marvel. The Company believes
that the Marvel bankruptcy has had and will continue to have an adverse impact
on the Company in various ways, including but not limited to, the following:
concerns among retailers about the future of the Marvel brand, the status of
the Company due to Marvel's ownership of 26% of the Company's Common Stock and
its claim that it continues to control the Company through its ownership of
Class B Common Stock, potential impact on the Company's relationship with its
distributors, difficulty in obtaining new licenses and excess legal and
administrative expenses.
On March 25, 1997, pursuant to an Asset Purchase Agreement between the
Company and Colorforms, the Company acquired certain assets and assumed certain
liabilities of Colorforms. The purchase price was approximately $5.0 million,
excluding fees and expenses. The Company utilized cash available under its
credit facility to finance the Acquisition. The Acquisition was accounted for
as a purchase. During 1997, the Company concluded that Colorforms did not fit
the Company's long-term strategy and the Company decided to dispose of this
operation. On January 30, 1998, the Company sold Colorforms for approximately
$4.35 million, of which $3.0 million was paid in cash and used to reduce the
amounts due under the credit facility, with a promissory note representing the
remainder of $1.35 million due in August, 1998 through May, 1999. The results
of Colorforms are included in the Company's consolidated financial statements
from the date of acquisition to the date of sale.
10
<PAGE>
RESULTS OF OPERATIONS
Three months ended March 31, 1998 compared with the three months ended March
31, 1997
The Company's net sales increased to approximately $42.6 million for
the first quarter of 1998 from approximately $34.4 million in the first quarter
of 1997. Net sales in the domestic boys' toys category increased approximately
$7.8 million to approximately $15.5 million in the first quarter of 1998 due
primarily to continued sales of boys' accessories which were introduced in the
second half of 1997 as well as increased sales of new action figure
assortments. Net sales in the domestic girls' toys category increased
approximately $3.7 million in the first quarter of 1998 to approximately $5.6
million due primarily to the introduction of the Lil' Splash 'n Shivers doll in
the 1998 quarter, while no comparable products were introduced during the first
quarter of 1997. Domestic activity toy and other product net sales increased
approximately $900,000 to approximately $10.3 million. Net sales of product
sold through the import division increased approximately $600,000 to
approximately $5.5 million in the first quarter of 1998. International net
sales, which includes international distribution and sub-licensing revenues,
decreased approximately $4.8 million to approximately $5.7 million in the first
quarter of 1998 as a result of reduced distribution of animated Marvel
television shows in international markets. The Company believes that the
reduced distribution of those shows is a result of the Marvel bankruptcy.
Gross profit increased 34% to approximately $19.4 million for the
first quarter of 1998 from approximately $14.5 million in the first quarter of
1997. Gross profit as a percentage of net sales increased to approximately 46%
in the first quarter of 1998 from approximately 42% in the first quarter of
1997 due to changes in the Company's product mix and the effect of a lower
percentage of international sales and sales from the import division during the
1998 period, both of which typically have lower gross margins than domestic
sales.
Selling, general and administrative expenses increased 31% to
approximately $14.2 million (approximately 33% of net sales) in the first
quarter of 1998 from approximately $10.9 million (approximately 32% of net
sales) in the first quarter of 1997. The increase of approximately $3.4 million
was due to increased advertising expenses as a result of additional promotional
products in 1998 and increased royalties as a result of increased sales.
Depreciation and amortization expense increased to approximately $3.3
million in the first quarter of 1998 from approximately $2.9 million in the
first quarter of 1997. The increase of approximately $400,000 was primarily
attributable to increased amortization expense resulting from an increased
investment in product tooling to support the Company's expanded product line.
The Company believes its sales and business continue to be adversely
affected in the first quarter of 1998 by concerns among retailers as to the
impact of the Marvel bankruptcy. While the Company is attempting to address
these concerns, to the extent they are not alleviated, it can be expected that
they will continue to adversely affect demand for the Company's products.
LIQUIDITY AND CAPITAL RESOURCES
Net cash used in operating activities was approximately $2.8 million
in the first quarter of 1998, while net cash provided by operating activities
was approximately $3.2 million in the first quarter of 1997. This change
results primarily from an increase in domestic receivables related to higher
domestic sales in the first quarter of 1998 on standard credit terms as
compared to the 1997 period which had a higher percentage of international
sales which generally provide for faster collection of receivables. This change
was partially offset by a decrease in inventory levels.
11
<PAGE>
In March, 1998, the Company and The Chase Manhattan Bank entered into
an amendment to the Company's revolving line of credit (the "Amended Credit
Facility") extending the duration of the credit facility and modifying its
terms. The Amended Credit Facility provides that the Company can borrow an
aggregate amount of up to $20.0 million (increasing during October through
mid-November 1998 to up to $29.0 million), subject to certain borrowing base
limitations based upon the level of the Company's receivables and inventory.
Substantially all of the assets of the Company continue to be pledged to secure
borrowings under the Amended Credit Facility. Borrowings under the Amended
Credit Facility bear interest at either The Chase Manhattan Bank's alternative
base rate or at the Eurodollar rate plus the applicable margin. The applicable
margin is 1% with respect to base rate loans and 2% with respect to Eurodollar
loans. The Amended Credit Facility requires the Company to pay a commitment fee
of 3/8 of 1% per annum on the average daily unused portion of the Amended
Credit Facility. The Company had $4.0 million in outstanding borrowings under
the Amended Credit Facility as of May 11, 1998. The Amended Credit Facility
is scheduled to expire in February 1999.
The Amended Credit Facility contains various financial covenants, as
well as restrictions, on new indebtedness, prepaying or amending subordinated
debt, acquisitions and similar investments, the sale or transfer of assets,
capital expenditures, limitations on restricted payments, dividends, issuing
guarantees and creating liens. In addition, the Amended Credit Facility also
requires that (a) the current board of directors or successors designated by
them remain in office, (b) the Marvel license remain in effect and (c) Messrs.
Perlmutter and Arad continue to own at least 50% of the Common Stock held by
them as of February 21, 1998. The Amended Credit Facility is not guaranteed by
Marvel.
The Company believes that it has sufficient funds available from cash
and cash equivalents, operating activities and borrowings under the Amended
Credit Facility to meet peak working capital needs and capital expenditure
requirements.
PART II. OTHER INFORMATION.
ITEM 1. LEGAL PROCEEDINGS.
On May 12, 1998, the Company and Marvel announced that an
agreement, subject to District Court approval had been
reached among the Company, the Trustee, representatives of
Marvel's Senior Secured Lenders and certain other parties
to settle litigation commenced by Marvel against the
Company, Marvel's Senior Secured Lenders and those other
parties as well as litigation commenced by the Company
against Marvel. See Note 5 to the Condensed Consolidated
Financial Statements of the Company included elsewhere in
this Report on Form 10-Q. On March 30, 1998, the District
Court entered a judgment declaring that the supervoting rights
associated with the Class B Common Stock owned by Marvel,
which enabled Marvel to control the board, terminated on
June 20, 1997 when Carl C. Icahn took control of Marvel.
This judgment has been appealed by the Trustee and others to
the United States Court of Appeals for the Third Circuit. On
April 13, 1998, the Court of Appeals stayed, pending the
outcome of the appeals, the previously scheduled confirmation
hearing on the Plan that had been proposed by the Company and
Marvel's Senior Secured Lenders.
If the settlement agreement is approved by the District Court,
the Trustee has agreed to seek to have the stay of the
confirmation hearing vacated, to defer consideration of the
appeals and to move to dismiss all appeals upon consummation
of the Plan. Under the terms of the proposed settlement
agreement, the Trustee, the Senior Secured Lenders of Marvel,
and others will exchange releases, including releases from
the lawsuit commenced by Marvel. The lawsuit was commenced
by Marvel when it was controlled by the Icahn interests
against the Senior Secured Lenders, the Company and others.
Among the parties against whom Marvel brought its lawsuit are
Ronald O. Perelman and certain of his affiliates and
associates, who are not being released. The proposed
settlement also provides for the amendment of the Plan so that
Marvel equityholders and entities entitled to securities
litigations claims will receive three series of warrants
upon consummation of the amended Plan entitling them to
purchase common and convertible/exchangeable preferred stock
to be issued by the Combined Company. The first series of
four million warrants will have a term of six months and
will allow the recipients to purchase common stock in the
Combined Company at a price of $12.00 per share (subject to
increase based on the issuance date of the warrants). The
second series of three million warrants will have a term of
six months and will allow the recipients to purchase
convertible/exchangeable preferred stock in the Combined
Company at a price of $10.65 per share (also subject to
increase based on the issuance date of the warrants). The
final series of five million warrants will have a term of
four years and will allow the recipients to purchase common
stock in the Combined Company at a price of $18.50 per share.
Finally, the equity holders and class securities litigation
claimants will be entitled to receive distributions from any
recovery on certain future litigation. The proposed amendment
to the Plan does not affect the terms of the Plan regarding
the distributions to be made to Marvel's Senior Secured or
Unsecured Lenders or the Company's stockholders.
In addition to the approval of the District Court, the
agreement is subject to the approval of the Senior Secured
Lenders that have agreed to support the Plan. The company
expects to receive the Senior Secured Lenders approval
shortly and will be seeking court approval of the
settlement together with the Trustee expeditiously.
The agreement is subject to confirmation of the amended Plan
by June 30, 1998, which will require the Court of Appeals to
lift its stay, and consummation of the amended Plan by
August 15, 1998. The Trustee has the right to terminate the
agreement prior to the confirmation of the amended Plan for
the purpose of accepting an alternative transaction involving
the sale of Marvel, but only if the Trustee determines that
the alternative transaction will provide greater recoveries
to the Senior Secured Lenders and Marvel's unsecured creditors
and equityholders and the transaction provides that the
pending dispute involving the conversion of the Class B
Common Stock is resolved in favor of the Company, or the
alternative transaction provides for payment in full in cash
to the Senior Secured Lenders and Marvel's debtor in
possession lenders.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K.
(a) Exhibits
10.32 Sixth Amendment to the Credit Agreement
between the Company and The Chase Manhattan
Bank, as administrative agent for the banks,
dated as of March 25, 1998.
10.33 Stipulation and Agreement of Settlement, among
John J. Gibbons, Chapter 11 Trustee of Marvel,
the Company and other parties thereto, dated
May 12, 1998.
(b) Reports on Form 8-K
None
12
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned, thereto duly authorized.
TOY BIZ, INC.
(Registrant)
Dated: May 13, 1998 By: /s/David J. Fremed
-------------------------------
David J. Fremed
Chief Financial Officer
and Treasurer
13
</TABLE>
<PAGE>
SIXTH AMENDMENT
SIXTH AMENDMENT (this "Amendment"), dated as of March 25,
1998, to the Credit Agreement, dated as of February 22, 1995 (as amended,
supplemented or otherwise modified from time to time, the "Credit Agreement"),
among Toy Biz, the banks and other financial institutions from time to time
parties thereto (the "Banks") and The Chase Manhattan Bank (formerly known as
Chemical Bank), as administrative agent (in such capacity, the "Administrative
Agent") for the Banks.
W I T N E S S E T H:
- - - - - - - - - -
WHEREAS, Toy Biz, the Banks and the Administrative Agent are
parties to the Credit Agreement;
WHEREAS, Toy Biz has requested that the Credit Agreement be
amended in the manner provided for herein; and
WHEREAS, the Administrative Agent and the Banks are willing
to consent to such amendments, but only upon the terms and subject to the
conditions set forth herein;
NOW, THEREFORE, in consideration of the premises and mutual
agreements contained herein, and for other good and valuable consideration, the
sufficiency of which is hereby acknowledged, Toy Biz, the Banks and the
Administrative Agent hereby agree as follows:
1. Defined Terms. Unless otherwise defined herein, terms
defined in the Credit Agreement shall have such meanings when used herein.
2. Amendments. (a) The Credit Agreement hereby is amended in
its entirety to reflect the terms and provisions shown in Exhibit A attached
hereto.
(b) Except for the addition of a new Exhibit H to the Credit
Agreement (as described in the definition of the term "Borrowing Base
Certificate" contained in subsection 1.1 of the Credit Agreement and as set
forth as Exhibit B hereto), the Schedules and the Exhibits to the Credit
Agreement shall not be modified by this Amendment.
3. Assignment and Acceptance. (a) Each of The Bank of New
York and Fleet Bank (the "Sellers") hereby irrevocably sells and assigns to The
Chase Manhattan Bank (the "Purchaser"), and the Purchaser hereby irrevocably
purchases and assumes from the Sellers, the full amount of each such Seller's
Commitment under the Credit Agreement, Aggregate Outstanding Extensions of
Credit and other rights and interests under the Credit Agreement. Such
assignment shall be effective as of March 25, 1998 and the Purchaser hereby
agrees to pay to each such Seller the amount equal to such Seller's Aggregate
Outstanding Extensions of Credit on such date plus any accrued but unpaid
interest and letter of credit commissions owing thereon on such date.
(b) From and after March 25, 1998, (i) the Purchaser shall
continue to be a party to the Credit Agreement and, to the extent provided
herein, have the rights and obligations of a Bank thereunder and under the
other Loan Documents and shall be bound by the provisions thereof and (ii) the
Sellers shall relinquish their rights and be released from
<PAGE>
their obligations under the Credit Agreement (including, without limitation,
all obligations pursuant to subsection 2A.4 of the Credit Agreement).
4. Supplemental Fees. Toy Biz hereby agrees to pay to the
Administrative Agent a supplemental fee in the amount equal to $50,000 on each
of the date which is six months after the effectiveness of this Amendment and
the date which is nine months after the effectiveness of this Amendment. Such
fee shall be payable to the Administrative Agent, for the ratable account of
the Banks party to the Credit Agreement on the relevant payment date, and shall
not be payable if, on the relevant payment date, the Commitments have been
terminated and no amounts are then due and payable thereunder.
5. Covenants. Toy Biz hereby covenants and agrees to provide
to the Agent, for the benefit of the Banks, a first priority, perfected
security interest in 65% of the issued and outstanding capital stock of Compana
de Juguetes S.A. de C.V. [Mexico] pursuant to documentation which is in form
and substance satisfactory to the Agent, together with such legal opinions and
other documents, instruments and agreements as the Agent reasonably shall
request to evidence such perfected security interest. Any failure to provide
such security interest and other documentation within 60 days following the
effective date of this Amendment shall be deemed to constitute an Event of
Default under the Credit Agreement.
6. Representations and Warranties. (a) Toy Biz hereby
confirms, reaffirms and restates the representations and warranties made by it
in Section 4 of the Credit Agreement; provided that each reference to the
Credit Agreement therein shall be deemed to be a reference to the Credit
Agreement after giving effect to this Amendment and to each other amendment,
supplement and other modification executed and delivered by Toy Biz or any of
its Subsidiaries on the date hereof.
(b) Toy Biz hereby further represents and warrants that, on
and as of the effective date of this Amendment:
(i) except to the extent disclosed in writing to the Lenders
prior to such date of effectiveness, no change, or development or
event involving a prospective change, has occurred since September 30,
1997 which in any such case would be reasonably likely to have a
Material Adverse Effect; and
(ii) no event of default (or condition which would constitute
an event of default with the giving of notice or the passage of time)
exists under any capital stock, financing agreements, lease agreements
or other contracts of Toy Biz or any of its Subsidiaries.
7. Continuing Effect of Credit Agreement. This Amendment
shall not constitute a waiver, amendment or modification of any other provision
of the Credit Agreement not expressly referred to herein and shall not be
construed as a waiver or consent to any further or future action on the part of
Toy Biz that would require a waiver or consent of the Banks or the
Administrative Agent. Except as expressly amended or modified herein, the
provisions of the Credit Agreement are and shall remain in full force and
effect.
8. Counterparts. This Amendment may be executed by one or
more of the parties hereto on any number of separate counterparts and all such
counterparts shall be deemed to be one and the same instrument. Each party
hereto confirms that any facsimile
<PAGE>
copy of such party's executed counterpart of this Amendment (or its signature
page thereof) shall be deemed to be an executed original thereof.
9. Effectiveness. This Amendment shall be effective upon
receipt by the Administrative Agent of:
(a) counterparts hereof, duly executed and delivered by Toy Biz and
each of the Banks;
(b) an amendment fee, for the account of the Banks (after giving
effect to this Amendment) in the amount equal to $100,000;
(c) a detailed financial model for the 1998 fiscal year of Toy Biz and
for the first and second quarters of its 1999 fiscal year, each
of which shall be in form and substance satisfactory to the
Banks;
(d) the results of an audit of the inventory and accounts receivable
of Toy Biz and its domestic Subsidiaries (other than any assets of
the Colorforms division), which audit shall be (i) reasonably
satisfactory in form and substance to the Banks, (ii) conducted by
the Collateral Agent Services Group of The Chase Manhattan Bank;
the fees and expenses of The Chase Manhattan Bank in conducting
such audit shall be for the account of Toy Biz;
(e) consents and approvals of the transactions contemplated hereby
from the Trustee of Marvel Entertainment Group, Inc., which
consents and approvals shall be in form and substance satisfactory
to the Banks; and
(f) legal opinions from independent counsel to Toy Biz and any special
and local counsel required by the Banks, each of which legal
opinions shall be in form and substance satisfactory to the Banks.
10. GOVERNING LAW. THIS AMENDMENT SHALL BE GOVERNED BY, AND
CONSTRUED AND INTERPRETED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF NEW
YORK.
IN WITNESS WHEREOF, the parties hereto have caused this
Amendment to be duly executed and delivered by their proper and duly authorized
officers as of the day and year first above written.
TOY BIZ, INC.
By:____________________
Name:
Title:
<PAGE>
THE CHASE MANHATTAN BANK (formerly
known as Chemical Bank), as Administrative
Agent and as a Bank
By:___________________________
Name:
Title:
THE BANK OF NEW YORK
By:___________________________
Name:
Title:
FLEET BANK
By:___________________________
Name:
Title:
<PAGE>
EXHIBIT A
===============================================================================
TOY BIZ, INC.
--------------------
$30,000,000
CREDIT AGREEMENT
Dated as of February 22, 1995
-------------------
CHEMICAL BANK,
as Administrative Agent
===============================================================================
<PAGE>
<TABLE>
<CAPTION>
TABLE OF CONTENTS
Page
----
<S> <C>
SECTION 1. DEFINITIONS......................................................................................... 1
1.1 Defined Terms....................................................................................... 1
1.2 Other Definitional Provisions....................................................................... 20
SECTION 2. AMOUNTS AND TERMS OF COMMITMENTS.................................................................... 21
2.1 Commitments......................................................................................... 21
2.2 Obligations of Toy Biz.............................................................................. 21
2.3 Procedure for Borrowing Loans....................................................................... 21
2.4 Use of Proceeds of Loans............................................................................ 22
2.5 [INTENTIONALLY OMITTED]............................................................................. 22
SECTION 2A. LETTERS OF CREDIT.................................................................................. 22
2A.1 L/C Commitment..................................................................................... 22
2A.2. Procedure for Issuance of Letters of Credit....................................................... 23
2A.3. Fees, Commissions and Other Charges............................................................... 23
2A.4 L/C Participations................................................................................. 23
2A.5 Reimbursement Obligation of Toy Biz................................................................ 24
2A.6 Obligations Absolute............................................................................... 25
2A.7 Letter of Credit Payments.......................................................................... 25
2A.8 Application........................................................................................ 25
SECTION 3. PROVISIONS RELATING TO THE LOANS; FEES AND PAYMENTS................................................. 25
3.1 Voluntary Termination or Reduction of Commitments. ................................................. 25
3.2 Optional Prepayments................................................................................ 26
3.3 Mandatory Prepayments and Commitment Reductions..................................................... 26
3.4 Interest Rate and Payment Dates..................................................................... 27
3.5 Conversion Options, Minimum Tranches and Maximum Interest Periods................................... 27
3.6 Inability to Determine Interest Rate................................................................ 28
3.7 Illegality.......................................................................................... 28
3.8 Requirements of Law; Changes of Law................................................................. 29
3.9 Indemnity........................................................................................... 30
3.10 Taxes.............................................................................................. 30
3.11 Fees............................................................................................... 32
3.12 Computation of Interest and Fees................................................................... 32
3.13 Pro Rata Treatment and Payments.................................................................... 33
3.14 Payments on Account of Loans, Reimbursement Obligations and Fees................................... 34
SECTION 4. REPRESENTATIONS AND WARRANTIES...................................................................... 34
4.1 Corporate Existence................................................................................. 34
4.2 Corporate Power..................................................................................... 34
4.3 No Legal Bar to Loans............................................................................... 35
4.4 No Material Litigation.............................................................................. 35
4.5 No Default.......................................................................................... 35
4.6 Ownership of Properties; Liens...................................................................... 35
-i-
<PAGE>
Page
----
<CAPTION>
<S> <C>
4.7 Taxes............................................................................................... 36
4.8 ERISA............................................................................................... 36
4.9 Financial Condition................................................................................. 36
4.10 No Change.......................................................................................... 37
4.11 Federal Regulations................................................................................ 37
4.12 Not an "Investment Company"........................................................................ 37
4.13 Matters Relating to Subsidiaries................................................................... 37
4.14 Security Documents................................................................................. 37
4.15 Intellectual Property.............................................................................. 38
4.16 Disclosure......................................................................................... 38
SECTION 5. CONDITIONS PRECEDENT................................................................................ 38
5.1 Conditions to Initial Extension of Credit........................................................... 38
5.2 Conditions to Each Extension of Credit.............................................................. 41
SECTION 6. AFFIRMATIVE COVENANTS............................................................................... 41
6.1 Financial Statements................................................................................ 41
6.2 Certificates; Other Information..................................................................... 42
6.3 Payment of Obligations.............................................................................. 43
6.4 Conduct of Business and Maintenance of Existence.................................................... 44
6.5 Maintenance of Property; Insurance.................................................................. 44
6.6 Inspection of Property; Books and Records; Discussions.............................................. 44
6.7 Notices............................................................................................. 45
6.8 Maintenance of Corporate Identity................................................................... 46
6.9 Environmental Laws.................................................................................. 46
6.10 Maintenance of the Liens of the Security Documents................................................. 46
6.11 International Pledge Agreement..................................................................... 47
SECTION 7. NEGATIVE COVENANTS.................................................................................. 47
7.1 Indebtedness........................................................................................ 47
7.2 Limitation on Liens................................................................................. 47
7.3 Limitation on Contingent Obligations................................................................ 48
7.4 Limitation on Fundamental Changes................................................................... 48
7.5 Limitation on Sale of Assets........................................................................ 49
7.6 Limitation on Leases................................................................................ 49
7.7 Limitation on Dividends............................................................................. 50
7.8 Limitation on Capital Expenditures.................................................................. 50
7.9 Limitation on Investments, Loans and Advances....................................................... 50
7.10 Limitation on Optional Payments and Modifications of Subordinated Debt............................. 51
7.11 Limitation on Transactions with Affiliates......................................................... 51
7.12 Limitation on Changes in Fiscal Year............................................................... 51
7.13 Limitation on Negative Pledge Clauses.............................................................. 51
7.14 Limitation on Lines of Business.................................................................... 51
7.15 Subsidiaries....................................................................................... 51
7.16 Financial Covenants................................................................................ 52
7.17 Cash Management System............................................................................. 52
SECTION 8. EVENTS OF DEFAULT................................................................................... 53
-ii-
<PAGE>
<CAPTION>
Page
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<S> <C>
SECTION 9. THE ADMINISTRATIVE AGENT............................................................................ 56
9.1 Appointment......................................................................................... 56
9.2 Delegation of Duties................................................................................ 56
9.3 Exculpatory Provisions.............................................................................. 56
9.4 Reliance by the Administrative Agent................................................................ 56
9.5 Notice of Default................................................................................... 57
9.6 Non-Reliance on the Administrative Agent and the Other Banks........................................ 57
9.7 Indemnification..................................................................................... 58
9.8 The Administrative Agent in Its Individual Capacity................................................. 58
9.9 Successor Administrative Agent...................................................................... 58
SECTION 10. MISCELLANEOUS...................................................................................... 59
10.1 Amendments and Waivers............................................................................. 59
10.2 Notices............................................................................................ 60
10.3 No Waiver; Cumulative Remedies..................................................................... 60
10.4 Survival of Representations and Warranties......................................................... 60
10.5 Payment of Expenses and Taxes...................................................................... 60
10.6 Successors and Assigns; Loan Participations........................................................ 61
10.7 Adjustments; Setoff................................................................................ 64
10.8 Severability....................................................................................... 65
10.9 Effectiveness; Counterparts........................................................................ 65
10.10 SUBMISSION TO JURISDICTION; WAIVERS............................................................... 65
10.11 GOVERNING LAW..................................................................................... 66
</TABLE>
SCHEDULES:
Schedule I Banks; Addresses for Notices
Schedule II Commitments
Schedule III UCC Filing Jurisdictions
Schedule IV Contingent Obligations
EXHIBITS:
Exhibit A Form of Note
Exhibit B Form of Subsidiary Guarantee
Exhibit C Form of Toy Biz Pledge Agreement
Exhibit D Form of Toy Biz Security Agreement
Exhibit E Form of Subsidiary Security Agreement
Exhibit F-1 Form of Opinion of Paul, Weiss, Rifkind,
Wharton & Garrison
Exhibit F-2 Form of Opinion of Amster, Rothstein & Ebenstein
Exhibit G Form of Commitment Transfer Supplement
Exhibit H Form of Borrowing Base Certificate
-iii-
<PAGE>
CREDIT AGREEMENT, dated as of February 22, 1995, among TOY
BIZ, INC., a Delaware corporation ("Toy Biz"); the financial institutions from
time to time parties hereto (the "Banks"); and CHEMICAL BANK ("Chemical"; and,
together with the Banks, the "Lenders"), as arranger (in such capacity, the
"Arranger") and as administrative agent (in such capacity, the "Administrative
Agent") for the Banks.
W I T N E S S E T H:
- - - - - - - - - -
The parties hereto hereby agree as follows:
SECTION 1. DEFINITIONS.
1.1 Defined Terms. As used in this Agreement, the following
terms shall have the following respective meanings (such definitions to be
equally applicable to the singular and plural forms thereof):
"Account": as defined in "Eligible Accounts";
"Account Debtor": with respect to any Account, the obligor
with respect to such Account;
"Administrative Agent" shall have the meaning assigned to
such term in the preamble hereto;
"Affected Loan" shall have the meaning assigned to such term
in subsection 3.6(a);
"Affiliate" of any Person shall mean any other Person (other
than a Subsidiary) which, directly or indirectly, is in control of, is
controlled by, or is under common control with, the first Person. For
purposes of this definition, a Person shall be deemed to be
"controlled by" another Person if such other Person possesses,
directly or indirectly, power either to (a) vote 10% or more of the
securities having ordinary voting power for the election of directors
of such first Person or (b) direct or cause the direction of the
management and policies of such first Person whether by contract or
otherwise;
"Aggregate Commitment" shall mean, during any period set
forth below, the amount set forth opposite such period:
Period Amount
------ ------
Prior to 09/01/98 $20,000,000
09/01/98 - 09/30/98 23,000,000
10/01/98 - 11/15/98 29,000,000
11/16/98 - 11/22/98 25,000,000
11/23/98 - 11/29/98 22,000,000
minus the amount of any reductions of the Aggregate Commitment made
after March 1, 1998 made pursuant to the terms hereof;
"Aggregate Outstanding Extensions of Credit" shall mean, as
to any Bank at any time, an amount equal to the sum of (a) the
aggregate principal amount of all
<PAGE>
Loans made by such Bank then outstanding and (b) such Bank's Commitment
Percentage of the L/C Obligations then outstanding;
"Agreement" shall mean this Credit Agreement, as the same may
be amended, supplemented or otherwise modified from time to time;
"Alternate Base Rate" for any day, shall mean a rate per
annum (rounded upwards, if necessary, to the next 1/16 of 1%) equal to
the greatest of (a) the Prime Rate in effect on such day, (b) the Base
CD Rate in effect on such day plus 1% and (c) the Federal Funds
Effective Rate in effect on such day plus 1/2 of 1%. If for any reason
the Administrative Agent shall have determined (which determination
shall be conclusive absent manifest error) that it is unable to
ascertain the Base CD Rate or the Federal Funds Effective Rate, or
both, for any reason, including the inability or failure of the
Administrative Agent to obtain sufficient quotations in accordance
with the terms thereof, the Alternate Base Rate shall be determined
without regard to clause (b) or (c), or both, of the first sentence of
this definition, as appropriate, until the circumstances giving rise
to such inability no longer exist;
"Alternate Base Rate Loans" shall mean Loans hereunder at
such time as such Loans are made and/or being maintained at a rate of
interest based upon the Alternate Base Rate;
"Applicable Margin" shall mean (a) 2% per annum with respect
to Eurodollar Rate Loans and (b) 1% per annum with respect to
Alternate Base Rate Loans;
"Application" shall mean an application, in such form as the
Issuer may specify from time to time, requesting the Issuer to open a
Letter of Credit;
"Available Commitment" at any date, shall mean the amount
equal to the difference between (a) the Aggregate Commitment at such
date and (b) the Aggregate Outstanding Extensions of Credit at such
date;
"Bankruptcy Code" shall mean Title 11, United States Code, as
amended from time to time;
"Banks" shall have the meaning assigned to such term in the
preamble hereto;
"Base CD Rate" shall mean the sum of (a) the product of (i)
the Three-Month Secondary CD Rate and (ii) a fraction, the numerator
of which is one and the denominator of which is one minus the C/D
Reserve Percentage and (b) the C/D Assessment Rate;
"benefitted Bank" shall have the meaning assigned to such
term in subsection 10.7;
"Borrowing Base" shall mean, as of any date, an amount equal
to (a) the sum (without duplication) of:
(i) 85% of the amount equal to (A) Eligible Accounts of
the Included Divisions as of such date minus (B) the
sum of the Dilution Reserve and
<PAGE>
the Seasonal Reserve applicable to each of the
Included Divisions at such date;
(ii) 50% of the Eligible Landed Inventory of the Included
Divisions at such date; and
(iii) 25% of Eligible In-transit Inventory of the Included
Divisions at such date;
minus (b) the Warehouse Fee Reserve at such date. The Borrowing Base
at any time in effect shall be determined by reference to the
Borrowing Base Certificate most recently delivered hereunder and
computed in accordance with the provisions of subsection 6.2(f);
provided that the information contained in the Borrowing Base
Certificate provided pursuant thereto shall not be conclusive in
calculating the amount of Eligible Accounts and Eligible Inventory and
the Agent shall be entitled to (x) adjust the amounts and other
information contained therein to the extent that it believes in its
reasonable credit judgment that such adjustment is appropriate to
reflect the then current amounts of Eligible Accounts and Eligible
Inventory or changes in the business practices of Toy Biz and its
Subsidiaries (or newly disclosed matters with respect to them and (y)
require that Toy Biz and its Subsidiaries maintain additional reserves
(for purposes of the computation of the Borrowing Base) in respect of
Eligible Accounts and Eligible Inventory, or otherwise to make
adjustments to its parameters for including Accounts and Inventory in
the Borrowing Base, to the extent that it believes that such
additional reserves and adjustments are appropriate based upon the
results of any evaluation or appraisal conducted pursuant to
subsection 6.6(b);
"Borrowing Base Certificate": a certificate, substantially in
the form of Exhibit H hereto;
"Business Day" shall mean a 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;
"Cash Equivalents" shall mean (a) securities with maturities
of one year or less from the date of acquisition issued or fully
guaranteed or insured by the United States Government or any agency
thereof, (b) certificates of deposit and eurodollar time deposits with
maturities of one year or less from the date of acquisition and
overnight bank deposits of any Bank or of any commercial bank having
capital and surplus in excess of $500,000,000, (c) repurchase
obligations of any Bank or of any commercial bank satisfying the
requirements of clause (b) of this definition or of Goldman, Sachs &
Co., Merrill Lynch, Pierce, Fenner & Smith Incorporated, Smith Barney,
Inc. or Salomon Brothers Inc, having a term of not more than 30 days
with respect to securities issued or fully guaranteed or insured by
the United States Government, (d) commercial paper of a domestic
issuer rated at least A-2 by Standard & Poor's Corporation ("S&P") or
P-2 by Moody's Investors Service, Inc, ("Moody's"), (e) securities
with maturities of one year or less from the date of acquisition
issued or fully guaranteed by any state, commonwealth or territory of
the United States or by any political subdivision or taxing authority
of any such state, commonwealth or territory or by any foreign
government, the securities of which state, commonwealth, territory,
political subdivision, taxing authority or foreign government (as the
case may be) are rated at least A by S&P or A by Moody's, (f)
securities with maturities of
<PAGE>
one year or less from the date of acquisition backed by standby
letters of credit issued by any Bank or any commercial bank
satisfying the requirements of clause (b) of this definition or (g)
shares of money market mutual or similar funds offered by the Persons
referred to in clause (c) above and Dreyfus Institutional Services
Corp.;
"C/D Assessment Rate" shall mean, for any day, the net annual
assessment rate in effect two Business Days prior to such day which is
payable by a member of the Bank Insurance Fund classified as well
capitalized and within supervisory subgroup "B" (or a comparable
successor assessment risk classification) within the meaning of 12
C.F.R. ? 327.3(d) (or any successor provision) to the Federal Deposit
Insurance Corporation (or any successor) for such Corporation's (or
such successor's) insuring time deposits at offices of such
institution in the United States;
"C/D Reserve Percentage" shall mean, 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 one billion Dollars in respect of new non-personal
time deposits in Dollars in New York City having a maturity of three
months and in an amount of $100,000 or more;
"Character" shall mean any character appearing in any product
of Toy Biz or its Subsidiaries;
"Closing Date" shall have the meaning assigned to such term
in subsection 5.1;
"Code" shall mean the Internal Revenue Code of 1986, as
amended from time to time;
"Collateral" shall mean, collectively, the Collateral (as
defined in each of the Security Documents);
"Colorforms Note" shall mean the promissory note, dated
January 30, 1998, owing from University Games Corporation to Toy Biz
in the aggregate face amount of $1,350,000;
"Commercial Letter of Credit" shall have the meaning assigned
to it in subsection 2A.1(b);
"Commitment" of any Bank at any date shall mean the
obligation of such Bank at such date to make Loans to and/or issue or
participate in Letters of Credit on behalf of Toy Biz, in an aggregate
principal and/or face amount at any one time outstanding not to exceed
the amount set forth opposite such Bank's name under the caption
"Commitment" on Schedule II, as such amount shall be increased and may
be reduced from time to time in accordance with the provisions hereof;
collectively, as to all Banks, the "Commitments";
"Commitment Percentage" for any Bank at any time shall mean
the percentage of the Aggregate Commitment then constituted by such
Bank's Commitment;
"Commitment Transfer Supplement" shall have the meaning
assigned to such term in subsection 10.6(c);
<PAGE>
"Commonly Controlled Entity" shall mean an entity, whether or
not incorporated, which is under common control with Toy Biz within
the meaning of Section 4001 of ERISA or is part of a group which
includes Toy Biz and which is treated as a single employer under
Section 414 of the Code;
"Consolidated Lease Expense" for any period, shall mean the
aggregate rental obligations of Toy Biz and its Subsidiaries
determined on a consolidated basis which are payable in respect of
such period under leases of real and/or personal property (net of
income from sub-leases thereof, but including taxes, insurance,
maintenance and similar expenses which the lessee is obligated to pay
under the terms of such leases), whether or not such obligations are
reflected as liabilities or commitments on a consolidated balance
sheet of Toy Biz and its consolidated Subsidiaries or in the notes
thereto, excluding, however, obligations under leases with respect to
which the obligations of Toy Biz and its Subsidiaries are required in
accordance with GAAP to be capitalized on a balance sheet of Toy Biz
and its Subsidiaries;
"Consolidated Net Income" for any period, shall mean the net
income (or net loss) of Toy Biz and its Subsidiaries determined on a
consolidated basis in accordance with GAAP;
"Contingent Obligation" as to any Person shall mean any
obligation of such Person guaranteeing or in effect guaranteeing any
Indebtedness, leases, dividends, letters of credit or other
obligations ("primary obligations") of any other Person (the "primary
obligor") in any manner, whether directly or indirectly, including,
without limitation, any "keep-well" or "make-well" agreement,
guarantee of return on equity or other obligation of such Person,
whether or not contingent, (a) to purchase any such primary obligation
or any property constituting direct or indirect security therefor, (b)
to advance or supply funds (i) for the purchase or payment of any such
primary obligation or (ii) to maintain working capital or equity
capital of the primary obligor or otherwise to maintain the net worth
or solvency of the primary obligor, (c) to purchase property,
securities or services primarily for the purpose of assuring the
obligee under any such primary obligation of the ability of the
primary obligor to make payment of such primary obligation or (d)
otherwise to assure or hold harmless the obligee under such primary
obligation against loss in respect thereof;
"Contractual Obligation" of any Person shall mean any
provision of any material debt security or of any material preferred
stock or other equity interest issued by such Person or of any
material indenture, mortgage, agreement, instrument or undertaking to
which such Person is a party or by which it or any of its material
property is bound;
"Copyright" shall have the meaning ascribed thereto in the
Toy Biz Security Agreement;
"Credit Documents" shall mean this Agreement, the Notes, the
Applications, the Guarantees and the Security Documents; each, a
"Credit Document";
"Cross Default" of any Person shall mean (a) default in the
payment of any amount when due (whether at maturity or by
acceleration) on any of its Indebtedness (other than any such default
in respect of the Loans or the Notes) or in the payment of any matured
Contingent Obligation in respect of any Indebtedness of any other
Person (except for any such payments on account of any such
Indebtedness and
<PAGE>
Contingent Obligations in an aggregate principal amount at any one
time outstanding of up to $1,000,000) or (b) default in the
observance or performance of any other agreement or condition
relating to any such Indebtedness or Contingent Obligation (except
for any such Indebtedness and Contingent Obligations in an aggregate
principal amount at any one time outstanding of up to $1,000,000) or
contained in any instrument or agreement evidencing, securing or
relating thereto, or any other event shall occur or condition exist,
the effect of which default or other event or condition is to cause,
or to permit the holder or holders of such Indebtedness or
beneficiary or beneficiaries of such Contingent Obligation (or a
trustee or agent on behalf of such holder or holders or beneficiary
or beneficiaries) to cause, with the giving of notice if required,
such Indebtedness to become due or to be required to be redeemed or
repurchased prior to its stated maturity or such Contingent
Obligation to become payable;
"Current Ratio" shall mean (a) the sum of cash, Cash
Equivalents, net accounts receivable, net inventory and prepaid
expenses of Toy Biz and its Subsidiaries divided by (b) the sum of
accounts payable, accrued expenses, Indebtedness (excluding trade
letters of credit and non-current Indebtedness) and current income
taxes payable of Toy Biz and its Subsidiaries;
"Default" shall mean any of the events specified in Section
8, whether or not any requirement for the giving of notice, the lapse
of time, or both, or any other condition, has been satisfied;
"Dilution Factors" shall mean, with respect to the Accounts
owing to the Included Divisions at any date by Account Debtors, the
aggregate Dollar amount of any deductions made by the relevant
Included Division to the gross amount of Accounts of such Account
Debtor, including, without limitation, the amount of (a) any credit
memos, adjustments, returns and allowances affecting such Accounts,
(b) bad debt write-offs with respect to such Accounts and (c) other
non-cash credits offsetting such Accounts;
"Dilution Ratio" shall mean, at any date for an Included
Division, the amount (expressed as a percentage) equal to (a) the
aggregate amount of the Dilution Factors for the 12 consecutive fiscal
months of Toy Biz most recently ended divided by (b) total gross sales
of the relevant Included Division for such 12-month period;
"Dilution Reserve" shall mean, as of any date for an Included
Division, (a) the Dilution Ratio for such Included Division for the
period of 12 consecutive fiscal months ended most recently prior to
the date of calculation of the Borrowing Base then in effect (which
such date shall be set forth on the applicable Borrowing Base
Certificate) multiplied by (b) the Eligible Accounts of such Included
Division on such date;
"Dollars" and "$" shall mean dollars in lawful currency of
the United States of America;
"EBITDA" for any period, shall mean Consolidated Net Income
for such period, plus, without duplication and to the extent deducted
from revenues in determining Consolidated Net Income for such period,
(a) the aggregate amount of interest expense for such period, (b) the
aggregate amount of letter of credit fees paid during such period, (c)
the aggregate amount of income tax expense for such period,
<PAGE>
(d) all amounts attributable to depreciation and amortization for
such period and (e) all non-cash non-recurring charges during such
period, and minus, without duplication and to the extent added to
revenues in determining Net Income for such period, (i) interest
income for such period, and (ii) all non-cash non-recurring gains
during such period, in each case determined in accordance with GAAP;
"Eligible Accounts": with respect to the Included Divisions
at any date, the amount equal to the aggregate gross amount of
accounts receivable ("Accounts") reflected on the receivable aging
detail or other analogous statement of the Included Divisions on such
date that (x) have been invoiced and represent the bona fide sale and
delivery of merchandise, in each case in the ordinary course of
business of the Included Divisions in connection with its trade
operations and (y) are deemed by the Agent in good faith to be
eligible for inclusion in the calculation of the Borrowing Base.
Unless otherwise approved from time to time in writing by the Agent,
no Account shall be an Eligible Account if:
(a) (i) Toy Biz or the relevant Included Division
shall not be sole payee with respect to, or otherwise shall
not have sole lawful and absolute title to, such Account or
(ii) the sale to the Account Debtor giving rise to such
Account is on a bill-and-hold, guaranteed sale,
sale-and-return, ship-and-return, sale on approval or
consignment or other similar basis or made pursuant to any
other written agreement providing for repurchase or return of
any merchandise which has been claimed to be defective or
otherwise unsatisfactory (other than consumer returns in the
ordinary course of business) or (iii) the goods giving rise
to such Account have not been shipped and delivered to and
accepted by the Account Debtor, or the transaction giving
rise to such Account otherwise does not represent a completed
sale; or
(b) such Account arises out of a sale made by Toy
Biz or any Subsidiary thereof to a Subsidiary or an
Affiliate; or
(c) (i) such Account (other than any Account owing
from Toys 'r Us which has November 10th dating) is unpaid
more than 60 days from the original due date thereof or is
unpaid for more than 120 days from the original invoice date
thereof or (ii) in the case of any Account owing from Toys 'r
Us which has November 10th dating, such Account is unpaid
more than 15 days from the original due date thereof or (iii)
such Account has been written off the books of such person or
has been otherwise designated as uncollectible or (iv) more
than 50% in face amount of all Accounts of the same Account
Debtor and its known affiliates, taken together, are
ineligible pursuant to clauses (i), (ii) and (iii) above or
(v) a check, promissory note, draft, trade acceptance or
other instrument for the payment of money with respect to all
or any part of such Account has been received, presented for
payment and returned uncollected for any reason or (vi)
except to the extent that such Account arises post-petition
and the relevant Account Debtor has obtained
debtor-in-possession credit facilities which are in form and
substance acceptable to the Agent, the Account Debtor with
respect to such Account is insolvent or the subject of any
bankruptcy, insolvency or material adverse legal proceeding
of any kind; or
(d) the Account is not payable in Dollars or the
Account Debtor is not incorporated under the laws of the
United States of America or any State
<PAGE>
thereof or the Account Debtor is located outside (or has its
principal place of business or substantially all of its
assets outside) the continental United States; or
(e) the Account Debtor with respect to such Account
(i) is a creditor of Toy Biz, (ii) has or has asserted a
right of setoff against Toy Biz, (iii) has disputed its
liability (whether by chargeback or otherwise) or made any
claim with respect to the Account which has not been resolved
or (iv) the Account is subject to any adverse security
deposit, progress payment or other similar advance made by or
for the benefit of the Account Debtor, in each case, without
duplication, to the extent of the amount owed by Toy Biz to
the Account Debtor, the amount of such actual or asserted
right of setoff, the amount of such dispute or claim, the
amount of such adverse security deposit, progress payment or
other similar advance or the amount owed to such taxing
authority, as the case may be; or
(f) the Account is a chargeback; provided that, to
the extent that such chargeback is less than 120 days old,
only 50% of such Account shall be deemed to be ineligible;
(g) the Account does not comply in all material
respects with all requirements of applicable law, including
without limitation the Federal Consumer Credit Protection
Act, the Federal Truth in Lending Act and Regulation Z of the
Board of Governors of the Federal Reserve System; or
(h) (i) such Account is not subject to a valid and
perfected first priority Lien in favor of the Agent (for the
benefit of the Banks), subject to no other Liens or (ii) such
Account does not otherwise conform in all material respects
to the representations and warranties contained in the Credit
Documents; or
(i) the Account Debtor with respect to such Account
is the United States of America or any department, agency or
instrumentality thereof, unless Toy Biz duly assigns its
rights to payment of such Account to the Agent pursuant to
the Assignment of Claims Act of 1940, as amended, which
assignment and related documents and filings shall be in form
and substance reasonably satisfactory to the Agent.
In determining the aggregate amount of Accounts from the same Account
Debtor that are unpaid more than 90 days from the original date of
invoice or more than 60 days from the original due date (or, in the
case of Accounts owing from Toys 'r Us with November 10th dating, more
than 15 days after the original due date) pursuant to clause (c)
above, there shall be excluded the amount of any net credit balances
relating to Accounts owing from such Account Debtor with invoice dates
more than 60 days from the original due date or 90 days from the
original date of invoice (or, in the case of Accounts owing from Toys
'r Us with November 10th dating, more than 15 days after the original
due date);
"Eligible Assignee" shall mean (a) a commercial bank
organized under the laws of the United States, or any State thereof,
having total assets in excess of $1,000,000,000; (b) a commercial bank
organized under the laws of any other country having total assets in
excess of $1,000,000,000; and (c) a finance company, insurance
<PAGE>
company or other financial institution or fund which is engaged in
making, purchasing or otherwise investing in commercial loans for its
own account in the ordinary course of its business and which has
total assets in excess of $150,000,000;
"Eligible In-Transit Inventory" shall mean, at any date with
respect to the Included Divisions, all finished goods which are
In-Transit, net of any Inventory Reserves and subject to the same
eligibility criteria as are set forth in the definition of the term
"Eligible Landed Inventory" contained in this subsection 1.1.
"Eligible Landed Inventory": shall mean, with respect to the
Included Divisions at any date, the amount equal to the value
(determined in accordance with the Inventory Valuation Standard and
expressed in Dollars) of all inventory located within the continental
United States of the Included Divisions (the "Inventory"), net of any
Inventory Reserves. Unless otherwise approved from time to time in
writing by the Agent, no Inventory shall be "Eligible Landed
Inventory" if:
(a) such item of Inventory is comprised of (i)
componentry or raw materials or (ii) packing, packaging
and/or shipping supplies or materials; or
(b) such item of Inventory is held on consignment,
is owned by Toy Biz or any of its Subsidiaries and has been
consigned to other Persons, or is located at, or in the
possession of, a vendor of Toy Biz or such Subsidiary; or
(c) such item of Inventory is located on a leasehold
(including, without limitation, a leased department of a
retail store), except to the extent that such Inventory is
segregated or otherwise separately identifiable from goods of
all others, if any, stored on the premises and the lessor has
entered into a landlord's waiver and consent (in form and
substance reasonably satisfactory to the Agent) providing to
the Agent (i) a waiver of any applicable warehouseman's (or
analogous) Lien (whether arising by contract or otherwise),
(ii) the right to receive notice of default, (iii) the right
to repossess such item of Inventory (without the making of
any payment to such landlord) at any time upon the occurrence
or during the continuance of a Default or Event of Default
and (iv) such other rights as may be reasonably acceptable to
the Agent; or
(d) such item of Inventory has been returned or
rejected by a customer or is in transit to a third party
(other than to a warehouse site described in clause (c)
above); or
(e) such item of Inventory (i) is damaged or not in
good condition (to the extent not provided for by Inventory
Reserves as described above), (ii) is a sample used for
marketing purposes, or (iii) does not meet all material
standards imposed by any Governmental Authority having
regulatory authority over such item of Inventory, its use or
its sale or (iv) shall be a discontinued item or otherwise be
believed by the Agent (using its commercially reasonable
judgment, after consultation with Toy Biz) to be not readily
usable or salable under the customary terms upon which it
usually is sold (with it being presumed that any Inventory
which is more than 12 months old is not readily usable or
salable under such customary terms); or
<PAGE>
(f) Toy Biz shall not have good, marketable and
unencumbered title as sole owner of such item of Inventory or
any claim disputing the title of Toy Biz to, or right to
possession of or dominion over, such item of Inventory shall
have been asserted; or
(g) any representation or warranty contained in this
Agreement or in any other Credit Document applicable to
either Inventory in general or to any such specific item of
Inventory has been breached in any material respect with
respect to such item of Inventory; or
(h) such item of Inventory is evidenced by an
Account; or
(i) such item of Inventory is subject to any
licensing, patent, royalty, trademark, trade name or
copyright agreements with any third party from whom Toy Biz
or any of its Subsidiaries has received notice of a dispute
in respect of any such agreement to the extent that such
dispute could reasonably be expected to prevent the sale of
such item of Inventory; or
(j) such item of Inventory is not assignable or a
first priority, perfected security interest in such item of
Inventory has not been obtained by the Agent pursuant to the
Security Agreements; or
(k) such item of Inventory is subject to any Lien
whatsoever, other than Liens which are permitted to encumber
Inventory pursuant to the Loan Documents;
"Environmental Laws" shall mean any and all Federal,
national, state, provincial, local or municipal laws, rules, orders,
regulations, statutes, ordinances, codes, decrees or requirements of
any Governmental Authority within or outside of the United States
regulating, relating to or imposing liability or standards of conduct
concerning any Hazardous Materials or environmental protection, as now
or may at any time hereafter be in effect, including, without
limitation, the Clean Water Act, also known as the Federal Water
Pollution Control Act ("FWPCA"), 33 U.S.C. ? 1251 et seq., the Federal
Insecticide, Fungicide and Rodenticide Act ("FIFRA"), 7 U.S.C. ? 136
et seq., the Surface Mining Control and Reclamation Act ("SMCRA"), 30
U.S.C. ? 1201 et seq., the Comprehensive Environmental Response,
Compensation and Liability Act ("CERCLA"), 42 U.S.C. ? 9601 et seq.
(as amended by the Superfund Amendment and Reauthorization Act of 1986
("SARA"), Public Law 99-499, 100 Stat. 1613), the Emergency Planning
and Community Right to Know Act ("EPCRKA"), 42 U.S.C. ? 1101 et seq.,
the Resource Conservation and Recovery Act ("RCRA"), 42 U.S.C. ? 6901
et seq., the Safe Drinking Water Act ("SDWA"), 42 U.S.C. ? 300F et
seq., the Toxic Substances Control Act ("TSCA"), 15 U.S.C. ? 2601 et
seq., together, in each case, with each amendment thereto, and the
regulations adopted and publications promulgated thereunder and all
substitutions therefor;
"ERISA" shall mean the Employee Retirement Income Security
Act of 1974, as amended from time to time;
"Eurocurrency Reserve Requirements" with respect to any
Interest Period for any Eurodollar Loan shall mean the aggregate of
the rates (expressed as a decimal) of reserve requirements current on
the date two Working Days prior to the beginning of such Interest
Period (including, without limitation, basic, supplemental, marginal
and
<PAGE>
emergency reserves under any regulations of the Board of Governors of
the Federal Reserve System or other governmental authority having
jurisdiction with respect thereto), as now and from time to time
hereafter in effect, dealing with reserve requirements prescribed for
eurocurrency funding (currently referred to as "Eurocurrency
liabilities" in Regulation D of such Board) required to be maintained
by a member bank of such System;
"Eurodollar Base Rate" with respect to each Eurodollar Loan
of each Bank for each Interest Period shall mean the rate per annum
equal to the rate at which the Administrative Agent is offered Dollar
deposits two Working Days prior to the beginning of such Interest
Period in the interbank eurodollar market where the foreign currency
and exchange operations or eurodollar funding operations of the
Administrative Agent are customarily conducted at or about 11:00 A.M.
(London time) for delivery on the first day of such Interest Period
for the number of days contained therein and in an amount equal to a
representative amount of such deposits;
"Eurodollar Loan" shall mean each Loan hereunder at such time
as it is made and/or being maintained at a rate of interest based upon
the Eurodollar Rate;
"Eurodollar Rate" with respect to each Eurodollar Loan for
each Interest Period shall mean the rate per annum (rounded upwards to
the nearest whole multiple of 1/100th of one percent) equal to the
following:
Eurodollar Base Rate
1.00 - Eurocurrency Reserve Requirements
"Event of Default" shall mean any of the events specified in
Section 8, provided that any requirement for the giving of notice, the
lapse of time, or both, or any other condition, has been satisfied;
"Exchange Act" shall mean the Securities Exchange Act of
1934, as amended;
"Existing Credit Agreement" shall mean the Credit Agreement,
dated as of April 30, 1993 (as amended, supplemented or otherwise
modified from time to time), among Toy Biz, certain lenders parties
thereto and Chemical Bank, as Administrative Agent;
"Federal Funds Effective Rate" for any day, shall mean the
weighted average of the rates on overnight federal funds transactions
with members of the Federal Reserve System arranged by federal funds
brokers, as published on the next succeeding Business Day by the
Federal Reserve Bank of New York, or, if such rate is not so published
for any day which is a Business Day, the average of the quotations for
the day of such transactions received by the Administrative Agent from
three federal funds brokers of recognized standing selected by it;
"Financing Lease" shall mean any lease of property, real or
personal, the obligations of the lessee in respect of which are
required in accordance with GAAP to be capitalized on a balance sheet
of a lessee;
"Formation and Contribution Agreement" shall mean the
Formation and Contribution Agreement, dated as of March 19, 1993,
among Old Toy Biz, Isaac
<PAGE>
Perlmutter, Isaac Perlmutter T.A., a Florida trust, Marvel, Avi Arad
and Toy Biz (as the same may be amended, supplemented or otherwise
modified from time to time);
"Fully Satisfied" shall mean, with respect to the Payment
Obligations as of any date, that, on or before such date, (a) the
principal of and interest accrued to such date on such Payment
Obligations (other than the Undrawn L/C Obligations) shall have been
paid in full in cash, (b) all fees, expenses and other amounts then
due and payable which constitute Payment Obligations (other than the
Undrawn L/C Obligations) shall have been paid in full in cash, (c) the
Commitments shall have expired or irrevocably been terminated, and (d)
the Undrawn L/C Obligations shall have been Fully Secured.
"Fully Secured" shall mean, with respect to any Undrawn L/C
Obligations as of any date, that, on or before such date, such Undrawn
L/C Obligations shall have been secured by the grant to the relevant
Issuer by Toy Biz of a first priority, perfected security interest in,
and Lien on, (a) cash in an amount at least equal to the excess of the
amount of such Undrawn L/C Obligations over the amount of the
Aggregate Commitment on such date or (b) other collateral security
which is acceptable to such Issuer and the Majority Banks;
"GAAP" shall mean generally accepted accounting principles in
the United States of America as in effect as of the date of, and used
in, the preparation of the audited consolidated financial statements
referred to in subsection 4.9, except that, with respect to the
presentation of financial statements required to be furnished
hereunder, GAAP shall mean generally accepted accounting principles in
the United States of America as in effect from time to time;
"Governmental Authority" shall mean any nation or government,
any state or other political subdivision thereof and any entity
exercising executive, legislative, judicial, regulatory or
administrative functions of or pertaining to government (including,
without limitation, any governmental department, commission, board,
bureau, agency or instrumentality, or other court or arbitrator, in
each case whether of the United States or foreign) and the National
Association of Insurance Commissioners;
"Guarantees" shall mean the collective reference to the
guarantees hereinafter delivered to the Administrative Agent
guaranteeing the obligations of Toy Biz to the Banks hereunder;
"Hazardous Materials" shall mean any hazardous materials,
hazardous wastes, hazardous or toxic substances, defined or regulated
as such in or under any Environmental Law, including without
limitation asbestos, Petroleum Products and material exhibiting the
characteristics of ignitability, corrosivity, reactivity or extraction
procedure toxicity, as such terms are defined in connection with
hazardous materials or hazardous wastes or hazardous or toxic
substances in any Environmental Law;
"Included Divisions" shall mean the Toy Biz and Spectra
divisions of Toy Biz and its domestic Subsidiaries (it being
understood that assets attributable to the Colorforms division of Toy
Biz shall be deemed not to constitute assets of an Included Division);
<PAGE>
"Incremental Liability" shall have the meaning assigned to
such term in subsection 7.9(f);
"Indebtedness" of a Person shall mean (a) indebtedness of
such Person for borrowed money whether short-term or long-term and
whether secured or unsecured, (b) indebtedness of such Person for the
deferred purchase price of services or property, which purchase price
(i) is due twelve months or more from the date of incurrence of the
obligation in respect thereof or (ii) customarily or actually is
evidenced by a note or other written instrument (including, without
limitation, any such indebtedness which is non-recourse to the credit
of such Person but is secured by assets of such Person), (c)
obligations of such Person under Capital Leases, (d) obligations of
such Person arising under acceptance facilities, (e) the undrawn face
amount of, and unpaid reimbursement obligations in respect of, all
letters of credit (including, without limitation, the Letters of
Credit) issued for the account of such Person, (f) all obligations of
such Person evidenced by bonds, debentures, notes or other similar
instruments, (g) all obligations of such Person upon which interest
charges are customarily paid, (h) all obligations of such Person under
conditional sale or other title retention agreements relating to
property purchased by such Person (even though the rights and remedies
of the seller or lender under such agreement in the event of default
are limited to repossession or sale of such property), (i) obligations
of such Person to purchase, redeem, retire, defease or otherwise
acquire for value any capital stock of such Person or any warrants,
rights or options to acquire such capital stock (with redeemable
preferred stock being valued at the greater of its voluntary or
involuntary liquidation preference plus accrued and unpaid dividends),
(j) all executory obligations of such Person in respect of interest
rate agreements and foreign exchange and other financial hedge
contracts (including, without limitation, equity hedge contracts), (k)
the face amount of all bankers' acceptances created for the account of
such Person, (l) all Indebtedness of the types referred to in clauses
(a) through (k) above for which such Person is obligated under a
Contingent Obligation and (m) renewals, extensions, refundings,
deferrals, restructurings, amendments and modifications of any such
indebtedness, obligation or guarantee;
"Indemnified Liabilities" shall have the meaning assigned to
such term in subsection 10.5;
"Insolvency" shall mean with respect to any Multiemployer
Plan, the condition that such Plan is insolvent within the meaning of
such term as used in Section 4245 of ERISA;
"Insolvent" shall pertain to a condition of Insolvency;
"In-Transit" shall mean, with respect to Inventory, that such
Inventory is in-transit from the contract manufacturer with respect
thereto to a distribution warehouse;
"Intellectual Property" shall have the meaning assigned to
such term in subsection 4.15;
"Interest Payment Date" shall mean (a) as to any Alternate
Base Rate Loan, the last day of each March, June, September and
December, commencing on the first of such days to occur after such
Alternate Base Rate Loan is made or Eurodollar Loans
<PAGE>
are converted to Alternate Base Rate Loans and on each date principal
is due, (b) as to any Eurodollar Loan, the last day of the Interest
Period with respect thereto and (c) in any event, the Termination
Date;
"Interest Period" shall mean, (a) initially, with respect to
any Eurodollar Loan, the period commencing on the borrowing date or
the initial date of conversion with respect to such Eurodollar Loan
and ending one, two or three months thereafter as selected by Toy Biz
in a notice of borrowing or conversion, as the case may be, as
provided herein and (b) thereafter, each period commencing on the last
day of the immediately preceding Interest Period applicable to such
Eurodollar Loan and ending one, two or three months thereafter, in any
such case as selected by Toy Biz in accordance with the provisions of
subsection 3.5; provided that all of the foregoing provisions relating
to Interest Periods are subject to the following:
(x) if any Interest Period relating to a Eurodollar
Loan would otherwise end on a day which is not a Working Day,
such Interest Period shall be extended to the next succeeding
Working Day, unless the result of such extension would be to
carry such Interest Period into another calendar month, in
which event such Interest Period shall end on the immediately
preceding Working Day;
(y) Toy Biz shall not select an Interest Period
relating to any Eurodollar Loan which extends beyond the
Termination Date and any Interest Period relating to any
Eurodollar Loan that would otherwise extend beyond the
Termination Date shall end on such date; and
(z) if any Interest Period relating to a Eurodollar
Loan begins on the last Working Day of a calendar month (or
on a day for which there is no numerically corresponding day
in the calendar month at the end of such Interest Period),
such Interest Period shall end on the last Working Day of a
calendar month;
"International Pledge Agreement" shall mean a pledge
agreement, in form and substance reasonably satisfactory to the
Administrative Agent, executed and delivered by Toy Biz and pledging
65% of the capital stock of Toy Biz International in favor of the
Administrative Agent;
"Inventory": as defined in "Eligible Landed Inventory";
"Inventory Reserves": the amount equal to the sum of (a) the
amount by which the value of the perpetual Inventory on such date
exceeds the value of the Inventory on the general ledger on such date,
(b) any profits or transfer price additions accrued in connection with
transfers of such Inventory between Toy Biz and its Subsidiaries or
among Subsidiaries of Toy Biz, (c) the amount of any reserve
maintained by Toy Biz and its Subsidiaries (consistent with their
respective historical practices) for inactive, excess and obsolete
inventory, shrinkage, and markdowns and (d) the amount of any accrued
and unpaid costs and expenses (such as freight, duty and insurance)
required to be paid by Toy Biz and its domestic Subsidiaries in order
to take possession at a facility of Toy Biz or any of its domestic
Subsidiaries of any Inventory which is In-Transit and which is
included in the Borrowing Base;
<PAGE>
"Inventory Valuation Standard" shall mean at the time of any
determination thereof, the lower of:
(a) cost (less any appropriate revaluation reserves or reserve
for obsolete Inventory and any profits accrued in
connection with transfers of Inventory between Toy Biz
and its Subsidiaries or between any such Subsidiaries),
determined in accordance with the standard cost method of
accounting, adjusted to (i) deduct favorable variances
from the value of Eligible Landed Inventory, in the event
variances under the standard cost method are capitalized
and (ii) cause the standard cost of Eligible Landed
Inventory to approximate actual cost, in the event that
variances under the standard cost method are expensed;
and
(b) the fair market value of the Eligible Landed
Inventory at such time (expressed in Dollars);
"IPO" shall mean the initial public offering of common stock
of Toy Biz contemplated by the Registration Statement on Form S-1
filed with the Securities and Exchange Commission on December 12,
1994;
"Issuer" shall mean The Chase Manhattan Bank, in its capacity
as issuer of any Letter of Credit;
"L/C Commitment" shall be $2,000,000;
"L/C Fee Payment Date" shall be the last day of each March,
June, September and December;
"L/C Obligations" shall mean, at any time, the collective
reference to (o) the aggregate amount of the Undrawn L/C Obligations
then outstanding and (b) the aggregate amount of the then unreimbursed
Reimbursement Obligations;
"L/C Participants" shall mean the collective reference to all
the Banks other than the Issuer;
"Letters of Credit" shall have the meaning assigned to it in
subsection 2A.1(a);
"Lien" shall mean any mortgage, deed of trust, pledge,
hypothecation, assignment, deposit arrangement, encumbrance, lien
(statutory or other) or other security agreement or preferential
arrangement of any kind or nature whatsoever (including, without
limitation, (a) any conditional sale or other title retention
agreement, (b) any financing lease having substantially the same
economic effect as any of the foregoing, (c) the filing of any
financing statement under the Uniform Commercial Code (other than any
such financing statement filed for informational purposes only) or
comparable law of any jurisdiction to evidence any of the foregoing
and (d) in the case of securities, any purchase option, call or
similar right of a third party with respect to such securities (other
than, in the case of securities other than the capital stock of any
Subsidiary of Toy Biz, pursuant to normal settlement terms));
"Loan" and "Loans" shall have the meanings assigned to such
terms in subsection 2.1;
<PAGE>
"Majority Banks" shall mean, at any date, the holders of at
least 66-2/3% of the Aggregate Commitment in effect on such date; or
if the Aggregate Commitment has been terminated or reduced to zero,
the holders of at least 66-2/3% of the aggregate unpaid principal
amount of the Notes on such date;
"Marvel" shall mean Marvel Entertainment Group, Inc., a
Delaware Corporation;
"Master Toy License Agreement" shall mean the License
Agreement, dated April 30, 1993, by and between Toy Biz and Marvel, as
amended on December 1, 1994 and as further amended on February 14,
1995;
"Material Adverse Effect" shall mean a material adverse
effect upon (a) the business, assets, operations, condition (financial
or otherwise) or prospects of Toy Biz and its Subsidiaries taken as a
whole, (b) the ability of Toy Biz and each of its Subsidiaries to
perform its obligations under the Credit Documents or (c) the rights
and remedies available to the Administrative Agent and/or the Banks
under any Credit Document;
"Multiemployer Plan" shall mean a Plan (other than a welfare
plan as defined in Section 3(1) of ERISA) which is a multiemployer
plan as defined in Section 4001(a)(3) of ERISA;
"Net Cash Proceeds" shall mean in connection with any
issuance by Toy Biz or any of its Subsidiaries of any equity
securities, the cash proceeds received from such issuance, net of
investment banking fees, legal fees, accountants' fees, underwriting
discounts and commissions and other customary fees and expenses
actually incurred in connection therewith;
"New Preferred Stock" shall mean the preferred stock of Toy
Biz to be issued in connection with the purchase of certain assets of
Spectra Star, Inc., which preferred stock shall have terms
substantially similar to those set forth in Exhibit A to the First
Amendment and Consent Number 1, dated as of August 29, 1995, to this
Agreement;
"Note" shall have the meaning assigned to such term in
subsection 2.2(c);
"Old Toy Biz" shall mean Toy Biz, Inc., a Delaware
corporation controlled by Isaac Perlmutter;
"Parent" shall have the meaning assigned to such term in
subsection 6.8;
"Participants" shall have the meaning assigned to such term
in subsection 10.6(b);
"Patent" shall have the meaning ascribed thereto in the Toy
Biz Security Agreement;
"Payment Obligations" shall mean (a) all principal, interest,
fees, charges, expenses, attorneys' fees and disbursements,
indemnities and any other amounts payable by any Person under any
Credit Document and (b) any amount in respect of any of the foregoing
that the Administrative Agent or any Bank, in its sole discretion,
<PAGE>
may elect to pay or advance under this Agreement on behalf of such
Person after the occurrence and during the continuance of a Default or
an Event of Default;
"PBGC" shall mean the Pension Benefit Guaranty Corporation
established pursuant to Subtitle A of Title IV of ERISA;
"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;
"Petroleum Products" shall mean gasoline, diesel fuel, motor
oil, waste or used oil, heating oil, kerosene and any other petroleum
products, including crude oil or any fraction thereof;
"Plan" shall mean at any particular time, any employee
benefit plan which is covered by ERISA and in respect of which Toy Biz
or a Commonly Controlled Entity is (or, if such plan was terminated at
such time, would under Section 4069 of ERISA be deemed to be) an
"employer" as defined in Section 3(5) of ERISA;
"Potential Withdrawal Liability" shall have the meaning
assigned to such term in subsection 4.8;
"Prime Rate" shall mean the rate of interest per annum
publicly announced from time to time by the Administrative Agent as
its prime rate in effect at its principal office in New York City
(each change in the Prime Rate to be effective on the date such change
is publicly announced);
"Purchasing Banks" shall have the meaning assigned to such
term in subsection 10.6(c)(ii);
"Register" shall have the meaning assigned to such term in
subsection 10.6(d);
"Reimbursement Obligation" shall mean the obligation of Toy
Biz to reimburse the Issuer pursuant to subsection 2A.5(a) for amounts
drawn under Letters of Credit;
"Reorganization" shall mean with respect to any Multiemployer
Plan, the condition that such Plan is in reorganization within the
meaning of such term as used in Section 4241 of ERISA;
"Reportable Event" shall mean any of the events set forth in
Section 4043(b) of ERISA, other than those events as to which the
30-day notice period is waived under subsections .13, .14, .16, .18,
.19 or .20 of PBGC Reg. ? 2615;
"Requirement of Law" for any Person shall mean the
Certificate of Incorporation and By-Laws or other organizational or
governing documents of such Person, and any law, treaty, rule or
regulation, or determination of an arbitrator or a court or other
Governmental Authority, in each case applicable to or binding upon
such Person or any of its material property or to which such Person or
any of its material property is subject;
<PAGE>
"Responsible Officer" shall mean any officer at the level of
Vice President or higher of Toy Biz, or, with respect to financial
matters, the Chief Financial Officer, Chief Accounting Officer or
Treasurer of Toy Biz;
"Security Documents" shall mean the Toy Biz Security
Agreement, each Subsidiary Security Agreement and all other security
documents hereafter delivered to the Administrative Agent granting a
security interest in any asset or assets of any Person to secure the
Payment Obligations of Toy Biz hereunder and under the Notes, or to
secure any guarantee of any such Payment Obligations;
"Single Employer Plan" shall mean any Plan (other than a
Multiemployer Plan) which is covered by Title IV of ERISA;
"Spectra Division Seasonal Reserve" shall mean, with respect
to any Borrowing Base Certificate due during the period from March 1
through July 31 of each year, the greater of (i) 25% of the prior
month's sales of the Spectra division and (ii) $500,000;
"Standby Letter of Credit" shall have the meaning assigned to
it in subsection 2A.1(b);
"Stockholders' Agreement" shall have the meaning assigned to
such term in subsection 5.1(d).
"Subordinated Debt" shall mean the collective reference to
the Entertainment Note and the Perlmutter Note as each such term is
defined in the Formation and Contribution Agreement;
"Subsidiary" of any Person shall mean a corporation or other
entity of which shares of stock or other ownership interests having
ordinary voting power (other than stock or other ownership interests
having such power only by reason of the happening of a contingency) to
elect a majority of the directors of such corporation, or other
Persons performing similar functions for such entity, are owned,
directly or indirectly, by such Person; unless otherwise qualified,
all references to a "Subsidiary" or to "Subsidiaries" in this
Agreement shall refer to a Subsidiary or Subsidiaries of Toy Biz and
all references to a "wholly owned Subsidiary" or to "wholly pledged
Subsidiaries" in this Agreement shall refer to a Subsidiary or
Subsidiaries of Toy Biz of which Toy Biz directly or indirectly owns
all of the capital stock (other than directors' qualifying shares);
"Subsidiary Guarantee" shall mean the Subsidiary Guarantee
substantially in the form of Exhibit B;
"Subsidiary Security Agreement" shall mean the Subsidiary
Security Agreement substantially in the form of Exhibit E;
"Taxable Bank" shall have the meaning assigned to such term
in subsection 3.10(d);
"Taxes" shall have the meaning assigned to such term in
subsection 3.10(a);
"Termination Date" shall mean the earliest of (a) February
21, 1999, (b) the date upon which Toy Biz or any of its Subsidiaries
is merged or consolidated with or into
<PAGE>
Marvel Entertainment Group, Inc. (or any of its Affiliates or
Subsidiaries) pursuant to the Plan of Reorganization of Marvel
Entertainment Group, Inc. described in the Disclosure Statement
approved by the United States Bankruptcy Court for the District of
Delaware on March 13, 1998, as the same may be amended, supplemented
or otherwise modified from time to time and (c) such earlier date upon
which the Commitments shall terminate in accordance with the terms
hereof;
"Three-Month Secondary CD Rate" shall mean, for any day, the
secondary market rate for three-month certificates of deposit reported
as being in effect on such day (or, if such day shall not be a
Business Day, the next preceding Business Day) by the Board of
Governors of the Federal Reserve System (the "Board") through the
public information telephone line of the Federal Reserve Bank of New
York (which rate will, under the current practices of the Board, be
published in Federal Reserve Statistical Release H.15(519) during the
week following such day), or, if such rate shall not be so reported on
such day or such next preceding Business Day, the average of the
secondary market quotations for three-month certificates of deposit of
major money center banks in New York City received at approximately
10:00 A.M., New York City time, on such day (or, if such day shall not
be a Business Day, on the next preceding Business Day) by the
Administrative Agent from three New York City negotiable certificate
of deposit dealers of recognized standing selected by it;
"Toy Biz" shall have the meaning assigned to such term in the
recitals hereto;
"Toy Biz Division Seasonal Reserve" shall mean, with respect
to any Borrowing Base Certificate due during the period from October 1
through January 31 of each year, the greater of (i) 25% of the prior
month's sales of the Toy Biz division and (ii) $6,000,000;
"Toy Biz Pledge Agreement" shall mean the Toy Biz Pledge
Agreement substantially in the form of Exhibit C;
"Toy Biz International" shall mean Toy Biz International
Ltd., a Hong Kong corporation and a Subsidiary of Toy Biz;
"Toy Biz Security Agreement" shall mean the Toy Biz Security
Agreement, to be executed and delivered by Toy Biz in favor of the
Administrative Agent, substantially in the form of Exhibit D, as the
same may be amended, supplemented or otherwise modified from time to
time;
"Toy Biz Stock Option Plan" shall mean the Toy Biz 1995 Stock
Option Plan;
"Trademark" shall have the meaning ascribed thereto in the
Toy Biz Security Agreement;
"Tranche" shall be the collective reference to Eurodollar
Loans the Interest Periods with respect to all of which begin on the
same date and end on the same later date (whether or not such Loans
shall originally have been made on the same day);
"Transferee" shall have the meaning assigned to such term in
subsection 10.6(f);
<PAGE>
"Undrawn L/C Obligations" shall mean the portion, if any, of
the Payment Obligations constituting the contingent obligation of Toy
Biz to reimburse each Issuer in respect of the then undrawn and
unexpired portions of the Letters of Credit issued by such Issuer
pursuant to subsection 2A.5;
"Unfunded Pension Amount" shall have the meaning assigned to
such term in subsection 4.8;
"Uniform Commercial Code" and "UCC" shall mean the Uniform
Commercial Code as in effect from time to time in the State of New
York;
"Uniform Customs" shall mean the Uniform Customs and Practice
for Documentary Credits (1983 Revision), International Chamber of
Commerce Publication No. 400, as the same may be amended from time to
time;
"Warehouse Fee Reserve" shall mean, at any date, the amount
equal to (a) three months of warehouse fees for Inventory of the
Included Divisions (based on average fees for the immediately
preceding twelve month period) plus (b) at any date occurring during
the period from December 1 through February 28 of each year, $100,000;
"Work" shall mean any work which is or may be subject to
copyright protection pursuant to Title 17 of the United States Code;
and
"Working Day" shall mean any Business Day other than a
Business Day on which commercial banks in London, England are
authorized or required by law to close.
. (a) All terms defined in this Agreement shall have the defined meanings when
used in the Notes, the Security Documents, any other Credit Document or any
certificate or other document made or delivered pursuant hereto or thereto
unless otherwise defined therein.
(b) As used herein, in the Notes, in the Security Documents,
in the other Credit Documents and in any certificate or other document made or
delivered pursuant hereto or thereto, accounting terms not defined in
subsection 1.1, and accounting terms partly defined in subsection 1.1 to the
extent not defined, shall have the respective meanings given to them under
GAAP. To the extent that the definitions of accounting terms herein are
inconsistent with the meanings of such terms under GAAP, the definitions
contained herein shall control.
(c) The words "hereof", "herein" and "hereunder" and words of
similar import when used in this Agreement, the Notes, any Security Documents
or any other Credit Document shall refer to this Agreement, such Note, such
Security Document or such other Credit Document, as the case may be, as a whole
and not to any particular provision of this Agreement, such Note, such Security
Document or such other Credit Document, as the case may be; and Section,
subsection, Schedule and Exhibit references contained in this Agreement are
references to Sections, subsections, Schedules and Exhibits in or to this
Agreement, unless otherwise specified.
<PAGE>
SECTION 2. AMOUNTS AND TERMS OF COMMITMENTS
2.1 Commitments. Subject to the terms and conditions of this
Agreement, each Bank severally agrees to make loans in Dollars (individually, a
"Loan"; collectively, the "Loans") to Toy Biz from time to time during the
period from the Closing Date to the Termination Date in an aggregate principal
amount at any one time outstanding which, when added to such Bank's Commitment
Percentage of the then outstanding L/C Obligations, does not exceed the amount
equal to the lesser of (a) the Commitment Percentage of such Bank times the
Aggregate Commitment as of such date, but in no event more than the Commitment
of such Bank and (b) the Commitment Percentage of such Bank times the Borrowing
Base then in effect. During the period commencing on the Closing Date and
ending on the Termination Date, Toy Biz may use the Commitments by borrowing,
repaying the Loans in whole or in part and reborrowing, all in accordance with
the terms and conditions hereof.
2.2 Obligations of Toy Biz. (a) Toy Biz agrees that each Loan
made by each Bank pursuant hereto shall constitute the unconditional promise
and obligation of Toy Biz to pay to the Administrative Agent, for the benefit
of such Bank, at the office of the Administrative Agent, 270 Park Avenue, New
York, New York 10017, in lawful money of the United States of America and in
immediately available funds the aggregate unpaid principal amount of all Loans
made by such Bank pursuant to subsection 2.1, which amounts shall be due and
payable (whether at maturity or by acceleration) as set forth in this Agreement
and, in any event, on the Termination Date.
(b) Toy Biz agrees that each Bank is authorized to record (i)
the date and amount of each Loan made by such Bank pursuant to subsection 2.1,
(ii) the date of each interest rate conversion pursuant to subsection 3.5 and
the principal amount subject thereto, (iii) the date and amount of each payment
or prepayment of principal of each Loan and (iv) in the case of each Eurodollar
Loan, the interest rate and Interest Period, in the books and records of such
Bank and in such manner as is reasonable and customary for such Bank and a
certificate of an officer of such Bank, setting forth in reasonable detail the
information so recorded, shall constitute prima facie evidence of the accuracy
of the information so recorded; provided that the failure to make any such
recording shall not in any way affect the Payment Obligations of Toy Biz
hereunder.
(c) Toy Biz agrees that, upon the request to the
Administrative Agent by any Bank at any time, such Bank's Loans shall be
evidenced by a promissory note of Toy Biz, substantially in the form of Exhibit
A with appropriate insertions as to date and principal amount (a "Note"),
payable to the order of such Bank and representing the obligation of Toy Biz to
pay a principal amount equal to the amount of the Commitment of such Bank or,
if less, the aggregate unpaid principal amount of all Loans made by such Bank,
with interest on the unpaid principal amount thereof from time to time
outstanding under such Note as prescribed in subsection 3.4. Upon the request
to the Administrative Agent by any Bank at any time, Toy Biz shall execute and
deliver to such Bank two Notes, one of which shall evidence the portion of such
Bank's Loans represented by Eurodollar Loans, and the other which shall
evidence the portion of such Bank's Loans represented by Alternate Base Rate
Loans.
2.3 Procedure for Borrowing Loans. (a) Toy Biz may request a
borrowing from time to time under the Aggregate Commitment prior to the
Termination Date on any Business Day (if the Loans to be borrowed are Alternate
Base Rate Loans) or on any Working Day (if the Loans to be borrowed are
Eurodollar Loans) by giving irrevocable notice to the
<PAGE>
Administrative Agent, specifying (i) the aggregate principal amount to be
borrowed, (ii) the requested borrowing date, (iii) whether the Loans to be
borrowed are to be Eurodollar Loans or Alternate Base Rate Loans or a
combination thereof and, if a combination, the respective aggregate amount of
each type of borrowing and (iv) if the Loans to be borrowed are Eurodollar
Loans, the length of the Interest Period or Interest Periods applicable
thereto. Any such notice of borrowing must be signed by a Responsible Officer
of Toy Biz and be received by the Administrative Agent prior to 11:00 A.M., New
York City time, three Working Days prior to the requested borrowing date, in
the case of Eurodollar Loans, and one Business Day prior to the requested
borrowing date, in the case of Alternate Base Rate Loans. Each borrowing under
the Commitments shall be in an aggregate principal amount equal to the lesser
of (x) $1,500,000 or a whole multiple of $500,000 in excess thereof (in the
case of Eurodollar Loans) or $1,000,000 or a whole multiple of $100,000 in
excess thereof (in the case of Alternate Base Rate Loans) or (y) the Available
Commitment. Upon receipt of any such notice, the Administrative Agent will
promptly notify each Bank thereof. Each Bank will make available to the
Administrative Agent at the office of the Administrative Agent specified in
subsection 10.2 (or at such other location as the Administrative Agent may
direct), by 1:00 P.M., New York City time, on the requested borrowing date, an
amount equal to the Commitment Percentage of such Bank times the aggregate
amount of Loans requested to be borrowed on such date, in funds immediately
available to the Administrative Agent. The proceeds of Loans received by the
Administrative Agent hereunder shall promptly be made available to Toy Biz by
the Administrative Agent's crediting the account of Toy Biz, at the office of
the Administrative Agent specified in subsection 10.2, with the aggregate
amount actually received by the Administrative Agent from the Banks and in like
funds as received by the Administrative Agent.
(b) The failure of any Bank to make the Loan to be made by it
on any requested borrowing date shall not relieve any other Bank of its
obligation hereunder to make its Loan on such borrowing date, but no Bank shall
be responsible for the failure of any other Bank to make the Loan to be made by
such other Bank on such borrowing date.
2.4 Use of Proceeds of Loans. The proceeds of the Loans
hereunder shall be used by Toy Biz for working capital and other general
corporate purposes of Toy Biz and its Subsidiaries.
. 2.5 [INTENTIONALLY OMITTED]
SECTION 2A. LETTERS OF CREDIT
2A.1 L/C Commitment. (a) Subject to the terms and conditions
hereof, the Issuer, in reliance on the agreements of the other Banks set forth
in subsection 2A.4(a) agrees to issue letters of credit ("Letters of Credit")
for the account of Toy Biz on any Business Day in such form as may reasonably
be approved from time to time by the Issuer; provided that the Issuer shall
have no obligation to issue any Letter of Credit if, after giving effect to
such issuance, (i) the L/C Obligations would exceed the L/C Commitment, (ii)
the Available Commitment would be less than zero or (iii) the Aggregate
Outstanding Extensions of Credit of all Banks will exceed the Borrowing Base
then in effect.
(b) Each Letter of Credit shall:
(i) be denominated in Dollars and shall be either
(1) a standby letter of credit issued to support obligations of Toy
Biz, contingent or otherwise, the payment
<PAGE>
of which Toy Biz would be permitted to utilize the proceeds of Loans
hereunder (a "Standby Letter of Credit"), or (2) a commercial letter
of credit issued in respect of the purchase of goods or services by
Toy Biz and its Subsidiaries in the ordinary course of business (a
"Commercial Letter of Credit") and
(ii) expire no later than five days prior to the
Termination Date.
(c) Each Letter of Credit shall be subject to the Uniform
Customs and, to the extent not inconsistent therewith, the laws of the State of
New York.
(d) The Issuer shall not at any time be obligated to issue
any Letter of Credit hereunder if such issuance would conflict with, or cause
the Issuer or any L/C Participant to exceed any limits imposed by, any
applicable Requirement of Law.
2A.2 Procedure for Issuance of Letters of Credit. Toy Biz may
from time to time request that the Issuer issue a Letter of Credit by
delivering to the Issuer at its address for notices specified herein an
Application therefor, completed to the satisfaction of the Issuer, and such
other certificates, documents and other papers and information as the Issuer
may reasonably request. Upon receipt of any Application, the Issuer will
process such Application and the certificates, documents and other papers and
information delivered to it in connection therewith in accordance with its
customary procedures and shall promptly issue the Letter of Credit requested
thereby (but in no event shall the Issuer be required to issue any Letter of
Credit earlier than three Business Days after its receipt of the Application
therefor and all such other certificates, documents and other papers and
information relating thereto) by issuing the original of such Letter of Credit
to the beneficiary thereof or as otherwise may be agreed by the Issuer and Toy
Biz. The Issuer shall furnish a copy of such Letter of Credit to Toy Biz
promptly following the issuance thereof.
2A.3 Fees, Commissions and Other Charges. (a) Toy Biz shall
pay to the Agent, for the account of the Issuer and the L/C Participants, a
letter of credit commission with respect to each Letter of Credit, computed for
the period from the date of such payment to the date upon which the next such
payment is due hereunder at the rate per annum equal to 1% on the face amount
of each such Letter of Credit, calculated on the basis of a 365 day (or 366
day, as the case may be) year. In addition, a fronting fee shall be payable to
the Issuer, for its own account, in the amount equal to 1/4 of 1% per annum on
the face amount of each Letter of Credit. Such commissions shall be payable
quarterly, in advance, on the date of issuance of each Letter of Credit and on
each L/C Fee Payment Date to occur thereafter while such Letter of Credit
remains outstanding and shall be nonrefundable.
(b) In addition to the foregoing fees and commissions, Toy
Biz shall pay or reimburse the Issuer for such normal and customary costs and
expenses as are incurred or charged by the Issuer in issuing, effecting payment
under, amending, negotiating or otherwise administering any Letter of Credit.
(c) The Agent shall, promptly following its receipt thereof,
distribute to the Issuer and the L/C Participants all fees and commissions
received by the Agent for their respective accounts pursuant to this
subsection.
2A.4 L/C Participations. (a) The Issuer irrevocably agrees to
grant and hereby grants to each L/C Participant, and, to induce the Issuer to
issue Letters of Credit hereunder, each L/C Participant irrevocably agrees to
accept and purchase and hereby accepts and purchases from the Issuer, on the
terms and conditions hereinafter stated, for
<PAGE>
such L/C Participant's own account and risk an undivided interest equal to such
L/C Participant's Commitment Percentage in the Issuer's obligations and rights
under each Letter of Credit issued hereunder and the amount of each draft paid
by the Issuer thereunder. Each L/C Participant unconditionally and irrevocably
agrees with the Issuer that, if a draft is paid under any Letter of Credit for
which the Issuer is not reimbursed in full by Toy Biz in accordance with the
terms of this Agreement, such L/C Participant shall pay to the Issuer upon
demand at the Issuer's address for notices specified herein an amount equal to
such L/C Participant's Commitment Percentage of the amount of such draft, or
any part thereof, which is not so reimbursed.
(b) If any amount required to be paid by any L/C Participant
to the Issuer pursuant to paragraph 2A.4(a) in respect of any unreimbursed
portion of any payment made by the Issuer under any Letter of Credit is paid to
the Issuer within three Business Days after the date such payment is due, such
L/C Participant shall pay to the Issuer on demand an amount equal to the
product of (i) such amount, times (ii) the daily average Federal funds rate, as
quoted by the Issuer, during the period from and including the date such
payment is required to the date on which such payment is immediately available
to the Issuer, times (iii) a fraction the numerator of which is the number of
days that elapse during such period and the denominator of which is 360. If any
such amount required to be paid by any L/C Participant pursuant to paragraph
2A.4(a) is not in fact made available to the Issuer by such L/C Participant
within three Business Days after the date such payment is due, the Issuer shall
be entitled to recover from such L/C Participant, on demand, such amount with
interest thereon calculated from such due date at the rate per annum applicable
to Alternate Base Rate Loans hereunder. A certificate of the Issuer submitted
to any L/C Participant with respect to any amounts owing under this subsection
shall be conclusive in the absence of manifest error.
(c) Whenever, at any time after the Issuer has made payment
under any Letter of Credit and has received from any L/C Participant its pro
rata share of such payment in accordance with subsection 2A.4(a), the Issuer
receives any payment related to such Letter of Credit (whether directly from
Toy Biz or otherwise, including proceeds of collateral applied thereto by the
Issuer), or any payment of interest on account thereof, the Issuer will
distribute to such L/C Participant its pro rata share thereof; provided,
however, that in the event that any such payment received by the Issuer shall
be required to be returned by the Issuer, such L/C Participant shall return to
the Issuer the portion thereof previously distributed by the Issuer to it.
2A.5 Reimbursement Obligation of Toy Biz (a) Toy Biz agrees
to reimburse the Issuer on each date on which the Issuer notifies Toy Biz of
the date and amount of a draft presented under any Letter of Credit and paid by
the Issuer for the amount of (i) such draft so paid and (ii) any taxes, fees,
charges or other costs or expenses incurred by the Issuer in connection with
such payment. Each such payment shall be made to the Issuer at its address for
notices specified herein in lawful money of the United States of America and in
immediately available funds.
(b) Interest shall be payable on any and all amounts
remaining unpaid by Toy Biz under this subsection from the date such amounts
become payable (whether at stated maturity, by acceleration or otherwise) until
payment in full at the rate which would be payable on any outstanding Alternate
Base Rate Loans which were then overdue.
(c) Each drawing under any Letter of Credit shall constitute
a request by Toy Biz to the Agent for a borrowing pursuant to subsection 2.3 of
Alternate Base Rate Loans in
<PAGE>
the amount of such drawing. The Borrowing Date with respect to such borrowing
shall be the date of such drawing.
2A.6 Obligations Absolute. (a) Toy Biz's obligations under
this Section 2A shall be absolute and unconditional under any and all
circumstances and irrespective of any set-off, counterclaim or defense to
payment which Toy Biz may have or have had against the Issuer or any
beneficiary of a Letter of Credit.
(b) Toy Biz also agrees with the Issuer that the Issuer shall
not be responsible for, and Toy Biz's Reimbursement Obligations under
subsection 2A.5(a) shall not be affected by, among other things, (i) the
validity or genuineness of documents or of any endorsements thereon, even
though such documents shall in fact prove to be invalid, fraudulent or forged,
or (ii) any dispute between or among Toy Biz and any beneficiary of any Letter
of Credit or any other party to which such Letter of Credit may be transferred
or (iii) any claims whatsoever of Toy Biz against any beneficiary of such
Letter of Credit or any such transferee.
(c) The Issuer shall not be liable for any error, omission,
interruption or delay in transmission, dispatch or delivery of any message or
advice, however transmitted, in connection with any Letter of Credit, except
for errors or omissions caused by the Issuer's gross negligence or willful
misconduct.
(d) Toy Biz agrees that any action taken or omitted by the
Issuer under or in connection with any Letter of Credit or the related drafts
or documents, if done in the absence of gross negligence of willful misconduct
and in accordance with the standards of care specified in the Uniform
Commercial Code of the State of New York, shall be binding on Toy Biz and shall
not result in any liability of the Issuer to Toy Biz.
2A.7 Letter of Credit Payments. If any draft shall be
presented for payment under any Letter of Credit, the Issuer shall promptly
notify Toy Biz of the date and amount thereof. The responsibility of the Issuer
to Toy Biz in connection with any draft presented for payment under any Letter
of Credit shall, in addition to any payment obligation expressly provided for
in such Letter of Credit, be limited to determining that the documents
(including each draft) delivered under such Letter of Credit in connection with
such presentment are in conformity with such Letter of Credit.
2A.8 Application. Except to the extent the Majority Banks and
the Issuer otherwise agree, to the extent that any provision of any Application
related to any Letter of Credit is inconsistent with the provisions of this
Section 2A, the provisions of this Section 2A shall apply.
SECTION 3. PROVISIONS RELATING TO THE LOANS; FEES
AND PAYMENTS
3.1 Voluntary Termination or Reduction of Commitments.(a) Toy
Biz shall have the right at any time, upon not less than five Business Days'
notice to the Administrative Agent, to terminate or, from time to time, reduce
the Aggregate Commitment, with any such voluntary reduction being in an amount
equal to the lesser of (i) $1,500,000 or a whole multiple of $500,000 in excess
thereof and (ii) the Aggregate Commitment then in effect. Any such termination
or reduction shall permanently terminate or reduce, as the case may be, the
Aggregate Commitment then in effect.
<PAGE>
(b) Any termination of the Aggregate Commitment pursuant to
subsection 3.1(a) shall be accompanied by prepayment in full (together with
accrued interest thereon through the date of such prepayment) by Toy Biz of any
Loans then outstanding and payment of any other amounts necessary to cause the
Payment Obligations with respect to the Loans and the L/C Obligations to be
Fully Satisfied.
3.2 Optional Prepayments. Toy Biz may, at any time and from
time to time, prepay the Loans then outstanding, in whole or in part, without
premium or penalty (other than amounts payable pursuant to subsection 3.9),
upon at least three Working Days' irrevocable notice to the Administrative
Agent, in the case of Eurodollar Loans, and one Business Day's irrevocable
notice to the Administrative Agent, in the case of Alternate Base Rate Loans,
specifying (a) the Loans to be prepaid, (b) the date and amount of such
prepayment and (c) whether the prepayment is of Eurodollar Loans or Alternate
Base Rate Loans or a combination thereof, and, if of a combination thereof, the
amount of prepayment allocable to each (and, with respect to such Eurodollar
Loans, each Tranche thereof). Upon receipt of any such notice, the
Administrative Agent will promptly notify each Bank thereof. If any such notice
is given, Toy Biz will make the prepayment specified therein, and such
prepayment shall be due and payable on the date specified therein. Each partial
prepayment of the Loans pursuant to this subsection 3.2 shall be in an amount
equal to the lesser of (x) $1,500,000 or a whole multiple of $500,000 in excess
thereof and (y) the aggregate principal amount of the Loans then outstanding.
3.3 Mandatory Prepayments and Commitment Reductions. (a) On
the Termination Date, the Aggregate Commitment shall terminate and Toy Biz
shall cause all Payment Obligations to be Fully Satisfied.
(b) If, at any time and from time to time, the Aggregate
Outstanding Extensions of Credit of all Banks then outstanding exceeds the
Aggregate Commitment (including, without limitation, as a result of any
permanent reduction in the Aggregate Commitment provided for in subsection 3.1
or this subsection 3.3) or the Borrowing Base then in effect, Toy Biz shall
immediately repay the Loans and cash collateralize the L/C Obligations by the
amount equal to such excess.
(c) If Toy Biz or any of its Subsidiaries shall receive any
Net Cash Proceeds as a result of the sale or issuance of equity securities
(other than in connection with (i) the IPO and (ii) stock options outstanding
on the date hereof or hereafter issued in connection with the Toy Biz Stock
Option Plan) or the incurrence of Indebtedness (other than any Indebtedness
incurred in reliance upon the provisions of subsection 7.1), then the Aggregate
Commitment shall immediately be reduced (and, to the extent that a Default or
Event of Default is then continuing, the Loans shall be repaid and the L/C
Obligations shall be cash collateralized) by an amount equal to such Net Cash
Proceeds.
(d) If Toy Biz or any of its Subsidiaries shall receive any
Net Cash Proceeds from the sale, lease or other disposition by Toy Biz or any
of its Subsidiaries of any assets, other than assets sold in reliance upon the
provisions of subsection 7.5, then the Aggregate Commitment shall immediately
be reduced (and, to the extent that a Default or Event of Default is then
continuing, the Loans shall be repaid and the L/C Obligations shall be cash
collateralized) by an amount equal to such Net Cash Proceeds.
(e) If Toy Biz or any of its Subsidiaries shall receive any
payments of principal under the Colorforms Note, then the Aggregate Commitment
shall immediately be reduced (and, to the extent that a Default or Event of
Default is then continuing, the Loans shall be
<PAGE>
repaid and the L/C Obligations shall be cash collateralized) by the amount
equal to such payment.
3.4 Interest Rate and Payment Dates. (a) The Eurodollar Loans
shall bear interest on the unpaid principal amount thereof for each day during
each Interest Period with respect thereto at a rate per annum equal to the
Eurodollar Rate for such Interest Period plus the Applicable Margin.
(b) The Alternate Base Rate Loans shall bear interest on the
unpaid principal amount thereof at a rate per annum equal to the Alternate Base
Rate plus the Applicable Margin.
(c) If all or a portion of any amount owing hereunder shall
not be paid when due, then, for so long as such amount remains unpaid, (i) if
the overdue amount represents principal, such overdue amount shall bear
interest at a rate per annum which is 2% above the rate which would otherwise
be applicable pursuant to subsection 3.4(a) or (b), as the case may be, and
(ii) if the overdue amount represents overdue interest, fees or other amounts
(other than the amounts described in clause (i) of this paragraph (c)) due
under the Credit Documents, such overdue amount shall bear interest at a rate
per annum equal to the Alternate Base Rate plus 3%. During such time as any
principal of or interest on any Eurodollar Loans remains unpaid, such
Eurodollar Loans shall be converted to Alternate Base Rate Loans at the end of
the respective Interest Periods applicable thereto.
(d) Interest on each Loan accrued to but not including each
Interest Payment Date applicable thereto shall be payable in arrears on such
Interest Payment Date; provided, however, that interest accruing on the
principal of or (to the extent permitted by applicable law) interest or any
other amount payable in connection with any Loan not paid when due (whether at
stated maturity, by acceleration or otherwise), shall be payable from time to
time upon demand of the Administrative Agent.
3.5 Conversion Options, Minimum Tranches and Maximum Interest
Periods. (a) Toy Biz may elect from time to time to convert outstanding Loans
from Eurodollar Loans to Alternate Base Rate Loans by giving the Administrative
Agent at least one Business Day's prior irrevocable notice of such election.
Toy Biz may elect from time to time and at any time to convert outstanding
Loans from Alternate Base Rate Loans to Eurodollar Loans by giving the
Administrative Agent at least three Working Days' irrevocable notice of such
election; provided that no Loans may be converted to Eurodollar Loans when any
Default or Event of Default has occurred and is continuing. Upon receipt of
such notice, the Administrative Agent shall promptly notify each Bank which has
made Loans affected by such notice thereof. On the date on which such
conversion is being made, each Bank shall take such action as is necessary to
effect such conversion. All or any part of the outstanding Eurodollar Loans or
Alternate Base Rate Loans may be converted as provided herein.
(b) Any Eurodollar Loans may be continued as such upon the
expiration of an Interest Period with respect thereto by Toy Biz's giving the
Administrative Agent at least three Working Days' irrevocable notice for
continuation thereof; provided that no Eurodollar Loan may be continued as such
when any Default or Event of Default has occurred and is continuing, and,
instead, such Eurodollar Loans shall be automatically converted to an Alternate
Base Rate Loan on the last day of the Interest Period for which a Eurodollar
Rate was determined by the Administrative Agent prior to the Administrative
Agent's obtaining knowledge of such Default or Event of Default. The
Administrative Agent shall notify the relevant Banks promptly that such
automatic conversion shall occur.
<PAGE>
(c) In the event that a timely notice of conversion or
continuation with regard to Eurodollar Loans is not given in accordance with
this subsection 3.5, then, unless the Administrative Agent shall have received
timely notice in accordance with subsection 3.2 that Toy Biz elects to prepay
such Eurodollar Loans on the last day of such Interest Period, Toy Biz shall be
deemed irrevocably to have requested that such Eurodollar Loans be converted
into Alternate Base Rate Loans on the last day of such Interest Period.
(d) Any borrowing or continuation of Eurodollar Loans, or
conversion to or from Eurodollar Loans, or payments or prepayments of
Eurodollar Loans, shall be in such amounts and be made pursuant to such
elections so that, after giving effect thereto, (i) the aggregate principal
amount of each Tranche of Eurodollar Loans shall be $1,500,000 or a whole
multiple (to the extent possible) of $500,000 in excess thereof, (ii) the
aggregate principal amount of all Alternate Base Rate Loans shall be $1,000,000
or a whole multiple (to the extent possible) of $100,000 in excess thereof and
(iii) there shall not be more than three Tranches of Eurodollar Loans at any
one time outstanding.
3.6 Inability to Determine Interest Rate. (a) In the event
that the Administrative Agent shall have determined (which determination, in
the absence of manifest error, shall be conclusive and binding upon Toy Biz)
that by reason of circumstances affecting the relevant interbank eurocurrency
market, adequate and reasonable means do not exist for ascertaining the
Eurodollar Rate for any Interest Period with respect to (i) proposed Loans that
Toy Biz has requested be made as Eurodollar Loans, (ii) a Eurodollar Loan that
will result from the requested conversion of all or part of the Alternate Base
Rate Loans into Eurodollar Loans, or (iii) the continuation of a Eurodollar
Loan as such for an additional Interest Period (any such Loan described in
clauses (i), (ii) or (iii) of this subsection 3.6(a) being herein called an
"Affected Loan"), the Administrative Agent shall forthwith give telecopy or
telephonic notice of such determination, confirmed in writing, to Toy Biz and
the Banks at least two Business Days prior to, as the case may be, the
borrowing date for such Loan, the conversion date for such Alternate Base Rate
Loan or the last day of the Interest Period applicable to such Loan. Unless Toy
Biz shall have notified the Administrative Agent promptly upon receipt of such
telecopy or telephonic notice that it wishes to rescind or modify its request
regarding such Affected Loans, then any requested Eurodollar Loan shall be made
as, continued as, or converted into an Alternate Base Rate Loan, as the case
may be. Until any such notice has been withdrawn by the Administrative Agent,
no further Affected Loans shall be made.
(b) In the event that the Majority Banks determine that the
rate quoted by the Administrative Agent does not accurately reflect the cost of
making or maintaining any Loans that Toy Biz has requested be made or continued
as or converted to Eurodollar Loans, the Administrative Agent shall forthwith
give telecopy or telephonic notice of such determination to Toy Biz on or
before the requested borrowing, conversion or continuation date for such Loans
or the next succeeding Interest Period for such Loans. Unless Toy Biz shall
have notified the Administrative Agent promptly after receipt of such telecopy
or telephonic notice that it wishes to rescind or modify its request regarding
such Loans, then any such Eurodollar Loans shall be made as or converted to
Alternate Base Rate Loans.
3.7 Illegality. Notwithstanding any other provision herein,
if any change in law, rule, regulation, treaty or directive or in the
interpretation or application thereof, shall make it unlawful for any Bank to
make or maintain Eurodollar Loans as contemplated by this Agreement or to
accept deposits in order to make or maintain such Eurodollar Loans, (a) such
Bank shall promptly notify the Administrative Agent and Toy Biz thereof, (b)
the agreements of such Bank hereunder to make or convert to Eurodollar Loans
shall be
<PAGE>
suspended forthwith and (c) such Bank's Loans then outstanding as Eurodollar
Loans, if any, shall automatically become Alternate Base Rate Loans for the
duration of the respective Interest Periods applicable thereto (or, if
permitted by applicable law, at the end of such Interest Periods). Toy Biz
agrees promptly to pay to any Bank any additional amounts necessary to
compensate such Bank for any costs incurred by such Bank as a consequence of
Toy Biz making any conversion in accordance with this subsection 3.7,
including, without limitation, any interest or fees payable by such Bank to
lenders of funds obtained by it in order to make or maintain its Eurodollar
Loans. A certificate as to any such costs payable pursuant to this subsection
3.7 submitted by an officer of any Bank, through the Administrative Agent, to
Toy Biz shall be conclusive, in the absence of manifest error.
3.8 Requirements of Law; Changes of Law. (a) In the event
that the adoption of or any change in law, rule, regulation, treaty or
directive or in the interpretation or application thereof, or compliance by any
Bank with any request or directive (whether or not having the force of law)
issued after the date hereof from any central bank or other Governmental
Authority:
(i) imposes upon any Bank any tax of any kind whatsoever
with respect to this Agreement, its Notes, any Letter of Credit, any
Application or any Loan, or changes the basis of taxation of payments
to such Bank of principal, commitment fee, interest or any other
amount payable hereunder (except for (x) income and franchise taxes
imposed on such Bank by the jurisdiction under the laws of which such
Bank is organized or any political subdivision or taxing authority
thereof or therein, or by any jurisdiction in which any office of such
Bank is located or any political subdivision or taxing authority
thereof or therein, (y) taxes resulting from the substitution of any
such system by another system of taxation, provided that the taxes
payable by Banks subject to such other system of taxation are not
generally charged to borrowers from such Banks having loans or
advances bearing interest at a rate similar to the Eurodollar Rate and
(z) taxes imposed by way of deduction or withholding, which shall be
exclusively governed by subsection 3.10);
(ii) imposes, modifies or holds applicable any reserve,
special deposit, compulsory loan or similar requirement against any
Loan made, or assets held by, or credit extended by, or deposits or
other liabilities in or for the account of, or acquisition of funds by
or for the account of, any office of such Bank, which is not otherwise
included in the determination of the Eurodollar Rate hereunder; or
(iii) imposes on such Bank any other condition;
and the result of any of the foregoing is to increase the cost to such Bank of
making, renewing or maintaining Loans or issuing or participating in Letters of
Credit or to reduce any amount receivable by it in respect of its Eurodollar
Loans, then, in any such case, Toy Biz shall promptly pay such Bank any
additional amounts necessary to compensate such Bank for such additional cost
or reduced amount receivable as reasonably determined by such Bank with respect
to this Agreement, its Notes, its Letters of Credit or its Loans after taking
into account any amounts paid or payable pursuant to subsection 3.10(a). If a
Bank becomes entitled to claim any additional amounts pursuant to this
subsection 3.8(a), it shall promptly notify Toy Biz, through the Administrative
Agent, of the event by reason of which it has become so entitled. A certificate
as to any additional amounts payable pursuant to the foregoing sentence
submitted by an officer of a Bank, through the Administrative Agent, to Toy Biz
shall be conclusive, in the absence of manifest error.
<PAGE>
(b) In the event that any Bank shall have determined that the
adoption of any law, rule, regulation or guideline adopted pursuant to or
arising out of the International Convergence of Capital Measurement and Capital
Standards or of any Requirement of Law otherwise regarding capital adequacy, or
any change therein or in the interpretation or application thereof or
compliance by any Bank with any request or directive regarding capital adequacy
(whether or not having the force of law) from any central bank or Governmental
Authority, does or shall have the effect of reducing the rate of return on such
Bank's capital as a consequence of its obligations hereunder or under any
Letter of Credit to a level below that which such Bank could have achieved but
for such adoption, change or compliance (taking into consideration such Bank's
policies with respect to capital adequacy) by an amount which is reasonably
deemed by such Bank to be material, then from time to time, promptly after
submission by such Bank, through the Administrative Agent, to Toy Biz of a
written request therefor, Toy Biz shall promptly pay to such Bank such
additional amount or amounts as will compensate such Bank for such reduction.
(c) The agreements in this subsection 3.8 shall survive the
termination of this Agreement and payment of the Loans, the Reimbursement
Obligations and the Notes and all other amounts payable hereunder.
3.9 Indemnity. Toy Biz agrees to promptly pay and indemnify
each Bank for, and to hold such Bank harmless from, any loss or expense which
such Bank may sustain or incur in its reemployment of funds obtained in
connection with the making or maintaining of, or converting to, Eurodollar
Loans as a consequence of (a) any default by Toy Biz in borrowing such
Eurodollar Loans or in converting Alternate Base Rate Loans to Eurodollar Loans
after Toy Biz has given a notice in respect thereof or (b) any failure by Toy
Biz to prepay Eurodollar Loans after Toy Biz has given notice in respect
thereof or (c) any payment, prepayment (whether optional or mandatory) or
conversion (whether optional or mandatory) of any Eurodollar Loan on a day
which is not the last day of an Interest Period with respect thereto. Without
limiting the effect of the foregoing, Toy Biz agrees to pay to each Bank an
amount equal to the excess, if any, of (i) the amount of interest which
otherwise would have accrued on the principal amount paid, prepaid or not
borrowed for (A) the period from the date of such payment or prepayment to the
last day of the Interest Period applicable to such Eurodollar Loan or (B) in
the case of a failure to borrow or to convert, the Interest Period applicable
to such Eurodollar Loan which would have commenced on the date specified for
such borrowing or conversion, at the applicable rate of interest for such
Eurodollar Loan provided for herein exclusive of any margin applicable thereto
minus (ii) the interest component of the amount such Bank would have bid in the
London interbank market in respect of such Loan if such Loan were to be made on
the date of such payment, prepayment, failure to borrow or failure to convert,
as the case may be. A certificate as to any additional amounts payable pursuant
to this subsection 3.9 submitted by an officer of a Bank, through the
Administrative Agent, to Toy Biz shall be conclusive, absent manifest error.
The agreements in this subsection 3.9 shall survive termination of this
Agreement and payment of the Loans and the Notes and all other amounts payable
hereunder.
3.10 Taxes. (a) All payments made by Toy Biz under this
Agreement shall be made free and clear of, and without reduction for or on
account of, any present or future income, stamp, documentary, property, excise
or other taxes, levies, imposts, duties, charges, fees, deductions or
withholdings, now or hereafter imposed, levied, collected, withheld or assessed
by any Governmental Authority, excluding, in the case of the Administrative
Agent and each Bank, income and franchise taxes imposed on the Administrative
Agent or such Bank by the jurisdiction under the laws of which the
Administrative Agent or such Bank is organized or any political subdivision or
taxing authority thereof or therein, or by any
<PAGE>
jurisdiction in which such Bank is located or any political subdivision or
taxing authority thereof or therein (such non-excluded taxes being called
"Taxes"). If any Taxes are required to be withheld from any amounts payable to
the Administrative Agent or any Bank hereunder or under the Notes or the
Letters of Credit, the amounts so payable to the Administrative Agent or such
Bank shall (without any obligation on the part of Toy Biz to pay such amounts
ratably in accordance with the provisions of subsection 3.13) be increased to
the extent necessary to yield to the Administrative Agent or such Bank (after
payment of all Taxes) interest or any such other amounts payable hereunder at
the rates or in the amounts specified in this Agreement and the Notes. Whenever
any Taxes are payable by Toy Biz, as promptly as possible thereafter, Toy Biz
shall send to the Administrative Agent, for its own account or for the account
of such Bank, as the case may be, a certified copy of an original official
receipt or other evidence reasonably satisfactory to the Administrative Agent
showing payment thereof. If Toy Biz fails to pay any Taxes when due to the
appropriate taxing authority or fails to remit to the Administrative Agent the
required receipts or other required documentary evidence, Toy Biz shall
indemnify the Administrative Agent and the Banks for any incremental taxes,
interest or penalties that may become payable by the Administrative Agent or
any Bank as a result of any such failure. If any Taxes are paid by the
Administrative Agent or any Bank to any Governmental Authority, Toy Biz shall
indemnify the Administrative Agent or such Bank, as the case may be (within 30
days after demand therefor upon Toy Biz), for any amounts so paid.
(b) Except as Toy Biz shall otherwise consent, each Bank
hereby severally (but not jointly) represents that, under applicable law and
treaties in effect on the date of this Agreement, no United States Federal
taxes will be required to be withheld by the Administrative Agent or Toy Biz
with respect to any payments to be made to such Bank in respect of this
Agreement. Each Bank which itself is not incorporated under the laws of the
United States of America or a state thereof or which is lending from an office
that is not incorporated under the laws of the United States of America or a
state thereof agrees severally (but not jointly) that, prior to the Closing
Date, it will deliver to Toy Biz and the Administrative Agent two duly
completed copies of United States Internal Revenue Service Form 1001 or 4224,
or successor applicable form, as the case may be, certifying in each case that
such Bank is entitled to receive all payments under this Agreement and the
Notes and Letters of Credit payable to it, without deduction or withholding of
any United States Federal income taxes. Each Bank which delivers to Toy Biz and
the Administrative Agent a Form 1001 or 4224, or successor applicable form,
pursuant to the immediately preceding sentence, further undertakes to deliver
to Toy Biz and the Administrative Agent two further completed copies of said
Form 1001 or 4224, or successor applicable form, or other manner of
certification, as the case may be, on or before the date that any such form
expires or becomes obsolete or after the occurrence of any event requiring a
change in the most recent form previously delivered by it to Toy Biz and the
Administrative Agent, and such extensions or renewals thereof as may reasonably
be requested by Toy Biz and the Administrative Agent, certifying that such Bank
is entitled to receive payments under this Agreement without deduction or
withholding of any United States Federal income taxes, unless in any such case
any change in law, rule, regulation, treaty or directive, or in the
interpretation or application thereof, has occurred prior to the date on which
any such delivery would otherwise be required which renders all such forms
inapplicable or which would prevent such Bank from duly completing and
delivering any such form with respect to it and such Bank advises Toy Biz that
it is not capable of receiving payments without any deduction or withholding of
United States Federal income tax. Notwithstanding any provision of subsection
3.10(a) to the contrary, Toy Biz shall have no obligation to pay any amount to
or for the account of any Bank on account of any Taxes pursuant to subsection
3.10(a) (including, without limitation, the second sentence thereof) to the
extent that such amount results from (i) the failure of any
<PAGE>
Bank to comply with its obligations pursuant to this subsection 3.10(b) (or, in
the case of any Transferee, pursuant to subsection 10.6(g)) or (ii) any
representation or warranty made or deemed to be made by any Bank pursuant to
this subsection 3.10(b) (or, in the case of any Transferee pursuant to
subsection 10.6(g)) proving to have been incorrect, false or misleading in any
material respect when so made or deemed to be made.
(c) Each Bank agrees to use reasonable efforts (including
reasonable efforts to change the office in which it is booking its Loans) to
avoid or to minimize any amounts which might otherwise be payable pursuant to
this subsection 3.10; provided, however, that such efforts shall not cause the
imposition on such Bank of any additional costs or legal or regulatory burdens
deemed by such Bank to be material or otherwise be deemed by such Bank to be
disadvantageous to it or contrary to its policies.
(d) In the event that such reasonable efforts pursuant to
subsection 3.10(c) are insufficient to avoid all withholding taxes which would
be payable pursuant to this subsection 3.10, then such Bank (the "Taxable
Bank") shall use its best efforts to transfer to any other Bank (which is not
subject to such withholding taxes) its Loans and Commitments hereunder;
provided, however, that such transfer shall not be deemed by such Taxable Bank,
in its sole discretion, to be disadvantageous to it or contrary to its
policies. In the event that the Taxable Bank is unable, or otherwise is
unwilling, so to transfer its Loans and Commitments, Toy Biz may designate an
alternate bank to purchase the Taxable Bank's Loans and Commitments and,
subject to the approval of the Administrative Agent (which approval shall not
be unreasonably withheld), the Taxable Bank shall transfer its Loans and
Commitments to such alternate bank and such alternate bank shall become a Bank
hereunder.
(e) The agreements in this subsection 3.10 shall survive the
termination of this Agreement and the payment of the Loans, the Reimbursement
Obligations and Notes, and all other amounts payable hereunder.
3.11 Fees. (a) Toy Biz agrees to pay to the Administrative
Agent, for the account of each Bank, a commitment fee in the amount equal to
3/8 of 1% per annum on the amount equal to the Commitment Percentage of such
Bank times the average daily Available Commitment during the period for which
such fee is payable. Such commitment fee of (a) Chemical Bank shall accrue from
January 13, 1995, and (b) each other Bank shall accrue from February 2, 1995.
Such commitment fee shall be payable on the Closing Date and in arrears on (a)
the last day of each March, June, September and December and (b) the
Termination Date. During the period prior to the Closing Date, the commitment
fee payable to Chemical Bank and each other Bank shall be paid net of any
commitment fee payable for the account of such Bank for such period under the
Existing Credit Agreement.
(b) [Intentionally Omitted].
(c) Toy Biz agrees to pay to the Administrative Agent, for
its own account, any administrative fees as agreed between Toy Biz and the
Administrative Agent in writing from time to time.
3.12 Computation of Interest and Fees. (a) Interest in
respect of Alternate Base Rate Loans bearing interest at a rate based upon the
Prime Rate and commitment fees shall be
<PAGE>
calculated on the basis of a 365 or 366-day year, as the case may be, for the
actual days elapsed. Interest in respect of Alternate Base Rate Loans bearing
interest at a rate based upon the Federal Funds Effective Rate or the Base CD
Rate and Eurodollar Loans shall be calculated on the basis of a 360-day year
for the actual days elapsed. The Administrative Agent will, as soon as
practicable, notify Toy Biz and the Banks of each determination of a Eurodollar
Rate and of any change in the Alternate Base Rate and the effective date
thereof. Any change in the Alternate Base Rate due to a change in the Prime
Rate, the Three-Month Secondary CD Rate or the Federal Funds Effective Rate
shall be effective on the effective day of such change in the Prime Rate, the
Three-Month Secondary CD Rate or the Federal Funds Effective Rate,
respectively.
(b) Except as set forth in subsection 3.6, each determination
of an interest rate by the Administrative Agent pursuant to any provision of
this Agreement shall be conclusive and binding on Toy Biz and the Banks, in the
absence of manifest error.
3.13 Pro Rata Treatment and Payments. (a) Except as otherwise
provided in subsections 3.8, 3.9 and 3.10, each borrowing by Toy Biz from the
Banks hereunder, each payment by Toy Biz on account of any commitment fee
hereunder and any reduction of the Aggregate Commitment shall be made pro rata
according to the respective Commitment Percentages of the Banks. Each payment
(including each prepayment) by Toy Biz on account of principal of and interest
on the Loans shall be made pro rata according to the respective outstanding
principal amounts of the Loans then held by the Banks. All payments (including
prepayments) to be made by Toy Biz hereunder and under the Notes and the Letter
of Credit, whether on account of principal, interest, fees or otherwise, shall
be made without setoff or counterclaim and shall be made prior to 12:00 Noon,
New York City time, on the due date thereof to the Administrative Agent, for
the account of the Banks, at the Administrative Agent's office specified in
subsection 10.2, in Dollars and in immediately available funds. The
Administrative Agent shall distribute such payments to the Banks promptly upon
receipt in like funds as received. If any payment hereunder (other than
payments on the Eurodollar Loans) becomes due and payable on a day other than a
Business Day, such payment shall be extended to the next succeeding Business
Day, and, with respect to payments of principal, interest thereon shall be
payable at the then applicable rate during such extension. If any payment on a
Eurodollar Loan becomes due and payable on a day other than a Business Day, the
maturity thereof shall be extended to the next succeeding Business Day unless
the result of such extension would be to extend such payment into another
calendar month, in which event such payment shall be made on the immediately
preceding Business Day.
(b) Unless the Administrative Agent shall have been notified
in writing by any Bank prior to a borrowing that such Bank will not make the
amount that would constitute its Commitment Percentage of such borrowing
available to the Administrative Agent, the Administrative Agent may assume that
such Bank is making such amount available to the Administrative Agent, and the
Administrative Agent may, in reliance upon such assumption, make available to
Toy Biz a corresponding amount. If such amount is not made available to the
Administrative Agent by the required time on the borrowing date therefor, such
Bank shall pay to the Administrative Agent, on demand, such amount with
interest thereon at a rate equal to the daily average Federal Funds Effective
Rate for the period until such Bank makes such amount immediately available to
the Agent. A certificate of the Administrative Agent submitted to any Bank with
respect to any amounts owing under this subsection shall be conclusive in the
absence of manifest error. If such Bank's Commitment Percentage of such
borrowing is not made available to the Administrative Agent by such Bank within
three Business Days of such borrowing date, the Administrative Agent shall also
be entitled to recover such amount with interest thereon at the rate per annum
applicable to Alternate Base Rate Loans hereunder, on demand, from Toy Biz.
<PAGE>
3.14 Payments on Account of Loans, Reimbursement Obligations
and Fees. All payments and prepayments on account of Loans, Reimbursement
Obligations and fees hereunder shall be made in Dollars.
SECTION 4. REPRESENTATIONS AND WARRANTIES
In order to induce the Banks and the Administrative Agent to
enter into this Agreement and to make the Loans and issue or participate in
Letters of Credit hereunder, Toy Biz hereby represents and warrants to each of
them that:
4.1 Corporate Existence. Each of Toy Biz and its Subsidiaries
is duly organized, validly existing and in good standing under the laws of the
jurisdiction of its incorporation, has the corporate power to own its assets
and to transact the business in which it is presently engaged, and is duly
qualified as a foreign corporation and in good standing under the laws of each
jurisdiction where its ownership or lease of property or the conduct of its
business requires such qualification, except where all such failures to so
qualify and be in good standing would not, in the aggregate, be reasonably
likely to have a Material Adverse Effect.
4.2 Corporate Power. (a) Each of Toy Biz and its Subsidiaries
has the corporate power, authority and legal right to execute, deliver and
perform this Agreement, the Notes, the Applications and the other Credit
Documents (as applicable) and to borrow hereunder (as applicable), and it has
taken all necessary corporate action to authorize its borrowings (as
applicable) on the terms and conditions of this Agreement and the other Credit
Documents and to authorize the execution, delivery and performance of this
Agreement, the Notes, the Applications and the other Credit Documents (as
applicable).
(b) No consent of any other Person (including, without
limitation, stockholders or creditors of Toy Biz or any of its Subsidiaries or
of any Parent of Toy Biz), and no consent, license, permit, approval or
authorization of, exemption by, or registration, filing or declaration with,
any Governmental Authority is required in connection with the execution,
delivery, performance, validity or enforceability of this Agreement, the Notes,
the Applications and the other Credit Documents (as applicable) by or against
Toy Biz and its Subsidiaries, except for (i) consents that have already been
obtained and which remain in full force and effect, (ii) any filings required
under the Uniform Commercial Code and (iii) filings with the United States
Copyright Office and the United States Patent and Trademark Office with respect
to security interests granted in Copyrights, Trademarks and Patents of Toy Biz
and its Subsidiaries, and other than all failures to obtain such consents,
licenses, permits, approvals, authorizations or exemptions and failures to make
such registrations, filings or declarations that would not, in the aggregate,
be reasonably likely to have a Material Adverse Effect.
(c) This Agreement has been, and the Notes, the Applications
and the other Credit Documents (as applicable) will be, executed and delivered
by a duly authorized officer of Toy Biz and its Subsidiaries (as applicable)
and this Agreement constitutes, and the Notes, the Applications and the other
Credit Documents (as applicable), when executed and delivered by Toy Biz and
its Subsidiaries (as applicable) and the other parties thereto, will
constitute, the legal, valid and binding obligations of Toy Biz and its
Subsidiaries party thereto, enforceable against each of them in accordance with
their respective terms except as enforceability may be limited by bankruptcy,
insolvency, moratorium, reorganization or other
<PAGE>
similar laws affecting creditors' rights generally and except as enforceability
may be limited by general principles of equity.
(d) Notwithstanding anything to the contrary contained
herein, the existence of litigation with Marvel Entertainment Group, Inc. with
respect to the proper constitution of the Board of Directors of Toy Biz and the
voting rights of the capital stock of Toy Biz which is held by Marvel
Entertainment Group, Inc. shall not, in itself and without any judgment adverse
to Toy Biz, be deemed to cause the representations and warranties contained in
this subsection 4.2 to fail to be true and correct in all material respects.
4.3 No Legal Bar to Loans. The execution, delivery and
performance of this Agreement, the Applications, the Notes and the other Credit
Documents, will not violate any Contractual Obligation or material Requirement
of Law to which Toy Biz or any of its Subsidiaries is a party, or by which Toy
Biz or any of its Subsidiaries or any of their respective material properties
or assets may be bound, and will not result in the creation or imposition of
any Lien (other than under the Security Documents) on any of their respective
material properties or assets pursuant to the provisions of any Contractual
Obligation; provided that existence of litigation with Marvel Entertainment
Group, Inc. with respect to the proper constitution of the Board of Directors
of Toy Biz and the voting rights of the capital stock of Toy Biz which is held
by Marvel Entertainment Group, Inc. shall not, in itself and without any
judgment adverse to Toy Biz, be deemed to cause the representations and
warranties contained in this subsection 4.3 to fail to be true and correct in
all material respects.
4.4 No Material Litigation. No litigation, suit, action,
investigation, inquiry or other proceeding is presently pending or, to the
knowledge of Toy Biz, threatened against Toy Biz or any of its Subsidiaries or
any of their properties or assets, by or before any arbitrator or any
Governmental Authority and no preliminary or permanent injunction or order by a
state or Federal court has been entered in connection with any Credit Document
or any of the transactions contemplated hereby, which in any of such cases
would be reasonably likely to have a Material Adverse Effect (it being
understood that the pendency of litigation with Marvel Entertainment Group,
Inc. with respect to the proper constitution of the Board of Directors of Toy
Biz and the voting rights of the capital stock of Toy Biz which is held by
Marvel Entertainment Group, Inc. shall not, in itself and without any judgment
adverse to Toy Biz, be deemed to have such a Material Adverse Effect).
4.5 No Default. Neither Toy Biz nor any of its Subsidiaries
is in default in the payment or performance of any obligations or in the
performance of any Contractual Obligation to which it is a party or by which it
or any of its properties or assets may be bound, except to the extent that such
defaults, in the aggregate, would not be reasonably likely to have a Material
Adverse Effect. After giving effect to all amendments, supplements and other
modifications to this Agreement, no Default hereunder has occurred and is
continuing. Neither Toy Biz nor any of its Subsidiaries is in default under any
order, award or decree of any court, arbitrator or Governmental Authority
binding upon or affecting it or by which any of its material properties or
assets is bound or affected, and no such order, award or decree would be
reasonably likely to have a Material Adverse Effect.
4.6 Ownership of Properties; Liens. Except as is or would be
permitted pursuant to subsection 7.2, each of Toy Biz and its Subsidiaries has
good and marketable title to all its owned real properties, subject to no Lien,
and has good title to all its owned material personal properties and assets,
subject to no Lien.
<PAGE>
4.7 Taxes. Each of Toy Biz and its Subsidiaries has timely
filed or caused to be timely filed all material tax returns (including, without
limitation, information returns) which to the knowledge of Toy Biz and its
Subsidiaries are required to be filed, and has paid all taxes shown to be due
and payable on said returns or on any assessments made against them (other than
those being contested in good faith by appropriate proceedings for which
adequate reserves (in accordance with GAAP) have been provided on the books of
Toy Biz or such Subsidiaries, as the case may be), and no tax liens have been
filed.
4.8 ERISA. No Reportable Event has occurred during the
immediately preceding six-year period with respect to any Plan that resulted or
would be reasonably likely to result in any unpaid liability that would be
reasonably likely to have a Material Adverse Effect, and each Plan (other than
any Multiemployer Plan or any multiemployer health or welfare plan) has
complied and has been administered in all material respects with the applicable
provisions of ERISA and the Code. The amount by which the present value of all
accrued benefits under each Single Employer Plan maintained by Toy Biz or any
of its Subsidiaries or any Commonly Controlled Entity (based on those
assumptions used to fund the Plans), as of the last annual valuation date
applicable thereto, exceeds the value of the assets of each such Plan allocable
to such benefits, in the aggregate for all such Plans as to which such present
value of benefits exceeds the value of its assets (the "Unfunded Pension
Amount"), is less than $1,000,000, when aggregated with the Potential
Withdrawal Liability (as hereinafter defined). Neither Toy Biz nor any of its
Subsidiaries nor any Commonly Controlled Entity has during the immediately
preceding six-year period had a complete or partial withdrawal from any
Multiemployer Plan that resulted or would be reasonably likely to result in any
unpaid withdrawal liability under Section 4201 of ERISA that would be
reasonably likely to have a Material Adverse Effect, and the withdrawal
liability under Section 4201 of ERISA to which Toy Biz or any of its
Subsidiaries or any Commonly Controlled Entity would become subject under ERISA
if Toy Biz or any of its Subsidiaries or any such Commonly Controlled Entity
were to withdraw completely from all Multiemployer Plans as of the most recent
valuation date applicable thereto (the "Potential Withdrawal Liability") is not
in excess of $1,000,000, when aggregated with the Unfunded Pension Amount.
Neither Toy Biz nor any of its Subsidiaries nor any Commonly Controlled Entity
has received notice that any Multiemployer Plan is in Reorganization or
Insolvent where such Reorganization or Insolvency has resulted, or would be
reasonably likely to result in an unpaid liability that would be reasonably
likely to have a Material Adverse Effect nor, to the best knowledge of Toy Biz
or any of its Subsidiaries, is any such Reorganization or Insolvency reasonably
likely to occur. The obligations of Toy Biz and each of its Subsidiaries and
each Commonly Controlled Entity for post retirement benefits to be provided to
their current and former employees under Plans which are welfare benefit plans
(as defined in Section 3(1) of ERISA) are not reasonably likely to have a
Material Adverse Effect, when aggregated with their obligations with respect to
the Unfunded Pension Amount and the Potential Withdrawal Liability.
4.9 Financial Condition. (a) The audited consolidated balance
sheet of Toy Biz for its fiscal year ended December 31, 1997, and the related
statements of earnings and stockholders' equity and cash flows for the fiscal
year then ended, heretofore furnished to the Administrative Agent and the Banks
and certified by Ernst & Young, present fairly the financial position of Toy
Biz as at such date, and the results of its operations and cash flows for the
fiscal year then ended. All such financial statements, including the related
schedules and notes thereto, have been prepared in accordance with GAAP applied
consistently throughout the periods involved except as disclosed in the notes
thereto.
<PAGE>
(b) The unaudited consolidated balance sheet of Toy Biz for
the fiscal quarters ended March 31, 1997, June 30, 1997 and September 30, 1997,
and the related statements of earnings and stockholders' equity and cash flows
for the fiscal periods then ended, heretofore furnished to the Administrative
Agent and the Banks, present fairly (subject to year-end audit adjustments) the
financial position of Toy Biz as at such dates, and the results of its
operations and cash flows for the fiscal periods then ended. All such financial
statements, including the related schedules and notes thereto, have been
prepared in accordance with GAAP applied consistently throughout the periods
involved except as disclosed in the notes thereto.
(c) Except as disclosed on Schedule IV, neither Toy Biz nor
any of its Subsidiaries has any material Contingent Obligation or any material
obligation, liability or commitment, direct or contingent (including, without
limitation, any liability for taxes or any material forward or long-term
commitment), which is not (i) reflected in the foregoing statements or in the
notes thereto or (ii) permitted to be incurred under this Agreement.
4.10 No Change. There has been since December 31, 1997 no
change, or development or event involving a prospective change, which in either
case in the reasonable opinion of the Lenders would be reasonably likely to
have a Material Adverse Effect, other than to the extent disclosed in writing
to the Lenders prior to March 15, 1998.
4.11 Federal Regulations. No part of the proceeds of any
Loans will be used for "purchasing" or "carrying" any "margin stock" in
violation of Regulations G, T, U and X of the Board of Governors of the Federal
Reserve System as now and from time to time hereafter in effect. If requested
by any Bank or the Administrative Agent at any time or from time to time, Toy
Biz will furnish to the Administrative Agent and each Bank a statement to the
foregoing effect in conformity with the requirements of FR Form U-1 or G-3
referred to in said Regulations U and G, respectively.
4.12 Not an "Investment Company". (a) Neither Toy Biz nor any
of its Subsidiaries is an "investment company", or a company "controlled" by an
"investment company", within the meaning of the Investment Company Act of 1940,
as amended. Neither Toy Biz nor any of its Subsidiaries is subject to
regulation under any Federal or state statute or regulation which limits its
ability to incur indebtedness.
4.13 Matters Relating to Subsidiaries. On March 15, 1998, Toy
Biz International and Compana de Juguetes S.A. de C.V. [Mexico] are the only
Subsidiaries of Toy Biz.
4.14 Security Documents. The provisions of each Security
Document to which Toy Biz or any of its Subsidiaries is party are effective to
create in favor of the Administrative Agent for the ratable benefit of the
Banks a legal and valid security interest in all right, title and interest of
Toy Biz and its Subsidiaries in the Collateral described (and as defined)
therein located in the United States. When (i) financing statements in
appropriate form have been filed and recorded in the offices in the
jurisdictions listed in Schedule III, (ii) the Toy Biz Security Agreement has
been timely filed and recorded in the United States Copyright Office and (iii)
the Toy Biz Security Agreement has been timely filed and recorded in the United
States Patent and Trademark Office, the Administrative Agent shall have, for
the ratable benefit of the Banks, a fully perfected security interest in all
right, title and interest of each of Toy Biz and its Subsidiaries in such
domestic Collateral superior in right to any Liens which any third Person may
have against such Collateral or interests therein,
<PAGE>
except for Liens permitted by subsection 7.2. For purposes of this subsection
4.14, the word "timely" shall be defined consistently with the provisions of
Section 205 of 17 U.S.C. and Section 1060 of 15 U.S.C.
4.15 Intellectual Property. Each of Toy Biz and its
Subsidiaries owns, or is licensed to use, all trademarks, tradenames,
copyrights, patents, technology, know-how and processes necessary for the
conduct of its business as currently conducted that are material to the
business, condition (financial or otherwise), operations, performance,
properties or prospects of Toy Biz and its Subsidiaries taken as a whole (the
"Intellectual Property"). No claim has been asserted and is pending by any
Person with respect to the use of any such Intellectual Property, or
challenging or questioning the validity or effectiveness of any such
Intellectual Property and Toy Biz and its Subsidiaries do not know of any valid
basis for any such claim, nor does the use of such Intellectual Property by Toy
Biz and its Subsidiaries infringe on the rights of any Person, except to the
extent of such claims and infringements which would not (including, without
limitation, any liability arising therefrom), in the aggregate, be reasonably
likely to have a Material Adverse Effect.
4.16 Disclosure. No statement, information, schedule, exhibit
or report or other document furnished by Toy Biz or any of its Subsidiaries to
the Administrative Agent or any Bank in connection with the negotiation of this
Agreement and the other Credit Documents or pursuant to the terms of this
Agreement and the other Credit Documents, as such information, schedule,
exhibit or report or other document has been amended, supplemented or
superseded by any other information, schedule, exhibit or report or other
document later delivered to the same parties receiving such information,
schedule, exhibit or report or other document, contained any material
misstatement of fact or omitted to state a material fact or any fact necessary
to make the statements contained therein, in light of the circumstances when
made, not materially misleading; provided, however, that in the case of
statements, information, schedules, exhibits or reports or other documents
made, delivered or prepared by Persons other than Toy Biz, its Subsidiaries and
their agents, such representation and warranty is subject to the qualification
that it is true and correct only to the knowledge of Toy Biz and its
Subsidiaries.
SECTION 5. CONDITIONS PRECEDENT
5.1 Conditions to Initial Extension of Credit. The agreement
of each Bank to make the initial extension of credit requested to be made by it
shall be subject to the satisfaction by such Bank of the following conditions
precedent (the date on which said conditions are satisfied being herein called
the "Closing Date"):
(a) Effectiveness of Agreement. This Agreement shall have
become binding upon the parties hereto in accordance with subsection
10.9;
(b) Notes. The Administrative Agent shall have received, for
the account of each Bank which has so requested, a Note conforming to
the requirements hereof and executed and delivered by a duly
authorized officer of Toy Biz;
(c) Toy Biz Security Agreement. The Administrative Agent
shall have received the Toy Biz Security Agreement, duly executed and
delivered by Toy Biz, and the Administrative Agent shall have received
evidence satisfactory to it that all
<PAGE>
actions necessary to perfect the security interests granted by the Toy
Biz Security Agreement shall have been taken;
(d) Organizational Documents, Corporate Proceedings. The
Administrative Agent shall have received (a) true and complete copies
of the certificate of incorporation and by-laws of Toy Biz, (b) the
resolutions, in form and substance reasonably satisfactory to the
Administrative Agent, of the Board of Directors of Toy Biz,
authorizing (i) the execution, delivery and performance of each Credit
Document to which Toy Biz is a party, (ii) the borrowings contemplated
hereunder, and (iii) the granting by it of the Liens granted by it
pursuant to the Security Documents to which it is a party and (c) a
form of the Stockholders' Agreement, by and among Avi Arad, Isaac
Perlmutter, Isaac Perlmutter T.A., Marvel, Toy Biz, and Zib Inc.
substantially in the form of the Stockholders' Agreement to be
executed in connection with the IPO (the "Stockholders' Agreement") in
each case certified as complete and correct copies thereof by the
Secretary or an Assistant Secretary of Toy Biz, as of the Closing Date
and each such certificate shall state that the resolutions thereby
certified have not been amended, modified, revoked or rescinded as of
the date of such certificate;
(e) Incumbency Certificates. The Administrative Agent shall
have received a certificate of the Secretary or an Assistant Secretary
of Toy Biz, dated the Closing Date, as to the incumbency and signature
of the officers of Toy Biz executing each Credit Document to which it
is a party or any certificate or other documents to be delivered by it
pursuant thereto, together with evidence of the incumbency of such
Secretary or Assistant Secretary, as the case may be;
(f) Financial Models. The Administrative Agent and the Banks
shall have received a detailed financial model for Toy Biz's 1995,
1996 and 1997 fiscal years and a written analysis of the business and
prospects of Toy Biz for such periods, each of which shall be in form
and substance satisfactory to the Banks;
(g) Certain Legal Opinions. The Administrative Agent shall
have received executed legal opinions of:
(i) Paul, Weiss, Rifkind, Wharton & Garrison,
substantially in the form of Exhibit F-1; and
(ii) Amster, Rothstein & Ebenstein, as special
intellectual property counsel, substantially in the form of Exhibit
F-2.
Each of the foregoing legal opinions shall be accompanied by copies of
the legal opinions, if any, upon which such counsel rely, and in each
case shall contain such changes thereto as may be approved by, and as
shall otherwise be in form and substance reasonably satisfactory to,
the Administrative Agent and shall cover such other matters incident
to the transactions contemplated by the Credit Documents as the
Administrative Agent may reasonably require. Each of the counsel
delivering the foregoing legal opinions is expressly instructed to
deliver its opinion for the benefit of each of the Administrative
Agent and the Banks;
(h) Fees. The Administrative Agent shall have received, for
the accounts of the Banks and the Administrative Agent, all accrued
fees and expenses owing hereunder or in connection herewith to the
Administrative Agent and the Banks
<PAGE>
(including, without limitation, accrued fees and disbursements of
primary counsel and local counsel to the Administrative Agent), to the
extent that such fees and expenses have been presented for payment a
reasonable time prior to the Closing Date;
(i) Financial Statements. The Administrative Agent shall have
received copies of the financial statements referenced in subsection
4.9;
(j) Insurance. The Administrative Agent shall have received
evidence satisfactory to it that (i) Toy Biz and each of its
Subsidiaries has obtained the policies of insurance required by the
Security Documents and subsection 6.5, which insurance shall be in
form and substance reasonably satisfactory to the Administrative
Agent, and (ii) the Administrative Agent (in its capacity as
Administrative Agent under this Agreement) has been named insured and
loss payee with respect to all such insurance required by the Security
Documents and all other requirements of the Security Documents with
respect to insurance shall have been fulfilled;
(k) Lien Searches. The Administrative Agent shall have
received the results of a recent lien search by a Person reasonably
satisfactory to the Administrative Agent of the Uniform Commercial
Code filings and tax and judgment liens which may have been filed with
respect to the personal property of Toy Biz and each of its
Subsidiaries and such search shall reveal no Liens, except as (i)
permitted pursuant to this Agreement and (ii) otherwise acceptable to
the Administrative Agent;
(l) Audit. The Administrative Agent shall have received
copies of an audit, in form and substance reasonably satisfactory to
the Administrative Agent, of the accounts receivable and inventory of
Toy Biz prepared by representatives of Chemical Bank;
(m) No New Information. The Banks shall not have become aware
of any previously undisclosed information which would be reasonably
likely to have a Material Adverse Effect;
(n) No Defaults. There shall exist no event of default (or
condition which would constitute an event of default with the giving
of notice or the passage of time) under any capital stock, financing
agreements, lease agreements or other contracts of Toy Biz or any of
its Subsidiaries;
(o) Collateral Perfection. All filings and other actions
required to create and perfect a first priority security interest in
all Collateral shall have been duly made or taken, and all Collateral
shall be free and clear of other liens except as permitted pursuant to
subsection 7.2;
(p) The IPO. The Administrative Agent shall have received
evidence satisfactory to it that Toy Biz received at least $20,000,000
in Net Cash Proceeds in connection with the IPO;
(q) Miscellaneous Matters. The Banks shall be reasonably
satisfied with the status of all labor, tax, employee benefit and
health and safety matters involving Toy Biz and its Subsidiaries;
<PAGE>
(r) Existing Credit Agreement. All loans, accrued interest
and fees and any other amounts owing to the lenders and the
Administrative Agent under the Existing Credit Agreement shall have
been paid and the Existing Credit Agreement shall have been
terminated; and
(s) Additional Matters. All corporate and other proceedings,
and all documents, including without limitation, any employment
agreement, management compensation agreement or other financing
agreement of Toy Biz, instruments and other legal, diligence and
financial matters in connection with the transactions contemplated by
the Credit Documents shall be reasonably satisfactory in form and
substance to the Lenders.
5.2 Conditions to Each Extension of Credit. The agreement of
each Bank to make any extension of credit requested to be made by it on any
date is subject to the satisfaction of the following conditions precedent:
(a) Representations and Warranties. Each of the
representations and warranties made by each party to each Credit
Document in or pursuant to this Agreement or any other Credit
Document, or contained in any certificate or financial statement
furnished at any time under or in connection with this Agreement or
any other Credit Document shall be true and correct in all material
respects on and as of such date as if made on and as of such date,
both before and after giving effect to such extension of credit, and
to all other extensions of credit to be made on such date and the use
of the proceeds thereof; and
(b) No Default. No Event of Default and no Default shall have
occurred and be continuing on such date or after giving effect to the
extensions of credit requested to be made on such date.
Each borrowing by, and Letter of Credit issued on behalf of, Toy Biz hereunder
shall constitute a representation and warranty by Toy Biz, as of the date of
such borrowing, that the conditions contained in paragraphs (a) and (b) of this
subsection 5.2 have been satisfied.
SECTION 6. AFFIRMATIVE COVENANTS
Toy Biz hereby agrees that, until the Payment Obligations
have been Fully Satisfied:
6.1 Financial Statements. Toy Biz will furnish to each Bank,
through the Administrative Agent:
(a) as soon as available, but in any event within 100 days
after the end of each fiscal year of Toy Biz, a copy of the audited
consolidated balance sheet of Toy Biz and its Subsidiaries as at the
end of such year and the related consolidated statements of earnings
and stockholders' equity and cash flows for such year, setting forth
in each case in comparative form the figures for the previous year,
certified without a "going concern" or like qualification or
exception, or qualification arising out of the scope of the audit, by
independent certified public accountants of nationally recognized
standing not unacceptable to the Majority Banks;
<PAGE>
(b) as soon as available, but in any event within 100 days
after the end of each fiscal year of Toy Biz, a copy of the
consolidating balance sheet of Toy Biz and its Subsidiaries as at the
end of such year and the related consolidating statements of earnings
and cash flows for such year, setting forth in each case in
comparative form the figures for the previous year, certified by a
Responsible Officer;
(c) as soon as available, but in any event within 50 days
after the end of each of the first three fiscal quarters in each
fiscal year of Toy Biz, a copy of the unaudited consolidated balance
sheet of Toy Biz and its Subsidiaries as at the end of each such
quarter and the related unaudited consolidated statements of earnings
and stockholders' equity and cash flows for such quarterly period and
the portion of the fiscal year through such date, setting forth in
each case in comparative form the figures for the previous year,
certified by a Responsible Officer (subject to normal year-end audit
adjustments);
(d) as soon as available, but in any event within 50 days
after the end of the first three fiscal quarters in each fiscal year
of Toy Biz, a copy of the unaudited consolidating balance sheet of Toy
Biz and its Subsidiaries as at the end of each such quarter and the
related unaudited consolidating statements of earnings and cash flows
for such quarterly period and the portion of the fiscal year through
such date, setting forth in each case in comparative form the figures
for the previous year, certified by a Responsible Officer (subject to
normal year-end audit adjustments); and
(e) as soon as available, but in any event within 30 days
after the end of each of fiscal month of Toy Biz (other than the
fiscal month ending December 31, 1998, with respect to which such
financial statements shall be due on February 14, 1999), a copy of the
unaudited consolidated balance sheet of Toy Biz and its Subsidiaries
as at the end of each such month and the related unaudited
consolidated statements of earnings and stockholders' equity and cash
flows for such monthly period and the portion of the fiscal year
through such date, in such form and detail as is customarily provided
to senior management of Toy Biz and certified by a Responsible Officer
(subject to normal year-end audit adjustments).
All financial statements referred to in this subsection 6.1
shall be prepared in reasonable detail and in accordance with GAAP applied
consistently throughout the periods reflected therein (except as approved by
such accountants or Responsible Officer, as the case may be, and disclosed
therein). All such financial statements which reflect a change in GAAP from
prior financial statements delivered hereunder shall set forth in reasonable
detail any material effect of such changes on what the compliance calculations
in respect of the financial covenants herein would have been had such financial
covenants been based upon GAAP as from time to time in effect instead of GAAP
as in effect as of the date of, and used in, the preparation of the financial
statements referred to in subsection 4.9.
6.2 Certificates; Other Information. Toy Biz will furnish to
each Bank, through the Administrative Agent:
(a) concurrently with the delivery of the financial
statements referred to in subsection 6.1(a), a certificate of the
independent certified public accountants certifying such financial
statements stating that in making the examination necessary therefor
no knowledge was obtained of any Default or Event of Default, except
as specified in such certificate;
<PAGE>
(b) concurrently with the delivery of the financial
statements referred to in subsections 6.1(a) through (d), a
certificate of a Responsible Officer stating that, to the best of such
Responsible Officer's knowledge, Toy Biz during such period has
observed or performed in all material respects all of its covenants
and other agreements, and satisfied in all material respects every
condition, contained in the Credit Documents to be observed, performed
or satisfied by it, and that such officer has obtained no knowledge of
any Default or Event of Default, except as specified in such
certificate;
(c) within 60 days following the commencement of each fiscal
year, the budget for Toy Biz and its Subsidiaries for such fiscal
year, showing each quarter separately;
(d) promptly upon receipt thereof, copies of all audit
reports submitted to Toy Biz by independent public accountants in
connection with each interim or special audit of the books of Toy Biz
or any of its Subsidiaries made by such accountants;
(e) within five days after the same are sent, copies of all
financial statements and reports which Toy Biz sends to holders of its
publicly traded equity securities or Indebtedness, if any, pursuant to
Section 13 or 15(d) of the Exchange Act, and within five days after
the same are filed, copies of all financial statements and reports
which Toy Biz may make to, or file with, the Securities and Exchange
Commission;
(f) not later than 20 days after the end of each calendar
month (and, if requested by the Agent at any other time when the Agent
reasonably believes that the then-existing Borrowing Base is
materially inaccurate, as soon as reasonably available but in no event
later than ten days after the date of such request), a Borrowing Base
Certificate setting forth the Borrowing Base as of the last day of
such calendar month (or as of such other requested date, as the case
may be), with supporting documentation (including, without limitation,
the documentation described in Exhibit H), duly completed and signed
by a Responsible Officer of Toy Biz (in his or her capacity as such)
and certified by such Responsible Officer as being complete and
correct; provided that (i) during the months of August through
November of 1998, Toy Biz shall also compute and certify the Borrowing
Base by the 30th day of such months, which computation shall be for
the Borrowing Base at the 15th day of such month and (ii) for purposes
of calculating the Borrowing Base at the 15th day of the months of
August through November of 1998, Toy Biz shall be permitted to use its
good faith, best estimate of Eligible Inventory and Eligible Accounts;
and
(g) promptly, such additional documents and financial and
other information with respect to Toy Biz and its Subsidiaries as the
Administrative Agent or any Bank may from time to time reasonably
request.
6.3 Payment of Obligations. Toy Biz will, and will cause each
of its Subsidiaries to, pay, discharge or otherwise satisfy at or before
maturity or before they become delinquent, as the case may be, all its
Indebtedness and other material obligations of whatever nature, except when the
amount or validity thereof is then being contested in good faith by appropriate
proceedings and reserves with respect thereto to the extent, if any, required
by GAAP have been provided on the books of Toy Biz or such Subsidiary, as the
case may be.
<PAGE>
6.4 Conduct of Business and Maintenance of Existence. Except
as permitted by this Agreement, Toy Biz and its Subsidiaries will continue to
engage in business of the same general type as now conducted by Toy Biz and its
Subsidiaries; and, except as permitted by this Agreement, Toy Biz will, and
will cause each of its Subsidiaries to, preserve, renew and keep in full force
and effect its corporate existence and take all reasonable action to maintain
all rights, privileges and franchises necessary or desirable in the normal
conduct of its business, except as otherwise permitted pursuant to subsections
7.4 and 7.5 and except that Toy Biz and its Subsidiaries may fail to maintain
any such rights, privileges and franchises (including, without limitation,
Trademarks and Copyrights) which in Toy Biz's business judgment are not
necessary in the best interests of Toy Biz to be maintained, and comply with
all Contractual Obligations and Requirements of Law except to the extent that
all failures to comply therewith would not in the aggregate, be reasonably
likely to have a Material Adverse Effect. Toy Biz and its Subsidiaries will not
make any material change in its present method of conducting business.
6.5 Maintenance of Property; Insurance. Toy Biz will, and
will cause each of its Subsidiaries to, (a) keep all property useful and
necessary in its business in good working order and condition, except where the
failure to do so would not, in the aggregate, be reasonably likely to have a
Material Adverse Effect and (b) maintain with financially sound and reputable
insurance companies insurance on such of its property and against such
liabilities in at least such amounts and against at least such risks as are
customarily insured against in the same general area by companies engaged in
the same or a similar business and furnish to the Administrative Agent, upon
written request, and to each Bank which makes a written request through the
Administrative Agent, reasonable information as to the insurance carried.
6.6 Inspection of Property; Books and Records; Discussions.
(a) Toy Biz will, and will cause each of its Subsidiaries to, (i) keep proper
books of accounts and records in which entries in conformity in all material
respects with all Requirements of Law shall be made of all dealings and
transactions in relation to its businesses and activities and which shall
permit the preparation of financial statements in conformity with GAAP and (ii)
permit representatives of any Bank to visit and inspect such of its properties
as such Bank may request through the Administrative Agent and (during such
visit or inspection, or otherwise upon request through the Administrative
Agent) examine and make abstracts from such of its books and records as it may
reasonably request at any reasonable time and as often as may reasonably be
desired, and to discuss the business, condition (financial or otherwise),
performance, properties and prospects of Toy Biz and its Subsidiaries with
officers and employees of Toy Biz and its Subsidiaries and with its then
independent certified public accountants.
(b) Toy Biz will, and will cause each of its Subsidiaries to,
permit the Agent, the Lenders and/or professionals (including, without
limitation, investment bankers, consultants, accountants, lawyers and
appraisers) retained by the Agent to conduct at any time and from time to time
(upon reasonable advance notice to Toy Biz) evaluations and appraisals of (i)
the practices of Toy Biz in computing the Borrowing Base and (ii) the assets
included in the Borrowing Base. Toy Biz shall pay, promptly upon receipt of an
invoice therefor, the reasonable fees and expenses of the Agent (including,
without limitation, the customary fees and any expenses of the Agent's
Collateral Agent Services Group) in connection any such evaluations and
appraisals; provided that, unless a Default or Event of Default has occurred
and is continuing, Toy Biz shall not be obligated to pay such fees and expenses
with respect to (x) any such evaluations and appraisals conducted during the
<PAGE>
period from March 15, 1998 through June 30, 1998 and (y) more than two such
evaluations after June 30, 1998. In addition, Toy Biz shall pay, promptly upon
receipt of an invoice therefor, the customary fees and expenses of the Agent's
Collateral Agent Services Group in evaluating and reviewing Borrowing Base
Certificates delivered from time to time.
6.7 Notices. Toy Biz will promptly give notice to each Bank,
through the Administrative Agent, and the Administrative Agent:
(a) of the occurrence of any Default or Event of Default;
(b) of any default or event of default by Toy Biz or any of
its Subsidiaries under any Contractual Obligation of Toy Biz or any of
its Subsidiaries or the institution of, or the occurrence of any
material adverse change in the status or likely result of, any
litigation, investigation or proceeding which may exist at any time
between Toy Biz or any of its Subsidiaries and any Governmental
Authority or any other Person which, in any of the foregoing cases,
would be reasonably likely to have a Material Adverse Effect;
(c) of (i) any violation or noncompliance by Toy Biz or any
of its Subsidiaries or, to the best of its knowledge, any other Person
of any Environmental Laws which would be reasonably likely to have a
Material Adverse Effect or (ii) any liability or potential liability
to Toy Biz or any of its Subsidiaries or, to the best of its
knowledge, to any other Person under, any Environmental Laws which
would be reasonably likely to have a Material Adverse Effect;
(d) of any of the following events, as soon as possible, and
in any event, within 30 days after Toy Biz knows or has reason to know
thereof:
(i) the occurrence or expected occurrence of any Reportable
Event with respect to any Plan; or
(ii) the institution of proceedings or the taking or
expected taking of any other action by PBGC or Toy Biz or any
Commonly Controlled Entity to terminate, withdraw or
partially withdraw from any Plan and with respect to a
Multiemployer Plan, the Reorganization or Insolvency of such
Plan;
if such Reportable Event, termination, withdrawal or partial
withdrawal (and, in the case of any Multiemployer Plan, its Reorganization or
Insolvency) would be reasonably likely to result in liability to Toy Biz and
its Subsidiaries, in the aggregate, in excess of $500,000;
(e) of (i) the incurrence of any Lien (other than any Lien
permitted by subsection 7.2) on, or any claim asserted against any of
the collateral security in the Security Documents to which Toy Biz or
any of its Subsidiaries is a party or (ii) the occurrence of any other
event which would be reasonably likely to have a material adverse
effect on the aggregate value of the Collateral under the Security
Documents;
(f) of a material adverse change in the business, condition
(financial or otherwise), operations, performance, properties or
prospects of Toy Biz and its Subsidiaries taken as a whole, or of any
event which would be reasonably likely to have a Material Adverse
Effect; and
<PAGE>
(g) of any material change in the credit terms made available
by any Included Division to an Account Debtor.
Each notice pursuant to this subsection 6.7 shall be accompanied by a statement
of a Responsible Officer of Toy Biz setting forth details of the occurrence
referred to therein and stating what action Toy Biz proposes to take with
respect thereto.
6.8 Maintenance of Corporate Identity. Toy Biz will operate
its businesses and those of its Subsidiaries, and maintain their records,
independently from any Person (a "Parent") which, directly or indirectly, is in
control (as defined in Rule 12b-2 under the Exchange Act) of Toy Biz and
independently from any Subsidiary of such Parent other than Toy Biz and its
Subsidiaries; and Toy Biz will maintain bank accounts separate from the bank
accounts of each Parent of Toy Biz and act solely in its own corporate name and
through its own authorized officers and agents.
6.9 Environmental Laws. Toy Biz will, and will cause each of
its Subsidiaries to:
(a) comply with and require compliance by all tenants and
subtenants, if any, with all Environmental Laws and obtain and comply
in all respects with and maintain, and require that all tenants and
subtenants obtain and comply with and maintain, any and all licenses,
approvals, registrations or permits required by Environmental Laws,
except to the extent that the failure to do so would not be reasonably
likely to have a Material Adverse Effect;
(b) conduct and complete all investigations, studies,
sampling and testing, and all remedial, removal and other actions
required under Environmental Laws and promptly comply in all respects
with all lawful orders and directives of all Governmental Authorities
respecting Environmental Laws, except (i) to the extent that the
failure to perform any of the obligations contained in this clause (b)
would not be reasonably likely to have a Material Adverse Effect or
(ii) to the extent that such obligations are being contested in good
faith by appropriate proceedings and the pendency of such proceedings
would not be reasonably likely to have a Material Adverse Effect; and
(c) defend, indemnify and hold harmless the Administrative
Agent and the Banks, and their respective employees, agents, officers
and directors, from and against any claims, demands, penalties, fines,
liabilities, settlements, damages, costs and expenses of whatever kind
or nature, known or unknown, contingent or otherwise, arising out of,
or in any way relating to the violation of or noncompliance with any
Environmental Laws by Toy Biz or any of its Subsidiaries, or any
orders, requirements or demands of Governmental Authorities related
thereto, including without limitation reasonable attorney and
consultant fees, investigation and laboratory fees, court costs and
litigation expenses, except to the extent that any of the foregoing
arise out of the gross negligence or willful misconduct of the party
seeking indemnification therefor. The agreements in this subsection
6.9(c) shall survive the payment of the Loans, the Notes, and all
other amounts payable hereunder.
6.10 Maintenance of the Liens of the Security Documents. Toy
Biz will, and will cause each of its Subsidiaries to, promptly, upon the
reasonable request of any Bank, at Toy Biz's expense, execute, acknowledge and
deliver, or cause the execution,
<PAGE>
acknowledgement and delivery of, and thereafter register, file or record, or
cause to be registered, filed or recorded, in an appropriate governmental
office, any document or instrument supplemental to or in conformity of the
Security Documents to which Toy Biz or any Subsidiary is a party or otherwise
reasonably deemed by the Administrative Agent to be necessary or desirable for
the continued validity, perfection and priority of the Liens on the collateral
covered thereby.
6.11 International Pledge Agreement. Toy Biz will as soon as
possible and in no event later than 30 days after the Closing Date (a) pledge
65% of the capital stock of Toy Biz International to the Administrative Agent
pursuant to the International Pledge Agreement and (b) cause the Administrative
Agent to receive, with a counterpart for each Bank, legal opinions of counsel
acceptable to the Administrative Agent covering such matters in respect of the
International Pledge Agreement as the Administrative Agent shall reasonably
request.
SECTION 7. NEGATIVE COVENANTS
Toy Biz hereby agrees that, until the Payment Obligations are
Fully Satisfied:
7.1 Indebtedness. Toy Biz will not, and will not permit any
of its Subsidiaries to, create, incur, assume or suffer to exist any
Indebtedness, except for:
(a) Indebtedness in respect of the Loans, the Notes and the
Letters of Credit;
(b) Indebtedness of Toy Biz to any Subsidiary and of any
Subsidiary to Toy Biz or any other Subsidiary; provided that any
interest on such Indebtedness of a Subsidiary to Toy Biz shall be paid
in cash or in kind at a rate per annum equal to at least the Alternate
Base Rate on the date of incurrence of such Indebtedness plus 1-1/2%;
(c) Indebtedness in respect of the undrawn portion of the
face amount of letters of credit issued for the account of Toy Biz or
any Subsidiary in an aggregate amount not to exceed at any one time
outstanding for Toy Biz and its Subsidiaries the amount equal to (x)
$2,000,000 minus (y) the aggregate amount of L/C Obligations then
outstanding;
(d) Indebtedness in respect of the Subordinated Debt;
(e) Indebtedness of Toy Biz in the nature of refinancings,
refundings, renewals or extension of Indebtedness otherwise permitted
under subsection 7.1(b) and (c); and
(g) Indebtedness in respect of the New Preferred Stock.
7.2 Limitation on Liens. Toy Biz will not, and will not
permit any of its Subsidiaries to, create, incur, assume or suffer to exist any
Lien upon any of their properties, assets (including shares of stock) or
revenues, whether now owned or hereafter acquired, except for:
(a) Liens for taxes not yet due or which are being contested
in good faith by appropriate proceedings, provided that adequate
reserves with respect thereto are
<PAGE>
maintained on the books of Toy Biz or its Subsidiaries, as the case
may be, in conformity with GAAP;
(b) carriers', warehousemen's, mechanics', materialmen's,
repairmen's or other like Liens arising in the ordinary course of
business which are not overdue for a period of more than 60 days or
which are being contested in good faith by appropriate proceedings;
(c) pledges or deposits in connection with workers' compensation,
unemployment insurance and other social security legislation and
deposits securing liability to insurance carriers under insurance or
self-insurance arrangements;
(d) deposits to secure the performance of bids, trade
contracts (other than for borrowed money), leases, statutory
obligations, surety and appeal bonds, performance bonds and other
obligations of a like nature incurred in the ordinary course of
business;
(e) easements, rights-of-way, restrictions and other similar
encumbrances incurred in the ordinary course of business which, in the
aggregate, are not substantial in amount and which do not in any case
materially detract from the value of the property subject thereto or
materially interfere with the ordinary conduct of the business of Toy
Biz or such Subsidiary;
(f) Liens (not otherwise permitted hereunder) which secure
obligations not exceeding (as to Toy Biz and all Subsidiaries)
$250,000 in aggregate amount at any time outstanding;
(g) Liens created pursuant to the Security Documents; and
(h) Liens securing letters of credit permitted under
subsection 7.1(c).
7.3 Limitation on Contingent Obligations. Except as disclosed
on Schedule IV, Toy Biz will not, and will not permit any of its Subsidiaries
to, agree to, or assume or incur, or otherwise in any way be or become
responsible or liable, directly or indirectly, with respect to, any Contingent
Obligation other than guarantees made in the ordinary course of its business by
Toy Biz of Indebtedness permitted by subsection 7.1.
7.4 Limitation on Fundamental Changes. Toy Biz will not, and
will not permit any of its Subsidiaries to, enter into any transaction in the
nature of merger, consolidation or amalgamation, or liquidate, wind up or
dissolve itself (or suffer any liquidation or dissolution), or convey, sell,
lease, assign, transfer or otherwise dispose of, in one transaction or a series
of related transactions, all or a substantial part of the business or assets of
Toy Biz, or enter into any such transaction or series of related transactions
with regard to a group of Subsidiaries which, if merged into a single
Subsidiary, would constitute a substantial part of the business or assets of
Toy Biz, or acquire by purchase or otherwise all or substantially all the
business or assets of, or stock or other evidences of beneficial ownership of,
any Person, or make any material change in its present method of conducting
business, except:
(a) any Subsidiary of Toy Biz may be merged or consolidated
with or into Toy Biz (provided that Toy Biz shall be the continuing or
surviving corporation) or with
<PAGE>
or into any one or more wholly owned Subsidiaries of Toy Biz (provided
that the wholly owned Subsidiary or Subsidiaries shall be the
continuing or surviving corporation);
(b) any wholly owned Subsidiary may sell, lease, transfer or
otherwise dispose of any or all of its assets (upon voluntary
liquidation or otherwise) to Toy Biz or any other wholly owned
Subsidiary of Toy Biz; and
(c) Toy Biz or any of its domestic Subsidiaries may be merged
or consolidated with or into Marvel Entertainment Group, Inc. pursuant
to the Plan of Reorganization of Marvel Entertainment Group, Inc.
described in the Disclosure Statement approved by the United States
Bankruptcy Court for the District of Delaware on March 13, 1998, as
the same may be amended, supplemented or otherwise modified from time
to time; provided that any material amendment, supplement or other
modification thereto has been consented to by the Majority Banks.
7.5 Limitation on Sale of Assets. Toy Biz will not, and will
not permit any of its Subsidiaries to, convey, sell, lease, assign, transfer or
otherwise dispose of any of its property, business or assets (including,
without limitation, receivables and leasehold interests), whether now owned or
hereafter acquired, or, in the case of any of the Subsidiaries of Toy Biz,
issue or sell any shares of capital stock (other than any director's qualifying
shares), to any Person other than Toy Biz or any of its Subsidiaries, except:
(a) the sale or other disposition of obsolete or worn out
property in the ordinary course of business;
(b) the sale of inventory in the ordinary course of business;
(c) as permitted by subsections 7.2 and 7.4(b);
(d) licensing agreements entered into with respect to
Trademarks, Copyrights or Patents, or with respect to any products of
Toy Biz manufactured by or for Toy Biz for sale or molds, dies, casts,
stencils or similar tooling materials incorporating or derived from
any such Trademarks, Copyrights or Patents, in any case in the
ordinary course of business; and
(e) notwithstanding the parenthetical contained in the third
and fourth lines of the precatory language of this subsection 7.5,
receivables due and payable to Toy Biz from its customers, when (i)
such receivables are sold or otherwise conveyed to a factor or other
third party purchaser without any recourse to Toy Biz or its
Subsidiaries (other than as a result of a misrepresentation on any
matter other than the creditworthiness of the obligor of any
receivable) and (ii) in the reasonable business judgment of the Chief
Financial Officer of Toy Biz, such transaction or series of
transactions would be in the economic interest of Toy Biz under the
facts and circumstances then appertaining; provided that the aggregate
undiscounted face amount of receivables sold in reliance upon the
provisions of this subsection 7.5(e) shall not exceed $1,000,000 in
any period of 12 consecutive calendar months.
7.6 Limitation on Leases. Toy Biz will not, and will not
permit any of its Subsidiaries to, permit Consolidated Lease Expense for any
fiscal year of Toy Biz to exceed $1,500,000.
<PAGE>
7.7 Limitation on Dividends. Toy Biz will not, and will not
permit any of its Subsidiaries to, declare or pay any dividend (other than
dividends payable solely in common stock of Toy Biz) on, or make any payment on
account of, or set apart assets for a sinking or other analogous fund for, the
purchase, redemption, defeasance, retirement or other acquisition of, any
shares of any class of capital stock of Toy Biz or any warrants or options to
purchase any such stock, whether now or hereafter outstanding, or make any
other distribution in respect thereof, either directly or indirectly, whether
in cash or property or in obligations of Toy Biz or any Subsidiary.
7.8 Limitation on Capital Expenditures. Toy Biz will not, and
will not permit any of its Subsidiaries to, make or commit to make (by way of
the acquisition of securities of a Person or otherwise) any expenditure in
respect of the purchase or other acquisition of fixed or capital assets
(excluding any such asset acquired in connection with normal replacement and
maintenance programs properly charged to current operations), except for
expenditures in the ordinary course of business not exceeding, in the aggregate
for Toy Biz and its Subsidiaries, $15,000,000 during the 1998 fiscal year of
Toy Biz and $3,000,000 during the portion of the 1999 fiscal year of Toy Biz
prior to the Termination Date.
7.9 Limitation on Investments, Loans and Advances. Toy Biz
will not, and will not permit any of its Subsidiaries to, make any advance,
loan, extension of credit or capital contribution to, or purchase any stock,
bonds, notes, debentures or other securities of or any assets constituting a
business unit of, or make any other investment in, any Person, except:
(a) extensions of trade credit in the ordinary course of
business;
(b) investments in Cash Equivalents;
(c) loans and advances to employees of Toy Biz or its
Subsidiaries for travel, entertainment and relocation expenses in the
ordinary course of business in an aggregate amount for Toy Biz and its
Subsidiaries not to exceed $700,000 at any one time outstanding;
(d) investments by Toy Biz in its Subsidiaries and
investments by such Subsidiaries in Toy Biz and in other Subsidiaries;
(e) investments (including, without limitation, advances
against royalties) in license rights and investments incident to the
exploitation of such rights in the ordinary course of business;
(f) loans and advances to Avi Arad for the sole purpose of
providing financing to him for any income tax liability in excess of
$7,100,000 (the "Incremental Liability") actually incurred by him as a
result of the exercise by him of certain options with respect to the
capital stock of Toy Biz; provided, that (i) Avi Arad shall grant to
Toy Biz (and Toy Biz shall maintain) a first priority, perfected
security interest in such capital stock of Toy Biz held by Avi Arad as
Toy Biz shall deem appropriate, (ii) such loans and advances shall
bear interest from time to time at the rate then payable by Toy Biz
hereunder (with such interest to accrue during the life of such loans
and advances and to be payable upon their final maturity) and (iii)
the aggregate amount of such loans and advances do not exceed the
after-tax benefit to Toy Biz from the Incremental Liability;
<PAGE>
(g) investments in the capital stock of Marvel Entertainment
Group, Inc. made pursuant to the Plan of Reorganization of Marvel
Entertainment Group, Inc. described in the Disclosure Statement
approved by the United States Bankruptcy Court for the District of
Delaware on March 13, 1998, as the same may be amended, supplemented
or otherwise modified from time to time; provided that any material
amendment, supplement or other modification thereto has been consented
to by the Majority Banks.
7.10 Limitation on Optional Payments and Modifications of
Subordinated Debt. Toy Biz will not, and will not permit any of its
Subsidiaries to, (a) make any optional payment or prepayment on or redemption
of any Subordinated Debt, provided that the foregoing shall not prohibit
optional payments, prepayments or redemptions of Subordinated Debt with any Net
Cash Proceeds received as a result of the issuance of equity securities in
connection with the IPO, (b) amend, modify or change, or consent or agree to
any amendment, modification or change to any of the terms of any Subordinated
Debt (other than any such amendment, modification or change which would extend
the maturity or reduce the amount of any payment of principal thereof or which
would reduce the rate or extend the date for payment of interest thereon), or
(c) amend the subordination provisions of any Subordinated Debt.
7.11 Limitation on Transactions with Affiliates. Toy Biz will
not, and will not permit any of its Subsidiaries to, enter into any
transaction, including, without limitation, any purchase, sale, lease or
exchange of property or the rendering of any service, with any Affiliate unless
such transaction is (a) otherwise permitted under this Agreement, (b) in the
ordinary course of Toy Biz's or such Subsidiary's business and (c) upon fair
and reasonable terms no less favorable to Toy Biz or such Subsidiary, as the
case may be, than it would obtain in a comparable arm's length transaction with
a Person which is not an Affiliate; provided that nothing contained in this
subsection 7.11 shall be deemed to prohibit the consummation of the
transactions contemplated by subsections 7.4(c) and 7.9(g).
7.12 Limitation on Changes in Fiscal Year. Toy Biz will not
permit the fiscal year of Toy Biz to end on a day other than December 31.
7.13 Limitation on Negative Pledge Clauses. Toy Biz will not,
and will not permit any of its Subsidiaries to, enter into with any Person any
agreement, other than (a) this Agreement and (b) any industrial revenue bonds,
purchase money mortgages or Financing Leases permitted by this Agreement (in
which cases, any prohibition or limitation shall only be effective against the
assets financed thereby), which prohibits or limits the ability of Toy Biz or
any of its Subsidiaries to create, incur, assume or suffer to exist any Lien
upon any of its property, assets or revenues, whether now owned or hereafter
acquired.
7.14 Limitation on Lines of Business. Toy Biz will not, and
will not permit any of its Subsidiaries to, enter into any business, either
directly or through any Subsidiary, except for those businesses in which Toy
Biz and its Subsidiaries are engaged on the date of this Agreement or which are
of a nature similar to the nature of, or that constitute reasonable extensions
of, the business carried on by Toy Biz and its Subsidiaries as of the date of
this Agreement.
7.15 Subsidiaries. Toy Biz will not, and will not permit any
of its Subsidiaries to, create, acquire or otherwise suffer to exist any
Subsidiary which was not a direct or indirect Subsidiary of Toy Biz on the
Closing Date unless:
<PAGE>
(a) such new Subsidiary is organized under the laws of a
jurisdiction within the United States and is party to a Subsidiary
Guarantee and a Subsidiary Security Agreement in form and substance
reasonably satisfactory to the Administrative Agent or otherwise has
provided to the Administrative Agent a fully perfected, first priority
security interest in substantially all of the assets of such new
Subsidiary located in the United States pursuant to documentation
reasonably satisfactory to the Administrative Agent and the
Administrative Agent has received a fully perfected, first priority
security interest pursuant to documentation in form and substance
reasonably satisfactory to the Administrative Agent, in all of the
issued and outstanding capital stock of such new Subsidiary owned by
Toy Biz or any of its Subsidiaries, together with such related
documents, instruments, agreements and legal opinions as the
Administrative Agent reasonably may require; or
(b) such new Subsidiary is organized under the laws of a
jurisdiction outside of the United States and the Administrative Agent
has received a fully perfected, first priority security interest
pursuant to documentation in form and substance reasonably
satisfactory to the Administrative Agent, in 65% of the issued and
outstanding capital stock of such new Subsidiary owned by Toy Biz or
any of its Subsidiaries together with such related documents,
instruments, agreements or legal opinions as the Administrative Agent
reasonably may require.
7.16 Financial Covenants. Toy Biz will not:
(a) Minimum EBITDA. Permit EBITDA for the fiscal quarter
ending on each date set forth below to be less than the amount set
forth below opposite such date:
Date Amount
12/31/97 $(16,500,000)
03/31/98 4,526,000
06/30/98 9,264,000
09/30/98 11,020,000
12/31/98 12,880,000
(b) Current Ratio. Permit the Current Ratio as of each date
set forth below to be less than the ratio set forth opposite such date:
Date Ratio
12/31/97 1.75 to 1.0
03/31/98 1.94 to 1.0
06/30/98 2.06 to 1.0
09/30/98 1.63 to 1.0
12/31/98 2.04 to 1.0
7.17 Cash Management System. Toy Biz will not, and will not
permit any of its domestic Subsidiaries to establish or maintain, or permit to
be established or maintained, any bank accounts in the name of, or for the
benefit of, Toy Biz or any of its Subsidiaries, with any Person other than The
Chase Manhattan Bank.
<PAGE>
SECTION 8. EVENTS OF DEFAULT
Upon the occurrence and during the continuance of any of the
following events:
(a) Payments. Failure by Toy Biz to pay any principal of or
interest on any Loan, any Reimbursement Obligation or Note when due in
accordance with the terms thereof and hereof, or failure by Toy Biz to
pay any fee or other amount payable by it in connection with any
Credit Document within five days after the date when due; or
(b) Representations and Warranties. Any representation or
warranty made or deemed made by Toy Biz or any of its Subsidiaries in
any Credit Document or which is contained in any certificate or
financial statement furnished at any time under or in connection
herewith or therewith shall prove to have been incorrect, false or
misleading in any material respect on or as of the date when made or
deemed to have been made; or
(c) Negative Covenants. Default by Toy Biz or any of its
Subsidiaries in the observance or performance of any negative covenant
or agreement contained in Section 7; or
(d) Security Document Covenants. Default by Toy Biz or any of
its Subsidiaries in the observance or performance of any covenant or
agreement contained in any Security Document and such default shall
continue unremedied for a period of 15 Business Days; or
(e) Other Covenants. Default by Toy Biz or any of its
Subsidiaries in the observance or performance of any other covenant or
agreement contained or incorporated by reference in this Agreement or
in any other Credit Document other than as provided in clauses (a)
through (d) above, and such default shall continue unremedied for a
period of 30 days; or
(f) Effectiveness of the Security Documents and the
Subsidiary Guarantee. On or after the Closing Date, (i) for any reason
(other than any act on the part of the Administrative Agent or any
Bank) any Security Document or any Guarantee ceases to be or is not in
full force and effect or any Liens intended to be created by any
Security Document on any Collateral which, individually or in the
aggregate, is material, ceases to be or is not a valid and perfected
Lien having the priority contemplated thereby or (ii) Toy Biz or any
of its Subsidiaries shall assert in writing that any Security Document
or any Guarantee has ceased to be or is not in full force and effect;
or
(g) Cross Default. Toy Biz or any of its Subsidiaries shall
Cross Default; or
(h) Commencement of Bankruptcy or Reorganization Proceeding.
(i) Toy Biz or any of its Subsidiaries shall commence any case,
proceeding or other action (A) under any existing or future law of any
jurisdiction, domestic or foreign, relating to bankruptcy, insolvency,
reorganization or relief of debtors, seeking to have an order for
relief entered with respect to it, or seeking to adjudicate it as
bankrupt or insolvent, or seeking reorganization, arrangement,
adjustment, wind-up, liquidation, dissolution, composition or other
relief with respect to it or its debts, or (B) seeking
<PAGE>
appointment of a receiver, trustee, custodian or other similar
official for it or for all or any substantial part of its assets; or,
(ii) there shall be commenced against Toy Biz or any of its
Subsidiaries any such case, proceeding or other action referred to in
subsection (i) which results in the entry of an order for relief or
any such adjudication or appointment remains undismissed, undischarged
or unbonded for a period of 60 days, provided that Toy Biz, for itself
and on behalf of each of its Subsidiaries, hereby expressly authorizes
the Administrative Agent and each Bank to appear in any court
conducting any such case, proceeding or other action during said
60-day period to preserve, protect and defend their rights under the
Credit Documents; or (iii) there shall be commenced against Toy Biz or
any of its Subsidiaries any case, proceeding or other action seeking
issuance of a warrant of attachment, execution, distraint or similar
process against all or any substantial part of its assets which
results in the entry of an order for any such relief which shall not
have been vacated, discharged, or stayed or bonded pending appeal
within 60 days from the entry thereof; or (iv) Toy Biz or any of its
Subsidiaries shall take any action authorizing, or in furtherance of,
or indicating its consent to, approval of, or acquiescence in, any of
the acts set forth above in this paragraph (h); or (v) Toy Biz or any
of its Subsidiaries shall generally not, or shall be unable to, or
shall admit in writing its inability to, pay its debts as they become
due; or
(i) ERISA. (i) Any Person shall engage in any "prohibited
transaction" (as defined in Section 406 of ERISA or Section 4975 of
the Code) involving any Plan, (ii) any "accumulated funding
deficiency" (as defined in Section 302 of ERISA), whether or not
waived, shall exist with respect to any Plan, (iii) a Reportable Event
shall occur with respect to, or proceedings shall commence to have a
trustee appointed, or a trustee shall be appointed, to administer or
to terminate, any Single Employer Plan, which Reportable Event or
commencement of proceedings or appointment of a trustee is, in the
reasonable opinion of the Majority Banks, likely to result in the
termination of such Plan for purposes of Title IV of ERISA, (iv) any
Single Employer Plan shall terminate for purposes of Title IV of
ERISA, (v) Toy Biz or any Commonly Controlled Entity of Toy Biz shall,
or in the reasonable opinion of the Majority Banks is likely to, incur
any liability in connection with a withdrawal from, or the Insolvency
or Reorganization of, a Multiemployer Plan or (vi) any other event or
condition shall occur or exist, with respect to a Plan; provided that,
in each case in clauses (i) through (vi) above, such event or
condition, together with all other such events or conditions, if any,
would be reasonably likely to have a Material Adverse Effect; or
(j) Material Judgments. (i) One or more judgments or decrees
shall be entered against Toy Biz or any of its Subsidiaries involving
in the aggregate a liability (not covered by insurance) of $1,000,000
or more or (ii) any non-monetary judgment or order shall be rendered
against Toy Biz or any of its Subsidiaries that is reasonably likely
to have a Material Adverse Effect, and in the case of either clause
(i) or (ii), there shall be any period of 60 consecutive days during
which a stay of enforcement of such judgment or order, by reason of a
pending appeal or otherwise, shall not be in effect unless such
judgment or order shall have been vacated, satisfied, discharged or
bonded pending appeal; or
(k) Master Toy License Agreement. The Master Toy License
Agreement shall terminate or ceases to be or is not in full force and
effect; or
<PAGE>
(l) Majority of the Board. Joseph M. Ahearn, Avi Arad, James
Carluccio, Alan Fine, James Halpin, Morton Mandel, Isaac Perlmutter,
Alfred Piergallini, General Donald Rosenblum and Paul Verkuil (and any
other Persons whose election to the Board of Directors of Toy Biz was
supported by the majority of the foregoing individuals who held office
as a Director of Toy Biz on the date of such election) shall cease to
constitute a majority of the Board of Directors of Toy Biz; or
(m) Ownership by Messrs. Perlmutter and Arad. Either of Isaac
Perlmutter and Avi Arad shall cease to be the record and beneficial
owner of at least 50% of the capital stock of Toy Biz held by him on
December 31, 1997;
then, and in any such event, (x) if such event is an Event of Default specified
in clause (i), (ii) or (iii) of paragraph (h) of this Section 8, automatically
the Commitments shall immediately terminate and the Loans hereunder (with
accrued interest thereon) and all other amounts owing under this Agreement
(including, without limitation, all amounts of L/C Obligations, whether or not
the beneficiaries of the then outstanding Letters of Credit shall have
presented the documents required thereunder), the Notes and the other Credit
Documents shall immediately become due and payable, and (y) if such event is
any other Event of Default, either or both of the following actions may be
taken: (i) with the consent of the Majority Banks, the Administrative Agent
may, or upon the request of the Majority Banks, the Administrative Agent shall,
by notice to Toy Biz, declare the Commitments to be terminated forthwith,
whereupon the Commitments shall immediately terminate; and/or (ii) with the
consent of the Majority Banks, the Administrative Agent may, or upon the
request of the Majority Banks, the Administrative Agent shall, by notice to Toy
Biz, declare all or any part of the Loans (with accrued interest thereon) and
any other amounts owing under this Agreement (including, without limitation,
all amounts of L/C Obligations, whether or not the beneficiaries of the then
outstanding Letters of Credit shall have presented the documents required
thereunder), the Notes and the other Credit Documents to be due and payable
forthwith, whereupon the same shall immediately become due and payable.
With respect to all Letters of Credit with respect to which
presentment for honor shall not have occurred at the time of an acceleration
pursuant to the preceding paragraph, Toy Biz shall at such time deposit in a
cash collateral account opened by the Agent an amount equal to 105%of the
aggregate then undrawn and unexpired amount of such Letters of Credit. Toy Biz
hereby grants to the Agent, for the benefit of the Issuer and the L/C
Participants, a security interest in such cash collateral to secure all
obligations of Toy Biz under this Agreement and the other Loan Documents.
Amounts held in such cash collateral account shall be applied by the Agent to
the payment of drafts drawn under such Letters of Credit, and the unused
portion thereof after all such Letters of Credit shall have expired or been
fully drawn upon, if any, shall be applied to repay other obligations of Toy
Biz hereunder and under the Notes. After all such Letters of Credit shall have
expired or been fully drawn upon, all Reimbursement Obligations shall have been
satisfied and all other obligations of Toy Biz hereunder and under the Notes
shall have been paid in full, the balance, if any, in such cash collateral
account shall be returned to Toy Biz. Toy Biz shall execute and deliver to the
Agent, for the account of the Issuer and the L/C Participants, such further
documents and instruments as the Agent may request to evidence the creation and
perfection of the within security interest in such cash collateral account.
Except as expressly provided above in this Section,
presentment, demand, protest and all other notices of any kind are hereby
expressly waived.
<PAGE>
SECTION 9. THE ADMINISTRATIVE AGENT
9.1 Appointment. Each Bank hereby irrevocably designates and
appoints Chemical Bank (and each successor thereto which is appointed in
accordance with the provisions of subsection 9.9) as the Administrative Agent
under the Credit Documents and hereby irrevocably authorizes Chemical Bank (and
any such successors thereto), as the Administrative Agent for such Bank, to
take such action, in the Administrative Agent's discretion, on such Bank's
behalf under the provisions of the Credit Documents and to exercise such powers
and perform such duties as are expressly delegated to the Administrative Agent
by the terms of the Credit Documents, together with such other powers as are
reasonably incidental thereto. Chemical Bank hereby accepts its appointment as
the Administrative Agent and the authorization set forth above. Notwithstanding
any provision to the contrary in the Credit Documents, the Administrative Agent
shall not have any duties or responsibilities, except those expressly set forth
in the Credit Documents, nor any fiduciary relationship with any Bank, and no
implied covenants, functions, responsibilities, duties, obligations or
liabilities shall be read into the Credit Documents or otherwise exist against
the Administrative Agent in such capacity.
9.2 Delegation of Duties. The Administrative Agent may
execute any of its duties under the Credit Documents by or through agents or
attorneys-in-fact and shall be entitled to advice of counsel concerning all
matters pertaining to such duties. The Administrative Agent shall not be
responsible for the negligence or misconduct of any agents or attorneys-in-fact
selected by it with reasonable care.
9.3 Exculpatory Provisions. Neither the Administrative Agent
nor any of its officers, directors, employees, agents, attorneys-in-fact or
affiliates shall be (a) liable to any of the Banks for any action lawfully
taken or omitted to be taken by it or such Person under or in connection with
the Credit Documents (except for its or such Person's own gross negligence or
willful misconduct) or (b) responsible in any manner to any of the Banks for
any recitals, statements, representations or warranties made by the Subsidiary
Guarantor, Toy Biz or any officer thereof contained in the Credit Documents or
in any certificate, report, statement or other document referred to or provided
for in, or received by it under or in connection with, the Credit Documents or
for the value, validity, effectiveness, genuineness, enforceability or
sufficiency of the Credit Documents (other than with respect to its own due
execution and delivery thereof) or the perfection of any security interest
contemplated thereby or for any failure of any party thereto (other than the
Administrative Agent in such capacity) to perform its obligations thereunder.
The Administrative Agent shall not be under any obligation to any Bank to
ascertain or to inquire as to the observance or performance of any of the
agreements contained in, or conditions of, the Credit Documents, or to inspect
the properties, books or records of any party to any thereof.
9.4 Reliance by the Administrative Agent. The Administrative
Agent shall be entitled to rely, and shall be fully protected in relying, upon
any writing, resolution, notice, consent, certificate, affidavit, letter,
cablegram, telegram, telecopy, telex or teletype message, statement, order or
other document or conversation believed by it to be genuine and correct and to
have been signed, sent or made by the proper Person or Persons and upon advice
and statements of legal counsel (including, without limitation, counsel to Toy
Biz), independent accountants and other experts selected by the Administrative
Agent. The Administrative Agent may deem and treat the payee of any Note or on
account of any Loan as the owner thereof for all purposes unless a written
notice of assignment, negotiation or transfer thereof shall have been filed
with the Administrative Agent (in its capacity as such). The
<PAGE>
Administrative Agent shall be fully justified in failing or refusing to take
any action under any Credit Document unless it shall have received such advice
or concurrence of the Majority Banks as it deems appropriate or it shall have
been expressly indemnified to its satisfaction by the Banks or, at its option,
the Majority Banks against any and all liability and expense which may be
incurred by it by reason of taking or continuing to take any such action
(except that no such indemnification need include any indemnification for any
liabilities, obligations, losses, damages, penalties, actions, judgments,
suits, costs, expenses or disbursements resulting solely from the gross
negligence or willful misconduct of the Administrative Agent). Each of the
Administrative Agent and its officers, directors, employees, agents,
attorneys-in-fact or affiliates shall in all cases be fully protected in
acting, or in refraining from acting, under the Credit Documents upon advice of
counsel or in accordance with a request of the Majority Banks (except in cases
in which a greater number of Banks is required, in which case the
Administrative Agent and its officers, directors, employees, agents,
attorneys-in-fact or affiliates shall in all cases be fully protected in
acting, or in refraining from acting, under the Credit Documents in accordance
with a request of such Banks), and such request, and any action taken or
failure to act pursuant thereto, shall be binding upon all the Banks and all
future holders of the Loans and the Notes.
9.5 Notice of Default. The Administrative Agent shall not be
deemed to have knowledge or notice of the occurrence of any Default or Event of
Default unless the Administrative Agent has received notice from a Bank or Toy
Biz referring to this Agreement, describing such Default or Event of Default
and stating that such notice is a "notice of default." In the event that the
Administrative Agent receives any such notice, it shall promptly give notice
thereof to the Banks. The Administrative Agent shall take such action with
respect to any Default or Event of Default as shall be reasonably directed by
the Majority Banks, provided that, unless and until the Administrative Agent
shall have received any such directions, it may (but shall not be obligated to)
take such action (other than any such action under clause (y) of Section 8), or
refrain from taking such action, with respect to such Default or Event of
Default as it shall deem advisable in the best interests of the Banks.
9.6 Non-Reliance on the Administrative Agent and the Other
Banks. Each Bank expressly acknowledges that neither the Administrative Agent
nor any of its officers, directors, employees, agents, attorneys-in-fact or
affiliates has made any representations or warranties to it and that no act by
it hereinafter taken, including any review of the affairs of Toy Biz or any
Subsidiary or any Affiliate of any of the foregoing, shall be deemed to
constitute any representation or warranty by the Administrative Agent to any
Bank. Each Bank represents to the Administrative Agent that it has or will,
independently and without reliance upon the Administrative Agent or any other
Bank, and based on such documents and information as it has deemed or will deem
appropriate, made and will make its own appraisal of and investigation into the
business, operations, property, financial and other condition and
creditworthiness of Toy Biz and its Subsidiaries and Affiliates and made and
will make its own decision to make its Loans and enter into the Credit
Documents to which it is or will be a party. Each Bank also represents that it
will, independently and without reliance upon the Administrative Agent or any
other Bank, and based on such documents and information as it shall deem
appropriate at the time, continue to make its own credit analysis, appraisals
and decisions in taking or not taking action under the Credit Documents, and to
make such investigation as it deems necessary to inform itself as to the
business, operations, property, financial and other condition and
creditworthiness of Toy Biz and its Subsidiaries and Affiliates. Each Bank
acknowledges that no action on the part of the Administrative Agent shall
relieve such Bank from performing its own credit analysis and making its own
determination prior to, and from time to time after, its entering into this
<PAGE>
Agreement with respect to the nature of the transaction contemplated hereby and
assuming any risks or disadvantages to it that may arise out of any such
determination. Except for notices, reports and other documents expressly
required to be furnished to the Banks, or obtained, by the Administrative
Agent, under the Credit Documents, the Administrative Agent in such capacity
shall have no duty or responsibility to provide any Bank with any credit or
other information concerning the business, operations, property, financial and
other condition or creditworthiness of Toy Biz and its Subsidiaries and
Affiliates which may come into its possession or the possession of any of its
officers, directors, employees, agents, attorneys-in-fact or affiliates.
9.7 Indemnification. The Banks agree to indemnify the
Administrative Agent (in its capacity as such) and its officers, directors,
employees, agents, attorneys-in-fact or affiliates, to the extent not
reimbursed by Toy Biz and without limiting the obligation of Toy Biz to do so,
ratably according to the respective amounts of their pro rata shares of the
Aggregate Commitment in effect on the date upon which indemnity is sought, from
and against any and all liabilities, obligations, losses, damages, penalties,
actions, judgments, suits, costs, expenses or disbursements of any kind
whatsoever (including, without limitation, reasonable legal fees and
disbursements) which may at any time (including, without limitation, at any
time following the payment of the Loans, the Reimbursement Obligations or the
Notes) be imposed on, incurred by or asserted against the Administrative Agent,
in such capacity, in any way relating to or arising out of the Credit
Documents, or any documents contemplated by or referred to therein or the
transactions contemplated thereby or any action taken or omitted by the
Administrative Agent, in such respective capacities, thereunder or in
connection therewith, provided that no Bank shall be liable for the payment of
any portion of such liabilities, obligations, losses, damages, penalties,
actions, judgments, suits, costs, expenses or disbursements resulting solely
from the gross negligence or willful misconduct of the Administrative Agent, in
such capacity, or, in the case of a claim against the Administrative Agent, in
such capacity, arising from a lawsuit against the Administrative Agent if such
Bank was not given notice of said lawsuit and an opportunity to participate in
the defense thereof at its own expense. The agreements in this subsection 9.7
shall survive the payment of the Loans, the Reimbursement Obligations, the
Notes, and all other amounts payable hereunder.
9.8 The Administrative Agent in Its Individual Capacity. The
Administrative Agent and its Affiliates may make loans to, accept deposits from
and generally engage in any kind of business with Toy Biz and any of its
Subsidiaries or Affiliates as though it were not the Administrative Agent. With
respect to its Loans and any Notes or other promissory note issued to it and
with respect to any Letter of Credit issued or participated in by it, the
Administrative Agent shall have the same rights and powers under this Agreement
as any Bank and may exercise the same as though it were not the Administrative
Agent, and the terms "Bank" and "Banks" shall include the Administrative Agent
in its individual capacity.
9.9 Successor Administrative Agent. The Administrative Agent
may resign as the Administrative Agent upon 30 days' notice to the Banks and
Toy Biz. If it shall resign as Administrative Agent, then the Majority Banks
shall appoint from among the Banks a successor Administrative Agent for the
Banks, which successor Administrative Agent shall be approved by Toy Biz, such
approval not to be unreasonably withheld (or, if the Majority Banks and Toy Biz
are unable to select such successor Administrative Agent within such 30-day
period, a successor Administrative Agent shall be selected by the
Administrative Agent), whereupon such successor agent shall succeed to the
rights, powers and duties of the resigning Administrative Agent under all of
the Credit Documents, and the term
<PAGE>
"Administrative Agent" shall mean such successor Administrative Agent effective
upon its appointment, and the former Administrative Agent's rights, powers and
duties as the Administrative Agent shall be terminated, without any other or
further act or deed on the part of such former Administrative Agent or any of
the parties to this Agreement or any holders of the Loans, Letters of Credit or
the Notes. After any retiring Administrative Agent's resignation hereunder or
as Administrative Agent, as the case may be, the provisions of this Section 9
shall inure to its benefit as to any actions taken or omitted to be taken by it
while it was the Administrative Agent under the Credit Documents.
SECTION 10. MISCELLANEOUS
10.1 Amendments and Waivers. (a) Except as set forth in the
next succeeding sentence, the Administrative Agent, on the one hand, and Toy
Biz or any of its Subsidiaries, as the case may be, as party thereto, on the
other hand, may from time to time with the written consent of the Majority
Banks enter into written amendments, supplements or modifications for the
purpose of adding, deleting or modifying any provision of any Credit Document
or changing in any manner the rights, remedies, obligations and duties of the
parties thereto, and the Administrative Agent, on behalf of the Banks, may,
with the written consent of the Majority Banks, execute and deliver a written
instrument waiving, on such terms and conditions as may be specified in such
instrument, any of the requirements applicable to Toy Biz or any of its
Subsidiaries, as the case may be, party to any Credit Document, or any Default
or Event of Default and its consequences. No such waiver, amendment, supplement
or modification shall:
(i) without the written consent of each Bank directly
affected thereby, extend the final scheduled maturity of any of the
Loans, or extend the Termination Date, or the Notes or any scheduled
installment thereof, or reduce the rate or extend the time of payment
of interest thereon, or reduce the principal amount thereof, or change
the amount or terms (including, without limitation, fees and
commissions) of any Commitment, or consent to the assignment or
transfer by Toy Biz of any of its rights and obligations under this
Agreement, or change the definition of "Majority Banks" in subsection
1.1, or amend, modify or waive any provision of this subsection 10.1
or subsection 10.6;
(ii) without the written consent of all the Banks, (A)
release any material guarantee obligation provided for in any
Guarantee or (B) release any of the material collateral provided for
in any Security Document (except in accordance with their terms); or
(iii) without the written consent of the then
Administrative Agent, amend, modify or waive any provision of Section
9.
Any such waiver and any such amendment, supplement or modification shall apply
equally to each of the Banks and shall be binding upon the Banks and all future
holders of any of the Loans, the Letters of Credit and the Notes. In the case
of such waiver, the parties to the Credit Documents, the Banks and the
Administrative Agent shall be restored to their former positions and rights
hereunder and under the Notes, the Letters of Credit and the other Credit
Documents, and any Default or any Event of Default waived shall, to the extent
provided in such waiver, be deemed to be cured and not continuing; but, no such
waiver shall extend to any subsequent or other Default or Event of Default, or
impair any right
<PAGE>
consequent thereon. The Administrative Agent shall, as soon as practicable,
furnish a copy of each such amendment, supplement, modification or waiver to
each Bank.
10.2 Notices. All notices, consents, requests and demands to
or upon the respective parties hereto to be effective shall be in writing and,
unless otherwise expressly provided herein, shall be deemed to have been duly
given or made when delivered by hand, or three Business Days after being
deposited in the mail, certified mail, return receipt requested, postage
prepaid, or, in the case of telecopy notice, when sent, addressed as follows in
the case of Toy Biz and the Administrative Agent, and as set forth in Schedule
I hereto in the case of each of the other parties hereto, or to such address or
other address as may be hereafter notified by any of the respective parties
hereto or any future holders of the Loans, the Letters of Credit or the Notes:
Toy Biz: Toy Biz, Inc.
685 Third Avenue
New York, New York 10017
Attention: Chief Financial Officer
Telecopy: (212) 588-5328
The Administrative
Agent: The Chase Manhattan Bank
270 Park Avenue - 30th Floor
New York, New York 10017
Attention: Ms. Billie Prue - Special Loan Group
Telecopy: (212) 661-8396
with a copy to: The Chase Manhattan Bank
One Chase Manhattan Plaza
New York, New York 10008
Attention: Ms. Donna Montgomery - Agency
Services Group
Telecopy: (212) [________________]
provided that any notice, request or demand to or upon the Administrative Agent
pursuant to Sections 2, 2A and 3 shall not be effective until received.
10.3 No Waiver; Cumulative Remedies. No failure to exercise
and no delay in exercising, on the part of the Administrative Agent or any
Bank, any right, remedy, power or privilege hereunder, shall operate as a
waiver thereof; nor shall any single or partial exercise of any right, remedy,
power or privilege hereunder preclude any other or further exercise thereof or
the exercise of any other right, remedy, power or privilege. The rights,
remedies, powers and privileges herein provided are cumulative and not
exclusive of any rights, remedies, powers and privileges provided by law.
10.4 Survival of Representations and Warranties. All
representations and warranties made hereunder and in any document, certificate
or statement delivered pursuant hereto or in connection herewith shall survive
the execution and delivery of this Agreement and the Notes.
10.5 Payment of Expenses and Taxes. Toy Biz agrees (a) to pay
or reimburse the Administrative Agent for all of its reasonable out-of-pocket
costs and expenses incurred
<PAGE>
in connection with the preparation, execution and delivery of, and any
amendment, supplement or modification to, any Credit Document and any other
documents prepared in connection herewith, and the consummation of the
transactions contemplated hereby and thereby (including, without limitation,
the fees and disbursements of primary counsel and local counsel to the
Administrative Agent, but not including any fees and expenses of counsel to the
Banks), (b) to pay or reimburse each Bank and the Administrative Agent for all
its reasonable costs and expenses incurred in connection with the enforcement
or preservation of any rights under the Credit Documents and any such other
documents, including, without limitation, fees and disbursements of counsel
(including, without limitation, the reasonable invoiced allocated costs and
expenses of in-house legal counsel or staff determined in good faith) to the
Administrative Agent and to the Banks, (c) to pay, indemnify, and to hold each
Bank and the Administrative Agent harmless from, any and all recording and
filing fees and any and all liabilities with respect to, or resulting from any
delay in paying, stamp, excise and other similar taxes, if any, if legal, which
may be payable or determined to be payable in connection with the execution and
delivery of, or consummation of any of the transactions contemplated by, or any
amendment, supplement or modification of, or any waiver or consent under or in
respect of, the Credit Documents and any such other documents, and (d) to pay,
indemnify, and hold each Bank, the Administrative Agent and the officers,
directors, employees and agents thereof, harmless from and against any and all
other liabilities, obligations, losses, damages, penalties, actions, judgments,
suits, costs, expenses or disbursements of any kind or nature whatsoever with
respect to the execution, delivery, consummation, enforcement, performance and
administration of the Credit Documents and the use by Toy Biz of the proceeds
of the Loans, the Letters of Credit and other extensions of credit hereunder
(all of the foregoing, collectively, the "Indemnified Liabilities"), provided
that Toy Biz shall have no obligation hereunder with respect to Indemnified
Liabilities arising from (i) the gross negligence or willful misconduct of any
such Bank or of the Administrative Agent, (ii) legal proceedings commenced
against any such Bank or against the Administrative Agent by any security
holder or creditor (other than Toy Biz and its Subsidiaries and Affiliates)
thereof arising out of and based upon rights afforded any such security holder
or creditor solely in its capacity as such, (iii) legal proceedings commenced
against any such Bank by any other Bank or by the Administrative Agent or (iv)
amounts of the types referred to in clauses (a) through (c) above except as
provided therein. The agreements in this subsection 10.5 shall survive
repayment of the Loans and the Notes and all other amounts payable hereunder.
10.6 Successors and Assigns; Loan Participations. (a) This
Agreement shall be binding upon and inure to the benefit of Toy Biz, the
Administrative Agent, the Banks, all future holders of the Loans and the Notes,
and their respective successors and assigns, except that Toy Biz may not assign
or transfer any of its rights or obligations under this Agreement without the
prior written consent of each Bank.
(b) Any Bank may, in accordance with applicable law, at any
time sell to one or more banks or other entities ("Participants") participating
interests in any Loan owing to such Bank, any Note held by such Bank, any
Commitment of such Bank or any other interest of such Bank hereunder or under
any other Credit Document. In the event of any such sale by a Bank of
participating interests to a Participant, such Bank's obligations under this
Agreement to the other parties to this Agreement shall remain unchanged, such
Bank shall remain solely responsible for the performance thereof, such Bank
shall remain the holder of any such Loan or Note for all purposes under this
Agreement and Toy Biz and the Administrative Agent shall continue to deal
solely and directly with such Bank in connection with such Bank's rights and
obligations under this Agreement. Toy Biz agrees that if
<PAGE>
amounts outstanding under this Agreement and the Notes are due and unpaid, or
shall have been declared or shall have become due and payable upon the
occurrence of an Event of Default, each Participant shall be deemed to have the
right of setoff in respect of its participating interest in amounts owing under
this Agreement and any Note to the same extent as if the amount of its
participating interest were owing directly to it as a Bank under this Agreement
or any Note; provided, that such right of setoff shall be subject to the
obligation of such Participant to share with the Banks, and the Banks agree to
share with such Participant, as provided in subsection 10.7. Toy Biz also
agrees that each Participant shall be entitled to the benefits of subsections
3.8, 3.9 and 10.5 with respect to its participation in the Loans and
Commitments outstanding from time to time; provided, that no Participant shall
be entitled to receive any greater amount pursuant to such subsections than the
transferor Bank would have been entitled to receive in respect of the amount of
the participation transferred by such transferor Bank to such Participant had
no such transfer occurred.
(c) Any Bank may, in accordance with applicable law:
(i) at any time sell all or any part of its rights and
obligations under this Agreement and any of the Loans or the Notes,
the Letters of Credit and any other Credit Document to any Bank or any
Affiliate thereof;
(ii) at any time sell to one or more additional banks or
financial institutions ("Purchasing Banks") which are Eligible
Assignees, all or any part of its rights and obligations under this
Agreement and any of the Loans or the Notes, the Letters of Credit and
any other Credit Document, provided that, unless Toy Biz otherwise
consents (which consent shall not be unreasonably withheld) or unless
the selling Bank is selling all of its rights and obligations under
this Agreement and the Loans, any Notes, the Letters of Credit and
each other Credit Document, each such sale pursuant to this clause
(ii) shall be in an amount equal to at least $2,500,000; and
(iii) with the consent of Toy Biz (which consent shall not
be unreasonably withheld) sell to one or more Purchasing Banks which
are not Banks, Affiliates thereof or Eligible Assignees, all or any
part of its rights and obligations under this Agreement and the Loans
and the Notes, the Letters of Credit and any other Credit Document,
provided that, unless Toy Biz otherwise consents (which consent shall
not be unreasonably withheld), each such sale pursuant to this clause
(iii) shall be in an amount equal to at least $2,500,000;
provided, however, that, after giving effect to such sale, if the transferor
Bank retains any Commitment hereunder, such Commitment shall, unless Toy Biz
otherwise consents (which consent shall not be unreasonably withheld), be not
less than $2,500,000. Any such sale shall be made pursuant to a Commitment
Transfer Supplement, substantially in the form of Exhibit G (a "Commitment
Transfer Supplement"), executed by the Administrative Agent, such Purchasing
Bank and such transferor Bank (and, in the case of any such transfer made
pursuant to clause (iii), by Toy Biz, and delivered to the Administrative Agent
for its acceptance and recording in the Register (as defined below). Upon such
execution, delivery, acceptance and recording, from and after the Transfer
Effective Date as defined in the Commitment Transfer Supplement determined
pursuant to such Commitment Transfer Supplement, (x) the Purchasing Bank
thereunder shall be a party hereto and, to the extent provided in such
Commitment Transfer Supplement, have the rights and obligations of a Bank
hereunder with Commitments as set forth therein, and (y) the transferor Bank
<PAGE>
thereunder shall, to the extent of the interest transferred, as reflected in
such Commitment Transfer Supplement, be released from its obligations under
this Agreement and the other Credit Documents (and, in the case of a Commitment
Transfer Supplement covering all or the remaining portion of a transferor
Bank's rights and obligations under this Agreement and the other Credit
Documents, such transferor Bank shall cease to be a party hereto). Such
Commitment Transfer Supplement shall be deemed to amend this Agreement to the
extent, and only to the extent, necessary to reflect the addition of such
Purchasing Bank and the resulting adjustment of the relevant Commitment
Percentages arising from the purchase by such Purchasing Bank of all or a
portion of the rights and obligations of such transferor Bank under this
Agreement and the Loans and the Notes. On or prior to the Transfer Effective
Date determined pursuant to such Commitment Transfer Supplement, Toy Biz, at
its own expense and upon the request of such Purchasing Bank or the transferror
Bank, shall execute and deliver to the Administrative Agent in exchange for any
surrendered Note a new Note to the order of such Purchasing Bank in an amount
equal to the relevant Commitment assumed by it pursuant to such Commitment
Transfer Supplement and, if the transferor Bank has retained such a Commitment
hereunder (and has previously requested a Note evidencing its Loans
thereunder), a new Note to the order of the transferor Bank in an amount equal
to the relevant Commitment retained by it hereunder. Any such new Note shall be
dated the date of the original Note and shall otherwise be in the form of the
Note replaced thereby. Any Note surrendered by the transferor Bank shall be
returned by the Administrative Agent to Toy Biz marked "canceled."
(d) The Administrative Agent shall maintain at its address
referred to in subsection 10.2 a copy of each Commitment Transfer Supplement
delivered to it and a register (the "Register") for the recordation of the
names and addresses of the Banks and the Commitments and Commitment Percentages
of the Loans owing to each Bank from time to time. The entries in the Register
shall be conclusive, in the absence of manifest error, and Toy Biz, the
Administrative Agent and the Banks may treat -------- each Person whose name is
recorded in the Register as the owner of the Loan recorded therein for all
purposes of this Agreement. The Register shall be available for inspection by
Toy Biz or any Bank at any reasonable time and from time to time upon
reasonable prior notice.
(e) Upon its receipt of a Commitment Transfer Supplement
executed by a transferor Bank and a Purchasing Bank (and, in the case of a
Purchasing Bank that is not then a Bank or an Affiliate thereof, by Toy Biz),
together with payment to the Administrative Agent of a registration and
processing fee of $4,000 ($2,000 if the Purchasing Bank is then a Bank or an
Affiliate thereof), the Administrative Agent shall (i) promptly accept such
Commitment Transfer Supplement and (ii) on the Transfer Effective Date
determined pursuant thereto record the information contained therein in the
Register and give notice of such acceptance and recordation to the Banks and
Toy Biz.
(f) Toy Biz authorizes each Bank to disclose to any
Participant or Purchasing Bank (each, a "Transferee") and any prospective
Transferee any and all financial information in such Bank's possession
concerning Toy Biz and its Subsidiaries and Affiliates which has been delivered
to such Bank by or on behalf of Toy Biz pursuant to this Agreement or any other
Credit Document, or which has been delivered to such Bank by or on behalf of
Toy Biz in connection with such Bank's credit evaluation of Toy Biz, its
Subsidiaries and its Affiliates prior to becoming a party to this Agreement;
provided that such Transferee or potential Transferee agrees to take normal and
reasonable precautions and exercise due care to maintain the confidentiality of
all information provided to it concerning Toy Biz or any of its Subsidiaries or
Affiliates.
<PAGE>
(g) Unless Toy Biz shall otherwise consent, if, pursuant to
this subsection 10.6, any interest in this Agreement or any Loan or Note or
Letter of Credit is transferred to any Transferee (which, for purposes of this
subsection 10.6(g), shall include an Affiliate of a Bank to which a s/ale is
made pursuant to subsection 10.6(c)(i)) which is organized under the laws of
any jurisdiction other than the United States of America or any state thereof,
the transferor Bank shall cause such Transferee, concurrently with the
effectiveness of such transfer, (i) to represent to the transferor Bank (for
the benefit of the transferor Bank, the Administrative Agent and Toy Biz) that
under applicable law and treaties at the time in effect no taxes will be
required to be withheld by the Administrative Agent, Toy Biz or the transferor
Bank with respect to any payments to be made to such Transferee in respect of
the Loans or Letter of Credit under this Agreement, (ii) to furnish to the
transferor Bank (and, in the case of any Purchasing Bank registered in the
Register, the Administrative Agent and Toy Biz) either United States Internal
Revenue Service Form 4224 or United States Internal Revenue Service Form 1001
or any successor applicable form, as the case may be (wherein such Transferee
claims entitlement to complete exemption from United States Federal withholding
tax on all payments hereunder) and (iii) to agree (for the benefit of the
transferor Bank, the Administrative Agent and Toy Biz) to be bound by the
provisions of subsections 3.10(b), (c) and (d) as if such Transferee were a
Bank hereunder.
(h) Nothing contained herein shall prohibit any Bank from
pledging or assigning any Note to any Federal Reserve Bank in accordance with
applicable law.
10.7 Adjustments; Setoff. (a) If any Bank (a "benefitted
Bank") shall at any time receive any payment of all or part of any of the Loans
or the Reimbursement Obligations owing to it, or interest thereon, pursuant to
a guarantee or otherwise (including, without limitation, by way of setoff
pursuant to the Subsidiary Guarantee), or receive any collateral in respect
thereof (whether voluntarily or involuntarily, by setoff or otherwise), in a
greater proportion than any such payment to and collateral received by any
other Bank, if any, in respect of such other Bank's Loans or the Reimbursement
Obligations owing to it or interest thereon, such benefitted Bank shall
purchase for cash from the other Banks such portion of each such other Bank's
Loans or the Reimbursement Obligations owing to such other Bank, or shall
provide such other Banks with the benefits of any such collateral, or the
proceeds thereof, as shall be necessary to cause such benefitted Bank to share
the excess payment or benefits of such collateral or proceeds ratably with each
of the Banks; provided, however, that if all or any portion of such excess
payment or benefits is thereafter recovered from such benefitted Bank, such
purchase shall be rescinded, and the purchase price and benefits returned, to
the extent of such recovery, but without interest. Toy Biz agrees that each
Bank so purchasing a portion of another Bank's Loans or Reimbursement
Obligations may exercise all rights of payment (including, without limitation,
rights of setoff) with respect to such portion as fully as if such purchasing
Bank were the direct holder of such portion.
(b) In addition to any rights and remedies of the Banks
provided by law, upon both the occurrence of an Event of Default and
acceleration of the obligations owing in connection with this Agreement, each
Bank shall have the right, without prior notice to Toy Biz, any such notice
being expressly waived to the extent permitted by applicable law, to setoff and
apply against any indebtedness, whether matured or unmatured, of Toy Biz to
such or any other Bank, any amount owing from such Bank to Toy Biz at, or at
any time after, the happening of both of the above mentioned events, and such
right of setoff may be exercised by such Bank against Toy Biz or against any
trustee in bankruptcy, debtor in possession, assignee for the benefit of
creditors, receiver, custodian or execution, judgment or
<PAGE>
attachment creditor of Toy Biz, or against anyone else claiming through or
against Toy Biz or such trustee in bankruptcy, debtor in possession, assignee
for the benefit of creditors, receivers, or execution, judgment or attachment
creditor, notwithstanding the fact that such right of setoff shall not have
been exercised by such Bank prior to the making, filing or issuance, or service
upon such Bank of, or of notice of, any such petition, assignment for the
benefit of creditors, appointment or application for the appointment of a
receiver, or issuance of execution, subpoena, order or warrant. Each Bank
agrees promptly to notify Toy Biz, as the case may be, and the Administrative
Agent after any such setoff and application made by such Bank, provided that
the failure to give such notice shall not affect the validity of such setoff
and application.
10.8 Severability. Any provision of this Agreement which is
prohibited or unenforceable in any jurisdiction shall, as to such jurisdiction,
be ineffective to the extent of such prohibition or unenforceability without
invalidating the remaining provisions hereof, and any such prohibition or
unenforceability in any jurisdiction shall not invalidate or render
unenforceable such provision in any other jurisdiction.
10.9 Effectiveness; Counterparts. This Agreement shall become
binding upon the parties hereto when the Administrative Agent shall have
received one or more counterparts of this Agreement, executed by a duly
authorized officer of each party hereto or, in the case of any Bank, telecopier
confirmation to the Administrative Agent that a duly authorized officer of such
Bank has executed a counterpart of this Agreement and that such counterpart has
been sent to the Administrative Agent. Notwithstanding any provision of the
immediately preceding sentence, this Agreement shall not become effective until
each of the conditions precedent contained in subsection 5.1 has been satisfied
or waived. This Agreement may be executed by one or more of the parties to this
Agreement on any number of separate counterparts and all of said counterparts
taken together shall be deemed to constitute one and the same instrument. A set
of the copies of this Agreement signed by all the parties shall be lodged with
Toy Biz and the Administrative Agent.
10.10 SUBMISSION TO JURISDICTION; WAIVERS. (A) TOY BIZ HEREBY
IRREVOCABLY AND UNCONDITIONALLY:
(I) SUBMITS FOR ITSELF AND ITS PROPERTY IN ANY LEGAL ACTION
OR PROCEEDING RELATING TO THIS AGREEMENT OR ANY OTHER CREDIT DOCUMENT
TO WHICH IT IS A PARTY, OR FOR RECOGNITION AND ENFORCEMENT OF ANY
JUDGMENT IN RESPECT THEREOF, TO THE NON-EXCLUSIVE GENERAL JURISDICTION
OF THE COURTS OF THE STATE OF NEW YORK, THE COURTS OF THE UNITED
STATES FOR THE SOUTHERN DISTRICT OF NEW YORK, AND APPELLATE COURTS
FROM ANY THEREOF;
(II) CONSENTS THAT ANY SUCH ACTION OR PROCEEDING MAY BE
BROUGHT IN SUCH COURTS AND WAIVES TRIAL BY JURY AND ANY OBJECTION THAT
IT MAY NOW OR HEREAFTER HAVE TO THE VENUE OF ANY SUCH ACTION OR
PROCEEDING IN ANY SUCH COURT OR THAT SUCH ACTION OR PROCEEDING WAS
BROUGHT IN AN INCONVENIENT COURT AND AGREES NOT TO PLEAD OR CLAIM THE
SAME;
(III) AGREES THAT SERVICE OF PROCESS IN ANY SUCH ACTION OR
PROCEEDING MAY BE EFFECTED BY MAILING A COPY THEREOF BY
<PAGE>
REGISTERED OR CERTIFIED MAIL (OR ANY SUBSTANTIALLY SIMILAR FORM OF
MAIL), POSTAGE PREPAID, TO IT AT ITS ADDRESS SET FORTH IN SUBSECTION
10.2 OR AT SUCH OTHER ADDRESS OF WHICH THE ADMINISTRATIVE AGENT SHALL
HAVE BEEN NOTIFIED PURSUANT THERETO; AND
(IV) AGREES THAT NOTHING HEREIN SHALL AFFECT THE RIGHT TO
EFFECT SERVICE OF PROCESS IN ANY OTHER MANNER PERMITTED BY LAW OR
SHALL LIMIT THE RIGHT TO SUE IN ANY OTHER JURISDICTION.
(B) EACH OF TOY BIZ, THE ADMINISTRATIVE AGENT AND THE BANKS
HEREBY IRREVOCABLY AND UNCONDITIONALLY WAIVES TRIAL BY JURY IN ANY LEGAL ACTION
OR PROCEEDING REFERRED TO IN PARAGRAPH (A) ABOVE.
10.11 GOVERNING LAW. THIS AGREEMENT SHALL BE GOVERNED BY, AND
CONSTRUED AND INTERPRETED IN ACCORDANCE WITH, THE LAW OF THE STATE OF NEW YORK.
IN WITNESS WHEREOF, the parties hereto have caused this
Agreement to be duly executed and delivered in New York, New York by their
proper and duly authorized officers as of the day and year first above written.
TOY BIZ, INC.
By:___________________
Title:
CHEMICAL BANK, as Administrative
Agent and as a Bank
By:___________________
Title:
THE BANK OF NEW YORK
By:___________________
Title:
FLEET BANK
By:___________________
Title:
<PAGE>
IN THE UNITED STATES DISTRICT COURT
FOR THE DISTRICT OF DELAWARE
- - - - - - - - - - - - - - - - - - - - - - - - -X
In re
MARVEL ENTERTAINMENT GROUP, INC., et al.,
-- --
Case No. 97-638 (RRM)
Debtors.
- - - - - - - - - - - - - - - - - - - - - - - - -X
TOY BIZ, INC., et al.,
-- --
Plaintiffs,
-against- Case No. 97-648 (RRM)
MARVEL CHARACTERS, INC., et al.,
-- --
Defendants.
- - - - - - - - - - - - - - -- - - - - - - - - - - -X
MARVEL ENTERTAINMENT GROUP, INC., et al.,
-- --
Plaintiffs,
-against- Case No. 97-586 (RRM)
RONALD O. PERELMAN, et al.,
-- --
Defendants.
- - - - - - - - - - - - - - - - - - - - - - - - - - -X
ORDER PURSUANT TO FED. R.
BANKR. P. 9019 APPROVING
STIPULATION AND AGREEMENT OF SETTLEMENT
Upon the motion (the "9019 Motion") of John J. Gibbons (the "Trustee"),
chapter 11 trustee for Marvel Entertainment Group, Inc. ("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
<PAGE>
Skybox International, Inc. (each, a "Debtor", collectively, the "Debtors"), for
an order pursuant to Fed. R. Bankr. P. 9019 approving that certain Stipulation
and Agreement of Settlement (the "Stipulation") dated as of May __, 1998, a
copy of which is annexed hereto as Exhibit 1, by and among Toy Biz, Inc. ("Toy
Biz"), Isaac Perlmutter, Isaac Perlmutter T.A., Zib Inc., Avi Arad, Joseph L.
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., Dickstein Partners Inc., the Trustee, The
Chase Manhattan Bank ("Chase") individually and on behalf of those holders of
Senior Secured Claims1 which authorized Chase to sign the Stipulation on their
behalf pursuant to the Master Agreement Amendment, Chase as a DIP Lender, CIBC.
Inc. as a DIP Lender, Goldman Sachs Credit Partners L.P. as a DIP Lender,
Lehman Commercial Paper Inc. as a DIP Lender, The Long Term Credit Bank of
Japan, Ltd., Los Angeles Agency as a DIP Lender and The Sumitomo Bank, Limited
as a DIP Lender; and upon the record of the hearing (the "9019 Hearing") held
before this Court on May __, 1998; and notice of the 9019 Motion and the 9019
Hearing having been mailed to all parties in interest required to receive
notice pursuant to Fed. R. Bankr. P. 2002; and the Court having considered the
objections of ________; and after full consideration of all of the foregoing;
the Court hereby FINDS that:
- --------
1 Capitalized terms used herein and not otherwise defined shall have the
meanings ascribed to those terms in the Stipulation.
-2-
<PAGE>
A. This order is entered pursuant to 11 U.S.C. ss.ss. 105(a) and Fed. R.
Bankr. P. 9019. The Court has jurisdiction to enter this order pursuant to 28
U.S.C. ss.ss. 157 and 1334. Venue of these cases in this district is proper
pursuant to 28 U.S.C. ss.ss. 1408 and 1409.
B. The notice given with respect to the 9019 Motion and the 9019 Hearing
was adequate and appropriate and satisfies the requirements of applicable law,
including the Bankruptcy Code and the Federal Rules of Bankruptcy Procedure.
C. The Stipulation, including without limitation the releases contained
therein, (1) is in the best interests of the Debtors, the Debtors' estates and
holders of Claims against and Equity Interests in the Debtors, (2) is fair,
reasonable, adequate and appropriate in light of the probabilities of success
in each of the causes of action being settled by the Trustee, the costs
associated with prosecuting or defending against such causes of action, and the
consideration flowing to the Debtors, (3) is a reasonable exercise of the
Trustee's business judgment, (4) is the result of arms length, good faith
bargaining, and (5) satisfies all applicable legal standards for approval
pursuant to Bankruptcy Rule 9019.
IT IS, THEREFORE, HEREBY ORDERED, ADJUDGED and DECREED THAT:
1. The findings set forth above and conclusions of law herein shall
constitute the Court's findings of fact and conclusions of law pursuant to
Bankruptcy Rule 7052. To the extent any finding of fact later shall be
determined to be a conclusion of law, it shall be so deemed, and to the extent
any conclusion of law later shall be determined to be a finding of fact, it
shall be so deemed.
2. The 9019 Motion be, and it hereby is, granted in all respects.
-3-
<PAGE>
3. The Stipulation be, and it hereby is, approved in all respects.
4. The Stipulation be, and it hereby is, determined to be a valid and
binding agreement enforceable against all parties to the Stipulation, the
Debtors and all parties in interest and all of their successors and assigns.
5. The releases contained in Sections 1.e and 2.e of the Stipulation be,
and they hereby are, determined to be valid, binding and enforceable in
accordance with their terms.
6. The covenant not to sue contained in Section 2.f of the Stipulation be,
and it hereby is, determined to be valid, binding and enforceable in accordance
with its terms.
7. Neither this order, the Stipulation, nor any proceedings taken pursuant
thereto shall be offered or received as evidence of a presumption, concession
or admission of any liability, fault, wrongdoing or other dereliction of duty;
provided, however, that reference may be made to this order and the Stipulation
in such proceedings as may be necessary to effectuate the provisions thereof.
8. In the event of the termination of the Stipulation pursuant to Section
5 thereof, neither this order, the Stipulation, nor any proceedings taken
pursuant thereto shall constitute any waiver, estoppel or admission by the
Trustee with respect to any rights or remedies he may possess, nor shall any
complaint, action or claim by the Trustee be barred or precluded. In the event
of such Termination of the Stipulation, the entry into the Stipulation by the
Trustee shall be deemed to have been without prejudice and a settlement
negotiation within the scope of Fed. R. Ev. 408.
-4-
<PAGE>
9. This Court shall retain jurisdiction over all persons or entities whose
claims or interests are effected by the Stipulation and this order and all
matters relating to the enforcement, administration and consummation of the
Stipulation.
Dated: Wilmington, Delaware
, 1998
--------------------------
United States District Judge
-5-
<PAGE>
IN THE UNITED STATES DISTRICT COURT
FOR THE DISTRICT OF DELAWARE
- - - - - - - - - - - - - - - - - X
In re
MARVEL ENTERTAINMENT GROUP, INC.,
et al.,
Case No. 97-638 (RRM)
Debtors.
- - - - - - - - - - - - - - - - - X
TOY BIZ, INC., et al.,
Plaintiffs,
-against- Case No. 97-648 (RRM)
MARVEL CHARACTERS, INC., et al.,
Defendants.
- - - - - - - - - - - - - - - - - X
MARVEL ENTERTAINMENT GROUP, INC., et al.,
Plaintiffs,
-against- Case No. 97-586 (RRM)
RONALD O. PERELMAN, et al.,
Defendants.
- - - - - - - - - - - - - - - - - X
STIPULATION AND AGREEMENT OF SETTLEMENT
----------------------------------------
This Stipulation and Agreement (the "Stipulation") is dated
this ____ day of May, 1998 by and among Toy Biz, Inc. ("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
<PAGE>
Limited, Dickstein Partners L.P., Dickstein Partners Inc., John J. Gibbons (the
"Trustee") solely in his capacity as chapter 11 trustee for Marvel
Entertainment Group, Inc. ("Entertainment"), The Asher Candy Company, Fleer
Corp., Frank H. Fleer Corp., Heroes World Distribution, Inc., Malibu Comics
Entertainment, Inc., Marvel Characters, Inc. ("Characters"), Marvel Direct
Marketing Inc., and Skybox International, Inc. (each, a "Debtor", collectively,
the "Debtors"), The Chase Manhattan Bank ("Chase") individually and on behalf
of those holders of Senior Secured Claims(1) which authorize Chase to sign this
Stipulation on their behalf pursuant to the Master Agreement Amendment (as
hereinafter defined), Chase as a DIP Lender (as hereinafter defined), CIBC.
Inc. as a DIP Lender, Goldman Sachs Credit Partners L.P. as a DIP Lender,
Lehman Commercial Paper Inc. as a DIP Lender, The Long Term Credit Bank of
Japan, Ltd., Los Angeles Agency as a DIP Lender and The Sumitomo Bank, Limited
as a DIP Lender.
THE PARTIES
-----------
A. On December 27, 1996, each of the Debtors commenced a case
under chapter 11 of title 11 of the United States Code (the "Bankruptcy Code")
in the United States Bankruptcy Court for the District of Delaware (the
"Bankruptcy Court"). On November 17, 1997, the United States District Court for
the District of Delaware (the "District Court") withdrew the reference to the
Bankruptcy Court. By order dated December 22, 1997, the
- ---------------------------
(1) Capitalized terms used herein and not otherwise defined shall have the
meanings ascribed to those terms in the Third Amended Joint Plan of
Reorganization proposed by Secured Lenders and Toy Biz, Inc. (the "Third
Amended Plan") annexed hereto as Exhibit "A".
-2-
<PAGE>
Trustee was appointed pursuant to section 1104(c) of the Bankruptcy Code to
serve as chapter 11 trustee for each of the Debtors.
B. Chase is the agent for the prepetition secured lenders
(the holders of "Senior Secured Claims") to the Debtors who, as of the date
hereof, are owed in excess of $600,000,000 in principal amount secured by liens
on substantially all of the Debtors' assets. Chase is initially entering into
this Stipulation solely for itself and not as agent, and makes no
representations or assurances as to whether the consent of any other Secured
Lender will be obtained.
C. Pursuant to a Revolving Credit and Guaranty Agreement
dated December 27, 1996, approved by the "Final Order Authorizing Debtors to
obtain Postpetition Financing Pursuant to 11 U.S.C. ss.ss. 364(c)(1),
364(c)(2), 364(c)(3) and 364(d)(1), and to Utilize Cash Collateral Pursuant to
11 U.S.C. ss. 363 and Granting Adequate Protection to Prepetition Secured
Parties" entered by the Bankruptcy Court on January 24, 1997, as amended,
certain of the holders of Senior Secured Claims (the "DIP Lenders") made
post-petition loans to the Debtors. Such post-petition loans have been in
default since June 30, 1997. As of the date hereof, the current principal
balance owed to the DIP Lenders is approximately $91,199,256.
D. Toy Biz is a Delaware corporation whose common stock is
traded on the New York Stock Exchange. Approximately 26.7% of Toy Biz's issued
and outstanding common stock is held by Characters. Toy Biz has asserted that
pursuant to a stockholders agreement dated March 2, 1995 (the "Stockholders
Agreement"), 7,394,000 shares of Class B Stock of Toy Biz (the "Class B Stock")
held by Characters were to convert, and in fact were so converted on June 20,
1997, to Class A Stock of Toy Biz upon a change in control of Entertainment.
-3-
<PAGE>
E. Chase, certain other holders of Senior Secured Claims, the
DIP Lenders, Mark Dickstein, Dickstein Co. L.P., Dickstein Focus Fund, L.P.,
Dickstein International Limited, Dickstein Partners L.P., Dickstein Partners
Inc., Toy Biz, Isaac Perlmutter, Isaac Perlmutter T.A., Zib Inc., Avi Arad and
each of Toy Biz's directors are the subject of various claims asserted in civil
actions purportedly brought by, on behalf of and against the Debtors, as
further described below. The parties hereto each desire to settle those claims
and in consideration for the Trustee's release of such claims, Toy Biz and the
holders of Senior Secured Claims (including, without limitation, the Dickstein
Defendants (as hereinafter defined)) executing the Master Agreement Amendment
(the "Lender Signatories") have agreed to amend the Second Amended Plan (as
hereinafter defined), among other things, to increase the distribution to
holders of Class Securities Litigation Claims in Class 5 and the holders of
Equity Interests in Class 6A as classified in the Third Amended Plan (such
holders of Class Securities Litigation Claims in Class 5 and Equity Interests
in Class 6A are hereinafter referred to collectively as "Equity Holders").
F. After conducting an investigation into the facts and legal
issues regarding the claims against Chase, certain other holders of Senior
Secured Claims, the DIP Lenders, the Toy Biz Defendants (as hereinafter
defined), and the Dickstein Defendants (as hereinafter defined) and an analysis
of the consideration being offered by Toy Biz, the holders of Senior Secured
Claims (including certain of the Dickstein Defendants), and the DIP Lenders,
the Trustee believes that the settlement contemplated hereunder is fair and
reasonable and should be approved by the Court.
-4-
<PAGE>
Background
----------
G. Commencing in January 1997, certain of the holders of
Senior Secured Claims, together with the Debtors (then controlled by the
Perelman Defendants (as defined below)), engaged in a protracted battle to
prevent a takeover of control of the Debtors by the holders of notes (the
"Noteholders") issued by holding companies which controlled the Debtors, which
notes were secured by, among other things, a pledge of approximately 80% of the
stock of Entertainment. That effort ultimately failed and, on June 20, 1997,
the existing board of directors of Entertainment was ousted and replaced by one
elected by the Noteholders, led by Messrs. Carl C. Icahn ("Icahn") and Vincent
Intrieri ("Intrieri"), who became Chairman and Vice-Chairman of the Board,
respectively (the "New Board").
H. Two settlement agreements in principle were negotiated
with the New Board but ultimately failed. The first, dated July 9, 1997,
contemplated a purchase of a percentage of the Senior Secured Claims at a
substantial discount by entities under the control of Icahn and Intrieri (the
"Icahn Interests") and a merger of the Debtors and Toy Biz. The second, dated
September 16, 1997 (the "September 16 Settlement"), contemplated a purchase of
a percentage of the Senior Secured Claims by the Icahn Interests at a more
substantial discount, and no agreement with Toy Biz. On October 7, 1997 the
Icahn Interests were notified formally that the requisite majority of the
holders of Senior Secured Claims had not agreed to support the September 16
Settlement.
I. On October 30, 1997, the New Board caused the filing of a
complaint (the "District Court Complaint") in the District Court, without leave
of the Bankruptcy Court
-5-
<PAGE>
and without obtaining approval for the retention of the attorneys who filed the
complaint. The District Court Complaint asserted claims against Chase, certain
holders of Senior Secured Claims and the DIP Lenders (collectively, the "Lender
Defendants"); the Governance Plaintiffs (as hereinafter defined) and the
directors of Toy Biz (collectively, the "Toy Biz Defendants"); Mark Dickstein,
Dickstein & Co. L.P., Dickstein Focus Fund, L.P., Dickstein International
Limited, Dickstein Partners L.P., and Dickstein Partners Inc. (the "Dickstein
Defendants"); and Ronald O. Perelman, Donald G. Drapkin, Kenneth Ziffren,
William L. Bevins, Mafco Holdings, Inc., MacAndrews & Forbes Holdings, Inc.,
and Andrews Group, Inc. (collectively, the "Perelman Defendants").
J. On November 21, 1997, the Proponents filed a chapter 11
plan (the "Plan") for the Debtors which resolves the Debtors' chapter 11 cases
in the context of a combination of Toy Biz and the Debtors. The terms and
conditions under which the Proponents agreed to propose the Plan (and all
amendments thereto) are governed by a certain Master Agreement (as amended from
time to time, the "Master Agreement") dated as of November 19, 1997 by and
between Toy Biz and the Secured Lenders. The Plan was amended on February 12,
1998 and again on March 12, 1998 to reflect an agreement with the Official
Committee of Unsecured Creditors for the Debtors (the "Creditors Committee").
As so amended, the Plan is hereinafter referred to as the "Second Amended
Plan". By orders dated March 3 and 17, 1998, the District Court approved a
disclosure statement for the Second Amended Plan. A hearing to consider
confirmation of the Second Amended Plan was scheduled for May 4 and 5, 1998.
-6-
<PAGE>
The Claims Against the Lender Defendants
----------------------------------------
K. In the District Court Complaint, the plaintiffs therein
purported to assert six claims against the Lender Defendants. In essence, those
claims challenge (i) the grant of security interests to the Secured Lenders in
March of 1996 on theories of preference, fraudulent conveyance and aiding and
abetting breach of fiduciary duty by the Perelman Defendants; (ii) the entry
into the DIP Facility on theories of equitable subordination and aiding and
abetting breach of fiduciary duty by the Perelman Defendants; and (iii) the
failure of the September 16 Settlement on theories of breach of contract and
equitable subordination.
L. The Lender Signatories and the DIP Lenders believe that
these claims are entirely without merit, both factually and legally. The Lender
Signatories and the DIP Lenders deny any liability for these claims and are
willing to enter into this settlement solely to avoid the additional expense
and delay in the Debtors' emergence from chapter 11 that further litigation
would entail.
The Claims Against the Dickstein Defendants
-------------------------------------------
M. The District Court Complaint purported to assert two
claims against the Dickstein Defendants. In essence, these claims assert that
the Dickstein Defendants (i) were insiders and acquired their claims against
the Debtors in violation of the Bankruptcy Code and the securities laws and
(ii) tortiously induced Chase to breach the September 16 Settlement.
N. The Dickstein Defendants believe that these claims are
entirely without merit. The Dickstein Defendants believe that there is no
factual basis for these claims and indeed no legal theory for these claims that
would survive a motion to dismiss, but are
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<PAGE>
nevertheless willing to enter into this Stipulation solely to avoid the
additional expense and delay in the Debtors' emergence from chapter 11 that
further litigation would entail.
The Toy Biz Corporate Governance Dispute
----------------------------------------
O. On June 23, 1997, Toy Biz, Zib Inc. ("Zib"), Isaac
Perlmutter T.A. (the "Perlmutter Trust"), Isaac Perlmutter ("Perlmutter") and
Avi Arad ("Arad") (collectively, the "Governance Plaintiffs") commenced an
adversary proceeding (the "Governance Litigation") in the Bankruptcy Court by
filing a complaint seeking, inter alia, a declaration that the 7,394,000 shares
of Class B Stock held by Characters had converted to an equal number of shares
of Class A Stock by virtue of the change in control of Entertainment when the
Icahn Interests took control of Entertainment's board of directors and the
express change of control provision contained in section 3.2 of the
Stockholders Agreement and that the incumbent Toy Biz board of directors had
been duly elected.
P. In the District Court Complaint, the Debtors purported to
assert various claims against various of the Toy Biz Defendants. In their
sixteenth cause of action in the District Court Complaint, the Debtors seek a
declaration that the nominees as directors of Toy Biz proposed by Characters
were the duly elected members of the Toy Biz board of directors. The
seventeenth cause of action in the District Court Complaint seeks an injunction
against Toy Biz on the ground that Toy Biz and its principal stockholders
violated the automatic stay afforded by section 362(a) of the Bankruptcy Code
by refusing to defer to and acknowledge the authority of Characters' nominees
to the Toy Biz board of directors.
-8-
<PAGE>
Q. On December 8, 1997, the Governance Plaintiffs filed a
motion for summary judgment (the "Summary Judgment Motion") in the Governance
Litigation. The Summary Judgment Motion included a motion to dismiss the
sixteenth and seventeenth causes of action in the District Court Complaint. The
Summary Judgment Motion was opposed by the (1) the Trustee, (2) the Official
Committee of Equity Security Holders (the "Equity Committee") for the Debtors
and the Creditors Committee acting jointly, and (3) High River Limited
Partnership and Westgate International, L.P. (the "Icahn Group"). On March 30,
1998, the District Court entered a memorandum decision and order (the
"Governance Litigation Judgment") granting the Governance Plaintiffs summary
judgment.
R. Notices of Appeal from the Governance Litigation Judgement
were filed with the United States Court of Appeals for the Third Circuit (the
"Third Circuit") by the Trustee, the Equity Committee and the Icahn Group. In
connection therewith, the Equity Committee filed a motion with the Third
Circuit seeking expedited consideration of the appeals in which the Trustee and
the Icahn Group joined. On April 13, 1988, the Third Circuit entered an order
(the "Stay Order") granting the Equity Committee's motion to expedite its
appeal from the Governance Litigation Judgment and sua sponte stayed the
Governance Litigation Judgment and any hearing on confirmation of the Second
Amended Plan pending resolution of the appeal. On April 16, 1998, Toy Biz made
a motion, joined in by the Secured Lenders and the Creditors Committee,
requesting that the Third Circuit vacate the Stay Order which motion was denied
on April 23, 1998.
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<PAGE>
Fairness of Settlement
----------------------
S. The Trustee has conducted an investigation into the claims
asserted against the Lender Defendants, the Toy Biz Defendants and the
Dickstein Defendants. The Trustee believes that, regardless of the outcome of
the appeal of the Governance Litigation Judgment in the Third Circuit, the
settlement contemplated hereby is a fair and reasonable settlement of all
disputes between the Debtors, the Lender Defendants, the Toy Biz Defendants,
and the Dickstein Defendants, and the parties hereto intend to be bound hereby
regardless of the ruling of the Third Circuit (subject only to the conditions
set forth in paragraph 5 below).
Claims Against the Perelman Defendants
--------------------------------------
T. The remainder of the Claims asserted in the District Court
Complaint are against the Perelman Defendants. The Claims against the Perelman
Defendants are not being released by this Stipulation and are included in the
Litigation Trust described below.
WHEREFORE, the undersigned parties stipulate and agree as
follows:
1. Consideration Provided by Toy Biz and the Secured
Lenders. Upon this Stipulation being "so ordered" by the District Court, Toy
Biz and the Secured Lenders (including certain Dickstein Defendants) shall file
a Third Amended Plan with the District Court in the form attached hereto as
Exhibit A, subject only to non-substantive changes. The Third Amended Plan
shall modify the Second Amended Plan to provide for, among other things, the
following:
a. Warrants. In lieu of the Stockholder Warrants provided for in the
Second Amended Plan, Equity Holders shall receive (i) four million (4,000,000)
(subject to increase or
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decrease for rounding as set forth in Section 1.b below) transferable warrants
("Stockholder Series A Warrants") issued under a warrant agreement in the form
attached hereto as Exhibit B, subject only to non-substantive changes, and in
accordance with the term sheet annexed hereto as Exhibit B1, (ii) three million
(3,000,000) (subject to increase or decrease for rounding as set forth in
Section 1.b below) transferable warrants ("Stockholder Series B Warrants")
issued under a warrant agreement in the form attached hereto as Exhibit C,
subject only to non-substantive changes, and in accordance with the term sheet
annexed hereto as Exhibit C1, and (iii) five million (5,000,000)) (subject to
increase or decrease for rounding as set forth in Section 1.b below)
transferable warrants issued under a warrant agreement in the form attached
hereto as Exhibit D, subject only to non-substantive changes, and in accordance
with the term sheet annexed hereto as Exhibit D1 ("Stockholder Series C
Warrants" and, collectively with the Stockholder Series A Warrants and the
Stockholder Series B Warrants, the "Warrants"). The proposed form of order
confirming the Third Amended Plan (the "Confirmation Order") shall determine
that the distribution of the Warrants, the Newco Common Stock issuable on
exercise of the 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 of 1933, as amended (the "Securities Act"),
and state blue sky laws pursuant to the exemption afforded by Section 1145 of
the Bankruptcy Code. The Third Amended Plan will provide, that if the
Confirmation Order does not provide for that exemption for those issuances, Toy
Biz will
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<PAGE>
either obtain a no action letter from the Securities and Exchange
Commission that those issuances are exempt from the registration requirements
of the Securities Act pursuant to the exemption afforded by Section 1145 of the
Bankruptcy Code or it will register those issuances under the Securities Act
promptly after the Confirmation Date. Newco shall use reasonable best efforts
to cause the Convertible Preferred Stock 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.
The Trustee and the Proponents, acting reasonably, shall agree upon the form of
Warrant Liquidation Agency Agreement not later than five (5) days prior to the
commencement of the Confirmation Hearing. Newco shall remain subject to the
reporting requirements of Section 13 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 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 the 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.
b. Fractional Distributions.
-------------------------
Warrants to acquire fractional shares of Convertible
Preferred Stock or Newco Common Stock (a "Fractional Warrant") shall not be
distributed pursuant to the Third Amended Plan. Instead, distributions to any
class of Claims or Interests, holders of Allowed
-12-
<PAGE>
Claims or Allowed Interests otherwise entitled, as of the applicable record
date, to receive a Fractional Warrant shall receive a Warrant to acquire a
whole share of Convertible Preferred Stock or Newco Common Stock if the holder
was to receive a Fractional Warrant to acquire 0.5 or more shares of
Convertible Preferred Stock or Newco Common Stock or no Warrant if the holder
was to receive a Fractional Warrant to acquire a share of Convertible Preferred
Stock or Newco Common Stock of less than 0.5.
c. Certificate of Incorporation. The Certificate of Incorporation and
Bylaws of Newco shall be in the form of Exhibit E hereto.
d. Litigation Trust. The definition of Beneficiaries contained in the
Second Amended Plan shall be modified to include the Equity Holders, which
shall receive seventy percent (70%) of all Net Litigation Proceeds derived from
claims against the Perelman Defendants asserted by the Debtors in the District
Court Complaint, but the Equity Holders shall have no right to or interest in
any other Litigation Claims (including causes of action pursuant to Sections
510, 544, 545, 547, 548, 549, 550, 551 and 553 of the Bankruptcy Code), and the
Litigation Trust Agreement annexed to the Third Amended Plan shall be in the
form of Exhibit F hereto, subject only to non-substantive changes.
e. Release of Debtors' Estates and Trustee. Effective upon the
Consummation Date of the Third Amended Plan, each of the Defendant Parties (as
hereinafter defined) for each of their heirs, executors, administrators,
successors and assigns and for any Entity acting on behalf of, or claiming
through any of them and each of them, for good and valuable consideration,
receipt of which is hereby acknowledged, shall be deemed to have fully, finally
-13-
<PAGE>
and forever released and discharged the Trustee and each of his respective past
and present (through and including the Consummation Date) servants, agents,
attorneys, employees, representatives, successors, assigns, heirs, parents,
subsidiaries, Affiliates and any Entity acting for or on behalf of any of them
and the Debtors and their present (through and including the Consummation Date)
officers and employees (collectively, the "Trustee Parties") of and from any
and all claims, which any of the Defendant Parties ever had or may have had,
now have, or hereafter can, shall or may have against any of the Trustee
Parties for, upon or by reason of any act, omission or other matter, cause or
thing whatsoever from the beginning of the world until the date hereof relating
to the Debtors' bankruptcy cases; provided, however, that nothing herein or in
the Third Amended Plan shall be construed as releasing, waiving or otherwise
discharging any of the Trustee Parties from any obligations under this
Stipulation or the Third Amended Plan or any agreement, instrument or other
document to be executed as contemplated or provided in the Third Amended Plan.
2. Consideration Provided by the Trustee.
--------------------------------------
a. Approval Order. Not later than two (2) Business Day following the
execution of this Stipulation by all of the parties hereto, the Trustee shall
file a motion (the "9019 Motion") pursuant to Fed. R. Bankr. P. 9019 seeking
approval of the settlement contemplated hereunder by the District Court (the
"Approval Order"). The Approval Order shall be in the form of Exhibit G hereto,
subject only to non-substantive changes.
b. Vacation of Stay. Two (2) Business Day following the Trustee's
being advised or becoming aware of entry of the Approval Order by the District
Court, the Trustee shall (i)
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apply to the Third Circuit for an order vacating the Stay Order or any stay
(other than any stay requested by the parties hereto) entered by the Third
Circuit relating to the Governance Litigation, and (ii) request the Third
Circuit to defer consideration of any appeal of the Governance Litigation
Judgment (or any appeal relating to the impact of a change of control of the
Debtors on Section 3.2 of the Stockholders Agreement) pending further
communication from the Trustee.
c. Support for the Third Amended Plan. Subject to Sections 5 and 6
below, the Trustee shall support the Proponents' efforts to (a) cause the
Confirmation Hearing to commence as soon as possible; (b) cause the entry of
the Confirmation Order in the form submitted to the District Court by the
Proponents (in form and substance reasonably acceptable to the Trustee) as soon
as practicable; and (c) cause the Consummation Date of the Third Amended Plan
to occur as soon as practicable.
d. District Court Complaint. On the Consummation Date, the Trustee
shall execute and file with the District Court a stipulation of dismissal and
notice thereof in the form annexed hereto as Exhibit H dismissing the District
Court Complaint with prejudice as against the Lender Defendants, the Toy Biz
Defendants and the Dickstein Defendants.
e. Releases. Effective upon the Consummation Date of the Third
Amended Plan, the Trustee, for each of the Debtors, and for each of the
Debtors' heirs, executors, administrators, successors and assigns, and for any
Entity acting for or on behalf of, or claiming through, any of them and each of
them (collectively, the "Debtor Parties"), for good and valuable consideration,
receipt of which is hereby acknowledged, shall be deemed to have fully, finally
and forever
-15-
<PAGE>
released and discharged each of Toy Biz, Perlmutter, The Perlmutter Trust,
Arad, Zib, Joseph M. Ahearn, James S. Carluccio, Alan Fine, James F. Halpin,
Morton E. Handel, Alfred A. Piergallini, Donald E. Rosenblum, Paul R. Verkuil,
Chase, all Entities which were or are holders of Senior Secured Claims at any
time on or before the Consummation Date, the Entities which were or are DIP
Lenders at any time on or before the Consummation Date, Mark Dickstein,
Dickstein Partners Inc., Dickstein & Co. L.P., Dickstein International Limited,
Dickstein Partners L.P., Dickstein Focus Fund L.P. and each of their respective
past and present (through and including the Consummation Date) officers,
directors, servants, agents, attorneys, employees, representatives,
predecessors, successors, assigns, heirs, parents, subsidiaries, Affiliates and
any Entity acting for or on behalf of any of them (collectively, the "Defendant
Parties"), of and from any and all claims, which any of the Debtor Parties ever
had or may have had, now have, or hereafter can, shall or may have against any
of the Defendant Parties for, upon or by reason of any act, omission or other
matter, cause or thing whatsoever from the beginning of the world until the
date hereof, including, but not limited to, all causes of action, claims or
allegations relating to, arising from or in any manner whatsoever connected
with the claims asserted in the District Court Complaint and/or the Debtors'
bankruptcy cases; provided, however, that nothing herein or in the Third
Amended Plan shall be construed as releasing, waiving or otherwise discharging
claims relating to compliance with the terms of this Stipulation or the
Third Amended Plan or any agreement, instrument or other document to be
executed as contemplated or provided in the Third Amended Plan. Notwithstanding
the definition of the term the Defendant Parties, nothing in such definition or
elsewhere in this Stipulation or the
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<PAGE>
Third Amended Plan shall be construed, directly or indirectly, by implication
or otherwise, to include, incorporate or embrace in said definitions (in any
capacity), and the releases granted hereby shall not be construed to run for
the benefit of (in any capacity), any individual who serves or has served as a
director of Entertainment or any insider, Affiliate, director, employee,
attorney, investment banker, or agent of any of such directors other than a
Lender Defendant; provided, however, that all claims asserted against the
Lender Defendants, the Toy Biz Defendants and the Dickstein Defendants in the
District Court Complaint will be deemed released effective on the Consummation
Date.
f. Covenant Not to Sue. The Trustee acknowledges that Toy Biz, its
officers, employees and directors will take actions in furtherance of the
transactions contemplated by this Stipulation although the matters in dispute
in the Governance Litigation have not been finally resolved. The Trustee agrees
that he will not, and will cause the Debtors not, to pursue any legal action
against any of the Toy Biz Defendants based upon an allegation that any Toy Biz
Defendant was not properly elected to the board of directors of Toy Biz if it
is ultimately determined that the board of directors of Toy Biz which approved
this Stipulation is not the duly authorized board of directors of Toy Biz for
any actions taken by them in furtherance of the transactions contemplated by
this Stipulation but only to the extent such actions are reasonably necessary
to carry out the terms of this Stipulation and the Third Amended Plan. The
provisions of this Section 2.f. shall survive the termination of this
Stipulation with respect to action taken prior to such termination.
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<PAGE>
g. Appeals. Upon the occurrence of the Consummation Date of the
Third Amended Plan, the Trustee shall (i) request the Third Circuit to enter an
order dismissing with prejudice all appeals from the Governance Litigation; and
(ii) support the Proponents (in a writing or writings filed with the Third
Circuit or the United States Supreme Court) in opposing any appeals of the
Confirmation Order and any stays pending any such appeals.
3. Obligations of Toy Biz and the Trustee.
The Trustee shall cause Entertainment to, and Toy Biz shall,
promptly file a Notification and Report Form under the Hart-Scott-Rodino
Antitrust Improvements Act of 1976, as amended ("HSR Act") with the Federal
Trade Commission (the "FTC") and the Antitrust Division of the Department of
Justice (the "Antitrust Division") with respect to the transactions
contemplated by the Third Amended Plan and respond as promptly as practicable
to all inquiries received from the FTC or the Antitrust Division, including any
request for additional information or documentary material. In connection with
such filings, Toy Biz and the Trustee shall cooperate with one another. The
obligations of Toy Biz and the Trustee obligations hereunder are not in any way
conditioned upon the outcome of the Governance Litigation or any appeal therein
and the Trustee shall continue to support prompt confirmation and consummation
of the Third Amended Plan regardless of the outcome of the Governance
Litigation.
4. Governing Law. The transactions contemplated hereby
shall be governed by the internal laws of the State of Delaware and, to the
extent applicable, federal law.
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<PAGE>
5. Termination of Stipulation. The parties' obligations
hereunder shall terminate in the event that (a) Chase has not provided the
Trustee with a copy of an amendment (the "Master Agreement Amendment") to the
Master Agreement in the form annexed hereto as Exhibit I approving this
Stipulation (and all of the attachments hereto) executed by a Requisite Amount
of Consenting Lenders (as defined in the Master Agreement) within ten (10) days
after the filing of the 9019 Motion, (b) the Confirmation Date of the Third
Amended Plan shall not have occurred on or before June 30, 1998, (c) the
Consummation Date of the Third Amended Plan shall not have occurred on or
before August 15, 1998, (d) the Trustee notifies Chase and Toy Biz that he
intends to accept an Alternative Transaction (as defined below) in accordance
with Section 6 hereof, or (e) the Trustee shall have received written notice
from Chase that as a result of the withdrawal of Consenting Lenders (as defined
in the Master Agreement) pursuant to Sections 7.2 and 8.2 of the Master
Agreement, the number of Consenting Lenders has fallen below the Consenting
Lender Threshold (as defined in the Master Agreement); provided, however, that
clauses (b) and (c) above may be waived in a writing executed by Toy Biz and
Secured Lenders comprising Requisite Secured Lender Consent. Notwithstanding a
waiver of clause (b) or (c) of the preceding sentence by Toy Biz and Secured
Lenders comprising Requisite Secured Lender Consent, the Trustee shall have the
right to terminate this Stipulation in the event that the Confirmation Date of
the Third Amended Plan shall not have occurred on or before August 15, 1998 or
the Consummation Date of the Third Amended Plan shall not have occurred on or
before September 30, 1998.
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<PAGE>
6. Alternative Transactions. The parties acknowledge that
the Trustee has a fiduciary duty prior to the Confirmation Date to hold
discussions or negotiations with any person with respect to an Alternative
Transaction. The Trustee agrees that he will advise Toy Biz and Chase of any
written proposal which is an Alternative Transaction and the Trustee will
provide the details of the Alternative Transaction promptly upon his receipt
from Chase and Toy Biz of a confidentiality agreement signed by them with
respect thereto in favor of the Trustee. For purposes of this Stipulation,
"Alternative Transaction" means any transaction involving the sale of all or
any significant portion of Entertainment's business (which for this purpose
shall include the business conducted by Entertainment through its
subsidiaries), whether by sale of capital stock or assets or by merger or
consolidation or a plan of reorganization. The Trustee shall have the right to
terminate this Stipulation at any time prior to the Confirmation Date pursuant
to paragraph 5 hereof only for the purpose of accepting an Alternative
Transaction which (i) (A) Secured Lenders comprising Requisite Secured Lender
Consent, and (B) Toy Biz each advise the Trustee in writing is acceptable to
each of them in the absolute discretion of each of them or (ii) the Trustee in
good faith determines is a Superior Proposal. "Superior Proposal" means an
Alternative Transaction which (a) provides for the indefeasible payment of all
amounts owing under the Existing Credit Agreements to holders of Allowed Senior
Secured Claims and all amounts owing to the DIP Lenders at the consummation of
the transaction in full in Cash, or (b) requires (I) the other parties to the
Alternative Transaction to agree (x) that the Class B Stock has converted, or
will upon the closing of such Alternative Transaction convert to Class A Stock,
and (y) not to object to the
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<PAGE>
entry by the Third Circuit of an order affirming the Governance Litigation
Judgment or dismissing with prejudice all appeals of the Governance Litigation
Judgment, (II) which may close only upon the entry of an order which is final,
and no longer subject to appeal, review or writ of certiorari affirming the
Governance Litigation Judgment or dismissing the Governance Litigation Judgment
with prejudice, and (III) provides for recoveries for holders of each of the
Senior Secured Claims, Unsecured Claims and Equity Interests which the Trustee
determines in good faith are greater than the recoveries that would be received
by those holders pursuant to the Third Amended Plan. For the purpose of
determining whether an Alternative Proposal constitutes a Superior Proposal,
the Trustee shall be entitled to rely on a representation from Chase concerning
the amount of the Senior Secured Claims. The foregoing shall not restrict the
Trustee from negotiating and selling the stock and/or assets of Panini, S.p.A.
or the Confection Business.
7. Remedies. The parties hereto acknowledge that
irreparable injury will result from a breach of the obligations hereunder and,
therefore, the sole remedy of any party hereto is to seek specific performance
in the District Court. If this Stipulation shall be terminated as provided in
Section 5 above, the provisions of this Stipulation shall become null and void
except (i) for Section 2.f hereof and (ii) if termination occurs pursuant to
clause (d) of Section 5 because the Trustee has elected to accept a Superior
Proposal which does not provide for the indefeasible payment of all amounts
owing under the Existing Credit Agreements to holders of Allowed Senior Secured
Claims at the consummation of the transaction in full in Cash, the provisions
of Sections 2.d and e shall survive and the Trustee shall continue to
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request the Third Circuit to enter an order dismissing with prejudice all
appeals from the Governance Litigation.
8.Further Assurances. The parties hereto will take such
actions as may be reasonably necessary to effect the provisions of this
Stipulation.
9. Counterparts. This Stipulation may be executed in
counterparts including facsimile counterparts.
10. Amendment of Third Amended Plan. The Third Amended Plan
and exhibits thereto shall not be amended from the form attached hereto in a
manner which the Trustee believes is inconsistent with the terms of this
Stipulation and the documents attached hereto without the prior written consent
of the Trustee. If the Trustee concludes that the foregoing provision of this
Stipulation has been violated, he shall give written notice thereof to Toy Biz
and Chase. If such violation is not cured within ten (10) days of the receipt
of such written notice by Chase and Toy Biz to the reasonable satisfaction of
the Trustee, the Trustee may terminate this Stipulation by written notice from
the Trustee to Chase and Toy Biz. Such termination shall be treated for all
purposes as a termination under Section 5 of this Stipulation.
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<PAGE>
IN WITNESS WHEREOF, the parties hereto, intending to be
legally bound hereby, have duly executed this Stipulation on the date first
above written.
TOY BIZ, INC.
By:______________________
Its:
THE CHASE MANHATTAN BANK,
individually and on behalf of those holders
of Senior Secured Claims which
authorize Chase to sign this Stipulation
on their behalf pursuant to the Master
Agreement Amendment
By:______________________
Its:
THE CHASE MANHATTAN BANK,
as a DIP Lender
By: _______________________
Its:
CIBC, INC.,
as a DIP Lender
By: _______________________
Its:
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SIGNATURE PAGE FOR STIPULATION AND AGREEMENT OF SETTLEMENT
GOLDMAN SACHS CREDIT PARTNERS L.P.,
as a DIP Lender
By: _______________________
Its:
LEHMAN COMMERCIAL PAPER INC.,
as a DIP Lender
By: _______________________
Its:
THE LONG TERM CREDIT BANK OF
JAPAN, LTD., LOS ANGELES AGENCY,
as a DIP Lender
By: _______________________
Its:
THE SUMITOMO BANK, LIMITED,
as a DIP Lender
By: _______________________
Its:
- -------------------------
JOHN J. GIBBONS, solely in his
capacity as chapter 11 trustee for
the Debtors
-24-
<PAGE>
SIGNATURE PAGE FOR STIPULATION AND AGREEMENT OF SETTLEMENT
ZIB INC.
By:______________________
Its:
- -------------------------
Isaac Perlmutter
Isaac Perlmutter T.A.
By:_______________________
- -------------------------
Avi Arad
- -------------------------
Joseph M. Ahearn
- -------------------------
James S. Carluccio
- -------------------------
Alan Fine
- -------------------------
James F. Halpin
- -------------------------
Morton E. Handel
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<PAGE>
SIGNATURE PAGE FOR STIPULATION AND AGREEMENT OF SETTLEMENT
- -------------------------
Alfred A. Piergallini
- -------------------------
Donald E. Rosenblum
- -------------------------
Paul R. Verkuil
DICKSTEIN PARTNERS INC.
By: ________________________
Name:
Title:
DICKSTEIN PARTNERS L.P.
By: Dickstein Partners Inc.
By: ________________________
Name:
Title:
DICKSTEIN & CO. L.P.
By: Dickstein Partners L.P.
By: Dickstein Partners Inc.
By: ________________________
Name:
Title:
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<PAGE>
SIGNATURE PAGE FOR STIPULATION AND AGREEMENT OF SETTLEMENT
DICKSTEIN FOCUS FUND, L.P.
By: Dickstein Partners L.P.
By: Dickstein Partners Inc.
By: ________________________
Name:
Title:
DICKSTEIN INTERNATIONAL LIMITED
By: Dickstein Partners Inc., as Agent
By: ________________________
Name:
Title:
- ----------------------------
Mark Dickstein
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<PAGE>
SIGNATURE PAGE FOR STIPULATION AND AGREEMENT OF SETTLEMENT
CONSENTED and AGREED:
OFFICIAL COMMITTEE OF
UNSECURED CREDITORS
By:_________________________
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<PAGE>
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. )
THIRD AMENDED JOINT PLAN OF REORGANIZATION PROPOSED BY
THE SECURED LENDERS AND TOY BIZ, INC.
WACHTELL, LIPTON, ROSEN & KATZ BATTLE FOWLER LLP
Attorneys for The Secured Attorneys for Toy Biz, Inc.
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
May __, 1998
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
<S> <C> <C>
SECTION 1. DEFINITIONS AND INTERPRETATION..............................................................1
A. Definitions.................................................................................1
B. Interpretation; Application of Definitions and Rules Construction..........................21
C. Exhibits and Schedules.....................................................................21
SECTION 2. PROVISIONS FOR PAYMENT OF ADMINISTRATION EXPENSE CLAIMS AND PRIORITY TAX CLAIMS............21
2.1 Administration Expense Claims..............................................................21
2.2 Compensation and Reimbursement Claims......................................................22
2.3 Priority Tax Claims........................................................................22
SECTION 3. CLASSIFICATION OF CLAIMS AND EQUITY INTERESTS..............................................22
SECTION 4. PROVISIONS FOR TREATMENT OF CLAIMS AND EQUITY INTERESTS UNDER THE PLAN.....................23
4.1 Priority Non-Tax Claims (Class 1)..........................................................23
4.2 Senior Secured Claims......................................................................24
(a) Allowance of Senior Secured Claims................................................24
(b) Treatment of Allowed Fixed Senior Secured
Claims............................................................................24
(i) No Qualifying.................................................................24
(A) Distributions...................................................24
(B) Panini Obligations..............................................25
(ii) Qualifying..................................................................26
(c) Treatment of Allowed Contingent Senior Secured
Claims............................................................................26
(i) No Panini.....................................................................26
(ii) Panini.......................................................................26
4.3 Other Secured Claims (Class 3).............................................................26
4.4 Unsecured Claims (Class 4).................................................................27
(a) Distributions..............................................................................27
(i) No Qualifying.................................................................27
(ii) Qualifying...................................................................27
(b) Intercompany Claims...............................................................28
(c) Insider Claims....................................................................28
4.5 Class Securities Litigation Claims (Class 5)...............................................28
(a) Distributions.....................................................................28
(b) Calculation of Distribution.......................................................29
(c) Parity of and Limitation on Distributions.........................................29
4.6 Equity Interests (Class 6).................................................................29
(a) Entertainment (Subclass 6A).......................................................29
(i) Distributions................................................................29
(ii) Parity of and Limitation on Distributions....................................30
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(b) Subsidiary Equity Interest (Subclass 6B)..........................................30
4.7 Existing Warrants (Class 7).....................................................................30
SECTION 5. IDENTIFICATION OF CLASSES OF CLAIMS AND INTERESTS IMPAIRED AND NOT IMPAIRED UNDER THE PLAN;
ACCEPTANCE OR REJECTION OF THE PLAN..................................................................30
5.1 Holders of Claims and Equity Interests Entitled to Vote.........................................30
5.2 Subtraction and Addition of Classes and Subclasses..............................................31
(a) Subtraction of Classes and Subclasses.............................................31
(b) Addition of Classes and Subclasses................................................31
5.3 Nonconsensual Confirmation......................................................................31
5.4 Severability of Plan of Reorganization..........................................................32
SECTION 6. MEANS OF IMPLEMENTATION.........................................................................32
6.1 Closing of Transaction..........................................................................32
6.2 Derivative Securities Litigation Claims.........................................................32
6.3 Board of Directors of the Reorganized Debtors...................................................32
6.4 Officers of the Reorganized Debtors.............................................................33
6.5 Distribution to New Investors...................................................................33
6.6 Toy Biz Distribution............................................................................33
(a) No Qualifying Transaction.........................................................33
(b) Qualifying Transaction............................................................33
6.7 Fees to New Investors...........................................................................33
6.8 Dissolution of Committees.......................................................................34
6.9 Transfer of Panini..............................................................................34
6.10 Newco Financing................................................................................34
6.11 Vote of Characters' Toy Biz Stock..............................................................34
6.12 Forgiveness of Panini Obligations..............................................................34
6.13 Panini Indemnity...............................................................................35
6.14 Outstanding Toy Biz Stock Interests............................................................35
6.15 Distribution of Subsidiary Equity Interests....................................................35
6.16 Continuation of Creditors Committee............................................................35
6.17 Right to Object to Fees........................................................................35
6.18 Certain Securities Law Matters.................................................................35
SECTION 7. LITIGATION TRUST...............................................................................36
Assignment of Rights.................................................................................36
Control of Litigation................................................................................37
Liability of Trustee.................................................................................37
Distribution of Net Litigation Proceeds, Net Avoidance Litigation Proceeds and Net MAFCO Litigation
Proceeds.............................................................................................37
Professional Fees and Expenses.......................................................................38
Commencement of Avoidance Actions....................................................................39
Reduction of Judgment and Indemnification............................................................39
Timing of Distributions..............................................................................40
Objections to Claims.................................................................................41
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Jurisdiction.........................................................................................41
SECTION 8. PROVISIONS GOVERNING DISTRIBUTIONS...................................................................41
8.1 Date of Distributions...........................................................................41
8.2 Entities to Exercise Function of Disbursing Agent...............................................41
8.3 Surrender and Cancellation of Instruments.......................................................42
8.4 Delivery of Distributions.......................................................................42
8.5 Manner of Payment Under Plan of Reorganization..................................................43
8.6 Reserves and Distributions......................................................................43
8.7 ...........................................................................................43
8.8 Distributions After Consummation Date...........................................................44
8.9 Rights And Powers Of Disbursing Agent...........................................................44
(a) Powers of the Disbursing Agent....................................................44
(b) Expenses Incurred on or after the Consummation Date...............................44
(c) Exculpation.......................................................................44
8.10 Distributions of Certain Warrants..............................................................45
SECTION 9. PROCEDURES FOR TREATING DISPUTED CLAIMS UNDER THE PLAN OF REORGANIZATION.............................45
9.1 Objections to Claims............................................................................45
9.2 No Distributions Pending Allowance..............................................................45
9.3 Cash Reserve....................................................................................46
9.4 Distributions After Allowance...................................................................46
9.5 Fractional Securities...........................................................................46
SECTION 10. PROVISION GOVERNING EXECUTORY CONTRACTS AND UNEXPIRED LEASES UNDER THE PLAN..........................47
10.1 General Treatment..............................................................................47
10.2 Amendments to Schedule; Effect of Amendments...................................................47
10.3 Bar to Rejection Damage Claims.................................................................48
10.4 Certain Panini Agreements......................................................................48
(a) Panini Sticker Agreement..........................................................48
(b) Panini Comic Distribution Agreement...............................................48
SECTION 11. CONDITIONS PRECEDENT TO CONFIRMATION DATE AND CONSUMMATION DATE......................................49
11.1 Conditions Precedent to Confirmation of Plan of Reorganization.................................49
(a) Confirmation Order................................................................49
11.2 Conditions Precedent to Consummation Date of Plan of Reorganization............................49
(a) SEC Proxy Statement...............................................................49
(b) HSR...............................................................................50
(c) Restructured Panini Loan Documents................................................50
(d) Secured Lender Consummation Date..................................................50
(e) Toy Biz Consummation Date.........................................................50
11.3 Waiver of Conditions Precedent.................................................................50
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SECTION 12. EFFECT OF CONFIRMATION.........................................................................50
12.1 General Authority..............................................................................50
12.2 Discharge of Debtors...........................................................................51
(a) General Discharge.................................................................51
(b) Exculpations......................................................................51
(c) Treatment of Indemnification Claims...............................................51
12.3 Term of Injunctions or Stays...................................................................52
SECTION 13. WAIVER OF CLAIMS...............................................................................52
13.1 Avoidance Actions..............................................................................52
SECTION 14. RETENTION OF JURISDICTION......................................................................53
14.1 Retention of Jurisdiction......................................................................53
14.2 Amendment of Plan of Reorganization............................................................54
SECTION 15. MISCELLANEOUS PROVISIONS.......................................................................55
15.1 Payment of Statutory Fees......................................................................55
15.2 Retiree Benefits...............................................................................55
15.3 Compliance with Tax Requirements...............................................................55
15.4 Recognition of Guaranty Rights.................................................................55
15.5 Severability of Plan Provisions................................................................56
15.6 Governing Law..................................................................................56
15.7 Further Assurances.............................................................................56
15.8 Time of the Essence............................................................................56
15.9 Counterparts...................................................................................57
15.10 Notices........................................................................................57
</TABLE>
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EXHIBITS
1. Bylaws for Newco
2. Charter for Newco
3. Confirmation Order
4. Convertible Preferred Stock
5. Designated Competitors
6. Excess Administration Claims Note
7. Intercompany Agreement
8. Litigation Trust Agreement
9. Litigation Trust Professional Fee Guaranty
10. Merger Agreement
11. New Investors
12. Newco Guaranty
13. Panini Indemnity
14. Plan Warrant Agreement
15. Professional Fee Reimbursement Note
16. Secured Lenders
17. Stockholder Warrant Agreement
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 May __, 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
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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.
"Ballot" means any form or forms distributed to each holder
of a Claim or Equity Interest entitled to vote on this Plan of Reorganization
on which is to be indicated the acceptance or rejection by such holder of this
Plan of Reorganization.
"Ballot Date" means the date fixed by the Bankruptcy Court as
the date by which all Ballots must be received by the Balloting Agent (as such
term is defined in the Disclosure Statement) from holders of impaired Claims
and Equity Interests other than holders of Equity Interests in Subclass 6B
(Fleer Corp.) of Class 6 Equity Interests in Class 7 (Existing Warrants) to be
counted as acceptances or rejections of this Plan of Reorganization.
"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 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 Newco and all holders of Allowed
Unsecured Claims (other than Intercompany Claims and Insider Claims), holders
of Allowed Fixed Senior Secured Claims, holders of Allowed Class Securities
Litigation Claims, and holders of Allowed Equity Interests in Entertainment.
"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).
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"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 1
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 2 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 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 include, without limitation, any Claim asserted by LaSalle
National Bank on behalf of itself or any holders of bonds) 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
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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 in the form of the order annexed as
Exhibit 3 hereto, subject to non-substantive changes.
"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 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.
"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.
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"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.
"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.
"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 4 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 (a) any entity that
serves or has served as a member of Entertainment's board of directors, or (b)
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 (a) any entity that
serves or has served as a member of Entertainment's board of directors, or (b)
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.
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<PAGE>
"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.
"Disclosure Statement" means that certain Disclosure
Statement, including, without limitation, all exhibits and schedules thereto,
in the form approved by the Bankruptcy Court relating to this Plan of
Reorganization as the same may be amended from time to time.
"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.
"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 all DIP Claims through October 7, 1997), 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
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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 an unsecured note
of Newco and its subsidiaries in the form of Exhibit 5 hereto, subject to
non-substantive changes, in an original principal amount equal to the Excess
Administration Claims Amount bearing interest at the rate of ten percent (10%)
per annum which shall, at the election of Newco, be paid semi-annually or
accrue and compound, and shall have a maturity date of the fifth anniversary of
the Consummation Date.
"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 (other than those beneficially
owned or controlled directly, indirectly or by participation by entities or
Affiliates of entities that serve or have served on Entertainment's board of
directors), Chase, Toy Biz, the New Investors, the Creditors Committee, all
members of the Creditors Committee, Affiliates (in each case exclusive of
Marvel Holdings, Inc., Marvel (Parent) Holdings Inc. and Marvel III Holdings
Inc. or any of their direct or indirect parents) 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.
"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
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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.
"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
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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 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,
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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.
"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.
"Insider Claim" means any Unsecured Claim (other than a
Senior Secured Claim) of an insider (as defined in section 101 of the
Bankruptcy Code) or Affiliate of any Debtor other than a Claim of any employee
or former employee of any Debtor.
"Intercompany Agreement" means those agreements set forth on
Exhibit 6 hereto.
"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.
"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" means the trust created by the Litigation
Trust Agreement to be executed on the Consummation Date pursuant to Section 7.1
hereof by the Debtors and the Litigation Trustee.
"Litigation Trust Agreement" means the trust agreement to be
executed by the Debtors and the Litigation Trustee in the form of Exhibit 7
hereto, subject to non-substantive changes.
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"Litigation Trust Assets" means all assets of the
Litigation Trust.
"Litigation Trustee" means such person or entity as may be
designated by the Creditors Committee on or before the Consummation Date
subject to the consent of the Proponents, and from and after the Consummation
Date, any successor trustee designated in accordance with the Litigation Trust
Agreement.
"Litigation Trust Loan Agreement" means the Loan Agreement to
be executed by Newco in the form of Exhibit 8 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 9
hereto, subject to non-substantive changes.
"NBA License Agreement" means that certain Retail Product
License Agreement dated July 21, 1995 between Entertainment and NBA Properties,
Inc., as amended, supplemented or otherwise modified from time to time.
"Net Avoidance Litigation Proceeds" means the gross proceeds
realized by the 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 Litigation Trust
(other than those allocable to Net Litigation Proceeds and Net MAFCO Litigation
Proceeds) including, without limitation, (i) payment without duplication of all
sums due and owing pursuant to the 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.
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"Net Litigation Proceeds" means the gross proceeds realized
by the Litigation Trust in respect of all of the Debtors' Causes of Action
(exclusive of Net Avoidance Litigation Proceeds and Net MAFCO Litigation
Proceeds) net of payment of all expenses of the Litigation Trust (other than
those allocable to Net Avoidance Proceeds and Net MAFCO Litigation Proceeds)
including, without limitation, payment without duplication of all sums due and
owing pursuant to the Professional Fee Reimbursement Note.
"Net MAFCO Litigation Proceeds" means the gross proceeds
realized by the Litigation Trust in respect of all of the Debtors' Causes of
Action (exclusive of all Causes of Action pursuant to sections 510, 544, 545,
547, 548, 549, 550, 551 and 553 of the Bankruptcy Code) derived from claims
against Ronald O. Perelman or any of his Affiliates, Mafco Holdings Inc.,
McAndrews & Forbes Holdings Inc., Andrews Group Incorporated, William C.
Bevins, Kenneth Ziffren and Donald G. Drapkin asserted in the District Court
Complaint net of payment of all expenses of the Litigation Trust (other than
those allocable to Net Avoidance Proceeds and Net Litigation Proceeds)
including, without limitation, payment without duplication of all sums due and
owing pursuant to the Professional Fee Reimbursement Note.
"New Investors" means the entities set forth on Exhibit 10
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 forty million dollars
($40,000,000) 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 Confection Business and the Panini
Stock to be executed and delivered by Newco in the form annexed hereto as
Exhibit 11, subject to non-substantive changes, pursuant to which Newco and its
subsidiaries shall guaranty the Restructured Panini
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Obligations; provided, however, that such guaranty obligation shall be limited
to forty million dollars ($40,000,000), eight million dollars ($8,000,000) of
which shall be payable in Cash and thirty two million dollars ($32,000,000) 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 thirty two million
dollars ($32,000,000) 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; provided, further, that in the event that the
Confection Business is sold prior to the Consummation Date, then in lieu of a
pledge of the Confection Business, Newco shall secure its obligations under its
guaranty of the Restructured Panini Loan Documents with a letter of credit in
an amount equal to the aggregate proceeds of a sale or other disposition of the
Confection Business realized by the Debtors on or prior to the Consummation
Date in form and substance and issued by a bank reasonably acceptable to Toy
Biz and the holders of Contingent Senior Secured Claims comprising Requisite
Panini Lender Consent.
"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
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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.
"Panini Indemnity" means an indemnity in the form of Exhibit
12 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
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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.
"Panini Stock" means all of the issued and outstanding
capital stock of Panini.
"Petition Date" means December 27, 1996, the date on which
each of the Debtors filed its voluntary petition for relief under the
Bankruptcy Code.
"Plan of Reorganization" means this Plan of Reorganization
dated as of May__, 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 Rate" means simple interest at the rate of seven
percent (7%) per annum.
"Plan Warrant Agreement" means that certain Warrant Agreement
in the form of Exhibit 13 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.
"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 Note" means the note to be
executed by the Litigation Trustee on behalf of the Litigation Trust in the
form of Exhibit 14 hereto, subject to non- substantive changes.
"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
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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, 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 not to be unreasonably withheld.
"Registration Rights Agreement" means a registration rights
agreement in the form annexed hereto as Exhibit 15, subject to non-substantive
changes.
"Reorganization Cases" means the cases commenced under
chapter 11 of the Bankruptcy Code by the Debtors on the Petition Date.
"Reorganized" means, with reference to any Debtor, such
Debtor (unless such Debtor is a Debtor for which this Plan of Reorganization is
not confirmed in accordance with Section 5.4 hereof) or any successor in
interest thereto from and after the Consummation Date, including, without
limitation, Newco.
"Required Secured Lender Consideration" means four hundred
and thirty five million dollars ($435,000,000) in Cash 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.
"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
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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.
"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.
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"Senior Secured Claim" means any Contingent Senior
Secured Claim and any Fixed Senior Secured Claim.
"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.
"Stipulation" means that certain Stipulation and Agreement
of Settlement dated May _, 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 this Stipulation 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 and The Sumitomo Bank, Limited as a holder of a DIP Claim.
"Stockholder Series A Warrants" means warrants entitling the
holder thereof to acquire one share of Newco Common Stock at an initial
exercise price of twelve dollars($12.00) per share, subject to increase as
provided in the Stockholder Series A 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 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
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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 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 17 hereto, subject to non-substantive
changes.
"Stockholder Series B Warrant Agreement" means that certain
Warrant Agreement in the form of Exhibit 18 hereto, subject to non-substantive
changes.
"Stockholder Series C Warrant Agreement" means that certain
Warrant Agreement in the form of Exhibit 19 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.
"Term Loan Facility" means a term loan facility or facilities
for Newco and its subsidiaries in the amount of one hundred and forty million
dollars ($140,000,000) secured by all of the assets of Newco upon market rate
terms and conditions and otherwise in form and substance reasonably acceptable
to each of 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)
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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 20 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 or any
deficiency Claim in respect of any Senior Secured Claim.
"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 ten (10) days prior to the commencement of
the Confirmation Hearing subject to the approval of each of the Trustee and the
Secured Lenders 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
the form of Exhibit 21 hereto, subject to non- substantive changes.
"Warrant Distribution Date" means the first to occur of (i)
the date on which Newco substantially completes the distribution of a series of
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
Warrants are distributed to the Warrant Liquidation Agent.
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"Warrants" means the Plan Warrants, the Stockholder
Series A Warrants, the Stockholder Series B Warrants and the
Stockholder Series C Warrants.
"Working Capital Facility" means a revolving credit loan
facility for Newco and its subsidiaries in an amount of up to seventy-five
million dollars ($75,000,000) upon market rate terms and conditions and
otherwise in form and substance reasonably acceptable to each of 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 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
The Merger Agreement, Charter and Bylaws are contained in a
separate Exhibit Volume filed with the Clerk of the Bankruptcy Court herewith.
All other Exhibits and Schedules to this Plan of Reorganization, including any
materially modified or amended Merger Agreement, Charter or Bylaws, all of
which shall be in form and substance reasonably acceptable to the Proponents,
shall be contained in a supplemental Exhibit Volume that shall be filed with
the Clerk of the Bankruptcy Court five (5) days prior to the commencement of
the Confirmation Hearing or such later date as the Bankruptcy Court may fix.
SECTION 2. PROVISIONS FOR PAYMENT OF ADMINISTRATION
EXPENSE CLAIMS AND PRIORITY TAX CLAIMS
2.1 Administration Expense Claims.
On the Consummation Date, each holder of an Allowed
Administration Expense Claim (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
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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 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
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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 -- Insider Claims
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.
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4.2 Senior Secured Claims (Class 2).
(a) Allowance of Senior Secured Claims. On the
Consummation Date, the Claims of each holder of a Senior Secured Claim under
each of the Existing Credit Agreements (other than and to the extent of Claims
beneficially owned or controlled directly, indirectly or by participation by
any entity or Affiliate of any entity that serves or has served as a member of
Entertainment's board of directors) 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, (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,
and (iii) the aggregate amount the holders of Senior Secured Claims would have
been entitled to in respect of any deficiency Claim to which such holders would
have been entitled if such deficiency Claims were classified as Unsecured
Claims in section 4.4 hereof.
(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:
(1) two hundred and thirty million, two hundred and fifty thousand
dollars ($230,250,000) in Cash less the sum of (a) the actual amount
distributed to the holders of DIP Claims from the proceeds of a sale or other
disposition of the Confection Business, (b) all amounts paid to satisfy DIP
Claims in full (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), and (c) the Excess Administration Claims Amount;
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(2) eleven million, six hundred thousand (11,600,000) shares
of Newco Common Stock;
(3) seven million nine hundred thousand (7,900,000) shares of
Convertible Preferred Stock;
(4) the Excess Administration Claims Note;
(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 thirty million dollars ($30,000,000)
of Convertible Preferred Stock of Newco as New Investors that would otherwise
be issued to the New Investors set forth on Exhibit 11; 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, it being
understood that(a) to the extent that there is an Excess Administration Claims
Amount, an amount equal to all or a portion of such fees may be included in the
Excess Administration Claims Note as set forth above, and (b) 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, (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,
and (iii) the aggregate amount the holders of Senior Secured Claims would have
been entitled to in respect of any deficiency Claims to which such holders
would have been entitled if such deficiency Claims were classified as Unsecured
Claims in section 4.4 hereof.
(B) Panini Obligations. All Intercompany Agreements
shall remain in full force and effect unless (a)
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modified or terminated in the ordinary course of business or pursuant to the
Plan of Reorganization or (b) the Proponents agree in writing otherwise.
(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, 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, in full and complete
satisfaction and discharge of their Contingent Senior Secured Claims, their
Ratable Proportion of the
New Panini Securities.
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 to the stated maturity of
such Claim from and after the occurrence of a default. Such treatment shall be
determined by the Proponents.
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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
Claim 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 thirty percent (30%) interest in the
Net MAFCO Litigation Proceeds to be distributed pursuant to Section 7.4(b)
hereof; and
(5) its Ratable Proportion of the thirty percent (30%) interest in the
Net Litigation Proceeds to be distributed pursuant to Section 7.4(b) hereof;
it being understood that distributions in respect of items (4) and (5) above
shall in all events be limited so that no holder of an Allowed Unsecured Claim
shall receive more than payment in full plus interest at the Plan Rate from
after the Consummation Date.
(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)
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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. Notwithstanding anything else contained herein to the
contrary, each of the foregoing Subclasses that does not vote as a Subclass to
accept this Plan of Reorganization shall not receive the right to any
distributions in respect of Net Litigation Proceeds, Net Mafco Litigation
Proceeds or Net Avoidance Litigation Proceeds and shall not receive any Cash
distribution in lieu of Plan Warrants.
(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) Insider Claims. Each holder of an Allowed
Insider Claim shall receive, in full and complete satisfaction and discharge of
its Insider Claim, its Ratable Proportion of one dollar ($1) and, in the event
a Qualifying Transaction closes pursuant to which holders of Fixed Senior
Secured Claims and holders of all other Unsecured Claims (other than
Intercompany Claims) are paid in full, all Excess Proceeds not distributed to
holders of Unsecured Claims.
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
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Proportion of (i) four million (4,000,000) Stockholder Series A Warrants, (ii)
three million (3,000,000) Stockholder Series B Warrants, (iii) five million
(5,000,000) 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
an Allowed Equity Interest in Subclass 6A (Entertainment) of Class 6 (Equity
Interests) shall be distributed, in full and complete satisfaction and
discharge of such Allowed Equity Interest, on account of such Allowed Equity
Interest its Ratable Proportion of (i) four million (4,000,000) Stockholder
Series A Warrants, (ii) three million (3,000,000) Stockholder Series B
Warrants, (iii) five million (5,000,000) Stockholder Series C Warrants, and
(iv)
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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 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, and the holders of
Claims in each of Class 1 (Priority Non-Tax Claims), Class 2 (Senior Secured
Claims), Class 4 (Unsecured Claims), Class 5 (Class Securities Litigation
Claims) and Subclass 6A (Entertainment) of Class 6 (Equity Interests) and, as
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applicable, each subclass thereof, are entitled to vote separately to accept or
reject this Plan of Reorganization as provided in the order of the Bankruptcy
Court fixing the Ballot Date and otherwise governing the balloting procedures
applicable to this Plan of Reorganization. Holders of Claims in Subclass 4J
(Intercompany Claims) of Class 4 (Unsecured Claims) and Equity Interests in
Subclass 6B (Subsidiary Equity Interests) of Class 6 (Equity Interests) and
Class 7 (Existing Warrants) are not entitled to vote on this Plan of
Reorganization and are presumed to have rejected it in accordance with section
1126(g) of the Bankruptcy Code.
For purposes of calculating the number of Allowed Claims held
by holders of Allowed Claims that have voted to accept or reject this Plan of
Reorganization under section 1126(c) of the Bankruptcy Code, all Allowed Claims
held by any entity of any Affiliate thereof that acquired record ownership of
such Allowed Claims after the Petition Date shall be aggregated and treated as
one Allowed Claim.
5.2 Subtraction and Addition of Classes and Subclasses.
(a) Subtraction of Classes and Subclasses. Any
class or subclass of Claims that does not contain as an element thereof an
Allowed Claim or a Claim temporarily allowed under Bankruptcy Rule 3018 as of
the date of the commencement of the Confirmation Hearing shall be deemed
subtracted from this Plan of Reorganization for purposes of voting to accept or
reject this Plan of Reorganization and for purposes of determining acceptance
or rejection of this Plan of Reorganization by such class or subclass under
section 1129(a)(8) of the Bankruptcy Code.
(b) Addition of Classes and Subclasses. In the
event that any subclass of Class 3 (Other Secured Claims) would contain as
elements thereof two or more Secured Claims collateralized by different
properties or interests in property or collateralized by Liens against the same
property or interest in property having different priority, such claims shall
be divided into separate subclasses of such subclass of Class 3 (Other Secured
Claims).
5.3 Nonconsensual Confirmation.
In the event that any impaired class of Claims or Equity
Interests entitled to vote shall not accept this Plan of Reorganization by the
requisite statutory majorities provided in section 1126(c) or 1126(d) of the
Bankruptcy Code, as applicable, after giving effect to any vote designated
under section 1126(e) of the Bankruptcy Code, the Proponents shall move to have
the Bankruptcy Court confirm this Plan of Reorganization under section 1129(b)
of the Bankruptcy Code notwithstanding such
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rejection and notwithstanding the deemed rejection of this Plan of
Reorganization by holders of Equity Interests in Subclass 6B (Subsidiary Equity
Interests) of Class 6 (Equity Interests) and Existing Warrants in Class 7
(Existing Warrants) in accordance
with Section 5.1 hereof.
5.4 Severability of Plan of Reorganization.
This Plan of Reorganization is, severally, a plan of
reorganization for each of the Debtors. In the event that this Plan of
Reorganization is not confirmed for all Debtors, then this Plan of
Reorganization may not be confirmed for any Debtor 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.
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.
6.3 Board of Directors of the Reorganized Debtors.
The initial Board of Directors of Newco shall consist of six
(6) individuals designated by Toy Biz and the New Investors and five (5)
individuals designated by the Secured Lenders. The initial members of the Board
of Directors of Newco, assuming its formation, are or shall be stated in the
Disclosure Statement under "GENERAL INFORMATION - Board of Directors and
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Executive Officers of the Reorganized Debtors" or an amendment or supplement to
the Disclosure Statement or such other filing as may be made with the
Bankruptcy Court. 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 receive on the
Consummation Date twenty million, three hundred fifty-two thousand, one hundred
twenty-seven (20,352,127) shares of Newco Common Stock, and such shares shall
be distributed to holders of Toy Biz common stock on the Consummation Date.
(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.
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
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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 Transfer of Panini. All Intercompany Agreements between
the Panini Entities and Marvel or any of its Affiliates, including, without
limitation, any material licensing agreement designated by the holders of a
majority of the Senior Secured Claims, shall remain in full force and effect
unless modified or terminated in the ordinary course of business or the holders
of the Senior Secured Claims and Toy Biz otherwise agree in writing.
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.
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.
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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 for the sole purpose of monitoring the Claims objection
process, 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
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.
6.18 Certain Securities Law Matters.
In the event that the Confirmation Order does not determine
that 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
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Securities Act of 1933, as amended, and state blue sky laws 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 that
those issuances are exempt from the registration requirements of the Securities
Act of 1933, as amended, pursuant to the exemption afforded by Section 1145 of
the Bankruptcy Code or it will register those issuances under the Securities
Act. Newco shall use its reasonable best efforts to cause the Convertible
Preferred Stock, Plan 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
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. Pursuant to the
Registration Rights Agreement, Newco shall use its reasonable best efforts to
have the Securities and Exchange Commission declare effective, as promptly as
reasonably practicable after the Consummation Date, a registration statement
under the Securities Act registering the resale of those share of Convertible
Preferred Stock acquired by the New Investors including, without limitation,
holders of Fixed Senior Secured Claims pursuant to Section 4.2(b)(i)(A)(6)
hereof.
SECTION 7. LITIGATION TRUST
7.1 Assignment of Rights.
On the Consummation Date, each of the Debtors and the
Litigation Trustee shall execute and deliver the Litigation Trust Agreement
pursuant to which (i) the Debtors shall grant, assign, transfer, convey and
deliver to the Litigation Trustee, without representation, warranty or
recourse, for the benefit of the Beneficiaries all of the Debtors' right, title
and interest in and to any and all Litigation Claims, and (ii) pursuant to the
Litigation Trust Agreement, the Litigation Trustee shall accept the rights and
properties assigned and transferred to it and the trust imposed upon it, agree
to retain and enforce the Litigation Claims for the benefit of the
Beneficiaries, further agree to be appointed for such purpose under section
1123(b)(3)(B) of the Bankruptcy Code and hold the Net Litigation Proceeds, the
Net Avoidance Litigation Proceeds and the Net MAFCO Litigation Proceeds in
trust for the Beneficiaries.
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7.2 Control of Litigation.
Except as set forth in this Section 7.2, the Litigation
Trustee 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 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.
The 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 Litigation Claims, except in the case of its gross negligence,
recklessness or its own intentional or wanton 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, the 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 Litigation Proceeds, Net Avoidance
Litigation Proceeds and Net MAFCO Litigation Proceeds. Net 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) thirty percent (30%) of Net Litigation Proceeds, thirty
percent (30%) of 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; it being understood that
distributions in respect of Net MAFCO Litigation Proceeds and Net Litigation
Proceeds shall in all events be limited so that no holder of an Allowed
Unsecured Claim shall receive more than payment in full plus interest at the
Plan Rate.
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(c) seventy percent (70%) of Net MAFCO Litigation Proceeds
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) seventy percent (70%) of Net Litigation Proceeds and
sixty five and one tenth percent (65.1%) of Net Avoidance Litigation Proceeds
shall be distributed to Newco.
From and after the date that holders of Allowed Unsecured Claims shall have
been paid in full together with interest at the Plan Rate, Net MAFCO Litigation
Proceeds otherwise payable to holders of Allowed Unsecured Claims shall be
payable to holders of Allowed Securities Litigation Claims (Class 5) and
holders of Allowed Equity Interests (Class 6A) in Entertainment. From and after
the date that holders of Allowed Unsecured Claims shall have been paid in full
together with interest at the Plan Rate, Net Litigation Proceeds otherwise
payable to holders of Allowed Unsecured Claims shall be payable to Newco.
7.5 Professional Fees and Expenses. On the Consummation Date,
Newco shall execute and deliver to the Litigation Trustee the 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 Litigation Trust for
the payment of all professional fees and expenses of the Litigation Trustee in
an amount not to exceed two million one hundred thousand dollars ($2,100,000)
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 become due and payable pursuant to Section 6.16
hereof. On the Consummation Date, the Litigation Trustee shall execute and
deliver to Newco the Professional Fee Reimbursement Note pursuant to which the
Litigation Trust shall be obligated to reimburse Newco for any and all sums
advanced pursuant to the 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 Litigation Trust. On the
Consummation Date and thereafter whenever reasonably requested to do so by
Newco, the 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 Litigation Trust to secure repayment of the Professional Fee Reimbursement
Note. After payment in full of the Professional Fee Reimbursement Note, the
Litigation Trustee shall have the right, but not the obligation, to reserve all
or a portion of any recoveries realized by the Litigation Trustee to pay for
future professional fees and expenses.
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7.6 Commencement of Avoidance Actions. Unless otherwise
authorized by the Court, the 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 and the Creditors Committee that no Exculpated
Person shall have any liability to any person or entity, including, without
limitation, 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 asserted or threatened by
the Litigation Trust and that any such claims-over shall be extinguished and/or
satisfied as provided herein.
(a) No Exculpated Person shall have any liability to any
person or entity for contribution or indemnification with respect to any
Litigation Claim asserted or threatened by the Litigation Trust and the
Litigation Trust (i) shall treat as a reduction or credit against any judgment
or settlement it may obtain against any person or entity the full amount of any
judgment or settlement such person or entity may obtain against any Exculpated
Person on whatsoever theory (whether by way of third- or subsequent
party-complaint, cross-claim, separate action or otherwise) in connection with,
arising out of, or which is any way related to any Litigation Claim; and (ii)
shall obtain from such person or entity for the benefit of any implicated
Exculpated Persons a satisfaction in full of such entity's or person's judgment
or settlement against any such Exculpated Person.
(b) 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 Litigation Trust and Newco
shall indemnify and hold harmless each Exculpated Person from and against any
and all liability (including amounts paid in judgment, settlement, compromise,
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, settlement,
compromise, 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, it
being understood that the Litigation Trust's indemnity shall be subordinate to
its obligation to pay up to two million one hundred thousand dollars
($2,100,000) of professional fees and expenses of the professionals for the
Litigation Trust and the Creditors Committee. If separate
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counsel is required as to any such claim-over, the 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.
(c) The Confirmation Order shall permanently bar and enjoin
all persons and entities, including, but not limited to, defendants or
potential defendants in controversies in connection with, arising out of, or
which are in any way related to any Litigation 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 entity to any other person or entity in connection with, arising
out of, or which is in any way related to any Litigation Claim.
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 the Litigation Trust
unless and until (a) the Litigation Trustee has paid all sums due and owing
pursuant to the Professional Fee Reimbursement Note, (b) the Litigation Trustee
has provided Newco with an instrument in form and substance reasonably
satisfactory to Newco releasing Newco from any further liability pursuant to
the Litigation Trust Loan Agreement. Notwithstanding the foregoing, the
Litigation Trustee shall distribute an amount equal to 50% of the Net
Litigation Proceeds, the Net Avoidance Litigation Proceeds and the Net MAFCO
Litigation Proceeds, provided that the Litigation Trustee has paid all
Litigation Trust costs incurred to date and then due and payable, on an annual
basis. In no event shall any distribution be made to any Beneficiary unless all
accrued interest in respect of the Litigation Trust Loan Agreement shall have
been paid in full. In the event the Litigation Trustee makes a distribution at
any time when the Litigation Trustee has not terminated the Litigation Trust
Loan Agreement with Newco and has not released Newco from any further liability
to make advances under the Loan Agreement, then Newco's obligation under the
Loan Agreement to make advances shall be reduced by any amount so distributed.
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7.9 Objections to Claims.
The Creditors Committee shall have the right to apply to the
Court to direct the Litigation Trustee to object to any Claim not Allowed by
this Plan if the 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 Litigation Trust in connection with the prosecution of
such objection.
7.10 Jurisdiction.
The Bankruptcy Court shall have jurisdiction over the
Litigation Trustee, the Litigation Trust, the Litigation Claims and the
remaining Litigation Trust Assets, including, without limitation, jurisdiction
to determine all controversies and disputes arising under or in connection with
the Litigation Trust Agreement. The Litigation Trustee 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 Agreement and to establish, amend and revoke
rules and regulations for the administration of the Litigation Trust,
including, but not limited to, correcting any defect or supplying any omission,
or reconciling any inconsistency in the Litigation Trust Agreement, 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 Trustee, 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.
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
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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 Delivery of Distributions.
Subject to Bankruptcy Rule 9010, all distributions to any
holder of an Allowed Claim or an Allowed Equity Interest shall be made at the
address of such holder as scheduled on the Schedules filed with the Bankruptcy
Court unless the Debtors or Reorganized Debtors, as applicable, have been
notified in writing of a change of address, including, without limitation, by
the filing of a proof of claim or interest by such holder that relates an
address for such holder different from the address reflected on such Schedules
for such holder. In the event that any distribution to any holder is returned
as undeliverable, the Disbursing Agent shall use reasonable efforts to
determine the current address of such holder, but no distribution to such
holder shall be made unless and until the Disbursing Agent has determined the
then current address of such holder, at which time
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such distribution shall be made to such holder without interest; provided that
such distributions shall be deemed unclaimed property under section 347(b) of
the Bankruptcy Code at the expiration of one year from the Consummation Date.
After such date, all unclaimed property or 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. 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.
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.
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. Appropriate reserves of Convertible Preferred Stock shall
also be reserved in the event that a disputed Senior Secured Claim becomes an
Allowed Fixed Senior Secured Claim, and the holder thereof wishes to exercise
its right to purchase Convertible Preferred Stock pursuant to Section
4.2(b)(i)(6) of this Plan.
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 Litigation Trustee and such Allowed Unsecured claim is a
Resulting Claim, such person's or entity's only rights
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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 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
Reorganization, or as deemed by the Disbursing Agent to be necessary and proper
to implement the provisions hereof.
(b) Expenses Incurred on or after the
Consummation Date. Except as otherwise ordered by the Bankruptcy Court, the
amount of any reasonable fees and expenses incurred by the Disbursing Agent on
or after the Consummation Date (including, without limitation, taxes) and any
reasonable compensation and expense reimbursement claims (including, without
limitation, reasonable fees and expenses of counsel) made by the Disbursing
Agent, shall be paid in Cash by the Reorganized Debtors.
(c) Exculpation. Each Disbursing Agent, from and
after the Consummation Date, is hereby exculpated by all entities, including,
without limitation, holders of Claims and Equity Interests and other parties in
interest from any and all claims, Causes of Action and other assertions of
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
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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 A Warrants or 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 best efforts
either (i) to obtain a no-action letter to the effect that neither the
distribution of Warrants to the Warrant Liquidation Agent or the resale of
Warrants by the Warrant Liquidation Agent will require 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 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 entity
to object to Claims. Any objections to Claims shall be filed by the latest of
(a) ninety (90) days after the Consummation Date, (b) thirty (30) days after a
proof of claim is filed and (c) such later date as may be fixed by the
Bankruptcy Court.
9.2 No Distributions Pending Allowance.
Notwithstanding any other provision hereof, if any
portion of a Claim is a Disputed Claim, no payment or
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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, 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.
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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 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
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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.
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
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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.
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 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, or (F) the holders of Class 5 Claims
and Class 6A Equity Interests; (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;(v) includes the contribution bar,
indemnification and judgment reduction provisions set forth in section
7.7(c) hereof, (vi) determines that the distributions to be made
pursuant to Section 4 hereof are exempt from the Securities Act and
state blue sky laws pursuant to section 1145 of the Bankruptcy Code,
and (vii) is otherwise in form and substance reasonably acceptable to
the Proponents, the Creditors Committee 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
49
<PAGE>
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 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 August 15, 1998; and
(e) Toy Biz Consummation Date. The Consummation Date shall
occur not later than November 20, 1998.
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 condition precedent
contained in Section 11.1(a)(i)(E) may only be waived with the consent of the
Creditors Committee and the condition precedent contained in section
11.1(a)(i)(F) may only be waived with the consent of the Trustee.
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
50
<PAGE>
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 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. 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, Reorganized 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 receiving 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 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) that relate, directly or
indirectly, by implication or otherwise, to the Existing Credit Documents, the
DIP Claims, or the Senior Secured Claims, or (iv) that were asserted in or
could have been asserted in the District Court Complaint; 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)
51
<PAGE>
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 contain injunctions enforcing such releases and
discharge; provided, that: (i) existing indemnity obligations may 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) 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. 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 and the 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; provided, however, that
notwithstanding the foregoing, the 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) and,
52
<PAGE>
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 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;
(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;
53
<PAGE>
(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 the Bankruptcy Code, and the Debtors 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
54
<PAGE>
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 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, or (b) is inconsistent with the Stipulation without
the consent of 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 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
55
<PAGE>
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.
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.
56
<PAGE>
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
-and-
YOUNG, CONAWAY, STARGATT & TAYLOR
Rodney Square North
Wilmington, Delaware 19899
Attn: James L. Patton, Jr., Esq.
Laura Davis Jones, Esq.
Telephone: (302) 571-6600
Telecopier: (302) 571-1253
If to 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-
57
<PAGE>
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) 777-656-8865
If to The Secured Lenders:
THE CHASE MANHATTAN BANK
270 Park Avenue
New York, New York 10017-2070
Attn: Ms. Susan E. Atkins
Telephone: (212) 270-7142
Telecopier: (212) 270-5748
-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-
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
58
<PAGE>
If to The Chapter 11 Trustee:
John J. Gibbons, Esq.
Gibbons, Del Deo, Dolan, Griffinger
& Vecchione
One Riverfront 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 Ho, Esq.
Willkie, Farr 7 Gallagher
153 East 53rd Street
New York, New York 10022
Telephone: (212) 935-8000
Telecopier: (212) 821-8111
59
<PAGE>
Dated: Wilmington, Delaware
May __, 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>
SECURED LENDER EXECUTION PAGE
Name of Secured Lender:
By:
------------------------------------
Name:
Title:
<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
Lenders
One Rodney Square
Wilmington, Delaware 19899
(302) 658-6541
By:
------------------------------------
<PAGE>
The Bylaws of Newco, Charter for Newco and Merger Agreement have been filed in
a separate exhibit volume.
Pursuant to Section 1(C) of the Plan of Reorganization, all other exhibits and
schedules to the Plan will be filed at least ten days prior to the hearing to
consider confirmation of the Plan.
63
<PAGE>
EXHIBIT B
CLASS A WARRANT AGREEMENT
WARRANT AGREEMENT
-----------------
WARRANT AGREEMENT, dated as of ____________, 1998 (this
"Agreement") between Toy Biz, Inc., a Delaware corporation (the "Company"), and
[Name of Warrant Agent], 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 Third 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") and of Marvel Holdings, Inc.,
Marvel (Parent) Holdings, Inc., and Marvel III Holdings, Inc. (collectively,
the "Holding Companies"), 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 Equity Interest and Allowed
Class Securities Litigation Claims (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, $0.01 par
value per share, of the Company (the "Common Stock"), representing ___ percent
(___%) of the fully diluted 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
<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.
"Closing Price" means (a) if the Common Stock shall be 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 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 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 30 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
2
<PAGE>
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 term "Qualifying Warrantholder" shall
include 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. 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" has the meaning set forth in the preamble
hereof.
"Company" means Toy Biz, 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 current Market 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
3
<PAGE>
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 Common Stock as
follows:
<TABLE>
<CAPTION>
- ------------------------------------------------ ----------------------------------------------- --------------
<S> <C> <C>
If the Warrant Distribution Date is a date on But Before: Then the
or after: Exercise
Price shall
be:
- ------------------------------------------------ ----------------------------------------------- --------------
[The Consummation Date] [The date 30 days after the Consummation Date] $12.00
- ------------------------------------------------ ----------------------------------------------- --------------
[The date 30 days after the Consummation Date] [The date 60 days after the Consummation Date] $12.25
- ------------------------------------------------ ----------------------------------------------- --------------
[The date 60 days after the Consummation Date] [The date 90 days after the Consummation Date] $12.50
- ------------------------------------------------ ----------------------------------------------- --------------
[The date 90 days after the Consummation Date] [The date 120 days after the Consummation $12.75
Date]
- ------------------------------------------------ ----------------------------------------------- --------------
[The date 120 days after the Consummation Date] [The date 150 days after the Consummation $13.00
Date]
- ------------------------------------------------ ----------------------------------------------- --------------
[The date 150 days after the Consummation Date] [The date 180 days after the Consummation $13.25
Date]
- ------------------------------------------------ ----------------------------------------------- --------------
[The date 180 days after the Consummation Date] [The date 210 days after the Consummation $13.50
Date]
- ------------------------------------------------ ----------------------------------------------- --------------
[The date 210 days after the Consummation Date] [The date 240 days after the Consummation $13.75
Date]
- ------------------------------------------------ ----------------------------------------------- --------------
[The date 240 days after the Consummation Date] [The date 270 days after the Consummation $14.00
Date]
- ------------------------------------------------ ----------------------------------------------- --------------
[The date 270 days after the Consummation Date] [The date 300 days after the Consummation $14.25
Date]
- ------------------------------------------------ ----------------------------------------------- --------------
[The date 300 days after the Consummation Date] [The date 330 days after the Consummation $14.50
Date]
- ------------------------------------------------ ----------------------------------------------- --------------
[The date 330 days after the Consummation Date] [The date 360 days after the Consummation $14.75
Date]
- ------------------------------------------------ ----------------------------------------------- --------------
</TABLE>
4
<PAGE>
"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
Common Stock, as of the date of determination the average of the daily
closing prices for 30 consecutive trading days preceding the date of
such computation.
"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 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" has the meaning set forth in Section 11(f) hereof.
"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 [Name of Warrant Agent] 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 Common Stock issued or
issuable upon the exercise of the Warrants.
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 A, Series 1; Class A, 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 cancelled 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
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
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 cancelled 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. Cancelled 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 A, Series 1; Class A, 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 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
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, at
the option of the Holder:
(i) 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; or
(ii) by reducing the number of Warrant Shares issuable to
the Warrantholder by a number of shares of Common Stock that
have a value equal to the Exercise Price which otherwise
would have been paid. For the purpose of any exercise
pursuant to the previous sentence, the value of a share of
Common Stock shall be the Fair Market Value of such share on
the date of such exercise.
(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 five (5) 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
9
<PAGE>
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 five (5) 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.
(f) All Warrant Certificates surrendered upon exercise of
Warrants shall be cancelled by the Warrant Agent. Such cancelled 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
10
<PAGE>
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.
(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 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 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
11
<PAGE>
to the record date for determination of shareholders entitled
thereto, and the applicable Exercise Price will be adjusted
as provided in Section 11(e) 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 applicable Exercise Price will be adjusted
as provided in Section 11(e) 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,
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 (collectively, "Rights") to
all holders of its outstanding
12
<PAGE>
Common Stock entitling them to subscribe for or purchase
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 or purchase 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 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. (i) 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)
13
<PAGE>
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.
(ii) In case the Company shall issue any shares of
Common Stock or rights, options or warrants to acquire shares
of Common Stock, other than the Exempted Issuances (as
defined below) and other than issuances covered by other
clauses of this Section 11, (x) within the first six months
after the Consummation Date at an Issue Price (as defined
below) which is lower than the then current Exercise Price,
then the Exercise Price of all outstanding Warrants and
Warrants issued thereafter shall be adjusted to a price equal
to the Issue Price, or (y) more than six months after the
Consummation Date, but prior to the Expiration Date, at an
Issue Price which is lower than both the current Exercise
Price 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 adjusted to
a price equal to that Issue Price. In the case the Company
shall issue rights, options or warrants to acquire shares of
Common Stock, the consideration received by the Company for
such issuance shall be deemed to be the same as the
consideration, if any, received by the Company upon the
issuance of such rights, options or warrants plus the minimum
purchase price provided in such options, warrants or rights
for the Common Stock covered thereby. "Exempted Issuances"
means securities issuances contemplated by the Third Amended
Plan (including securities issued on conversion or exercise
of securities contemplated by the Third Amended Plan),
issuances of shares of the Company's 8% Cumulative
Convertible Preferred Stock ("Convertible Preferred Stock")
as dividends on Convertible 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 Convertible
Preferred Stock outstanding as of the Consummation Date.
"Issue Price" means (i) in the case of the issuance of
14
<PAGE>
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 performing similar services; (ii) in the
case of the issuance of Common Stock for 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.
(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 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 after the date of 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 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 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 applicable Exercise Price of the
Warrants and/or increase the number of Warrants Shares
issuable upon
15
<PAGE>
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
Common Stock or rights, options or warrants to acquire shares
of Common Stock, other than the Exempted Issuances 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 which is equal to or greater than the then
current Exercise Price but lower than the Current Market
Price of the Common Stock on the date of issuance, then the
Board of Directors shall make such adjustments in the
application of the provisions of this Section 11, in
accordance with the essential intent and principles of this
Section 11, as shall be reasonably necessary, in the good
faith opinion of the Board of Directors, to protect the
purchase rights of the Holders in accordance with such
essential intent and principles.
(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 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 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.
16
<PAGE>
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 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 such series of Warrant 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) 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
17
<PAGE>
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 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 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, 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.
18
<PAGE>
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
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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.
20
<PAGE>
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
21
<PAGE>
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, 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 commercially reasonable 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 such registration or
approval is required 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 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 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.
(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 of 1933, as amended.
(c) The Company covenants that it shall use commercially
reasonable efforts to have the Common 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.
22
<PAGE>
SECTION 21. Notices. (a) Any notice or demand authorized by
this Agreement to be given or made by the Warrant Agent or by the Holder to or
on the Company shall be deemed given or made when and if delivered personally,
facsimiled (which is confirmed) or sent by overnight courier service, addressed
(until another address is filed in writing by the Company with the Warrant
Agent), as follows:
Toy Biz, 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 the Holder(s) of any Warrant Certificate to the Warrant Agent
shall be sufficiently given when and if deposited in the mail, first-class or
registered or overnight, postage prepaid, addressed (until another address is
filed in writing by the Warrant Agent with the Company) to the Warrant Agent as
follows:
[Name of Warrant Agent]
[Address of Warrant Agent]
Attn: [Corporate Trust Department]
(d) Any notice or demand authorized by this Agreement to be
given or made by the Warrant Agent or by the Company to any Holder shall be
sufficiently given or made when and if mailed by first-class or registered,
postage prepaid, mail to the Holder's address 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
23
<PAGE>
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 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 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. 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 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
24
<PAGE>
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.
25
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this
Agreement to be duly executed, as of the day and year first above written.
TOY BIZ, INC.
By____________________
Title______________
[NAME OF WARRANT AGENT]
By____________________
Title______________
26
<PAGE>
EXHIBIT A-1
EXERCISABLE ON OR BEFORE 5:00 P.M. NEW YORK CITY
TIME ON _________________.
Class A, Series __ No. Cusip No.
-------------
___________________Class A, Series __ Warrants
[Form of Class A, Series __ Warrant Certificate]
TOY BIZ, 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, Series __ Warrants
expiring __________ (the "Warrants") to purchase shares of Common Stock (the
"Common Stock"), of Toy Biz, 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 $_______ 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
<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:
TOY BIZ, INC.
By _________________________
Name:
Title:
Countersigned:
[NAME OF WARRANT AGENT],
as Warrant Agent
By________________________
Authorized Signature
A-2
<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 [Warrant Agent], 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, or by reducing the number of Warrant
Shares issuable to the holder by a number of shares of Common Stock that have a
value equal to the Exercise Price which otherwise would have been paid (for
purpose of any such exercise, the value of a share of Common Stock shall be the
Fair Market Value of such share on the date of such exercise).
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
<PAGE>
SUBSCRIPTION FORM
(To be executed only upon exercise of Warrants represented by this Warrant
Certificate)
To: [Name of Warrant Agent],
as Warrant Agent
[Address of Warrant Agent]
The undersigned hereby irrevocably exercises [_____________]
of the Class A, 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 Common Stock of Toy Biz, Inc. (the "Warrant Shares")
deliverable upon the exercise of such Class A, 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
A, Series __ Warrants exercised shall not be all of the Class A, Series __
Warrants evidenced by this Warrant Certificate, a new Warrant Certificate for
the balance remaining of such Class A, 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
<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, Series __ Warrants constituting a part
of the Class A, 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 A, 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
<PAGE>
EXHIBIT B-1
TERM SHEET
FOR STOCKHOLDER CLASS A WARRANTS
Number of Warrants 4,000,000 (subject to increase or decrease to
accommodate rounding of Fractional Warrants), issuable
in one or more series, with each Warrant being
exercisable for one share of Common Stock. The date on
which each series of Warrants are issued is referred to
herein as the "Warrant Distribution Date." All Warrants
having the same Warrant Distribution Date shall
constitute the same series. The distribution of the
Warrants shall occur as promptly as reasonably
practicable after the Consummation Date.
With respect to each series of Warrants issued on a
particular Warrant Distribution Date, the Exercise
Price shall be an amount per share of Common Stock as
follows:
<TABLE>
<CAPTION>
If the Warrant Distribution Date is a But Before: Then the Exercise
date on or after: Price shall be:
<S> <C> <C>
[The Consummation Date] [The date 30 days after the $12.00
Consummation Date]
[The date 30 days after the [The date 60 days after the $12.25
Consummation Date] Consummation Date]
[The date 60 days after the [The date 90 days after the $12.50
Consummation Date ] Consummation Date]
[The date 90 days after the [The date 120 days after the $12.75
Consummation Date] Consummation Date]
[The date 120 days after the [The date 150 days after the $13.00
Consummation Date] Consummation Date]
[The date 150 days after the [The date 180 days after the $13.25
Consummation Date] Consummation Date]
[The date 180 days after the [The date 210 days after the $13.50
Consummation Date] Consummation Date]
[The date 210 days after the [The date 240 days after the $13.75
Consummation Date] Consummation Date]
[The date 240 days after the [The date 270 days after the $14.00
Consummation Date] Consummation Date]
[The date 270 days after the [The date 300 days after the $14.25
Consummation Date] Consummation Date]
<PAGE>
<CAPTION>
[The date 300 days after the [The date 330 days after the $14.50
Consummation Date] Consummation Date]
[The date 330 days after the [The date 360 days after the $14.75
Consummation Date] Consummation Date]
</TABLE>
If any Warrants have not yet been issued by the first
anniversary of the Consummation Date (or the first business day
thereafter if that date is not a business day) (the
"Consummation Anniversary Date"), on the Consummation
Anniversary Date Newco shall distribute all of those unissued
Warrants to a financial institution (the "Warrant Liquidation
Agent"). The Expiration Date of the Warrants distributed to the
Warrant Liquidation Agent shall be six months after the date
they are distributed to the Warrant Liquidation Agent and the
Exercise Price of those Warrants shall be $14.75. The Warrant
Liquidation Agent shall be instructed by Newco to sell those
Warrants into the market as promptly as reasonably practical to
permit an orderly sale. 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 Agent shall be paid by Newco. Any remaining
net proceeds of the sale of those Warrants shall be delivered
to the Disbursing Agent to be held in a trust account and
disbursed to claimants who would otherwise have been entitled
to receive those Warrants after the Consummation Anniversary
Date. Before the Consummation Anniversary Date, Newco shall
either obtain a no-action letter from the Securities and
Exchange Commission to the effect that neither (i) the issuance
of those Warrants to the Warrant Liquidation Agent nor (ii) the
resale of those Warrants by the Warrant Liquidation Agent will
require registration under the Securities Act, or, if it does
not obtain such a no-action letter, file and cause to become
effective a registration statement under the Securities Act as
promptly as reasonably practical after the Consummation Date.
Prior to the Confirmation Date, Toy Biz shall designate a
financial institution to serve as the Warrant Liquidation Agent
and shall prepare a form of Warrant Liquidation Agreement to
effectuate these arrangements. The Warrant Liquidation Agent
and Warrant Liquidation Agreement shall be subject to the
approval of the Trustee and the Senior Secured Lenders, which
shall not be unreasonably withheld or delayed.
Expiration Date:For each series of Warrants, the first business day occurring
more than six months after the Warrant Distribution Date
applicable to that series.
Anti-Dilution The Warrants shall be subject to customary anti-dilution
Adjustments: adjustments with respect to stock dividends, stock splits or
other similar capital reorganizations. If any anti-dilution
event occurs prior the issuance of any series of Warrants, then
the Board of Directors shall make appropriate adjustment in the
exercise rights of that series of Warrants so that the Warrants
shall be subject, as nearly as may be practical, to the
adjustment which would have resulted from that anti-dilution
event had the Warrants been outstanding at the time of that
event.
If any shares of Common Stock, or warrants or other rights to
acquire shares of Common Stock, other than Exempted Issuances,
are issued within six months after Consummation Date for an
issue price less than the then current Exercise Price, then the
2
<PAGE>
Exercise Price of all outstanding Warrants and Warrants issued
thereafter shall be changed to an amount equal to that issue
price. If any shares of Common Stock, or warrants or other
rights to acquire shares of Common Stock, other than Exempted
Issuances, are issued within six months after Consummation Date
for an issue price which is equal to or greater than the then
current Exercise Price but less than the then Current Market
Price per share of Common Stock, then appropriate adjustment
shall be made by the Board of Directors to the Exercise Price
of all outstanding Warrants and Warrants issued thereafter. If
any shares of Common Stock, or warrants or other rights to
acquire shares of Common Stock, other than Exempted Issuances,
are issued more than six months after the Consummation Date but
prior to the Expiration Date for an issue price which is less
than both the then current Exercise Price and the then Current
Market Price per share of Common Stock, then the Exercise Price
of all outstanding Warrants and Warrants issued thereafter
shall be changed to an amount equal to that issue price.
"Exempted Issuances" means securities issuances contemplated by
the Third Amended Plan (including securities issuable on
conversion or exercise of securities contemplated by the Third
Amended Plan), issuances of shares of Convertible Preferred
Stock as dividends on shares of Convertible 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 Convertible Preferred
Stock outstanding as of the Consummation Date.
3
<PAGE>
EXHIBIT C
CLASS B WARRANT AGREEMENT
WARRANT AGREEMENT
-----------------
WARRANT AGREEMENT, dated as of ____________, 1998 (this
"Agreement") between Toy Biz, Inc., a Delaware corporation (the "Company"), and
[Name of Warrant Agent], 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 Third 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") and of Marvel Holdings, Inc.,
Marvel (Parent) Holdings, Inc., and Marvel III Holdings, Inc. (collectively,
the "Holding Companies"), 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 Equity Interest and Allowed
Class Securities Litigation Claims (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 preferred stock, $0.01 par value per share, of the Company (the
"Preferred Stock"), representing ___ percent (___%) of the fully diluted
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
<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.
"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 during such 30 consecutive trading
days); 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 in good faith by the
Board of Directors (which determination shall be reasonably described
2
<PAGE>
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 term "Qualifying Warrantholder" shall
include 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. 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 Toy Biz, 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 Current Market 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
3
<PAGE>
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:
<TABLE>
<CAPTION>
- ------------------------------------------------ ----------------------------------------------- --------------
<S> <C> <C>
If the Warrant Distribution Date is a date on But Before: Then the
or after: Exercise
Price shall
be:
- ------------------------------------------------ ----------------------------------------------- --------------
[The Consummation Date] [The date 30 days after the Consummation Date] $10.65
- ------------------------------------------------ ----------------------------------------------- --------------
[The date 30 days after the Consummation Date] [The date 60 days after the Consummation Date] $10.76
- ------------------------------------------------ ----------------------------------------------- --------------
[The date 60 days after the Consummation Date] [The date 90 days after the Consummation Date] $10.86
- ------------------------------------------------ ----------------------------------------------- --------------
[The date 90 days after the Consummation Date] [The date 120 days after the Consummation $10.97
Date]
- ------------------------------------------------ ----------------------------------------------- --------------
[The date 120 days after the Consummation Date] [The date 150 days after the Consummation $11.08
Date]
- ------------------------------------------------ ----------------------------------------------- --------------
[The date 150 days after the Consummation Date] [The date 180 days after the Consummation $11.19
Date]
- ------------------------------------------------ ----------------------------------------------- --------------
[The date 180 days after the Consummation Date] [The date 210 days after the Consummation $11.31
Date]
- ------------------------------------------------ ----------------------------------------------- --------------
[The date 210 days after the Consummation Date] [The date 240 days after the Consummation $11.42
Date]
- ------------------------------------------------ ----------------------------------------------- --------------
[The date 240 days after the Consummation Date] [The date 270 days after the Consummation $11.53
Date]
- ------------------------------------------------ ----------------------------------------------- --------------
[The date 270 days after the Consummation Date] [The date 300 days after the Consummation $11.65
Date]
- ------------------------------------------------ ----------------------------------------------- --------------
[The date 300 days after the Consummation Date] [The date 330 days after the Consummation $11.76
Date]
- ------------------------------------------------ ----------------------------------------------- --------------
[The date 330 days after the Consummation Date] [The date 360 days after the Consummation $11.88
Date]
- ------------------------------------------------ ----------------------------------------------- --------------
4
<PAGE>
"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 prices for [20] consecutive trading days preceding the
date of such computation.
"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 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" has the meaning set forth in Section 11(f) hereof.
"Preferred Stock" has the meaning set forth in the preamble
hereof.
"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 [Name of Warrant Agent] 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.
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 cancelled 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
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
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 cancelled 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. Cancelled 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
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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, at
the option of the Holder:
(i)ab 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; or
(ii)ab by reducing the number of Warrant Shares issuable to
the Warrantholder by a number of shares of Preferred Stock
that have a value equal to the Exercise Price which otherwise
would have been paid. For the purpose of any exercise
pursuant to the previous sentence, the value of a share of
Preferred Stock shall be the Fair Market Value of such share
on the date of such exercise.
(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 five (5) 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
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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 five (5) 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.
(f) All Warrant Certificates surrendered upon exercise of
Warrants shall be cancelled by the Warrant Agent. Such cancelled 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
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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.
(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
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<PAGE>
to the record date for determination of shareholders entitled
thereto, and the applicable Exercise Price will be adjusted
as provided in Section 11(e) 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 following such action had such Warrant been
exercised immediately prior thereto, and the applicable
Exercise Price will be adjusted as provided in Section 11(e)
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 or warrants (collectively, "Rights") to
all holders of its outstanding
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Preferred Stock entitling them to subscribe for or purchase
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 of issuance
of such Rights plus the additional Number of Shares of
Preferred Stock offered for subscription or purchase 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
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<PAGE>
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 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
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. "Exempted Issuances" means
securities issuances contemplated by the Third
Amended Plan (including securities issuable on
conversion or exercise of securities contemplated by
the Third Amended Plan), 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
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<PAGE>
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 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.
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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 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 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 after the date of issuance of a
Warrant, 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
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<PAGE>
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 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
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
17
<PAGE>
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 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 such series of Warrant 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
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<PAGE>
(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
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. 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
19
<PAGE>
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.
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.
20
<PAGE>
(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 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,
21
<PAGE>
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.
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,
22
<PAGE>
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 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, 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 commercially reasonable 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 such
registration or approval is required 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 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 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.
(b) The Company covenants that it shall, until the
expiration of one year after the Consummation 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 of 1933, as amended.
23
<PAGE>
(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 or demand authorized by
this Agreement to be given or made by the Warrant Agent or by the Holder to or
on the Company shall be deemed given or made when and if delivered personally,
facsimiled (which is confirmed) or sent by overnight courier service, addressed
(until another address is filed in writing by the Company with the Warrant
Agent), as follows:
Toy Biz, 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 the Holder(s) of any Warrant Certificate to the Warrant Agent
shall be sufficiently given when and if deposited in the mail, first-class or
registered or overnight, postage prepaid, addressed (until another address is
filed in writing by the Warrant Agent with the Company) to the Warrant Agent as
follows:
[Name of Warrant Agent]
[Address of Warrant Agent]
Attn: [Corporate Trust Department]
(d) Any notice or demand authorized by this Agreement to be
given or made by the Warrant Agent or by the Company to any Holder shall be
sufficiently given or made when and if mailed by first-class or registered,
postage prepaid, mail to the Holder's address 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.
24
<PAGE>
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 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 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. 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 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
25
<PAGE>
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.
26
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this
Agreement to be duly executed, as of the day and year first above written.
TOY BIZ, INC.
By_______________________
Title_________________
[NAME OF WARRANT AGENT]
By_______________________
Title_________________
27
<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]
TOY BIZ, 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 Toy Biz, 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
<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:
TOY BIZ, INC.
By__________________________________
Name:
Title:
Countersigned:
[NAME OF WARRANT AGENT],
as Warrant Agent
By_______________________________
Authorized Signature
A-2
<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 [Warrant Agent], 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, or by reducing the number of Warrant
Shares issuable to the holder by a number of shares of Preferred Stock that
have a value equal to the Exercise Price which otherwise would have been paid
(for purpose of any such exercise, the value of a share of Common Stock shall
be the Fair Market Value of such share on the date of such exercise).
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
<PAGE>
SUBSCRIPTION FORM
(To be executed only upon exercise of Warrants represented
by this Warrant Certificate)
To: [Name of Warrant Agent],
as Warrant Agent
[Address of Warrant Agent]
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 Toy Biz, 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
<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 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
<PAGE>
EXHIBIT C-1
TERM SHEET
FOR STOCKHOLDER CLASS B WARRANTS
Number 3,000,000 (subject to increase or decrease to
of Warrants accommodate rounding of Fractional Warrants), issuable in
one or more series, with each Warrant being exercisable for
one share of Convertible Preferred Stock. The date on which
each series of Warrants are issued is referred to herein as
the "Warrant Distribution Date." All Warrants having the
same Warrant Distribution Date shall constitute the same
series.
Exercise Price: With respect to each series of Warrants issued on a
particular Warrant Distribution Date, the Exercise Price
shall be an amount per share of Convertible Preferred Stock
as follows:
</TABLE>
<TABLE>
<CAPTION>
If the Warrant Distribution Date But Before: Then the Exercise
is a date on or after: Price shall be:
<S> <C> <C>
[The Consummation Date] [The date 30 days after the Consummation $10.65
Date]
[The date 30 days after the [The date 60 days after the Consummation $10.76
Consummation Date] Date]
[The date 60 days after the [The date 90 days after the Consummation $10.86
Consummation Date] 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 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]
<PAGE>
<CAPTION>
<S> <C> <C>
[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>
If any Warrants have not yet been issued by the first
anniversary of the Consummation Date (or the first business
day thereafter if that date is not a business day) (the
"Consummation Anniversary Date"), on the Consummation
Anniversary Date Newco shall distribute all of those
unissued Warrants to a financial institution (the "Warrant
Liquidation Agent"). The Expiration Date of the Warrants
distributed to the Warrant Liquidation Agent shall be six
months after the date they are distributed to the Warrant
Liquidation Agent and the Exercise Price of those Warrants
shall be $11.88. The Warrant Liquidation Agent shall be
instructed by Newco to sell those Warrants into the market
as promptly as reasonably practical to permit an orderly
sale. 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 Agent shall be paid by Newco. Any remaining net
proceeds of the sale of those Warrants shall be delivered to
the Disbursing Agent to be held in a trust account and
disbursed to claimants who would otherwise have been
entitled to receive those Warrants after the Consummation
Anniversary Date. Before the Consummation Anniversary Date,
Newco shall either obtain a no-action letter from the
Securities and Exchange Commission to the effect that
neither (i) the issuance of those Warrants to the Warrant
Liquidation Agent nor (ii) the resale of those Warrants by
the Warrant Liquidation Agent will require registration
under the Securities Act, or, if it does not obtain such a
no-action letter, file and cause to become effective a
registration statement under the Securities Act. Prior to
the Confirmation Date, Toy Biz shall designate a financial
institution to serve as the Warrant Liquidation Agent and
shall prepare a form of Warrant Liquidation Agreement to
effectuate these arrangements. The Warrant Liquidation Agent
and the Warrant Liquidation Agreement shall be subject to
the approval of the Trustee and the Senior Secured Lenders,
which shall not be unreasonably withheld or delayed.
Expiration For each series of Warrants, the first business day
Date: occurring more than six months after the Warrant
Distribution Date applicable to that series.
Anti-Dilution The Warrants shall be subject to customary anti-dilution
Adjustments: adjustments with respect to stock dividends, stock splits or
other similar capital reorganizations. If any anti-dilution
event occurs prior the issuance of any series of Warrants,
then the Board of Directors shall make appropriate
adjustment in the exercise rights of that series of Warrants
so that the Warrants shall be subject, as nearly as may be
practical, to the adjustment which would have resulted from
that anti-dilution event had the Warrants been outstanding
at the time of that event.
If any shares of Convertible Preferred Stock or Common
Stock, or warrants or other rights to acquire shares of
Convertible Preferred Stock or Common Stock, other than
Exempted Issuances, are issued within six months after the
Consummation Date for an
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issue price less than (i) in the case of issuances of shares
of Convertible Preferred Stock or warrants or other rights
to acquire shares of Convertible Preferred Stock, the then
current Exercise Price, or (ii) in the case of issuances of
shares of Common Stock or warrants or other rights 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") issuable on conversion of a
share of Convertible Preferred Stock, then the Exercise
Price of all outstanding Warrants and Warrants issued
thereafter shall be changed to an amount equal to that issue
price, if the adjustment is triggered by the issuance of
shares of Convertible Preferred Stock or warrants or other
rights to acquire shares of Convertible 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 warrants or other
rights to acquire shares of Common Stock. "Exempted
Issuances" means securities issuances contemplated by the
Third Amended Plan (including securities issuable on
conversion or exercise of securities contemplated by the
Third Amended Plan), issuances of shares of Convertible
Preferred Stock as dividends on shares of Convertible
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 Convertible Preferred Stock outstanding as of the
Consummation Date.
If any shares of Convertible Preferred Stock or Common
Stock, or warrants or other rights to acquire shares of
Convertible Preferred Stock or Common Stock, other than
Exempted Issuances, are issued within six months after the
Consummation Date for an issue price which is (i) in the
case of issuances of shares of Convertible Preferred Stock
or warrants or other rights to acquire shares of Convertible
Preferred Stock, equal to or greater than the then current
Exercise Price but less than the product of the Conversion
Number multiplied by the then Current Market Price per share
of Common Stock, or (ii) in the case of issuances of shares
of Common Stock or warrants or other rights 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 then Current Market
Price per share of Common Stock, then appropriate adjustment
shall be made by the Board of Directors to the Exercise
Price of all outstanding Warrants and Warrants issued
thereafter.
If any shares of Convertible Preferred Stock of Common
Stock, or Warrants or other rights to acquire shares of
Convertible Preferred Stock or Common Stock, other than
Exempted Issuances, are issued more than six months after
the Consummation Date but prior to the Expiration Date for
an issue price which is less than (i) in the case of
issuances of shares of Convertible Preferred Stock or
Warrants or other rights to acquire shares of Convertible
Preferred Stock, both the then current Exercise Price and
the product of the Conversion Number multiplied by the then
Current Market Price per share of Common Stock, or (ii) in
the case of issuances of shares of Common Stock or Warrants
or other rights to acquire shares of Common Stock, both
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the quotient of the current Exercise Price divided by the
Conversion Number and the then Current Market Price per
share of Common Stock, then the Exercise Price of all
outstanding Warrants and Warrants issued thereafter shall be
changed to an amount equal to that issue price, if the
adjustment is triggered by the issuance of shares of
Convertible Preferred Stock or Warrants or other rights to
acquire shares of Convertible 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 Warrants or other rights to
acquire shares of Common Stock.
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EXHIBIT D
CLASS C WARRANT AGREEMENT
WARRANT AGREEMENT
WARRANT AGREEMENT, dated as of ____________, 1998 (this
"Agreement") between Toy Biz, Inc., a Delaware corporation (the "Company"),
and [Name of Warrant Agent], 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 Third 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") and of Marvel Holdings, Inc.,
Marvel (Parent) Holdings, Inc., and Marvel III Holdings, Inc. (collectively,
the "Holding Companies"), 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 Equity Interest and
Allowed Class Securities Litigation Claims (as defined in the Plan of
Reorganization) evidencing Class C Warrants (the "Warrants") to acquire, under
certain circumstances, an aggregate of 5,000,000 shares of the common stock,
$0.01 par value per share, of the Company (the "Common Stock"), representing
___ percent (___%) of the fully diluted 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
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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 Toy Biz, 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 prices for 30 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
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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 30 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 term "Qualifying Warrantholder"
shall include 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. 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.
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"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 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" has the meaning set forth in Section 11(f) hereof.
"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 [Name of Warrant Agent] 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.
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
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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.
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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
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<PAGE>
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 then in effect for the Warrants 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 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, at the option
of the Holder:
(i) 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; or
(ii) by reducing the number of Warrant Shares issuable to
the Warrantholder by a number of shares of Common Stock that
have a value equal to the Exercise Price which otherwise
would have been paid. For the purpose of any exercise
pursuant to the previous sentence, the value of a share of
Common Stock shall be the Fair Market Value of such share on
the date of such exercise.
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(c) 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 five (5) 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 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 five (5) 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.
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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
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
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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 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 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(e)
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(e) 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
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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 or warrants (collectively, "Rights")
to all holders of its outstanding Common Stock entitling
them to subscribe for or purchase 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 or purchase 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;
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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
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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<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, 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 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 exercise price legally permissible for warrants to
acquire shares of Common Stock,
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<PAGE>
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, or with
respect to the method employed in making such adjustment or the validity or
value (or the
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<PAGE>
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 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
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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
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.
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<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, 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 commercially reasonable 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 such registration or
approval is required 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 Warrant Shares in order to allow the resale or
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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.
(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 of 1933,
as amended.
(c) The Company covenants that it shall use commercially
reasonable efforts to have the Warrants and the Common 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 or demand authorized by
this Agreement to be given or made by the Warrant Agent or by the Holder to or
on the Company shall be deemed given or made when and if delivered personally,
facsimiled (which is confirmed) or sent by overnight courier service,
addressed (until another address is filed in writing by the Company with the
Warrant Agent), as follows:
Toy Biz, 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 the Holder(s) of any Warrant Certificate to the Warrant Agent
shall be sufficiently given when and if deposited in the mail, first-class or
registered or overnight, postage prepaid, addressed (until another address is
filed in writing by the Warrant Agent with the Company) to the Warrant Agent
as follows:
[Name of Warrant Agent]
[Address of Warrant Agent]
Attn: [Corporate Trust Department]
(d) Any notice or demand authorized by this Agreement to be
given or made by the Warrant Agent or by the Company to any Holder shall be
sufficiently given or made when and if mailed by first-class or registered,
postage prepaid, mail to the Holder's address shown on
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<PAGE>
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 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 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 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,
21
<PAGE>
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.
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.
TOY BIZ, INC.
By
---------------------------------
Title
---------------------------
[NAME OF WARRANT AGENT]
By
---------------------------------
Title
---------------------------
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]
TOY BIZ, 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 Toy Biz, 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 $_______ 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
<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:
TOY BIZ, INC.
By
-------------------------------
Name:
Title:
Countersigned:
[NAME OF WARRANT AGENT],
as Warrant Agent
By
---------------------------
Authorized Signature
A-2
<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 [Warrant Agent], 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, or by reducing the number of Warrant
Shares issuable to the holder by a number of shares of Common Stock that have
a value equal to the Exercise Price which otherwise would have been paid (for
purpose of any such exercise, the value of a share of Common Stock shall be
the Fair Market Value of such share on the date of such exercise).
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
<PAGE>
SUBSCRIPTION FORM
(To be executed only upon exercise of Warrants represented
by this Warrant Certificate)
To: [Name of Warrant Agent],
as Warrant Agent
[Address of Warrant Agent]
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 Toy Biz, 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
<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
<PAGE>
EXHIBIT D-1
TERM SHEET
FOR STOCKHOLDER SERIES C WARRANTS
Number of Warrants 5,000,000 (subject to
increase or decrease to accommodate
rounding of Fractional Warrants) with
each Warrant being exercisable for one
share of Common Stock.
Exercise Price: $18.50 per share.
Expiration Date: The first business day after the fourth
anniversary of the Consummation Date.
Anti-Dilution Adjustments: The Warrants shall be subject to
customary anti-dilution adjustments with
respect to stock dividends, stock splits
or other similar capital reorganizations.
<PAGE>
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 a special
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 Toy Biz, 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 registered agent of the Corporation at such
address is The Prentice-Hall Corporation System, Inc.
<PAGE>
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
250,000,000 shares, consisting of two classes of capital stock:
(a) 200,000,000 shares of common stock, par value $.01 per
share (the "Common Stock"); and
(b) 50,000,000 shares of preferred stock, par value $.01 per
share (the "Preferred Stock") of which 30,000,000 shares shall be designated as
shares of 8% Cumulative Convertible 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 restrictions thereof, of the capital
stock of the Corporation shall be as set forth in this Certificate of
Incorporation.
-2-
<PAGE>
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.
-3-
<PAGE>
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 Preferred Stock. The initial
series of Preferred Stock shall be comprised of 30,000,000 shares and shall be
designated 8% Cumulative Convertible Preferred Stock (the "8% Preferred
Stock").
-4-
<PAGE>
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 [March, June, September and December] in each year (each such
date being referred to herein as a "Quarterly Dividend Payment Date"),
commencing __________________, 199_. 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
-5-
<PAGE>
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, or (C) transfer all or substantially all of its properties or
its assets to any other person, unless such transaction is approved by at least
two-thirds of the shares of outstanding 8% Preferred Stock, voting together as
a separate class, except that in the case of a merger, consolidation or
transfer to be consummated prior to [THE DATE WHICH IS THE THIRD ANNIVERSARY OF
THE CLOSING WILL BE INSERTED] 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 [THE DATE WHICH IS
THE THIRD ANNIVERSARY OF THE CLOSING WILL BE INSERTED], 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:
-6-
<PAGE>
(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 [Third]
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 "Third Amended Plan"), including pursuant to the
Stockholder Series B Warrants referred to in the Third 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 [THE DATE WHICH IS THE THIRTEENTH
ANNIVERSARY OF THE CLOSING WILL BE INSERTED] 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 [THE
DATE WHICH IS THE THIRD ANNIVERSARY OF THE CLOSING WILL BE INSERTED] 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.
-7-
<PAGE>
(c) The following provisions shall apply to any redemption
pursuant to this Section 6.5:
(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
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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 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.
(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
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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 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
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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; 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
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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 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
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purpose, a certificate or certificates representing the shares of 8% Preferred
Stock to be 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 [THE DATE WHICH IS THE THIRD ANNIVERSARY OF THE CLOSING WILL BE
INSERTED], 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 [THE DATE WHICH IS THE THIRD
ANNIVERSARY OF THE CLOSING WILL BE INSERTED] 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, the Corporation,
as note issuer (the "Note Issuer"), may, at its option, exchange all, but not
less than all, of the outstanding 8% Preferred Stock for subordinated notes
(the "Subordinated Notes") of the Note Issuer (the "Note
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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.
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 [THE DATE WHICH IS THE THIRTEENTH ANNIVERSARY
OF THE CLOSING WILL BE INSERTED]
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
"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
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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 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
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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.
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
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
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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 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
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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.
IN WITNESS WHEREOF, the Corporation has caused this Restated
Certificate of Incorporation to be duly executed and acknowledged, this ____
day of _______________, 1998.
Toy Biz, Inc.
By:
-------------------------------------
Name:
Title: President and Chief Executive
Officer
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FORM OF INDENTURE(1)
- -------------------------------------------------------------------------------
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 Preferred Stock (the "8%
Preferred Stock") of Toy Biz, Inc.
2 Or the successor entity, the "Note Issuer" as defined in the Restated
Certificate of Incorporation of the Corporation.
<PAGE>
<TABLE>
<CAPTION>
TABLE OF CONTENTS
Page
ARTICLE I
<S> <C>
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..............................................................................21
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.......................................................................26
Section 6.04 Disclaimer.........................................................................................26
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........................................................................28
Section 6.10 Eligibility; Disqualification......................................................................29
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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.......................................................................................................30
Section 8.01 Without Consent of Holders.........................................................................30
Section 8.02 With Consent of Holders............................................................................31
Section 8.03 Reserved...........................................................................................31
Section 8.04 Revocation and Effect of Consents..................................................................31
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....................................................................................................32
Section 9.01 Agreement to Subordinate...........................................................................32
Section 9.02 Subordination......................................................................................32
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............................34
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...................................................35
Section 9.08 Enforceability of Subordination....................................................................35
Section 9.09 Trustee Authorized to Effectuate Subordination.....................................................36
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Page
ARTICLE X
REDEMPTION.......................................................................................................36
Section 10.01 Optional Redemption; Notice of Redemption.........................................................36
Section 10.02 Notice of Redemption..............................................................................36
Section 10.03 Effect of Notice of Redemption....................................................................36
Section 10.04 Deposit of the Redemption Price...................................................................37
ARTICLE XI
MISCELLANEOUS....................................................................................................37
Section 11.01 Trust Indenture Act Controls......................................................................37
Section 11.02 Notices...........................................................................................37
Section 11.03 Communication by Holders with Other Holders.......................................................38
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.......................................................................39
Section 11.07 Legal Holidays....................................................................................39
Section 11.08 No Recourse Against Others........................................................................39
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 __________, 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.
<PAGE>
"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. 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 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
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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 __________, 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 respect to a
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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
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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 A,
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.
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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 at least two-thirds 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 [THE DATE WHICH IS THE THIRD ANNIVERSARY OF THE CLOSING WILL BE
INSERTED] 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 [THE DATE WHICH IS THE THIRD ANNIVERSARY
OF THE CLOSING WILL BE INSERTED], 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.
(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
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accrued and unpaid interest up to the date of conversion of such
Securities (the amount 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
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Common Stock determined by multiplying (a) the number of shares of
Common Stock 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
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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 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
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asked prices are quoted on 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 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
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the converting Holder shall be treated for all purposes as having
become the record holder of such Common Stock at such time;
(g) The Corporation shall have the right, from time to time,
on or after [THE DATE WHICH IS THE THIRD ANNIVERSARY OF THE CLOSING
WILL BE INSERTED], 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 [THE DATE WHICH IS THE
THIRD ANNIVERSARY OF THE CLOSING WILL BE INSERTED] 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
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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 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
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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
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
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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.
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, 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.
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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.
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
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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.
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
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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) 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.
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
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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;
(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.
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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;
(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.
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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 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.
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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, 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;
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(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.
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
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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. 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.
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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.
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.
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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 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
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(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.
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.
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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.
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.
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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.
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
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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 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.
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(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
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
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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.
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.
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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 the [THE DATE WHICH IS THE THIRD ANNIVERSARY OF
THE CLOSING WILL BE INSERTED] 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;
(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.
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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.
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:
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<PAGE>
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.
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).
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<PAGE>
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.
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.
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<PAGE>
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.
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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:
- -------------------------------
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Exhibit A
[Form of Face of Security(1)]
THE DEBENTURES EVIDENCED BY THIS CERTIFICATE MAY BE ISSUED AND TRANSFERRED
ONLY IN DENOMINATIONS OF $1,000 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 __________,
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.
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
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<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 ____, 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 [March, June,
September and December] 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 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 terms and
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<PAGE>
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 $1,000 (or such greater
amount as may be required by applicable State or Federal law) and integral
multiples of $1,000 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 [THE DATE WHICH IS THE THIRD
ANNIVERSARY OF THE CLOSING WILL BE INSERTED] 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.
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<PAGE>
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 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 [THE DATE
WHICH IS THE THIRTEENTH ANNIVERSARY OF THE CLOSING WILL BE INSERTED].
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
A-5
<PAGE>
endorsements and transfer documents if required by the Registrar or the
Corporation, and (4) pay any transfer or similar tax if required.
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.
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<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
-------------------------------------------
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<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
-------------------------------------------
A-8
<PAGE>
TOY BIZ, INC.
BY-LAWS
(as restated and amended)
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
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.................................................................13
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......................................................14
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
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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>
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TOY BIZ, 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 cause the election to be held at
a special meeting as soon thereafter as conveniently may be. At such special
meeting, the
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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 and outstanding shares of
each such class or classes or one or more series of a class or classes
entitled to vote, present in
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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
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<PAGE>
proposal is made (x) the name and address of such stockholder, as 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.
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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) Executive, Compensation, Audit and Other Committees. The
Board of Directors may, by resolution adopted by a Super Majority of the Board
(i) designate an Executive Committee to exercise, subject to applicable
provisions of law, all the powers of the Board in the management of the
business and affairs of the Corporation when the Board is not in session,
including without limitation the power to declare dividends, to authorize the
issuance of the Corporation's capital stock and to adopt a certificate of
ownership and merger pursuant to Section 253 of the General Corporation Law of
the State of Delaware, (ii) designate a Compensation 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 Company, the administering of the stock option plans and
executive compensation programs of the Company, including bonus and incentive
plans applicable to officers and key employees of the Company and, (iii)
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) the review of 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) the review, in
consultation with the independent auditors and the internal auditors, the plan
and
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results of the annual external audit, the adequacy of the Corporation's
internal control systems and the results of the Corporation's internal audits,
and (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(iv) by resolution similarly adopted,
designate one or more other committees. The Executive Committee, the
Compensation Committee, the Audit Committee and each such other committees
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 Executive Committee and the Compensation
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 provisions of the Certificate of Incorporation
and of these By Laws.
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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 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
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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 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
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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.
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
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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 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
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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 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
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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. The
affirmative vote of more than 75% of the entire Board shall be required to
terminate the Chief Executive Officer of the Corporation.
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 duties and powers shall, so far as the Chief Executive
Officer or
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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
Executive Committee.
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 Operating Officer, a Senior Legal Officer, a
Controller, one or
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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
initiation of such proceeding (or part thereof) by such person
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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, incorporator, employee, partner, trustee, or
agent of another
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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 the Corporation, shall be signed or endorsed by such
officer or
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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 to a transfer agent of
the Corporation an address at which
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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 certificates may
nevertheless be issued and delivered by the
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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 been lost, stolen or destroyed, upon the making of an affidavit
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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, and provided further, that Section 5.7 may not be
amended or repealed without the affirmative vote of 75% of the Board or the
affirmative vote of 75% 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.
-25-
<PAGE>
AMENDMENT NO. 3 TO THE
AMENDED AND RESTATED MASTER AGREEMENT
This Amendment No. 3, dated as of May 11, 1998 (this "Third
Amendment"), to the Amended and Restated Master Agreement, dated as of
November 19, 1997 (the "Master Agreement"), by and among (i) Toy Biz, Inc., a
Delaware corporation ("Toy Biz"), (ii) certain secured creditors (the
"Consenting Lenders") of Marvel Entertainment Group, Inc., a Delaware
corporation ("Entertainment"), and certain of its direct and indirect
subsidiaries and (iii) certain creditors (the "Consenting Panini Lenders") of
Panini S.p.A. and its subsidiaries.
PRELIMINARY STATEMENT
Each of the parties to this Third Amendment is a party
to the Master Agreement. The Master Agreement was amended by
Amendment No. 1, dated as of February 3, 1998 (the "First
Amendment"), and by Amendment No. 2, dated as of March 12, 1998
(the "Second Amendment").
NOW, THEREFORE, in consideration of the foregoing and the
mutual promises and covenants set forth herein, and on the terms and subject
to the conditions set forth herein, the parties hereto agree as follows:
Section 1. The following dates referred to in the Master
Agreement are hereby amended as follows:
(a) The dates "April 10, 1998" and "April 1, 1998" in
Section 7.2(c) of the Master Agreement, as previously extended by the
Amendments No. 1 and 2 to the Master Agreement, are hereby extended
to July 10, 1998 and June 30, 1998, respectively.
(b) The dates "May 25, 1998" and "May 15, 1998" in Section
7.2(d) of the Master Agreement, as previously extended by the
Amendments No. 1 and 2 to the Master Agreement, are hereby extended
to August 25, 1998 and August 15, 1998, respectively.
Section 2. Each of the undersigned Consenting Lenders hereby
appoints The Chase Manhattan Bank ("Chase") as its attorney-in-fact for the
purpose of executing and delivering, in the name and on behalf of such
Consenting Lender, the stipulation and agreement of settlement (the
"Stipulation"), dated as of May 11, 1998 by and among Toy Biz, Isaac
Perlmutter, Isaac Perlmutter
<PAGE>
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., Dickstein
Partners, Inc., John J. Gibbons solely in his capacity as chapter 11 trustee
for 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., Chase individually and on behalf of the Consenting Lenders, and Chase as
a DIP Lender (as defined in the Stipulation), CIBC, Inc. as a DIP Lender,
Goldman Sachs Credit Partners L.P. as a DIP Lender, Lehman Commercial Paper
Inc. as a DIP Lender, The Long Term Credit Bank of Japan, Ltd., Los Angeles
Agency as a DIP Lender and The Sumitomo Bank, Limited as a DIP Lender.
Section 3. This Third Amendment shall become effective when
(i) it has been executed by Consenting Lenders who are parties to the Master
Agreement and who constitute the Consenting Lender Threshold (as that terms is
defined in the Master Agreement), and (ii) the annexed consents have been
executed by Avi Arad, Isaac Perlmutter, Isaac Perlmutter T.A. and Zib Inc.
This Third Amendment may be executed in two or more counterparts, all of which
shall be considered one and the same agreement. Delivery of an executed
signature page of this Third Amendment by facsimile transmission shall be
effective as delivery of a manually executed counterpart hereof.
Section 4. Except as specifically amended in this Third
Amendment, the Master Agreement is ratified and confirmed in all respects and
remains in full force and effect in accordance with its terms.
Section 5. Notwithstanding anything in the Stipulation, the
Third Amendment, or otherwise, the joint plan of reorganization of
Entertainment and certain of its direct and indirect subsidiaries, filed on
November 19, 1997, and amended on February 12, 1998 and March 12, 1998(the
"Plan"), shall be further amended to be substantially in the form attached as
Exhibit A hereto. If the Stipulation of Settlement is terminated the Plan
filed as Exhibit A to the Second Amendment will be reinstated.
THE REMAINDER OF THIS PAGE HAS BEEN LEFT BLANK
2
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this
Third Amendment to be signed by their respective officers thereunto duly
authorized as of the date first written above.
TOY BIZ, INC.
By:
-------------------------
Name: Joseph M. Ahearn
Title: President
CONSENTS TO EXTENSION
I, Avi Arad, consent to this Amendment No. 3, dated as of
May 11, 1998, to the Amended and Restated Master Agreement (the "Master
Agreement Third Amendment"), and confirm that the Amended and Restated Proxy
and Stock Option Agreement, dated as of November 19, 1997, between myself and
secured creditors of Marvel Entertainment Group, Inc., remains in full force
and effect despite the Master Agreement Third Amendment.
-----------------------------
Avi Arad
We, Isaac Perlmutter, Zib Inc. and Isaac Perlmutter T.A.,
each consent to this Amendment No. 3, dated as of May 11, 1998, to the Amended
and Restated Master Agreement (the "Master Agreement Third Amendment"), and
confirm that the Amended and Restated Proxy and Stock Option Agreement, dated
as of November 19, 1997, between each of us and secured creditors of Marvel
Entertainment Group, Inc., remains in full force and effect despite the Master
Agreement Third Amendment.
-----------------------------
Isaac Perlmutter
ZIB INC.
By:
--------------------------
Isaac Perlmutter
ISAAC PERLMUTTER T.A.
By:
--------------------------
Isaac Perlmutter
Trustee
<PAGE>
CONSENTING LENDER EXECUTION PAGE
By signing below, the undersigned is hereby executing and agreeing to be bound
by (a) Amendment No. 3, dated as of May 11, 1998, to the Amended and Restated
Master Agreement, dated as of November 19, 1997, by and among (i) Toy Biz,
Inc., (ii) certain secured creditors (the "Consenting Lenders") of Marvel
Entertainment Group, Inc., a Delaware corporation ("Entertainment"), and
certain of its direct and indirect subsidiaries (the "Marvel Debtors") and
(iii) certain creditors of Panini S.p.A. and its subsidiaries.
Name of Consenting Lender:
-----------------------------
By:__________________________
Name:
Title:
ii
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<LEGEND>
This schedule contains summary financial infomation extracted from Toy Biz, Inc.
Condensed Consolidated Balance Sheets and Statements of Income and is qualified
in its entirety by reference to such financial statements.
</LEGEND>
<CIK> 0000933730
<NAME> TOY BIZ, INC.
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1998
<PERIOD-END> MAR-31-1998
<CASH> 7,910
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<ALLOWANCES> 26,996
<INVENTORY> 17,269
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<PP&E> 37,913
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<TOTAL-ASSETS> 143,621
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0
0
<COMMON> 277
<OTHER-SE> 108,780
<TOTAL-LIABILITY-AND-EQUITY> 143,621
<SALES> 42,641
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<CGS> 23,233
<TOTAL-COSTS> 23,233
<OTHER-EXPENSES> 17,526
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 189
<INCOME-PRETAX> 1,815
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<CHANGES> 0
<NET-INCOME> 1,076
<EPS-PRIMARY> $0.04
<EPS-DILUTED> $0.04
</TABLE>
