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As filed with the Securities and Exchange Commission on December 31, 1998
Registration Statement No. 333-68019
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
----------------------
AMENDMENT NO. 2
TO
FORM S-3
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
--------------------------
MARVEL ENTERPRISES, INC.
(Exact Name of Registrant as Specified in its Charter)
Delaware 13-3711775
(State or Other Jurisdiction of (I.R.S. Employer
Incorporation or Organization) Identification Number)
685 Third Avenue
New York, New York 10017
(212) 588-5100
(Address, Including Zip Code and Telephone Number,
Including Area Code, of Registrant's Principal Executive Offices)
Morton E. Handel
Chairman of the Board
685 Third Avenue
New York, New York 10017
(212) 588-5100
(Name, Address, Including Zip Code, and Telephone Number,
Including Area Code, of Agent for Service)
--------------------
copy to:
John N. Turitzin, Esq.
Battle Fowler LLP
75 East 55th Street
New York, New York 10022
(212) 856-7000
Approximate date of commencement of proposed sale to public: From time
to time or at one time after the effective date of this registration statement
as determined by market conditions.
If the only securities being registered on this form are being offered
pursuant to dividend or interest reinvestment plans, please check the following
box. [ ]
If any of the securities being registered on this form are to be
offered on a delayed or continuous basis pursuant to Rule 415 under the
Securities Act of 1933, other than securities offered only in connection with
dividend or interest reinvestment plans, check the following box. [X]
If this form is filed to register additional securities for an
offering pursuant to Rule 462(b) under the Securities Act, please check the
following box and list the Securities Act registration statement number of the
earlier effective registration statement for the same offering. [ ]
If this form is a post-effective amendment filed pursuant to Rule
462(c) under the Securities Act, check the following box and list the Securities
Act registration statement number of the earlier effective registration
statement for the same offering. [ ]
If delivery of the prospectus is expected to be made pursuant to Rule
434, please check the following box. [ ]
The registrant hereby amends this Registration Statement on such date
or dates as may be necessary to delay its effective date until the registrant
shall file a further amendment which specifically states that this Registration
Statement shall thereafter become effective in accordance with Section 8(a) of
the Securities Act of 1933 or until the Registration Statement shall become
effective on such date as the Commission, acting pursuant to said Section 8(a),
may determine.
782128.3
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Prospectus
MARVEL ENTERPRISES, INC.
36,642,683 Shares of Common Stock
15,620,234 Shares of 8% Cumulative Convertible
Exchangeable Preferred Stock
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All of the shares of stock covered by this prospectus are owned by the
stockholders listed in the section of this prospectus called "Selling
Stockholders." The selling stockholders may sell any or all of their shares from
time to time. The sales prices, and the methods of determining those prices, are
yet to be determined. We will not receive any of the proceeds of sales by the
selling stockholders.
The common stock is listed for trading on the New York Stock Exchange
under the symbol "MVL". The preferred stock is not listed for trading on any
national securities exchange or on the Nasdaq Stock Market.
See "Risk Factors" beginning on page 5 for certain factors relevant to
an investment in our common stock and/or preferred stock.
Neither the Securities and Exchange Commission nor any state
securities commission has approved or disapproved of these securities or passed
upon the adequacy or accuracy of this prospectus. Any representation to the
contrary is a criminal offense.
December 31, 1998
782128.3
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TABLE OF CONTENTS
Page
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Prospectus Summary ........................................................... 3
Risk Factors ................................................................. 5
Ratio of Combined Fixed Charges and
Preference Dividends to Earnings ............................................ 9
Forward-Looking Statements ...................................................10
Federal Income Tax Considerations ............................................10
Use of Proceeds ..............................................................14
Selling Stockholders .........................................................14
Plan of Distribution .........................................................19
Where You Can Find More Information ..........................................20
Experts ......................................................................21
Legal Matters ................................................................21
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PROSPECTUS SUMMARY
Because this is a summary, it does not contain all the details that may be
important to you. You should read this entire prospectus carefully before you
invest.
About Marvel Enterprises, Inc.
Our company was called "Toy Biz, Inc." until October 1, 1998. On that day,
we acquired Marvel Entertainment Group, Inc., which had been in bankruptcy since
December 1996, and changed our name to Marvel Enterprises, Inc. When we use the
term "Marvel Entertainment" in this prospectus, we are referring to Marvel
Entertainment Group. Our acquisition of Marvel Entertainment was part of a plan
of reorganization for Marvel Entertainment that was proposed, and ultimately
confirmed by the court, in Marvel Entertainment's bankruptcy case.
We operate through the following five business divisions:
1. Marvel Comics. We believe that Marvel Comics is one of the leading
publishers of comic books and one of the largest licensors of proprietary
characters in the world. Marvel Comics owns the copyrights to over 3,500
fictional characters, including Spider-Man, X-Men, Hulk, Fantastic Four, Captain
America and Iron Man. We believe that the Marvel characters are among the most
recognizable in the entertainment industry. Marvel Comics has been publishing
comic books based upon the Marvel characters since 1939, and has consistently
published some of the world's most popular comic book titles.
2. Toy Biz. Toy Biz designs, develops, markets and distributes, on a
worldwide basis, both innovative and traditional toys in the boys', girls',
preschool, activity and electronic toy categories. Toy Biz's products are based
on popular entertainment properties, including the Marvel characters, Sony's
Godzilla and World Championship Wrestling, and consumer brand names like Gerber.
3. Marvel Media. We pursue our strategy of maximizing media exposure for
the Marvel characters primarily through Marvel Media. Marvel Media seeks to
establish a broad array of licensing relationships, including licenses with
studio and network partners for television, motion picture and home video
projects.
4. Fleer/SkyBox. We believe that Fleer/SkyBox is the leading marketer of
sports and entertainment trading cards in the world.
5. Panini. We believe that Panini is the world leader in the children's
activity sticker market. Panini's sticker products focus on European, World Cup
and other soccer leagues and events as well as entertainment properties. Panini
also operates a Europe-based regional adhesive paper business. We do not intend
to continue the Panini business lines in light of Panini's deficit in net
tangible assets.
Our executive offices are located at 685 Third Avenue, New York, New York
10017 and our telephone number is (212) 558-5100.
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Securities to be Offered
This prospectus relates to the offer and sale of two types of stock in
Marvel Enterprises: our common stock and our 8% cumulative convertible
exchangeable preferred stock, which is the formal name of the preferred stock
covered by this prospectus. Each share of preferred stock:
. pays dividends, at the rate of 8% per year, in cash or in additional
shares of preferred stock;
. can be converted by its owner into 1.039 shares of common stock;
. votes generally with the common stock as one class;
. has the same voting power as 1.039 common shares when it votes with
the common stock; and
. can be forced to convert into common stock beginning on October 1,
2001 if the trading price of the common stock is above a certain
dollar amount.
Federal Income Tax Considerations
See "Federal Income Tax Considerations," which discusses certain U.S.
federal income tax consequences that may result from the purchase of the common
stock or the preferred stock offered by this prospectus.
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RISK FACTORS
You should consider carefully the following risk factors together with all of
the other information included or incorporated by reference in this prospectus
before you decide to purchase shares of our common stock or preferred stock.
This section includes or refers to certain forward-looking statements. You
should refer to the explanation of the qualifications and limitations on such
forward-looking statements discussed on page 10 of the prospectus.
Our indebtedness is substantial and it could hurt our financial health.
We have a lot of indebtedness, which presents a risk to our stockholders
that our financial health will suffer. We have outstanding indebtedness of
approximately $200 million and have guaranteed $27 million of the indebtedness
of Panini. Our indebtedness consists of $200 million owed to UBS AG, Stamford
Branch that was used to fund the acquisition of Marvel Entertainment. In
addition, we expect to borrow under a new $50 million credit facility.
The amount of our indebtedness could have important consequences to holders
of our common stock and preferred stock, including, but not limited to, the
following:
. our ability to borrow money or sell stock when we want to for working
capital, capital expenditures, acquisitions, general corporate or
other purposes may be limited;
. a substantial portion of whatever cash we make from our business will
be needed to pay the principal of, and interest on, our indebtedness;
. we have made promises in our loan agreements that could limit our
ability to develop our business and expand; and
. our indebtedness may make us more vulnerable to economic downturns,
limit our ability to withstand competitive pressures and reduce our
flexibility in responding to changing business and economic
conditions.
Our ability to pay dividends on the preferred stock, to pay interest on our
indebtedness, to repay our lenders and to operate and build our business will
depend on our operating success, which could be affected by many factors,
including general economic conditions and other factors beyond our control. If
we do not fulfill the promises that we made in our loan agreements, we might be
forced to pay back all of the indebtedness under those loan agreements
immediately. If the cash we generate by operating our business, together with
borrowings under our credit facility, is not sufficient to make required
payments under our loan agreements and to cover our other cash requirements, we
will need to renegotiate our loan agreements or to refinance all or a portion of
our indebtedness or to obtain additional financing. It is possible that we will
be unable to renegotiate our loan agreements, refinance that indebtedness or
obtain additional financing.
We might not be able to repay our largest creditor in September 1999, when we
must do so.
We are obligated to repay UBS AG, Stamford Branch (see the previous risk
factor) by September 27, 1999, but we might not be able to do so. Our repayment
obligation is secured by a lien on virtually all of our assets, including the
assets of all of our subsidiaries except Panini. We will need to obtain
alternate financing in order to repay UBS AG. If we cannot obtain alternate
financing, we will default on that obligation and UBS AG might be able to demand
repayment of that obligation and to foreclose on our assets.
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We might not be able to integrate Marvel Entertainment into our business.
Our future success as a company will depend in part on our ability to
effectively integrate the businesses of Toy Biz and Marvel Entertainment. The
process of integrating the businesses of Toy Biz and Marvel Entertainment may
involve unforeseen difficulties and may require a disproportionate amount of
time and attention of our management and financial and other resources. Although
we believe that we have the opportunity for synergies and cost savings, the
timing or amount of synergies or cost savings that may ultimately be attained is
uncertain. Some of the anticipated benefits of the combination may not be
achieved if our operations are not successfully integrated in a timely manner.
The difficulties of that integration may initially be increased by the necessity
of coordinating and integrating personnel with different business backgrounds
and corporate cultures. We might not be able to integrate effectively Marvel
Entertainment's operations. If we are not successful in this combination, if the
combination takes longer than anticipated, or if the integrated operations fail
to achieve market acceptance, our business could be adversely affected. In
addition, implementation of our business strategy will be subject to numerous
other contingencies beyond our control, including general and regional economic
conditions, interest rates, competition, and the ability to attract and maintain
skilled employees. As a result, the combination might not be successful, our
business strategies might not be effective and we might not be able to achieve
our goals.
There have been declines in many of our lines of business in recent periods.
In recent years there has been a decline in many of our businesses, and
that decline may continue. In 1995 and 1996 there was an overall decline in
Marvel Entertainment's core publishing and trading card businesses which had a
material adverse effect on Marvel Entertainment. This decline, when taken in
connection with indebtedness incurred by Marvel Entertainment in connection with
its acquisition program, ultimately caused Marvel Entertainment's filing for
reorganization under chapter 11 of the bankruptcy code in 1996. Marvel
Entertainment's publishing revenues, along with those of the overall comic book
industry, declined primarily as a result of reduced readership, lower
speculative purchases and lower selling prices, which in turn caused a
contraction in the number of comic book specialty stores. These store closings
further hurt Marvel Entertainment's net publishing revenues. In addition,
Fleer/SkyBox's trading card markets contracted during 1995 through 1997,
although this contraction appears to be slowing. The decline in the comic book
and trading card business could continue or get worse.
The bankruptcy of Marvel Entertainment also caused a decline in our toy
business because a substantial portion of our toy products were based on the
Marvel characters. Our toy business might not return to its pre-bankruptcy
levels. In addition, during the third quarter of 1998, our operations began to
be hurt by the decision of certain major retailers to significantly reduce their
toy inventory levels.
We believe the sales and the profitability of each of our businesses have
been hurt by concerns about the effect of Marvel Entertainment's bankruptcy
proceedings among customers and others with whom we do business. While we
believe that the consummation of Marvel Entertainment's plan of reorganization
has alleviated these concerns, our sales and profitability might continue to be
adversely affected.
Labor disputes that disrupt professional sports seasons could hurt our trading
card business.
Labor disputes that delay or cancel professional sports seasons could hurt
our trading card business. In recent years, labor disputes have disrupted the
professional baseball season. There is currently a labor dispute with the
National Basketball Association, with which we have licensing arrangements,
which has resulted in the delay, and may result in the cancellation, of the
1998-1999 professional basketball season. Disruptions in professional sports
seasons reduce demand for trading cards based on those sports. The terms of
certain of our professional team sports licenses, including the terms of the
National Basketball Association license, should reduce the effect of any labor
disputes on our trading card business.
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Marvel Entertainment's bankruptcy proceedings might cause us to lose licensing
arrangements.
Some of our licensing arrangements might be lost because of Marvel
Entertainment's bankruptcy. Marvel Entertainment was a party to various
licensing arrangements that were rejected pursuant to Marvel Entertainment's
plan of reorganization. If those licenses are not renegotiated they will be
lost, and that loss could have a material adverse effect on us. Although there
can be no assurances, we believe that many of these licensing arrangements can
be renegotiated on terms acceptable to us.
We depend on manufacturers in China.
A large number of our toy products are manufactured in China, which
subjects us to risks of currency exchange fluctuations, transportation delays
and interruptions, and political and economic disruptions. Our ability to obtain
products from our Chinese manufacturers is dependent upon the United States'
trade relationship with China. The "most favored nation" status of China, which
is reviewed annually by the United States government, is a regular topic of
political controversy. The loss of China's "most favored nation" status would
increase the cost of importing products from China significantly, which could
have a material adverse effect on us. The imposition of further trade sanctions
on China could result in significant supply disruptions or higher merchandise
costs to us. We might not be able to find alternate sources of manufacturing
outside China on acceptable terms even if we want or need to.
We purchase goods from manufacturers in China mostly in Hong Kong dollars
and, accordingly, fluctuations in Hong Kong monetary rates may have an impact on
our cost of goods. In recent years, the value of the Hong Kong dollar has been
tied to the value of the United States dollar, eliminating fluctuations between
the two currencies. The Hong Kong dollar, however, might not continue to be tied
to the United States dollar. Furthermore, appreciation of Chinese currency
values relative to the Hong Kong dollar could increase our cost of products
manufactured in China and harm our business.
We depend on a single comic book distributor.
We distribute our comic book publications through the only major provider
for the direct comic book market and, as a result, a termination of our
agreement with that distributor would significantly disrupt our publishing
operations in the short term. The distributor is an entity unaffiliated with us.
Our agreement with the distributor is for a term of three-and-a-half years and
automatically renews for succeeding one-year periods unless terminated by either
party. Either party has the right to terminate upon the happening of certain
events. We believe that the termination of the current distribution agreement
would not have a long-term material adverse effect on us. Such a termination,
however, might materially harm our financial condition or results of operations
or both.
We must often make advance payments and guarantee royalties under licenses that
we acquire.
When we obtain licenses from others to manufacture products based on their
characters, we are often required to pay significant non-refundable advances or
to guarantee significant minimum royalty payments without knowing whether the
characters will be popular. If a character does not turn out to be popular, the
non-refundable advances and guaranteed minimum royalties might cause us to lose
a significant amount of money on the license.
The outcome of stockholder votes is controlled by a small number of
stockholders.
A majority of the voting power of our stock is held by a small number of
stockholders, who can determine the outcome of most stockholder votes. In
addition, holders of over 60% in voting power of our stock have entered into a
stockholders' agreement with us. The stockholders' agreement provides, among
other things, that its parties shall nominate and vote in favor of each other's
designated members of our board of directors.
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Other stockholders, therefore, have little or no ability to select our directors
while the stockholders' agreement is in effect.
Holdings of preferred stock are highly concentrated in a small number of
holders.
A significant portion of the outstanding shares of preferred stock are held
by a relatively small number of stockholders. Sales of a large number of the
outstanding shares of preferred stock at once, or within a limited period of
time, might have a significant negative effect on the price an investor could
otherwise expect to receive for shares of preferred stock.
Our toy business is seasonal.
Our annual operating performance depends, in large part, on our sales
during the relatively brief Christmas selling season. Unlike many industries,
the toy industry tends to be seasonal. Our toy business experiences seasonality
in sales and net income because of the heavy demand for toys during the
Christmas season. During 1995, 1996 and 1997, 69%, 64% and 67%, respectively, of
our domestic net toy sales were realized during the months of July through
December. This seasonal pattern requires significant use of working capital
mainly to build inventory during the year, prior to the Christmas selling
season, and requires accurate forecasting of demand for our products during the
Christmas selling season. We expect that our toy business will continue to
experience a significant seasonal pattern for the foreseeable future.
There is no public market for the preferred stock.
There is currently no public market for the preferred stock. It is possible
that an active trading market in the preferred stock will not develop and that
purchases of the shares of preferred stock offered by this prospectus will be an
illiquid investment.
Dividends paid in kind on the preferred stock may cause preferred stockholders
to suffer tax liability without the receipt of any cash.
Holders of preferred stock may incur income tax liability without the
receipt of any cash to pay that liability. Dividends on the preferred stock may
be paid, at our option, either in cash or in additional shares of preferred
stock. Dividends paid in additional shares of preferred stock are said to be
paid "in kind." We have promised some of our lenders that we will pay dividends
only in kind for as long as we owe money to them. Dividends paid in kind may be
taxable income to holders of preferred stock even though those dividends provide
no cash to those holders with which to pay the resulting income tax liability.
We can repurchase the preferred stock.
We have the option, on thirty days' notice, to repurchase all of the shares
of preferred stock at any time after October 1, 2001 for $10 per share, plus all
accrued but unpaid dividends, whether or not the holders of preferred stock wish
us to do so.
We can require conversion of preferred stock into common stock.
If the common stock has been trading at prices above a certain dollar
amount (determined by a formula set forth in Section 6.8(g) of our certificate
of incorporation), then we will have the right, at any time on or after October
1, 2001, to force a conversion of up to $50 million worth of preferred stock at
a time into shares of common stock. Purchasers of the shares of preferred stock
offered by this prospectus therefore risk having their shares converted, against
their will, into shares of common stock.
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Corporate holders of preferred stock risk loss of a tax deduction if we exchange
the preferred stock.
If we exchange the preferred stock for subordinated notes, corporate
holders of preferred stock may suffer adverse tax consequences. If a majority of
the holders of preferred stock approve, we may exchange all of the shares of
preferred stock for subordinated notes at any time after April 1, 2000. Those
notes will have substantially the same economic terms, voting rights and
conversion features as the preferred stock, but instead of receiving dividend
payments, holders of subordinated notes would receive interest payments.
Corporate holders of preferred stock therefore risk the loss of the "dividends
received" deduction in the event of our exchange of the shares of preferred
stock for subordinated notes.
We have not yet assured Year 2000 compliance.
We expect to incur Year 2000 conversion costs of approximately $1.0 million
throughout the balance of 1998 and 1999. We are utilizing both internal and
external sources to remediate, or replace, and test our software for Year 2000
modifications. We anticipate completing the Year 2000 project by June 30, 1999.
We are in the process of completing an assessment of Year 2000 compliance
for the Marvel Entertainment operations. Marvel Entertainment had not allocated
resources to the Year 2000 project while it was in bankruptcy. We believe that
we can successfully complete Marvel Entertainment's Year 2000 compliance by
converting Marvel Entertainment's financial system into our financial system by
August, 1999. Other systems used by Marvel Entertainment will be made Year 2000
compliant in conformance with our systems. We estimate that the costs to conform
Marvel Entertainment will be under $500,000.
The cost of the project and the date on which we believe we will complete
the Year 2000 modifications are only estimates. We currently believe that the
Year 2000 issue will not pose significant operational problems for our computer
systems. We have begun to communicate with our customers and major suppliers in
order to determine whether the Year 2000 issue will affect the ability of those
companies' computer systems to interface with our systems or will otherwise
affect the ability of those companies to transact business with us. We are not
aware of any such material issues with our customers and suppliers at this time.
We have not developed a detailed contingency plan. We assess our Year 2000
status regularly and will begin to develop comprehensive contingency plans if we
believe we will not complete the Year 2000 project in a timely manner. If our
Year 2000 project is not completed on a timely basis, or if our major customers
or suppliers fail to address all the Year 2000 issues, we believe it could have
a material adverse impact on our operations.
RATIO OF COMBINED FIXED CHARGES AND PREFERENCE DIVIDENDS TO EARNINGS
<TABLE>
<CAPTION>
Nine Months Ended
-----------------
Pro Pro
Forma Forma
1993 1994 1995 1996 1997 1997 9/30/97 9/30/98 9/30/98
---- ---- ---- ---- ---- ---- ------- ------- -------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Ratio of Combined
Fixed Charges and Preference
Dividends to Earnings 4.08 16.16 67.63 57.64 -- -- -- -- --
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</TABLE>
For the purposes of the ratio of combined fixed charges and preference
dividends to earnings, earnings were calculated by adding pretax income,
interest expense and the portion of rents representative of an interest factor.
Combined fixed charges consist of interest expense and the portion of rents
representative of an interest factor. For the periods in which earnings were
insufficient to cover combined fixed charges, the dollar amount of coverage
deficiency was $49,721, $200,356, $26,754, $6,815 and $74,066 for the twelve
months ended
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December 31, 1997, the pro-forma twelve months ended December 31, 1997, the nine
months ended September 30, 1997 and 1998 and the pro-forma nine months ended
September 30, 1998, respectively.
FORWARD-LOOKING STATEMENTS
Certain information both included and incorporated by reference in this
prospectus may contain forward-looking statements within the meaning of Section
27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act
of 1934, and as such may involve known and unknown risks, uncertainties and
other factors which may cause our actual results, performance or achievements to
be materially different from future results, performance or achievements
expressed or implied by such forward-looking statements. Forward-looking
statements, which are based on certain assumptions and describe our future
plans, strategies and expectations, are generally identifiable by use of the
words "may," "will," "should," "expect," "anticipate," "estimate," "believe,"
"intend" or "project" or the negative thereof or other variations thereon or
comparable terminology. Factors which could have a material adverse effect on
our operations and future prospects include, but are not limited to, changes in
general economic conditions, our ability to integrate Marvel Entertainment's
business, our ability to refinance the bridge loan we used to finance our
acquisition of Marvel Entertainment, the level of media exposure or the
popularity of our characters and trademarks, consumer acceptance of our new
product introductions, a decrease in the level of media exposure or popularity
of our characters resulting in declining revenues based on such characters, the
lack of continued commercial success of properties owned by major licensors
which have granted us licenses for our sports and entertainment trading card and
sticker businesses, the timing and effectiveness of our programs designed to
make our operations Year-2000 compliant, our dependence on Chinese
manufacturers, U.S. trade relations with China, and continued pressure by
certain of our major retail customers to significantly reduce their toy
inventory levels. These risks and uncertainties should be considered in
evaluating any forward-looking statements contained or incorporated by reference
herein.
FEDERAL INCOME TAX CONSIDERATIONS
The following is a summary of material federal income tax matters relating
to our operations that may be relevant to our prospective stockholders. It is
based upon current law and is not tax advice. This discussion does not address
all aspects of taxation that may be relevant to particular stockholders in light
of their personal investment or tax circumstances, or to certain types of
stockholders (including, without limitation, insurance companies, tax-exempt
organizations, financial institutions, broker-dealers, foreign corporations and
persons who are not citizens or residents of the United States) subject to
special treatment under the federal income tax laws, nor does it give a detailed
discussion of any state, local or foreign tax considerations.
Each of our prospective stockholders is encouraged to consult its own tax
advisor regarding the specific tax consequences to it of the purchase, ownership
and sale of shares of common stock and/or preferred stock of Marvel Enterprises,
Inc. ("Marvel"), including the federal, state, local, foreign and other tax
consequences of such purchase, ownership and sale and of potential changes in
applicable tax laws.
The following discussion is a summary of certain U.S. federal income tax
consequences expected to result from the implementation of the Plan. This
discussion is based on the Internal Revenue Code of 1986, as amended (the
"Code"), as in effect on the date hereof and on United States Treasury
Regulations in effect (or in certain cases, proposed) on the date hereof, as
well as judicial and administrative interpretations thereof available on or
before such date. All of the foregoing are subject to change, which change could
apply retroactively and could affect the tax consequences described below. There
can be no assurance that the Internal Revenue Service (the "IRS") will not take
a contrary view with respect to one or more of the issues discussed below, and
no ruling from
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the IRS has been or will be sought with respect to any issues which may arise
under the Plan. This summary is for general information only and does not
purport to address all of the U.S. federal income tax consequences that maybe
applicable to Marvel. This discussion does not address state, local or foreign
tax considerations that may be applicable.
The merger is expected to be characterized as a transfer of the stock of
Marvel Entertainment to Marvel upon which, for Federal income tax purposes,
Marvel is not expected to recognize any gain or loss.
The reclassification on October 1, 1998 of the two then-existing
classes of common stock of Marvel into one class of common stock is expected to
be treated as a nontaxable recapitalization of Marvel in which neither the
stockholders nor Marvel will recognize gain or loss.
a. Utilization of Marvel Entertainment's net operating loss
carryovers and built-in losses.
Section 382 of the Code imposes an annual limitation on the amount of
taxable income of a "loss corporation" that may be offset by net operating loss
carryovers ("NOLs") and certain built-in losses (referred to collectively as
pre-change loss) that are attributable to the period preceding an "ownership
change." The NOLs of Marvel Entertainment and its subsidiaries may be subject to
an existing limitation. Marvel Entertainment and its subsidiaries may also have
had a built-in loss at the time of the merger. Upon consummation of Marvel
Entertainment's plan of reorganization, Marvel Entertainment and its
subsidiaries underwent an ownership change within the meaning of section 382 of
the Code. As a result, the NOLs of Marvel Entertainment and its subsidiaries
will be subject to a section 382 limitation. In addition, Marvel may also
undergo an ownership change within the meaning of section 382 of the Code. Thus,
to the extent that Marvel is a loss corporation, such losses will be limited. No
assurance can be provided that the Marvel Entertainment NOL carryovers and
built-in losses (if any) will be available to offset income.
b. Preferred Stock Dividends.
Because Marvel is required to redeem the preferred stock on October 1, 2011
for an amount equal to its liquidation preference plus all accrued and unpaid
dividends, whether or not declared, to the redemption date, for federal income
tax purposes, holders of the preferred stock will be deemed to have received,
each year, an amount equal to the dividends accruing on the preferred stock,
regardless of whether they receive cash distributions. If and to the extent
Marvel has current or accumulated earnings and profits, this deemed distribution
will be treated as ordinary dividend income. If the deemed distribution exceeds
the current or accumulated earnings and profits of Marvel, the excess will be a
return of capital (requiring the holders of the preferred stock to reduce their
tax basis in the preferred stock and then recognize gain). In addition, if at
any time Marvel makes a distribution to its shareholders and, pursuant to the
antidilution provisions of the preferred stock, the conversion rate of the
preferred stock is increased, such increase may be deemed to be the payment of a
taxable dividend to the holders of the preferred stock.
Because the preferred stock is subject to mandatory redemption and, subject
to certain limitations, is exchangeable for 8% Convertible Subordinated
Debentures at the Marvel's option, there is a risk that the preferred stock
could be treated as indebtedness for federal income tax purposes. Marvel intends
to take the position (which counsel believes is reasonable) that the preferred
stock constitutes stock for federal income tax purposes and, therefore, the
material tax consequences to holders of preferred stock should be as described
herein. If, however, it is determined that the preferred stock is debt,
corporate holders would not be entitled to the benefit of the dividends received
deduction discussed below and the yield to the holders of the preferred stock
would be taxable as original issue discount (i.e., interest income), whether or
not actual cash payments are received and whether or not Marvel has current or
accumulated earnings and profits. The remainder of the discussion assumes that
the preferred stock will be classified as stock for federal income tax purposes.
Taxable dividends on the preferred stock should qualify for the dividends
received deduction in the hands of qualifying corporate holders, subject to the
minimum holding period requirements and other applicable requirements (including
the disallowance of the dividends received deduction to the extent a corporate
11
782128.3
<PAGE>
shareholder incurs interest expense on debt directly attributable to the
preferred stock). A corporate shareholder's liability for alternative minimum
tax may be affected by the portion of the dividends received that are deducted
in computing taxable income.
Section 1059 of the Code reduces the benefit of the dividends received
deduction with respect to "extraordinary dividends" by requiring a corporate
shareholder to reduce its basis in the preferred stock (but not below zero) by
the nontaxed portion (as a result of the dividends received deduction) of any
"extraordinary dividend" if the holder has not held the preferred stock for more
than two years before the earliest of the dates on which the corporation
declares, announces, or agrees to, the amount or payment of such dividend. In
addition, an amount treated as a dividend in the case of a redemption that is
either non-pro rata as to all shareholders, in partial liquidation, or which
would not have been treated as a dividend if any options had not been taken into
account under Section 318(a)(4) of the Code or if Section 304(a) of the Code had
not applied, would also constitute an extraordinary dividend even if the
preferred stock were held for more than two years before the date of
announcement or agreement with respect to the redemption. If the nontaxed
portion of all extraordinary dividends exceeds the corporate holder's basis, the
excess is treated as taxable gain. The dividends on the preferred stock may
constitute extraordinary dividends for this purpose. An "extraordinary dividend"
on the preferred stock would generally be a dividend (including a deemed
dividend) that either equals or exceeds 5 percent of the holder's basis in such
stock, treating all dividends having ex-dividend dates within an eighty-five-day
period as one dividend, or exceeds 20 percent of the holder's basis in such
stock, treating all dividends having ex-dividend dates within a 365-day period
as one dividend. However, if the market value can be established by the holder
to the satisfaction of the Secretary of the Treasury, it may be substituted for
stock basis.
If stock pays fixed dividends at least annually, has no dividends in
arrears at the time it is acquired by a corporate holder, and does not have an
actual rate of return exceeding 15 percent, then a fixed dividend paid with
respect to such stock will be a "qualified preferred dividend" that may qualify
for special relief under Section 1059 of the Code. Under this relief provision,
(a) a qualified preferred dividend is not treated as "extraordinary" if the
taxpayer holds such stock for more than five years or (b) if the taxpayer
disposes of such stock before it has been held for more than five years, then
the amount of the basis reduction under Section 1059 of the Code with respect to
such dividends will not be greater than the excess (if any) of (i) the qualified
preferred dividends paid with respect to such stock during the period the
taxpayer held the stock over (ii) the qualified preferred dividends that would
have been paid during such period on the basis of the stated rate of return. For
purposes of determining the actual rate of return or the stated rate of return,
the average amount of actual dividends received (or deemed received under
Section 305 of the Code), or the stated dividends, as the case may be, are
compared with the lesser of the holder's adjusted tax basis in the stock or the
liquidation preference (excluding dividend arrearages) of the stock.
c. Conversion of Preferred Stock to Common Stock.
If the preferred stock is converted to common stock, neither the holder of
the preferred stock nor Marvel should recognize gain or loss for federal income
tax purposes. Income will generally be recognized, however, to the extent common
stock is received in payment of dividends in arrears. The tax basis for the
preferred stock will be transferred to the common stock in the hands of a
converting shareholder.
d. Redemption of Preferred Stock for Cash.
A redemption of the preferred stock will be a taxable event that will be
treated as a sale or exchange (on which capital gain or loss may be realized) if
the redemption (a) results in a "complete termination" of the stockholder's
stock interest in Marvel under Section 302(b)(3) of the Code, (b) is
"substantially disproportionate" with respect to the shareholder under Section
302(b)(2) of the Code, or (c) is "not essentially equivalent to a dividend" with
respect to the stockholder under Section 302(b)(1) of the Code. The gain or loss
recognized will be an amount equal to the difference between the stockholder's
adjusted tax basis in the preferred stock and the
12
782128.3
<PAGE>
amount of cash received (less any cash received in payment of accumulated and
declared but unpaid dividends, which will be taxable as ordinary income if not
previously included in a holder's income). In determining whether any of these
tests has been met, shares considered to be owned by the stockholder by reason
of certain constructive ownership rules set forth in Section 318 of the Code, as
well as shares actually owned, must be taken into account. A holder's gain, if
any, will generally be considered a capital gain and will be long-term if the
holder has held the preferred stock for more than one year. Capital gains
realized by corporations are generally taxed at the same rates applicable to
ordinary income, although non-corporate taxpayers who realize long-term capital
gains may be subject to a reduced tax rate of 20% on such gains, rather than the
"regular" maximum tax rate of 39.6%. Tax rates may increase prior to the time
when holders may realize gains.
Because satisfaction of either of these tests will depend on the particular
facts and circumstances of each holder of preferred stock as they exist at the
time of the redemption, each holder is urged to consult its own tax adviser as
to whether it would be entitled to sale or exchange treatment in connection with
such a redemption.
If a redemption of the preferred stock does not meet any of the tests under
Section 302 of the Code, it will be treated as a distribution that is taxable as
a dividend under Section 301 of the Code to the extent of Marvel's current or
accumulated earnings and profits. The dividend amount should be the amount of
cash received by the stockholder. If a corporate stockholder has dividend
treatment on a redemption of the preferred stock, the dividend will be an
extraordinary dividend under Section 1059 of the Code irrespective of such
holder's holding period.
e. Conversion of Preferred Stock to 8% Convertible Subordinated
Debentures.
Marvel may, under certain circumstances, exchange all of the preferred
stock for 8% Convertible Subordinated Debentures of Marvel. If this occurs, the
treatment to the holders of the preferred stock will generally be as described
in subparagraph (d), above. If gain or loss is recognized for federal income tax
purposes, an amount equal to the difference between the issue price of the 8%
Convertible Subordinated Debentures (less any amount attributable to accumulated
and declared but unpaid dividends, which will be taxable as ordinary income if
not previously included in a holder's income) and the holders' adjusted tax
basis in the preferred stock will be taken into account. If issuance of the 8%
Convertible Subordinated Debentures is treated as a dividend, the amount of the
distribution should be the issue price of the 8% Convertible Subordinated
Debentures. If the 8% Convertible Subordinated Debentures have original issue
discount upon their issuance, a holder will be required to include in income an
amount equal to the sum of the "daily portions" of such original issue discount,
even if the holder does not receive cash payments of interest.
f. Backup Withholding.
Under Section 3406 of the Code and under applicable Treasury regulations, a
noncorporate holder of preferred stock, 8% Convertible Subordinated Debentures,
or common stock may be subject to backup withholding at the rate of 31 percent
with respect to dividends or interest paid on, original issue discount accrued
with respect to, or the proceeds of a sale, exchange, or redemption of,
preferred stock, 8% Convertible Subordinated Debentures, or common stock, as the
case may be. The payor will be required to deduct and withhold the prescribed
amounts if (i) the payee fails to furnish a taxpayer identification number (TIN)
to the payor, (ii) the Internal Revenue Service notifies the payor that the TIN
furnished by the payee is incorrect, (iii) there has been a "notified payee
under-reporting" described in Section 3406(c) of the Code, or (iv) there has
been a failure of the payee to certify under penalty of perjury that the payee
is not subject to withholding under Section 3406(a)(1)(C) of the Code. If any
one of the events listed above occurs, Marvel will be required to withhold an
amount equal to 31 percent from any dividend payment made with respect to
preferred stock or common stock, any payment of interest or principal pursuant
to the terms of the 8% Convertible Subordinated Debentures, or any payment of
proceeds of a redemption of such instruments, to a noncorporate holder. Amounts
paid as backup withholding do not constitute an additional tax and will be
credited against the holder's federal income tax liabilities.
13
782128.3
<PAGE>
USE OF PROCEEDS
Any shares offered under this prospectus will be offered by the selling
stockholders. See "Plan of Distribution." We will not receive any proceeds from
the sale of shares offered under this prospectus.
SELLING STOCKHOLDERS
The following table sets forth certain information with respect to the
amount of common stock and preferred stock held by each selling stockholder as
of the date of this prospectus. The table indicates the nature of any position,
office, or other material relationship which the selling stockholder has had
within the past three years with Marvel or any of its predecessors or
affiliates. Certain of the selling stockholders are parties to the stockholders'
agreement, which is described in "RISK FACTORS--Control by Certain
Stockholders." Those parties are identified in the table. The selling
stockholders may offer all or part of the common stock or preferred stock
covered by this prospectus. No estimate, therefore, can be given as to the
amount of common stock or preferred stock that will be held by the selling
stockholders upon completion of the offering. The common stock and preferred
stock offered by this prospectus may be offered from time to time by the selling
stockholders named below.
<TABLE>
<CAPTION>
A B C D E F
Percentage
Number of Number of Number of Number of Represented
Shares of Shares of Existing Common by Columns
Preferred Stock Common Stock Shares of Shares C and D
Owned and Underlying the Common Covered by Combined of
Name, Address, and Covered by this Shares Listed Stock(2) this Shares
Relationship to Marvel Prospectus(1) in Column B Owned Prospectus(3) Outstanding(4)
- ---------------------- -------------------- --------------- --------- -------------- -----------
<S> <C> <C> <C> <C> <C>
Dickstein & Co., L.P.(5) 2,419,609 2,513,973 1,458,029 3,972,002 7.8%
c/o Dickstein Partners Inc.
660 Madison Avenue
16th Floor
New York, NY 10021
** Signatory of Stockholders'
Agreement **
Dickstein Focus Fund L.P.(5) 232,577 241,647 195,620 437,267 0.9%
c/o Dickstein Partners Inc.
660 Madison Avenue
16th Floor
New York, NY 10021
** Signatory of Stockholders'
Agreement **
Dickstein International Limited(5) 805,876 837,305 613,967 1,451,272 2.8%
c/o Dickstein Partners Inc.
660 Madison Avenue
16th Floor
New York, NY 10021
** Signatory of Stockholders'
Agreement **
</TABLE>
14
782128.3
<PAGE>
<TABLE>
<CAPTION>
A B C D E F
Percentage
Number of Number of Number of Number of Represented
Shares of Shares of Existing Common by Columns
Preferred Stock Common Stock Shares of Shares C and D
Owned and Underlying the Common Covered by Combined of
Name, Address, and Covered by this Shares Listed Stock(2) this Shares
Relationship to Marvel Prospectus(1) in Column B Owned Prospectus(3) Outstanding(4)
- ---------------------- -------------------- --------------- --------- -------------- -----------
<S> <C> <C> <C> <C> <C>
Elyssa Dickstein, Jeffrey 50,000 51,950 0 51,950 0.1%
Schwarz and Alan Cooper as
Trustees U/T/A/D 12/27/88,
Mark Dickstein, Grantor(5)
c/o Dickstein Partners Inc.
660 Madison Avenue
16th Floor
New York, NY 10021
** Signatory of Stockholders'
Agreement **
Mark Dickstein and Elyssa 10,000 10,390 0 10,390 *
Dickstein, as Trustees of the
Mark and Elyssa Dickstein
Foundation(5)
c/o Dickstein Partners Inc.
660 Madison Avenue
16th Floor
New York, NY 10021
** Signatory of Stockholders'
Agreement **
Elyssa Dickstein(5) 140,000 145,460 0 145,460 0.3%
c/o Dickstein Partners Inc.
660 Madison Avenue
16th Floor
New York, NY 10021
** Signatory of Stockholders'
Agreement **
Mark Dickstein(5) 0 0 47,500 47,500 *
c/o Dickstein Partners Inc.
660 Madison Avenue
16th Floor
New York, NY 10021
** Director and Signatory of
Stockholders' Agreement **
Object Trading Corp.(6) 3,492,852 3,629,073 33,500 3,662,573 7.2%
685 Third Avenue
New York, NY 10017
** Signatory of Stockholders'
Agreement **
</TABLE>
15
782128.3
<PAGE>
<TABLE>
<CAPTION>
A B C D E F
Percentage
Number of Number of Number of Number of Represented
Shares of Shares of Existing Common by Columns
Preferred Stock Common Stock Shares of Shares C and D
Owned and Underlying the Common Covered by Combined of
Name, Address, and Covered by this Shares Listed Stock(2) this Shares
Relationship to Marvel Prospectus(1) in Column B Owned Prospectus(3) Outstanding(4)
- ---------------------- -------------------- --------------- --------- -------------- -----------
<S> <C> <C> <C> <C> <C>
Zib Inc. (6) 0 0 9,256,000 9,256,000 18.1%
1105 North Market Street
Room 1300
Wilmington, DE 19801
** Signatory of Stockholders'
Agreement **
The Laura & Isaac Perlmutter 0 0 250,000 250,000 0.5%
Foundation Inc.(6)
P.O. Box 1028
Lake Worth, FL 33460
** Signatory of Stockholders'
Agreement **
Avi Arad 0 0 4,150,000 4,150,000 8.1%
1698 Post Road East
Westport, CT 06880
** Director and Signatory of
Stockholders' Agreement **
The President and Fellows of 551,300 572,800 484,997 1,057,797 2.1%
Harvard College (7)
c/o Whippoorwill Associates,
Incorporated
11 Martine Avenue
White Plains, NY 10606
Attn: Shelley F. Greenhaus
The Rockefeller Foundation (7) 208,488 216,619 121,539 338,158 0.7%
c/o Whippoorwill Associates,
Incorporated
11 Martine Avenue
White Plains, NY 10606
Attn: Shelley F. Greenhaus
Vega Partners II, L.P. (7) 234,592 243,741 137,458 381,199 0.7%
c/o Whippoorwill Associates,
Incorporated
11 Martine Avenue
White Plains, NY 10606
Attn: Shelley F. Greenhaus
Vega Partners III, L.P. (7) 543,273 564,460 317,594 882,054 1.7%
c/o Whippoorwill Associates,
Incorporated
11 Martine Avenue
White Plains, NY 10606
Attn: Shelley F. Greenhaus
</TABLE>
16
782128.3
<PAGE>
<TABLE>
<CAPTION>
A B C D E F
Percentage
Number of Number of Number of Number of Represented
Shares of Shares of Existing Common by Columns
Preferred Stock Common Stock Shares of Shares C and D
Owned and Underlying the Common Covered by Combined of
Name, Address, and Covered by this Shares Listed Stock(2) this Shares
Relationship to Marvel Prospectus(1) in Column B Owned Prospectus(3) Outstanding(4)
- ---------------------- -------------------- --------------- --------- -------------- -----------
<S> <C> <C> <C> <C> <C>
Vega Partners IV, L.P. (7) 342,656 356,019 200,814 556,833 1.1%
c/o Whippoorwill Associates,
Incorporated
11 Martine Avenue
White Plains, NY 10606
Attn: Shelley F. Greenhaus
Vega Offshore Fund Trust (7) 138,552 143,955 86,109 230,064 0.5%
c/o Whippoorwill Associates,
Incorporated
11 Martine Avenue
White Plains, NY 10606
Attn: Shelley F. Greenhaus
Whippoorwill Associates, Inc. 2,703 2,808 1,896 4,704 *
Profit Sharing Plan (7)
c/o Whippoorwill Associates,
Incorporated
11 Martine Avenue
White Plains, NY 10606
Attn: Shelley F. Greenhaus
Foothill Capital Corporation 1,611 1,673 0 1,673 *
11111 Santa Monica Blvd., Suite
1500
Los Angeles, CA 90025
Attn: Karen Sandler
Foothill Partners II, L.P. 16,286 16,921 0 16,921 *
11111 Santa Monica Blvd., Suite
1500
Los Angeles, CA 90025
Attn: Karen Sandler
Foothill Partners III, L.P. 39,835 41,388 0 41,388 *
11111 Santa Monica Blvd., Suite
1500
Los Angeles, CA 90025
Attn: Karen Sandler
Elliott Associates, L.P. 142,200 147,745 0 147,745 0.3%
712 Fifth Avenue, 35th Floor
New York, NY 10019
Attn: Michael Stephen
</TABLE>
17
782128.3
<PAGE>
<TABLE>
<CAPTION>
A B C D E F
Percentage
Number of Number of Number of Number of Represented
Shares of Shares of Existing Common by Columns
Preferred Stock Common Stock Shares of Shares C and D
Owned and Underlying the Common Covered by Combined of
Name, Address, and Covered by this Shares Listed Stock(2) this Shares
Relationship to Marvel Prospectus(1) in Column B Owned Prospectus(3) Outstanding
- ---------------------- -------------------- --------------- --------- -------------- -----------
<S> <C> <C> <C> <C> <C>
Morgan Stanley & Co. 2,166,908 2,251,417 1,769,375 4,020,792 7.9%
Incorporated
c/o Morgan Stanley
1585 Broadway
New York, NY 10036
Attn: Edgar Sabounghi
** Signatory of Stockholders'
Agreement **
The Chase Manhattan Bank 777,201 807,511 1,288,777 2,096,288 4.1%
380 Madison Avenue, 9th Floor
New York, NY 10071
Attn: Susan Atkins
** Signatory of Stockholders'
Agreement **
- -------------------------------------------------------------------------------------------------------------------------------
TOTAL 12,316,519 12,796,855 20,413,175 33,210,030 65.1%
</TABLE>
* = Less than 0.1%
(1) In the case of each selling stockholder, all the shares of preferred stock
listed in Column B may be offered pursuant to this prospectus. In addition,
shares of preferred stock paid as dividends in kind on the shares of
preferred stock listed in Column B may be offered pursuant to this
prospectus. The total number of shares of preferred stock covered by this
prospectus is 15,620,234, which is equal to 12,316,519 (the total of the
numbers in Column B) plus 3,303,715 (the approximate number of shares of
preferred stock that would be necessary to pay dividends in kind on
12,316,519 shares of preferred stock for three years). See Note 3 for the
total number of shares of common stock offered pursuant to this prospectus.
(2) Does not include shares of common stock listed in Column C.
(3) The total number of shares of common stock offered pursuant to this
prospectus is 36,642,683, which is equal to 33,210,030 (the total of the
numbers in Column E) plus 3,432,653 (the number of shares of common stock
that underlie the shares of preferred stock that would be necessary to pay
dividends in kind on 12,316,519 shares of preferred stock for three years;
see Note 1). See Note 1 for the total number of shares of preferred stock
offered pursuant to this prospectus.
(4) Refers to the 51,011,227 shares of common stock that would be outstanding
if all outstanding shares of preferred stock were converted into shares of
common stock. Does not include shares that would be outstanding if warrants
or rights were exercised.
(5) (a) Dickstein & Co., L.P. is a Delaware limited partnership.
(b) Dickstein Focus Fund L.P. is a Delaware limited partnership.
18
782128.3
<PAGE>
(c) Dickstein International Limited is a limited-liability, open-end
investment fund incorporated as an international business company in
the Territory of the British Virgin Islands.
(d) Elyssa Dickstein, Jeffrey Schwarz and Alan Cooper as Trustees U/T/A/D
12/27/88, Mark Dickstein, Grantor is a New York trust established by
Mark Dickstein, as Grantor, for the benefit of his children. Elyssa
Dickstein, Jeffrey Schwarz and Alan Cooper are the trustees of the
trust. Mark Dickstein has no beneficial interest in the trust.
(e) The Mark and Elyssa Dickstein Foundation is a New York trust
organized to be exempt from federal income taxes under Section
501(c)(3) of the Internal Revenue Code.
(f) Mark Dickstein, a director and principal stockholder of Marvel, is
the president, sole stockholder and sole director of Dickstein
Partners Inc., a Delaware corporation that is the advisor to
Dickstein International Limited and is the general partner of
Dickstein Partners, L.P., a Delaware limited partnership which in
turn is the general partner of both Dickstein & Co., L.P. and
Dickstein Focus Fund L.P. Mr. Dickstein is a trustee and the grantor
of the Mark and Elyssa Dickstein Foundation and has the sole and
exclusive authority to invest the principal of that foundation.
(g) Elyssa Dickstein is the wife of Mark Dickstein and is a trustee of
the Mark and Elyssa Dickstein Foundation and the trust described in
(d), above.
(6) (a) Object Trading Corp., a Delaware corporation, is wholly owned by
Isaac Perlmutter, a director and principal stockholder of Marvel. (b)
Zib Inc., a Delaware corporation, is wholly owned by the Isaac
Perlmutter T.A., a Florida trust established by Mr. Perlmutter (the
"Trust"). Mr. Perlmutter is a trustee and the sole beneficiary of the
Trust, and may revoke the Trust at any time. (c) Mr. Perlmutter is a
director and the president of The Laura & Isaac Perlmutter Foundation
Inc., a Florida not-for-profit corporation.
(7) Whippoorwill Associates, Incorporated, a Delaware corporation, as
agent of and/or general partner for these accounts, is a signatory of
the Stockholders' Agreement.
PLAN OF DISTRIBUTION
The shares of common stock and preferred stock covered by this prospectus
are now owned by the selling stockholders. As used in the rest of this section
of the prospectus, the term "Selling Stockholders" includes the named selling
stockholders and any of their pledgees, donees, transferees or other successors
in interest selling shares received from a named selling stockholder after the
date of this prospectus. The shares of common stock and preferred stock covered
by this prospectus are referred to in this section as the "Shares." The selling
stockholders may offer and sell, from time to time, some or all of the Shares.
We have registered the Shares for sale by the selling stockholders so that the
Shares will be freely tradeable by them. Registration of the Shares does not
mean, however, that the Shares will necessarily be offered or sold. We will not
receive any proceeds from any offering or sale by the selling stockholders of
the Shares. We will pay all costs, expenses and fees in connection with the
registration of the Shares. The selling stockholders will pay all brokerage
commissions and similar selling expenses, if any, attributable to the sale of
the Shares.
The selling stockholders may sell the Shares from time to time, at market
prices prevailing at the time of sale or at negotiated prices, by methods such
as the following: (a) on markets where our common stock or preferred stock is
traded or in an exchange distribution in accordance with the rules of the
exchange; (b) in privately negotiated transactions; (c) through broker-dealers,
which may act as agents or principals; (d) in a block trade in which a
broker-dealer will attempt to sell a block of Shares as agent but may position
and resell a portion of the block as principal to facilitate the transaction;
(e) through one or more underwriters on a firm commitment or best-efforts basis;
(f) directly to one or more purchasers; (g) through agents; (h) through put or
call option transactions, forward contracts or equity swaps relating to the
Shares; (i) through short sales of the Shares by the selling stockholders or
counterparties to those transactions; or (j) in any combination of the above.
19
782128.3
<PAGE>
In effecting sales, brokers or dealers engaged by the selling stockholders
may arrange for other brokers or dealers to participate. The broker-dealer
transactions may include (a) purchases of the Shares by a broker-dealer as
principal and resales of the Shares by the broker-dealer for its account
pursuant to this prospectus; (b) ordinary brokerage transactions; or (c)
transactions in which the broker-dealer solicits purchasers.
If a material arrangement with any underwriter, broker, dealer or other
agent is entered into for the sale of any Shares through a secondary
distribution, or a purchase by a broker or dealer, a prospectus supplement will
be filed, if necessary, pursuant to Rule 424(b) under the Securities Act
disclosing the material terms and conditions of such arrangement. If an
underwriter or underwriters are used in the sale of Shares, Marvel and the
selling stockholders will execute an underwriting agreement with such
underwriter or underwriters at the time an agreement for such sale is reached.
The underwriter or underwriters with respect to an underwritten offering of
Shares and the other material terms and conditions of the underwriting will be
set forth in a prospectus supplement relating to such offering and, if an
underwriting syndicate is used, the managing underwriter or underwriters will be
set forth on the cover of such prospectus supplement. In connection with the
sale of Shares, underwriters will receive compensation in the form of
underwriting discounts or commissions and may also receive commissions from
purchasers of Shares for whom they may act as agent. Underwriters may sell to or
through dealers, and such dealers may receive compensation in the form of
discounts, concessions or commissions from the underwriters and/or commissions
from the purchasers for whom they may act as agent.
The Shares may be sold either at a fixed price or prices that may be
changed, at market prices prevailing at the time of sale, at prices related to
such prevailing market prices or at negotiated prices.
The selling stockholders and any underwriters, broker-dealers or agents
participating in the distribution of the Shares may be deemed to be
"underwriters" within the meaning of the Securities Act, and any profit on the
sale of the Shares by the selling stockholders and any commissions received by
any such broker-dealers or agents may be deemed to be underwriting commissions
under the Securities Act. We have agreed to indemnify some of the selling
stockholders -- those who signed a Registration Rights Agreement with us, dated
as of October 1, 1998 --, and each person or entity which participates as or may
be deemed to be an underwriter in the offering or sale of those selling
stockholders' shares, against certain liabilities (and to contribute to payments
in respect thereof), including liabilities arising under the Securities Act. The
selling stockholders may agree to indemnify any agent or broker-dealer that
participates in transactions involving sales of the Shares against certain
liabilities, including liabilities arising under the Securities Act.
WHERE YOU CAN FIND MORE INFORMATION
We file annual, quarterly and special reports, proxy statements and other
information with the Securities and Exchange Commission. You may read and copy
any document we file at the Securities and Exchange Commission's public
reference rooms at 450 Fifth Street, N.W., Washington, D.C. 20549, 7 World Trade
Center, 13th Floor, New York, New York 10048, and Citicorp Center, 500 West
Madison Street, Suite 1400, Chicago, Illinois 60661-2511. Please call the
Securities and Exchange Commission at 1-800-SEC-0330 for further information on
the public reference rooms. Our Securities and Exchange Commission filings are
also available to the public from the Securities and Exchange Commission's
Website at "http://www.sec.gov."
The Securities and Exchange Commission allows us to "incorporate by
reference" the information we file with them, which means that we can disclose
important information to you by referring you to those documents. The
information incorporated by reference is considered to be part of this
prospectus, and information that we file later with the Securities and Exchange
Commission will automatically update and supersede this information. We
incorporate by reference the documents listed below and any future filings we
will make with the Securities and Exchange Commission under Sections 13(a),
13(c), 14 or 15(d) of the Securities Exchange Act of 1934:
1. Our Annual Report on Form 10-K for the year ended December 31, 1997;
20
782128.3
<PAGE>
2. Our Quarterly Reports on Form 10-Q for the quarters ended March 31, 1998,
June 30, 1998 and September 30, 1998;
3. Our Current Reports on Form 8-K filed with the Securities and Exchange
Commission on August 3, 1998, October 2, 1998, and October 14, 1998, our Current
Report on Form 8-K/A filed on October 16, 1998, and our Current Report on Form
8-K/A-2 filed on November 25, 1998 (which incorporates by reference the
consolidated financial statements included in Marvel Entertainment Group, Inc.'s
Annual Report on Form 10-K for the year ended December 31, 1997 and its
Quarterly Reports on Form 10-Q for the quarters ended March 31, 1998 and June
30, 1998);
4. Our descriptions of our common stock and preferred stock contained in our
Registration Statements on Form 8-A filed on October 2, 1998 (SEC File Nos.
001-13638 and 000-24937); and
5. The section entitled "THE MARVEL PROPOSALS -- Securities to be Issued and
Transferred under the Plan" on pages 82 -87 of our Proxy Statement on Schedule
14A (SEC File No. 001-13638), as filed with the Securities and Exchange
Commission on August 13, 1998, which includes descriptions of our common stock
and preferred stock.
You may request a copy of these filings, at no cost, by writing or
telephoning us at the following address:
David J. Fremed,
Chief Financial Officer
Marvel Enterprises, Inc.
685 Third Avenue
New York, NY 10017
Telephone requests may be directed to (212) 558-5100.
This prospectus is part of a registration statement we filed with the
Securities and Exchange Commission. You should rely only on the information or
representations provided in this prospectus. We have authorized no one to
provide you with different information. We are not making an offer of these
securities in any state where the offer is not permitted. You should not assume
that the information in this prospectus is accurate as of any date other than
the date on the front of the document.
EXPERTS
The consolidated financial statements of Toy Biz, Inc. appearing in Toy
Biz, Inc.'s (now known as Marvel Enterprises, Inc.) Annual Report (Form 10-K)
for the year ended December 31, 1997, have been audited by Ernst & Young LLP,
independent auditors, as set forth in their report thereon included therein and
incorporated herein by reference. Such consolidated financial statements are
incorporated herein by reference in reliance upon such report given upon the
authority of such firm as experts in accounting and auditing.
The consolidated financial statements of Marvel Entertainment Group, Inc.
appearing in Marvel Entertainment Group, Inc.'s Annual Report (Form 10-K/A) for
the year ended December 31, 1997, have been audited by Ernst & Young LLP,
independent auditors, as set forth in their report thereon included therein and
incorporated herein by reference. Such consolidated financial statements are
incorporated herein by reference in reliance upon such report given upon the
authority of such firm as experts in accounting and auditing.
LEGAL MATTERS
The validity of the shares of common stock offered hereby will be passed
upon for us by Battle Fowler LLP, New York, New York. Lawrence Mittman, a
director of Marvel, is a partner in Battle Fowler LLP.
21
782128.3
<PAGE>
<TABLE>
- ------------------------------------------------------ ----------------------------------------------------------
- ------------------------------------------------------ ----------------------------------------------------------
<S> <C>
No dealer, salesperson or other individual has been
authorized to give any information or make any
representations not contained in this prospectus in
connection with the offering covered by this
prospectus. If given or made, such information or 36,642,683 Shares of Common Stock
representation must not be relied upon as having
been authorized by us or the selling stockholders. 15,620,234 Shares of 8% Cumulative Convertible
This prospectus does not constitute an offer to Exchangeable
sell, or a solicitation of an offer to buy, common Preferred Stock
stock and or the preferred stock in any jurisdiction
where, or to any person to whom, it is unlawful to
make such offer or solicitation. Neither the
delivery of this prospectus nor any sale made
hereunder shall, under any circumstances, create an MARVEL ENTERPRISES, INC.
implication that there has not been any change in
the facts set forth in this prospectus or in our
affairs of since the date hereof.
TABLE OF CONTENTS
Prospectus
Prospectus
Page
Prospectus Summary ........................... 3
Risk Factors ................................. 5
Ratio of Combined Fixed Charges and
Preference Dividends to Earnings .......... 9
Forward-Looking Statements ...................10
Federal Income Tax Considerations ............10
Use of Proceeds ..............................14
Selling Stockholders ........................ 14
Plan of Distribution .........................19
Where You Can Find More Information ..........20 December 31, 1998
Experts ......................................21
Legal Matters ................................21
- ----------------------------------------------------- ----------------------------------------------------------
- ------------------------------------------------------ ----------------------------------------------------------
</TABLE>
<PAGE>
782128.3
<PAGE>
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
Item 14. Other Expenses of Issuance and Distribution
Set forth below is an estimate of the approximate amount of the fees and
expenses (other than underwriting discounts and commissions) incurred in
connection with the issuance and distribution of the shares of common stock and
preferred stock to be registered under this Registration Statement. The selling
stockholders will bear no portion of the fees and expenses estimated below.
Those fees and expenses will be borne entirely by Marvel.
Securities and Exchange Commission, registration fee ...................$ 87,272
Federal taxes........................................................... 0
State taxes and fees.................................................... 0
Transfer agent's fees................................................... 0
Engineering fees........................................................ 0
Printing and engraving costs............................................ 25,000
Mailing expenses........................................................ 1,000
Accounting fees and expenses............................................ 35,000
Legal fees and expenses................................................. 100,000
Miscellaneous expenses.................................................. 20,000
Total....................................................$ 268,272
Item 15. Indemnification of Directors and Officers
In accordance with Section 102(b)(7) of the Delaware General
Corporation Law, Article X of our Certificate of Incorporation eliminates, with
certain exceptions, our directors' personal liability to Marvel or its
stockholders for monetary damages for breach of fiduciary duty as a director.
Article 6 of our By-Laws provides, to the extent permitted by the
Delaware General Corporation Law, for our indemnification of present or former
directors, officers or incorporators of Marvel against various costs they may
incur in connection with certain lawsuits and similar proceedings in which they
become involved by reason of their relationship to Marvel. Only those who have
acted in good faith are entitled to our indemnification. In certain cases, our
indemnification payments may be made, conditionally, before the lawsuit or
similar proceeding is complete.
Item 16. Exhibits
2.1 -- Fourth Amended Plan of Reorganization filed with the United
States District Court for the District of Delaware on July 31, 1998 by
certain creditors of Marvel Entertainment Group, Inc. and the
Registrant, with attached exhibits (incorporated by reference to
Exhibit 2.1 to the Registrant's Current Report on Form 8-K, dated as
of October 13, 1998, and filed on October 14, 1998).
4.1 -- The Registrant's Restated Certificate of Incorporation
(incorporated by reference to Exhibit 4.1 to the Registrant's Current
Report on Form 8-K, dated as of October 13, 1998, and filed on October
14, 1998).
II-1
782128.3
<PAGE>
5.1 -- Opinion of Battle Fowler LLP.*
12.1 -- Statements re: Computation of Ratios.*
23.1 -- Consent of Ernst & Young LLP.
23.2 -- Consent of Ernst & Young LLP.
24.1 -- Power of Attorney.*
- -------------------------------
* Previously filed.
Item 17. Undertakings
The undersigned Registrant hereby undertakes:
(1) To file, during any period in which offers or sales are being made, a
post-effective amendment to this registration statement;
(i) To include any prospectus required by Section 10(a)(3) of the
Securities Act of 1933;
(ii) To reflect in the prospectus any facts or events arising after
the effective date of the registration statement (or the most recent
post-effective amendment thereof) which, individually or in the aggregate,
represent a fundamental change in the information set forth in the registration
statement. Notwithstanding the foregoing, any increase or decrease in volume of
securities offered (if the total dollar value of securities offered would not
exceed that which was registered) and any deviation from the low or high end of
the estimated maximum offering range may be reflected in the form of a
prospectus filed with the Commission pursuant to Rule 424(b) if, in the
aggregate, the changes in volume and price represent no more than a 20 percent
change in the maximum aggregate offering price set forth in the "Calculation of
Registration Fee" table in the effective registration statement; and
(iii) To include any material information with respect to the plan of
distribution not previously disclosed in the registration statement or any
material change to such information in the registration statement.
(2) That, for the purpose of determining any liability under the Securities
Act of 1933, each such post-effective amendment shall be deemed to be a new
registration statement relating to the securities offered therein, and the
offering of such securities at that time shall be deemed to be the initial bona
fide offering thereof.
(3) To remove from registration by means of a post-effective amendment any
of the securities being registered which remain unsold at the termination of the
offering.
The undersigned Registrant hereby undertakes that, for purposes of
determining any liability under the Securities Act of 1933, each filing of the
registrant's annual report pursuant to Section 13(a) or Section 15(d) of the
Securities Exchange Act of 1934 (and, where applicable, each filing of an
employee benefit plan's annual report pursuant to Section 15(d) of the
Securities Exchange Act of 1934) that is incorporated by reference in the
registration statement shall be deemed to be a new registration statement
relating to the securities offered
II-2
782128.3
<PAGE>
therein, and the offering of such securities at that time shall be deemed to be
the initial bona fide offering thereof.
Insofar as indemnification for liabilities arising under the Securities Act
of 1933 may be permitted to directors, officers and controlling persons of the
Registrant pursuant to the provisions referred to in Item 15 of this
Registration Statement, or otherwise, the Registrant has been advised that in
the opinion of the Securities and Exchange Commission such indemnification is
against public policy as expressed in the Act and is, therefore, unenforceable.
In the event that a claim for indemnification against such liabilities (other
than the payment by the Registrant of expenses incurred or paid by a director,
officer, or controlling person of the Registrant in the successful defense of
any action, suit, or proceeding) is asserted by such director, officer, or
controlling person in connection with the securities being registered, the
Registrant will, unless in the opinion of its counsel the matter has been
settled by controlling precedent, submit to a court of appropriate jurisdiction
the question whether such indemnification by it is against public policy as
expressed in the Act, and will be governed by the final adjudication of such
issue.
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782128.3
<PAGE>
SIGNATURES
Pursuant to the requirement of the Securities Act of 1933, the
Registrant certifies that it has reasonable grounds to believe that it meets all
of the requirements for filing on Form S-3 and has duly caused this Registration
Statement to be signed on its behalf by the undersigned, thereunto duly
authorized in the City of New York, New York, on the 31st day of December, 1998.
MARVEL ENTERPRISES, INC.
a Delaware corporation (Registrant)
By: /s/ DAVID J. FREMED
David J. Fremed
Chief Financial Officer and Treasurer
Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement has been signed by the following persons in the
capacities indicated on the dates indicated.
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
<S> <C> <C>
Chairman of the Board and Director December __, 1998
*
Morton E. Handel
Chief Executive Officer (principal December __, 1998
* executive officer)
Eric Ellenbogen
/s/ DAVID J. FREMED Chief Financial Officer and December 31, 1998
- ---------------------------------- Treasurer (principal financial and
David J. Fremed accounting officer)
Director December __, 1998
*
Avi Arad
Director December __, 1998
*
Mark Dickstein
Director December __, 1998
*
Eric Ellenbogen
</TABLE>
782128.3
<PAGE>
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
<S> <C> <C>
Director December __, 1998
*
Shelley F. Greenhaus
Director December __, 1998
*
James F. Halpin
Director December __, 1998
*
Michael M. Lynton
Director December __, 1998
*
Lawrence Mittman
Director December __, 1998
*
Isaac Perlmutter
Director December __, 1998
*
Rod Perth
Director December __, 1998
*
Michael J. Petrick
*By: /s/ DAVID J. FREMED December 31, 1998
- --------------------------------
David J. Fremed
Attorney-in-fact
</TABLE>
Exhibit 23.1
CONSENT OF INDEPENDENT AUDITORS
We consent to the reference to our firm under the caption "Experts" in Amendment
No. 2 to the Registration Statement (Form S-3 No. 333-68019) and related
Prospectus of Marvel Enterprises, Inc. (formerly Toy Biz, Inc.) for the
registration of 36,642,683 shares of its common stock and 15,620,234 shares of
its 8% cumulative convertible exchangeable preferred stock and to the
incorporation by reference therein of our report dated March 9, 1998, except as
to Note 7 as to which the date is March 25, 1998, with respect to the
consolidated financial statements and schedule of Toy Biz, Inc. included in its
Annual Report (Form 10-K) for the year ended December 31, 1997, filed with the
Securities and Exchange Commission.
ERNST & YOUNG LLP
New York, New York
December 31, 1998
794196.1
Exhibit 23.2
CONSENT OF INDEPENDENT AUDITORS
We consent to the reference to our firm under the caption "Experts" in Amendment
No. 2 to the Registration Statement (Form S-3 No. 333-68019) and related
Prospectus of Marvel Enterprises, Inc. (formerly Toy Biz, Inc.) for the
registration of 36,642,683 shares of its common stock and 15,620,234 shares of
its 8% cumulative convertible exchangeable preferred stock and to the
incorporation by reference therein of our report dated April 14, 1998, with
respect to the consolidated financial statements and schedule of Marvel
Entertainment Group, Inc. included in its Annual Report (Form 10-K/A) for the
year ended December 31, 1997, filed with the Securities and Exchange Commission.
ERNST & YOUNG LLP
New York, New York
December 31, 1998
794202.1
