UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
(Rule 14a-101)
SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of the
Securities Exchange Act of 1934
Filed by the Registrant |X|
Filed by a Party other than the Registrant |_|
Check the appropriate box:
|_| Preliminary Proxy Statement.
|_| Confidential, for Use of the Commission Only (as permitted by
Rule 14a-6(e)(2)).
|X| Definitive Proxy Statement.
|_| Definitive Additional Materials.
|_| Soliciting Material Pursuant to Section 240.14a-11(c) or
Section 240.14a-12.
MARVEL ENTERPRISES, INC.
- --------------------------------------------------------------------------------
(Name of Registrant as Specified in its Charter)
- --------------------------------------------------------------------------------
(Name of Person(s) Filing Proxy Statement, if Other Than the Registrant)
Payment of filing fee (check the appropriate box):
|X| No fee required.
|_| Fee computed on table below per Exchange Act Rules 14a-6(i)(4) and 0-11.
1) Title of each class of securities to which transaction applies: ______
2) Aggregate number of securities to which transaction applies: ______
3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (Set forth the amount on which the
filing fee is calculated and state how it was determined): ______
4) Proposed maximum aggregate value of transaction: ______
5) Total fee paid: ______
|_| Fee paid previously with preliminary materials.
|_| Check box if any part of the fee is offset as provided by Exchange Act Rule
0-11(a)(2) and identify the filing for which the offsetting fee was paid
previously. Identify the previous filing by registration statement number,
or the Form or Schedule and the date of its filing.
1) Amount Previously Paid: ______
2) Form, Schedule or Registration Statement No.: ______
3) Filing Party: ______
4) Date Filed: ______
MARVEL ENTERPRISES, INC.
10 East 40th Street
New York, New York 10016
March 30, 2004
Dear Stockholder:
You are cordially invited to attend the 2004 Annual Meeting of
Stockholders of Marvel Enterprises, Inc., which will be held at 10:00 a.m.,
local time, on Wednesday, May 5, 2004 at the offices of Paul, Hastings, Janofsky
& Walker LLP, 75 East 55th Street, New York, New York. The matters to be acted
upon at the Annual Meeting are (i) a proposal to approve and adopt an amendment
and restatement of our certificate of incorporation eliminating certain
no-longer applicable provisions (concerning, for example, a class of preferred
stock that is no longer outstanding); (ii) a proposal to approve and adopt an
amendment to our stock incentive plan to increase the number of shares issuable
pursuant to awards made thereunder; (iii) a proposal to elect three of our
directors; (iv) a proposal to ratify the appointment of Ernst & Young LLP as the
Company's independent accountants for the fiscal year ending December 31, 2004;
and (v) such other business as may properly come before the Annual Meeting, all
as described in the attached Notice of Annual Meeting of Stockholders and Proxy
Statement.
It is important that your shares be represented at the Annual Meeting
and voted in accordance with your wishes. Whether or not you plan to attend the
Annual Meeting, we urge you to complete, date, sign and return your proxy card
in the enclosed prepaid envelope as promptly as possible so that your shares
will be voted at the Annual Meeting. This will not limit your right to vote in
person or to attend the Annual Meeting.
Sincerely,
/s/ Allen S. Lipson
Allen S. Lipson
President and Chief Executive Officer
MARVEL ENTERPRISES, INC.
10 East 40th Street
New York, New York 10016
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
To the Stockholders of Marvel Enterprises, Inc.:
Notice is hereby given that the 2004 Annual Meeting of Stockholders (the
"Annual Meeting") of Marvel Enterprises, Inc., a Delaware corporation (the
"Company"), will be held at 10:00 a.m., local time, on Wednesday, May 5, 2004 at
the offices of Paul, Hastings, Janofsky & Walker LLP, 75 East 55th Street, New
York, New York, for the following purposes:
1. To consider and vote upon a proposal to approve and adopt an
amendment and restatement of the Company's certificate of
incorporation eliminating certain no-longer applicable provisions.
2. To consider and vote upon a proposal to approve and adopt an
amendment to the Company's stock incentive plan to increase the
number of shares issuable pursuant to awards made under the plan.
3. To consider and vote upon a proposal to elect three directors of the
Company to serve until the election and qualification of their
respective successors.
4. To consider and vote upon a proposal to ratify the appointment of
Ernst & Young LLP as the Company's independent accountants for the
fiscal year ending December 31, 2004.
5. To transact such other business as may properly come before the
Annual Meeting or any adjournment or postponement thereof.
The accompanying proxy statement describes the matters to be considered
at the Annual Meeting. The Board of Directors has fixed the close of business on
Wednesday, March 24, 2004 as the record date for determination of stockholders
entitled to notice of, and to vote at, the Annual Meeting and at any
adjournments thereof. A complete list of the stockholders entitled to vote at
the Annual Meeting will be available for inspection by any stockholder at the
Annual Meeting. In addition, the list of stockholders will be open for
examination by any stockholder, for any purpose germane to the Annual Meeting,
during ordinary business hours, for a period of ten days prior to the Annual
Meeting, at the offices of the Company at 10 East 40th Street, New York, New
York 10016.
To ensure that your vote will be counted, please complete, date, sign
and return the enclosed proxy card promptly in the enclosed prepaid envelope,
whether or not you plan to attend the Annual Meeting. You may revoke your proxy
in the manner described in the proxy statement at any time before the proxy has
been voted at the Annual Meeting.
By Order of the Board of Directors,
/s/ Benjamin Dean
Benjamin Dean
Secretary
March 30, 2004
If you have any questions or need assistance in voting your shares, call
D.F. King & Co., Inc., which is assisting the Company with the Annual Meeting
proxies, toll free at 888-886-4425.
MARVEL ENTERPRISES, INC.
10 East 40th Street
New York, New York 10016
-------------------
PROXY STATEMENT
for the
2004 Annual Meeting of Stockholders
to be held on May 5, 2004
-------------------
This proxy statement is being furnished by and on behalf of the board of
directors (the "Board of Directors") of Marvel Enterprises, Inc., a Delaware
corporation (the "Company"), in connection with the solicitation of proxies to
be voted at the 2004 Annual Meeting of Stockholders (the "Annual Meeting") to be
held at 10:00 a.m., local time, on Wednesday, May 5, 2004 at the offices of
Paul, Hastings, Janofsky & Walker LLP, 75 East 55th Street, New York, New York,
and at any adjournments or postponements thereof. This proxy statement and the
enclosed proxy card are being sent to stockholders on or about March 30, 2004.
At the Annual Meeting, stockholders will be asked to act on (1) a
proposal to approve and adopt an amendment and restatement of the Company's
certificate of incorporation eliminating certain no-longer applicable provisions
(concerning, for example, a class of preferred stock that is no longer
outstanding) (the "Charter Proposal"); (2) a proposal to approve and adopt an
amendment to the Company's stock incentive plan to increase the number of shares
issuable pursuant to awards made thereunder (the "Stock Incentive Plan
Proposal"); (3) a proposal to elect the following nominees as directors of the
Company to serve until the election and qualification of their respective
successors: Morton E. Handel, F. Peter Cuneo and Isaac Perlmutter; (4) a
proposal to ratify the appointment of Ernst & Young LLP as the Company's
independent accountants for the fiscal year ending December 31, 2004; and (5)
such other business as may properly come before the Annual Meeting or any
adjournment or postponement thereof.
The principal offices of the Company are located at 10 East 40th Street,
New York, New York 10016, and the Company's telephone number is (212) 576-4000.
Solicitation and Voting of Proxies; Revocation
All duly executed proxy cards received by the Company in time for the
Annual Meeting will be voted in accordance with the instructions given therein
by the person executing the proxy card. In the absence of instructions, duly
executed proxy cards will be voted FOR (1) the approval and adoption of the
Charter Proposal, (2) the approval and adoption of the Stock Incentive Plan
Proposal, (3) the election as a director of the Company of each of the three
nominees identified above and (4) the ratification of the appointment of Ernst &
Young LLP as the Company's independent accountants for the fiscal year ending
December 31, 2004. Any other matters that may properly come before the meeting
will be acted upon by the persons named in the accompanying proxy in accordance
with their discretion.
The submission of a signed proxy card will not affect a stockholder's
right to attend, or to vote in person at, the Annual Meeting. Stockholders who
execute a proxy card may revoke the proxy at any time before it is voted by (i)
filing a revocation with the Secretary of the Company, (ii) executing a proxy
card bearing a later date or (iii) attending the Annual Meeting and voting in
person. In accordance with
applicable rules, boxes and a designated blank space are provided on the proxy
card for stockholders to mark if they wish either to withhold authority to vote
for some or all of the nominees for director of the Company or to abstain from
the vote to (1) approve and adopt the Charter Proposal, (2) approve and adopt
the Stock Incentive Plan Proposal, or (3) ratify the appointment of Ernst &
Young LLP as the Company's independent accountants for the fiscal year ending
December 31, 2004. A stockholder's attendance at the Annual Meeting will not by
itself revoke a proxy given by such stockholder.
The cost of soliciting proxies will be borne by the Company. In addition
to soliciting proxies by mail, proxies may be solicited by the Company's
directors, officers and other employees by personal interview, telephone and
telegram. Such persons will receive no additional compensation for such
services. In addition, the Company has retained D.F. King & Co., Inc. to assist
in soliciting proxies for a fee estimated at $4,000, plus reimbursements of
reasonable out-of-pocket expenses. The Company requests that brokerage houses
and other custodians, nominees and fiduciaries forward solicitation materials to
the beneficial owners of shares of the Company's capital stock held of record by
such persons and will reimburse such brokers and other fiduciaries for their
reasonable out-of-pocket expenses incurred when the solicitation materials are
forwarded.
In some cases, only one copy of this proxy statement (and the
accompanying annual report) is being delivered to multiple stockholders sharing
an address unless the Company has received contrary instructions from one or
more of the stockholders. The Company will deliver promptly, upon written or
oral request, a separate copy of this proxy statement (and the annual report) to
a stockholder at a shared address to which a single copy of the document was
delivered. To request a separate delivery of these materials now or in the
future, a stockholder may submit a written request to the Secretary, Marvel
Enterprises, Inc., 10 East 40th Street, New York, New York 10016 or an oral
request by calling (212) 576-4000, extension 8531. Additionally, any
stockholders who are currently sharing an address and receiving multiple copies
of either the proxy statement or the annual report and who would rather receive
a single copy of such materials may instruct the Company accordingly by
directing their request to the Company in the manner provided above, or by
contacting their broker.
Stock Split on March 26, 2004
On March 26, 2004 (the "Split Date"), the Company effected a 3-for-2
stock split, in the form of a stock dividend that was distributed that day to
stockholders of record as of March 12, 2004. On the first trading day after the
Split Date, the number of shares of Common Stock outstanding increased by
one-half and the trading price for the Common Stock on the New York Stock
Exchange was adjusted accordingly. When this proxy statement refers to a number
of shares of Common Stock, it distinguishes between the number of "pre-split"
shares (i.e., the number applicable through March 26, 2004) and the number of
"post-split" shares (i.e., the number applicable after March 26, 2004).
Record Date; Voting Rights
Only holders of record of shares of the Company's Common Stock (the
"Common Stock") at the close of business on March 24, 2004 (the "Record Date")
will be entitled to notice of, and to vote at, the Annual Meeting. On the Record
Date, there were issued and outstanding 72,639,927 shares (pre-split) of Common
Stock, each of which is entitled to one vote.
With respect to all matters expected to be presented for a vote of
stockholders, the presence, in person or by duly executed proxy card, of the
holders of a majority in voting power of the outstanding shares of Common Stock
entitled to vote at the Annual Meeting is necessary to constitute a quorum in
2
order to transact business. The Charter Proposal requires the affirmative vote
of a majority of the shares of Common Stock outstanding on the Record Date. The
Stock Incentive Plan Proposal requires the affirmative vote of a majority of the
votes cast, provided that the total vote cast represents a majority of the
shares of Common Stock outstanding on the Record Date. The election of directors
requires a plurality of the votes of the shares present in person or represented
by proxy at the Annual Meeting and entitled to vote thereon. The ratification of
the appointment of independent accountants requires the affirmative vote of the
majority of shares present in person or represented by proxy at the Annual
Meeting and entitled to vote thereon.
Abstentions will be counted as present in determining whether a quorum
exists, but will have the same effect as a vote against a proposal (other than
with respect to the proposal relating to the election of directors). Shares held
by nominees that are present but not voted on a proposal because the nominees
did not have discretionary voting power and were not instructed by the
beneficial owner ("broker non-votes") will be counted as present in determining
whether a quorum exists, but will be disregarded in determining whether a
proposal has been approved except to the extent that they prevent the
achievement of the requirement, in the case of the Stock Incentive Plan
Proposal, that the total vote cast represent a majority of the shares of Common
Stock outstanding on the Record Date.
THE CHARTER PROPOSAL
On February 24, 2004, the Board of Directors adopted resolutions
proposing and recommending that the stockholders of the Company approve an
amendment and restatement of the Company's certificate of incorporation (as so
amended and restated, the "Restated Certificate of Incorporation") by approving
the Charter Proposal. The Charter Proposal would, among other things:
1. eliminate references to a class of stock that is no longer
outstanding (the Company's 8% cumulative convertible exchangeable
preferred stock);
2. eliminate a form of indenture, attached to the current certificate of
incorporation, that would have governed a class of debt securities
issuable upon conversion of the no-longer-outstanding class of
preferred stock referred to above;
3. eliminate references to a stockholders' agreement that is no longer
in effect; and
4. include provisions concerning the Company's Class A Junior
Participating Preferred Stock (no shares of which are currently
outstanding) which formerly were contained in a certificate of
designation.
Stockholders are urged to read carefully the descriptions and
discussions of the Charter Proposal that follow before voting on the Charter
Proposal.
If the Charter Proposal is approved, the Company intends to file the
Restated Certificate of Incorporation in substantially the form attached hereto
as Appendix A reflecting the Charter Proposal. The Charter Proposal would become
effective upon the filing of the Restated Certificate of Incorporation with the
Secretary of State of the State of Delaware. Under Delaware law, the Company's
stockholders are not entitled to dissenters' rights with respect to the proposed
amendment to the Certificate of Incorporation. The Board of Directors has
reserved the right under Section 242(c) of the Delaware General Corporation Law
(the "DGCL") to abandon the Charter Proposal, notwithstanding approval of the
Charter Proposal by the stockholders, without further action by the
stockholders.
Now that there are no longer any shares of the Company's 8% cumulative
convertible exchangeable preferred stock outstanding, the provisions of the
Company's certificate of incorporation
3
governing that class of stock are obsolete, as is the indenture that sets forth
the terms of a class of debentures into which that preferred stock was, in some
circumstances, convertible. The indenture, which runs over 40 pages, is
currently attached to the Company's certificate of incorporation. Likewise, now
that the Stockholders' Agreement entered into as of October 1, 1998 in
connection with the Company's acquisition of Marvel Entertainment Group, Inc.
has been terminated, the references to that agreement in the Company's
certificate of incorporation are obsolete and no longer serve any purpose.
The only effect of the Charter Proposal will be to shorten the form of
the Company's certificate of incorporation, without changing its substance.
Pursuant to the DGCL, approval of the Charter Proposal will require the
affirmative vote of the holders of a majority in voting power of the outstanding
shares of Common Stock. In tabulating the vote, abstentions and broker non-votes
will have the same effect as a vote against the Charter Proposal. The Board of
Directors unanimously recommends that stockholders vote FOR the approval and
adoption of the Charter Proposal.
THE STOCK INCENTIVE PLAN PROPOSAL
The Stock Incentive Plan Proposal is to approve and adopt the Plan
Amendment, as defined below.
The Amendment
The 1998 Stock Incentive Plan was adopted by the Board of Directors in
November 1998 and approved by the stockholders in December 1998. An amendment to
the Plan was adopted by the Board of Directors in September 2001 and approved by
the stockholders in January 2002 (the 1998 Stock Incentive Plan as amended and,
where applicable, as proposed to be amended by the Plan Amendment, is referred
to in this proxy statement as the "1998 Plan").
Currently, under the 1998 Plan, an aggregate of 16 million pre-split
shares, or 24 million post-split shares, of Common Stock may be made the subject
of options, stock appreciation rights, restricted stock awards, performance
shares and performance units (collectively, "Awards"), provided that the number
of shares of Common Stock that may be the subject of Awards granted to any
individual during any calendar year may not exceed 4 million pre-split shares,
or 6 million post-split shares. Also, the current termination date of the 1998
Plan is November 10, 2008. The Board of Directors has determined that the number
of shares remaining under the 1998 Plan is insufficient to continue to meet the
Company's needs of attracting and retaining executive officers, directors and
other key employees, and that the remaining term of the Plan should be extended
until December 31, 2013. As a result, on February 24, 2004, the Board of
Directors adopted, subject to stockholder approval, an amendment (the "Plan
Amendment") to the 1998 Plan increasing the number of shares of Common Stock
that may be issued upon exercise of Awards under the 1998 Plan by an additional
7.5 million pre-split shares, or 11.25 million post-split shares, and extending
the termination date of the 1998 Plan to December 31, 2013.
The principal provisions of the 1998 Plan are summarized below. The
following summary of the material provisions of the 1998 Plan does not purport
to be complete and is qualified in its entirety by the terms of the 1998 Plan, a
complete copy of which is attached hereto as Appendix B. A copy of the Plan
Amendment is attached hereto as Appendix C.
The Board of Directors is seeking stockholder approval of the Plan
Amendment in order to satisfy the listing requirements of the New York Stock
Exchange and to satisfy the requirements of the Internal Revenue Code of 1986,
as amended (the "Code") for favorable tax treatment of Incentive Stock Options
and any Awards intended to qualify as "performance-based compensation" under
Section 162(m) of the
4
Code. Under the rules of the New York Stock Exchange, stockholder approval of
the Plan Amendment will require the affirmative vote of a majority of the votes
cast, provided that the total vote cast represents a majority of the Common
Stock. In addition, under Delaware law, stockholder approval of the Plan
Amendment will require the affirmative vote of the majority of shares present in
person or represented by proxy at the annual meeting and entitled to vote
thereon. In tabulating the vote, abstentions will have the same effect as a vote
against the Plan Amendment and broker non-votes will be disregarded and will
have no effect on the outcome of the vote, except to the extent that the broker
non-votes prevent the achievement of the requirement that the total vote cast
represent a majority of the shares of Common Stock outstanding on the Record
Date. The Board of Directors unanimously recommends that stockholders vote FOR
the Stock Incentive Plan Proposal.
Summary of the Plan
Under the 1998 Plan, Awards may be granted to officers, employees and
directors of the Company and its subsidiaries and to consultants and advisors to
the Company or its subsidiaries (collectively, "Participants"). The 1998 Plan is
intended to provide financial incentives to the Participants, rewarding them for
making significant contributions to the Company's success and encouraging them
to associate their interests with those of the Company and its stockholders. The
1998 Plan should also assist the Company in attracting and retaining competent
and dedicated individuals whose efforts will be important in helping the Company
achieve its long-term growth objectives.
The 1998 Plan is administered by a "Committee" (currently the Company's
Compensation Committee) which is composed of at least two directors of the
Company, each of whom is a "non-employee director" within the meaning of Rule
16b-3 promulgated under Section 16(b) ("Rule 16b-3") of the Securities Exchange
Act of 1934, as amended (the "Exchange Act") and an "outside director" within
the meaning of regulations promulgated under Section 162(m) of the Code.
Pursuant to the 1998 Plan, the Committee selects Participants to whom Awards
will be granted and determines the type, size, terms and conditions of Awards,
including the per share purchase price and vesting provisions of options and the
restrictions or performance criteria relating to restricted stock and
performance awards. The Committee also administers, construes and interprets the
1998 Plan.
Securities to be Offered
Upon approval of the Plan Amendment, under the 1998 Plan the aggregate
number of shares of Common Stock ("Shares") which may be issued upon exercise of
Awards, as amended, will be 23,500,000 (pre-split), or 35,250,000 (post-split),
including Shares that have already been issued upon exercise of Awards. No
Participant, however, will be permitted to receive Awards with respect to more
than 4 million (pre-split), or 6 million (post-split), Shares during any
calendar year. In the event of any Change in Capitalization (as defined below),
the Committee may adjust the maximum number and class of Shares with respect to
which Awards may be granted under the 1998 Plan, the maximum number of Shares
with respect to which options or other Awards may be granted to any Participant
during any year, the number and class of Shares which are subject to outstanding
Awards granted under the 1998 Plan, and if applicable, the purchase price
therefor. In addition, if any Award expires or terminates without having been
exercised, the Shares subject to that Award again become available for grant
under the 1998 Plan. A "Change in Capitalization" means any increase or
reduction in the number of Shares, or any change in the Shares or exchange of
Shares for a different number or kind of shares or other securities of the
Company, by reason of a reclassification, recapitalization, merger,
consolidation, reorganization, spin-off, split-up, issuance of warrants or
rights or debentures, stock dividend, stock split or reverse stock split, cash
dividend, property dividend, combination or exchange of shares, repurchase of
shares, change in corporate structure or otherwise. Pursuant to this authority,
the Committee has adjusted outstanding stock options issued by the Company
5
so that they are exercisable, post-split, for one-and-a-half times as many
shares as before the March 26, 2004 three-for-two stock split, at two-thirds of
the former exercise price per share.
Individuals Who May Participate in the 1998 Plan
All of the Company's (and its subsidiaries') officers, employees and
directors together with its (and its subsidiaries') advisors and consultants are
eligible to receive Awards under the 1998 Plan. Awards under the 1998 Plan shall
be granted at the sole discretion of the Committee. The granting of an Award
does not confer upon the Participant any right to continue in the employ of the
Company or any of its subsidiaries or affect any right or power of the Company
or any of its subsidiaries to terminate the services of such Participant at any
time. As of the date of this proxy statement, the class of Participants was
approximately 200 persons.
Awards
Options. The Committee may grant to Participants options to purchase
Shares. Subject to the provisions of the Code, options may be either incentive
stock options (within the meaning of Section 422 of the Code) ("Incentive Stock
Options") or nonqualified stock options (an option which does not qualify as an
Incentive Stock Option) ("Nonqualified Stock Options"). The per Share purchase
price (i.e., the "exercise price") under each option shall be established by the
Committee at the time the option is granted. The per Share exercise price of an
option shall not be less than 100% of the fair market value of a Share on the
date the option is granted (110% in the case of an Incentive Stock Option
granted to a ten-percent stockholder). Options will be exercisable at such times
and in such installments as determined by the Committee. The Committee may
accelerate the exercisability of any option at any time. Each option granted
pursuant to the 1998 Plan shall be for such term as determined by the Committee,
provided, however, that no option shall be exercisable after the expiration of
ten years from its grant date (five years in the case of an Incentive Stock
Option granted to a ten-percent stockholder). The agreement evidencing the
option grant shall set forth the terms and conditions applicable to such option
upon a termination or change in the employment status of the optionee as
determined by the Committee. The Committee may also grant dividend equivalent
rights in tandem with an option.
Unless permitted by the Committee, options are not transferable by the
optionee other than by will or the laws of descent and distribution and may be
exercised during the optionee's lifetime only by the optionee or the optionee's
guardian or legal representative. The purchase price for Shares acquired
pursuant to the exercise of an option must be paid (i) in cash, (ii) by
transferring Shares to the Company, or (iii) a combination of the foregoing,
upon such terms and conditions as determined by the Committee.
Stock Appreciation Rights. The 1998 Plan permits the granting of stock
appreciation rights to Participants in connection with an option or as a
freestanding right. A stock appreciation right permits the grantee to receive,
upon exercise, cash and/or Shares, at the discretion of the Committee, equal in
value to an amount determined by multiplying (i) the excess, if any, of (x) for
those granted in connection with an option, the fair market value per Share on
the date preceding the exercise date over the purchase price per Share under the
related option, or (y) for those not granted in connection with an option, the
fair market value per Share on the date preceding the exercise date over the
fair market value per Share on the grant date of the stock appreciation right by
(ii) the number of Shares as to which such stock appreciation right is being
exercised.
Stock appreciation rights granted in connection with an option cover the
same Shares as those covered by such option and are generally subject to the
same terms. A stock appreciation right granted in connection with an Incentive
Stock Option is exercisable only if the fair market value of a Share on the
exercise date exceeds the purchase price specified in the related Incentive
Stock Option agreement.
6
Freestanding stock appreciation rights shall be granted on such terms and
conditions as shall be determined by the Committee, but shall not have a term of
greater than ten years.
Restricted Stock. The terms of a restricted stock Award, including the
restrictions placed on such Shares and the time or times, or the circumstances,
upon which such restrictions will lapse, shall be determined by the Committee at
the time the Award is made. The Committee may determine at the time an Award of
restricted stock is granted that dividends paid on such restricted stock may be
paid to the grantee or deferred and, if deferred, whether such dividends will be
reinvested in shares of Common Stock. Deferred dividends (together with any
interest accrued thereon) will be paid upon the lapsing of restrictions on
shares of restricted stock or forfeited upon the forfeiture of shares of
restricted stock. The agreements evidencing Awards of restricted stock shall set
forth the effects on such Awards of a grantee's termination of employment or
service.
Performance Units and Performance Shares. Performance units and
performance shares will be awarded at such times as the Committee may determine
and the vesting of performance units and performance shares is based upon the
attainment of specified performance objectives by the Corporation, a subsidiary
or a division within the specified performance period (the "Performance Cycle").
Performance objectives and the length of the Performance Cycle for performance
units and performance shares will be determined by the Committee at the time the
Award is made. Prior to the end of a Performance Cycle, the Committee, in its
discretion, may adjust the performance objectives to reflect a Change in
Capitalization, a change in the tax rate or book tax rate of the Company or any
subsidiary, or any other event which may materially affect the performance of
the Company, a subsidiary or division. The agreements evidencing Awards of
performance units and performance shares will set forth the terms and conditions
of such Awards, including those applicable in the event of the grantee's
termination of employment. Each performance unit will represent one Share and
payments in respect of vested performance units will be made in cash, Shares or
Shares of restricted stock or any combination of cash, Shares or Shares of
restricted stock. The Committee will determine the total number of performance
shares subject to an Award and the time or times at which the performance shares
will be issued to the grantee at the time the Award is made. In addition, the
Committee will determine (a) the time or times at which the awarded but not
issued performance shares shall be issued to the grantee and (b) the time or
times at which awarded and issued performance shares shall become vested in or
forfeited by the grantee, in either case based upon the attainment of specified
performance objectives within the Performance Cycle. At the time the Award of
performance shares is made, the Committee may determine that dividends be paid
or deferred on the performance shares issued. Deferred dividends (together with
any interest accrued thereon) will be paid upon the lapsing of restrictions on
performance shares or forfeited upon the forfeiture of performance shares.
Additional Information
The 1998 Plan provides that in satisfaction of the federal, state and
local income taxes and other amounts as may be required by law to be withheld
with respect to an option or other Award, the optionee or grantee may make a
written election to have withheld a portion of the Shares issuable to him or her
having an aggregate fair market value equal to the withholding taxes.
The Committee shall have the authority at the time a grant of options or
an Award is made to award designated optionees or grantees tax bonuses that
shall be paid on the exercise of such options or payment of such Awards. The
Committee shall have full authority to determine the amount of any such tax
bonus and the terms and conditions affecting the vesting and payment thereof.
Upon approval of the Plan Amendment, the 1998 Plan will terminate on
December 31, 2013. (Currently, the 1998 Plan terminates on November 10, 2008,
the day preceding the tenth anniversary of
7
its effective date.) The Board of Directors may terminate or amend the 1998 Plan
at any time, except that (i) no such amendment or termination may adversely
affect outstanding Awards, and (ii) to the extent necessary under applicable law
or securities exchange rule, no amendment will be effective unless approved by
stockholders.
The closing price of the Common Stock as reported on the New York Stock
Exchange on March 26, 2004 was $28.35 per share.
Federal Income Tax Consequences Relating to Awards
Summarized below are the federal income tax consequences that the
Company expects (based on current tax laws, rules and interpretations) with
respect to Awards.
Incentive Stock Options. In general, an optionee will not recognize
taxable income upon grant or exercise of an Incentive Stock Option and the
Company will not be entitled to any business expense deduction with respect to
the grant or exercise of an Incentive Stock Option.
Upon the exercise of an Incentive Stock Option, however, the excess of
the fair market value on the date of the exercise of the Shares received over
the exercise price of Shares will be treated as an adjustment to alternative
minimum taxable income. In order for the exercise of an Incentive Stock Option
to qualify for the foregoing tax treatment, the optionee generally must be an
employee of the Company or a subsidiary from the date the Incentive Stock Option
is granted through the date three months before the date of exercise, except in
the case of death or disability, where special rules apply.
If the optionee has held the Shares acquired upon exercise of an
Incentive Stock Option for at least two years after the date of grant and for at
least one year after the date of exercise, upon disposition of the Shares by the
optionee, the difference, if any, between the sale price of the Shares and the
exercise price of the option will be treated as long-term capital gain or loss.
If the optionee does not satisfy these holding period requirements, the optionee
will recognize ordinary income at the time of the disposition of the Shares,
generally in an amount equal to the excess of the fair market value of the
Shares at the time the option was exercised over the exercise price of the
option. The balance of gain realized, if any, will be long-term or short-term
capital gain, depending on whether or not the Shares were sold more than one
year after the option was exercised. If the optionee sells the Shares prior to
the satisfaction of the holding period requirements but at a price below the
fair market value of the Shares at the time the option was exercised, the amount
of ordinary income will be limited to the excess of the amount realized on the
sale over the exercise price of the option. Subject to the discussion below with
respect to Section 162(m) of the Code, the Company will be allowed a business
expense deduction to the extent the optionee recognizes ordinary income.
Nonqualified Stock Options. In general, an optionee to whom a
Nonqualified Stock Option is granted will recognize no income at the time of the
grant of the option. Upon the exercise of a Nonqualified Stock Option, an
optionee will generally recognize ordinary income in an amount equal to the
amount by which the fair market value of the Shares on the date of exercise
exceeds the exercise price of the option (special rules may apply in the case of
an optionee who is subject to Section 16(b) of the Exchange Act). If the Company
complies with applicable withholding requirements, it will be entitled to a
business expense deduction in the same amount and at the same time as the
optionee recognizes ordinary income (subject to the discussion below with
respect to Section 162(m) of the Code).
Stock Appreciation Rights (SARs). In general, a grantee to whom an SAR
is granted will recognize no income at the time of the grant of the option. Upon
exercise of an SAR, the grantee must recognize taxable compensation income in an
amount equal to the value of any cash or Shares that the
8
grantee receives. In general, the Company will be entitled to a deduction for
federal income tax purposes at the same time and in the same amount as the
ordinary income recognized by the grantee upon exercise of the SAR (subject to
the discussion below with respect to Section 162(m) of the Code).
Restricted Stock. In general, a grantee of restricted stock or any
performance award will recognize no income at the time of the grant, unless the
grantee of restricted stock elects to accelerate income taxation to the date of
the award, and thereby recognizes ordinary income equal to the excess of the
market value of the restricted shares over any amount the grantee pays for them
(in which case subsequent gain or loss would be capital in nature, and the
Company's deduction would equal the income recognized by the grantee as of the
date of the restricted stock award).
If a grantee has not elected to accelerate income taxation to the date
of a restricted stock award and the restrictions on such stock subsequently
lapse, the grantee must recognize taxable compensation income in an amount equal
to the then-current value of any cash or Shares that the grantee receives. The
same tax consequences apply to performance units and performance shares. With
respect to these Awards generally, the Company will be entitled to a deduction
for federal income tax purposes at the same time and in the same amount as the
ordinary income recognized by the grantee pursuant to the restricted stock or
performance award (subject to the discussion below with respect to Section
162(m) of the Code).
Special Tax Provisions. Under certain circumstances, the accelerated
vesting, cashout or accelerated lapse of restrictions on Awards in connection
with a change in control of the Company might be deemed an "excess parachute
payment" for purposes of the golden parachute tax provisions of Section 280G of
the Code. To the extent it is so considered, the optionee may be subject to a
20% excise tax and the Company may be denied a tax deduction.
Section 162(m) of the Code and the regulations thereunder generally
would disallow the Company a federal income tax deduction for compensation paid
to the chief executive officer and the four other most highly compensated
executive officers to the extent such compensation paid to any of such
individuals exceeds one million dollars in any year. Section 162(m) generally
does not disallow a deduction for payments of qualified "performance-based
compensation" the material terms of which have been approved by stockholders.
The Company intends that compensation attributable to options, stock
appreciation rights, performance Awards, and performance-based Awards of
restricted stock granted under the 1998 Plan will be qualified
"performance-based compensation." To qualify, the Company has obtained
stockholder approval of the 1998 Plan.
Interest of Certain Persons in Matters to be Acted Upon
The officers and directors of the Company have an interest in the Plan
Amendment to the extent they are eligible to participate therein.
ELECTION OF DIRECTORS
Three directors will be elected at the Annual Meeting to serve until the
election and qualification of their respective successors. Each of the nominees
is currently a member of the Board of Directors. Proxy votes will not be voted
for a greater number of persons than the number of nominees named.
The Board of Directors has been informed that each of the nominees is
willing to serve as a director of the Company, but if any of them should decline
or be unable to act as a director, the individuals named as proxies on the
enclosed proxy card will vote for the election of such other person or persons
as they, in their discretion, may choose. The Board of Directors has no reason
to believe that any of the nominees will be unable or unwilling to serve.
9
Pursuant to the Company's By-Laws (the "By-Laws"), the election to the
Board of Directors of each of the three nominees identified in this proxy
statement will require the affirmative vote of the holders of a plurality of the
shares of Common Stock present in person or represented by proxy at the Annual
Meeting and entitled to vote. In tabulating the vote, abstentions and broker
non-votes will be disregarded and will have no effect on the outcome of the
vote. The Board of Directors unanimously recommends that stockholders vote FOR
the election to the Board of Directors of Morton E. Handel, F. Peter Cuneo and
Isaac Perlmutter.
Nominees for Election as Directors
The Company's Board of Directors has three classes of directors with
staggered three-year terms. Sid Ganis and James F. Halpin were elected at the
2002 annual meeting of stockholders as Class I directors to serve a three-year
term. Avi Arad, Lawrence Mittman (since resigned) and Richard L. Solar were
elected at the 2003 annual meeting of stockholders as Class II directors to
serve a three-year term. Morton E. Handel, F. Peter Cuneo and Isaac Perlmutter
were elected at the 2001 annual meeting of stockholders as Class III directors
to serve a three-year term, and are eligible for re-election to a new three-year
term at this Annual Meeting.
Set forth below is each nominee's name, age as of March 30, 2004,
principal occupation for the last five years, selected biographical information
and period of service as a director of the Company.
Morton E. Handel (Class III), 68, has been the non-executive Chairman of
the Board of Directors of the Company since October 1998 and was first appointed
as a director of the Company in June 1997. Mr. Handel is a director of Linens `N
Things, Inc.
F. Peter Cuneo (Class III), 60, was the Company's President and Chief
Executive Officer from July 1999 through December 2002. Mr. Cuneo has been a
director of the Company since July 1999. Since January 1, 2003, Mr. Cuneo has
served as the part-time Special Advisor to the Chief Executive Officer of the
Company, and since June 2003, Mr. Cuneo has served as a non-executive Vice
Chairman of the Board of Directors. From September 1998 until July 1999, Mr.
Cuneo served as Managing Director of Cortec Group Inc., a private equity fund.
From February 1997 until September 1998, Mr. Cuneo was Chairman of Cuneo & Co.,
L.L.C., a private investment firm. Mr. Cuneo is also a director of Water Pik
Technologies, Inc.
Isaac Perlmutter (Class III), 61, has been employed by the Company as
Vice Chairman of the Board of Directors since November 2001, has been a director
of the Company since April 1993 and served as Chairman of the Board of Directors
until March 1995. Mr. Perlmutter purchased the Company's predecessor company in
January 1990. Mr. Perlmutter has been actively involved in the management of the
affairs of the Company since prior to his employment as Vice Chairman and has
been an independent financial investor for more than the past five years. As an
independent investor, Mr. Perlmutter has a controlling ownership interest in
Tangible Media, Inc., a media buying and advertising agency.
Directors Whose Terms Are Continuing
For each member of the Board of Directors whose term of office as a
director continues after the Annual Meeting, set forth below is the director's
name, age as of March 30, 2004, principal occupation for the last five years,
selected biographical information and period of service as a director of the
Company.
Avi Arad (Class II), 55, has been Chief Creative Officer of the Company
and Chairman and Chief Executive Officer of the Company's Marvel Studios
Division (which is responsible for motion picture
10
and television licensing and development) since October 1998. Mr. Arad has been
a director of the Company since April 1993. Mr. Arad is a producer or executive
producer of each movie and television project utilizing the Company's
characters. Mr. Arad has been a toy inventor and designer for more than 20
years. Mr. Arad is also the owner of Avi Arad & Associates, a firm engaged in
the design and development of toys and the production and distribution of
television programs.
Sid Ganis (Class I), 64, has been a director of the Company since
October 1999. Mr. Ganis has been President of Out of the Blue...Entertainment, a
company that he founded, since September 1996. Out of the Blue...Entertainment
is a provider of motion pictures, television and musical entertainment for Sony
Pictures Entertainment and others. From January 1991 until September 1996, Mr.
Ganis held various executive positions with Sony Pictures Entertainment,
including Vice Chairman of Columbia Pictures and President of Worldwide
Marketing for Columbia/TriStar Motion Picture Companies.
James F. Halpin (Class I), 53, has been a director of the Company since
March 1995. Mr. Halpin retired in March 2000 as President and Chief Executive
Officer and a director of CompUSA Inc., a retailer of computer hardware,
software, accessories and related products, which he had been with since May
1993.
Richard L. Solar (Class II), 64, has been a director of the Company
since December 2002. Since February 2003, Mr. Solar has been a management
consultant and investor. From June 2002 to February 2003, Mr. Solar acted as a
consultant for Gerber Childrenswear, Inc., a marketer of popular licensed brand
apparel including Gerber, Baby Looney Tunes, Wilson, Converse and Coca-Cola.
From 1996 to June 2002 (when Gerber Childrenswear was acquired by the Kellwood
Company), Mr. Solar was Senior Vice President, Director and Chief Financial
Officer of Gerber Childrenswear.
Meetings of the Board of Directors, its Audit Committee, its Compensation
Committee and its Nominating and Corporate Governance Committee
The Board of Directors held four meetings during 2003. Each incumbent
director attended at least 75% of the aggregate number of meetings of the Board
of Directors and meetings of committees of the Board of Directors on which he
served.
The Board of Directors' committees are an Audit Committee (the "Audit
Committee"), a Compensation Committee (the "Compensation Committee"), and a
Nominating and Corporate Governance Committee (the "Nominating and Corporate
Governance Committee").
Audit Committee
The Audit Committee is comprised of Messrs. Solar (chairman), Ganis and
Handel. The Audit Committee met four times in 2003. The Board of Directors has
determined that each member of the Audit Committee is "independent" as defined
in Section 303A.02 of the New York Stock Exchange's Listed Company Manual and
under Section 10A(m)(3) of the Securities Exchange Act of 1934, as amended. The
Board of Directors has also determined that each of Morton E. Handel and Richard
L. Solar is an "audit committee financial expert" as that term is used in Item
401(h) of Regulation S-K.
The Audit Committee's function is (i) to directly appoint, retain,
compensate, evaluate and, where appropriate, terminate the Company's independent
auditors; (ii) to assist the Board's oversight of the integrity of the Company's
financial statements, the Company's compliance with legal and regulatory
requirements, the independent auditors' qualifications and independence, and the
performance of the Company's internal audit function and the independent
auditors; and (iii) to prepare the report required to be included in the
Company's annual proxy statement. A copy of the Audit Committee charter is
attached
11
to this proxy statement as Appendix D. Current copies of the Audit Committee
charter and the Company's Complaint Procedure for Accounting and Audit Matters
are available on the Company's Internet website, www.marvel.com.
- --------------------------------------------------------------------------------
Audit Committee Report
The Board of Directors has approved and adopted a written charter for
the Audit Committee which the Board of Directors shall include as an Appendix to
the proxy statement in which this report will appear.
The Audit Committee has reviewed and discussed the audited financial
statements of the Company for the fiscal year ended December 31, 2003 with the
Company's management. The Audit Committee has discussed with Ernst & Young LLP,
the Company's independent auditors, the matters required to be discussed by
Statement on Auditing Standards No. 61, Communication with Audit Committees.
The Audit Committee has received the written disclosures and the letter
from Ernst & Young LLP required by Independence Standards Board Standard No. 1,
Independence Discussions with Audit Committees, and the Audit Committee has
discussed the independence of Ernst & Young LLP with that firm.
Based on the Audit Committee's review and discussions noted above, the
Audit Committee recommended to the Board of Directors that the Company's audited
financial statements be included in the Company's Annual Report on Form 10-K for
the fiscal year ended December 31, 2003 for filing with the SEC.
Audit Committee
Richard L. Solar Sid Ganis Morton E. Handel
- --------------------------------------------------------------------------------
Compensation Committee
The Compensation Committee is comprised of Messrs. Halpin (chairman),
Handel and Ganis. The Board of Directors has determined that each member of the
Compensation Committee is "independent" as defined in Section 303A.02 of the New
York Stock Exchange's Listed Company Manual. The Compensation Committee met
twice in 2003. The Compensation Committee's function is (i) to discharge the
Board's responsibilities relating to compensation of the Company's executives,
(ii) to produce an annual report on executive compensation for inclusion in the
Company's proxy statement in accordance with applicable rules and regulations,
and (iii) to administer the 1998 Stock Incentive Plan. A current copy of the
Compensation Committee charter is available on the Company's Internet website,
www.marvel.com.
Nominating and Corporate Governance Committee
The Nominating and Corporate Governance Committee is comprised of
Messrs. Handel (chairman) and Ganis. The Board of Directors has determined that
each member of the Nominating and Corporate Governance Committee is
"independent" as defined in Section 303A.02 of the New York Stock Exchange's
Listed Company Manual. The Nominating and Corporate Governance Committee met
once in 2003. The Nominating and Corporate Governance Committee's function is
(i) to identify individuals qualified to become members of the Board of
Directors; (ii) to recommend to the Board of Directors individuals to be
selected by the Board of Directors as nominees for election as directors at the
12
next Annual Meeting of Stockholders; and (iii) to develop and recommend to the
Board of Directors a set of corporate governance guidelines applicable to the
Company (the "Corporate Governance Guidelines") and the modification of such
guidelines from time to time. Current copies of: (i) the Nominating and
Corporate Governance Committee charter and (ii) the Corporate Governance
Guidelines are available on the Company's Internet website, www.marvel.com.
As part of the Corporate Governance Guidelines, the Nominating and
Corporate Governance Committee has developed, and the Board of Directors has
approved, Guidelines for Board Membership. These Guidelines for Board
Membership, which are included as Appendix A to the Corporate Governance
Guidelines, assist the Nominating and Corporate Governance Committee in
evaluating qualified candidates for the Board of Directors among individuals
recommended to it or identified through searches conducted by the Committee.
Stockholders of the Company may also make nominations for election as directors,
provided that the nominations are made in accordance with the provisions of the
Guidelines for Board Membership and the By-Laws. See "Stockholder Proposals,"
below. The Nomination and Corporate Governance Committee applies the same
standards in considering candidates submitted by stockholders as it does in
considering all other candidates. The Corporate Governance Guidelines provide
that the Chair of the Board of Directors presides at executive sessions of
non-management directors without management if the Chair is a non-management
director, as is the case with Mr. Handel. Mr. Handel therefore presides at such
meetings.
Code of Ethics
The Company has adopted a code of ethics applicable to its principal
executive officer, principal financial officer, principal accounting officer or
controller, or persons performing similar functions (the "Code of Ethics"). A
copy of the Code of Ethics is available on the Company's Internet website,
www.marvel.com. The Company intends to disclose any amendments to, or waivers
from, the Code of Ethics that are required to be publicly disclosed pursuant to
rules of the Securities and Exchange Commission and the New York Stock Exchange
by posting such amendment or waiver on the Company's website.
Communications with the Board of Directors
The process for communicating with the Non-Management Presiding Director
(as defined in the Corporate Governance Guidelines) or the non-management
directors as a group is set forth in the Corporate Governance Guidelines, which
are available on the Company's Internet website, www.marvel.com. Communications
to the Board of Directors as a whole should be addressed to the Board of
Directors as a whole and may otherwise be made in the same manner as
communications to the Non-Management Presiding Director. It is the Company's
policy to invite directors to attend the Annual Meeting of Stockholders, but not
to require their attendance. Two directors attended the 2003 Annual Meeting of
Stockholders.
Compensation of Directors
Members of the Board of Directors who are officers or employees of the
Company or any of its subsidiaries do not receive compensation for serving in
their capacity as directors.
Non-employee directors currently receive an annual retainer of $25,000
and an annual grant of options to purchase 20,000 shares (pre-split), or 30,000
shares (post-split), of Common Stock.
In addition, members (other than the committee chair) of (i) the Audit
Committee, (ii) the Compensation Committee and (iii) the Nominating and
Corporate Governance Committee each receive,
13
per committee membership, an annual grant of options to purchase 1,000 shares
(pre-split), or 1,500 shares (post-split), of Common Stock. The chair of each of
those committees receives an annual grant of options to purchase 5,000 shares
(pre-split), or 7,500 shares (post-split), of Common Stock, and an annual
retainer of $5,000.
In addition, in June 2003, (i) Mr. Handel received options to purchase
25,000 (pre-split) shares of Common Stock, (ii) Mr. Halpin received options to
purchase 20,000 (pre-split) shares of Common Stock, and (iii) Messrs. Ganis and
Solar each received options to purchase 5,000 (pre-split) shares of Common
Stock.
All option grants to directors are exercisable at fair market value on
the date of the grant, and are immediately vested.
In March 2004, in order to allow the Company to comply with a recently
implemented rule of the New York Stock Exchange that requires a majority of the
Company's directors to satisfy standards of independence set out in that rule,
Lawrence Mittman resigned as a director of the Company. In recognition of his
past service as well as his willingness to resign from the Board to permit the
Company to comply with that rule, the Company paid Mr. Mittman $100,000 upon his
resignation.
The chair of the Company's Board of Directors has newly specified duties
and a new compensation structure as of October 1, 2003. The chair's duties
require approximately 15 to 30 hours per week of the chair's time, on average.
The chair's compensation consists of annual cash payments of $450,000 and one
grant per five-year period of 100,000 shares (pre-split) of restricted stock.
The restricted stock is forfeitable, and is not tradable, upon grant, but it
vests (i.e., becomes tradable and non-forfeitable) on the following schedule, if
the recipient continues to serve as chair on such dates: 50% of the stock vests
on the first anniversary of the grant; 25% vests on the second anniversary; 10%
vests on the third anniversary; 10% vests on the fourth anniversary; and 5%
vests on the fifth anniversary. The restricted stock grant is also subject to
certain other terms set forth in a restricted stock agreement between the chair
and the Company. In addition, the chair is reimbursed by the Company for the
reasonable costs of maintaining an office and for any income tax obligations
resulting from reimbursement of office-maintenance costs or of tax obligations.
The chair of the Company's Board of Directors currently receives no other cash
or equity-based compensation for service as a director, including service on
committees of the Board of Directors.
Compensation Committee Interlocks and Insider Participation
During 2003, the members of the Company's Compensation Committee were
Messrs. Halpin, Handel and Ganis. None of those individuals was an officer or
employee of the Company, or of any of its subsidiaries, during 2003 or formerly.
RATIFICATION OF APPOINTMENT OF INDEPENDENT ACCOUNTANTS
The Audit Committee has appointed Ernst & Young LLP as the Company's
independent accountants for the fiscal year ending December 31, 2004, and has
directed that the appointment of the independent accountants be submitted for
ratification by the stockholders at the Annual Meeting. Ernst & Young LLP has
audited the consolidated financial statements of the Company since its
formation. Representatives of Ernst & Young LLP are expected to be present at
the Annual Meeting, where they will have the opportunity to make a statement if
they desire to do so and will be available to respond to appropriate questions.
14
The ratification of the appointment of Ernst & Young LLP as the
Company's independent accountants for the fiscal year ending December 31, 2004
will require the affirmative vote of the holders of a majority in voting power
of the outstanding shares of Common Stock present in person or represented by
proxy at the Annual Meeting and, in each case, entitled to vote. In determining
whether the proposal has received the requisite number of affirmative votes,
abstentions will be counted and will have the same effect as a vote against the
proposal. Broker non-votes will be disregarded and will have no effect on the
outcome of the vote.
Stockholder ratification of the appointment of Ernst & Young LLP as the
Company's independent accountants is not required by the Certificate of
Incorporation or By-Laws or otherwise. The Audit Committee is submitting the
appointment of Ernst & Young LLP to stockholders for ratification as a matter of
what it considers to be good corporate practice. If the stockholders fail to
ratify the appointment, the Audit Committee will reconsider whether or not to
retain Ernst & Young LLP. Even if the appointment is ratified, the Audit
Committee in its discretion may direct the appointment of a different
independent accounting firm at any time during the year if the Audit Committee
determines that such a change would be in the interests of the Company and its
stockholders. The Audit Committee and the Board of Directors each unanimously
recommend that stockholders vote FOR the ratification of the appointment of
Ernst & Young LLP as the Company's independent accountants for 2004.
During 2002 and 2003, Ernst & Young LLP provided various audit and other
services to the Company as described below. All of the services described below
were approved by the Audit Committee pursuant to its charter and its policy
regarding pre-approval of audit and non-audit services.
Audit Fees
As of March 30, 2004, the aggregate fees billed by Ernst & Young LLP for
professional services rendered for the audit of the Company's annual financial
statements and the review of financial statements included in the Company's
Quarterly Reports on Form 10-Q for the fiscal years ended December 31, 2002 and
2003 were approximately $445,000 and $420,000, respectively. Audit fees for the
fiscal year ended December 31, 2002 include fees for performing the audit of
Spider-Man Merchandising LP, a joint venture between the Company and an
affiliate of Sony Pictures Entertainment Inc., whose audited financial
statements for its fiscal year ended March 31, 2003 were required to be included
in the Company's annual financial statements for the Company's fiscal year ended
December 31, 2002.
Audit-Related Fees
As of March 30, 2004, the aggregate fees billed by Ernst & Young LLP for
assurance and related services that were reasonably related to the performance
of the audit or review of the Company's financial statements and are not
reported in "Audit Fees," above, for the fiscal years ended December 31, 2002
and 2003, were approximately $90,000 and $37,000, respectively. These
audit-related services were in connection with the following: the review of
certain significant license agreements; the review of certain proposed grants of
stock options and restricted stock under the Company's 1998 Stock Incentive
Plan; the Sarbanes-Oxley Act of 2002; the warrants issued to Mr. Perlmutter in
January 2002 in connection with the Company's establishment of a credit facility
in 2001 (see "Certain Relationships and Related Transactions -- Guaranty,
Warrant Agreement, Registration Rights Agreement, Notes Purchase Agreement,"
below); and the 2002 exchange offer in which the Company offered to exchange any
or all of its outstanding shares of 8% cumulative convertible exchangeable
preferred stock ("8% Preferred Stock") for newly issued shares of Common Stock
at an exchange rate of 1.39 common shares per preferred share.
15
Tax Fees
As of March 30, 2004, the aggregate fees billed by Ernst & Young LLP for
tax compliance, tax advice and tax planning for the fiscal years ended December
31, 2002 and 2003 were approximately $105,000 and $214,000, respectively. These
tax fees were for tax-return review and for miscellaneous consulting.
All Other Fees
For all other products and services performed for the Company for the
fiscal years ended December 31, 2002 and 2003, Ernst & Young LLP has billed an
aggregate of approximately $16,000 and $44,000, respectively. These other
services were in connection with an acquisition the Company considered in 2003
and with registration statements under the Securities Act of 1933 which the
Company filed in 2002 with the Securities and Exchange Commission in connection
with (i) the issuance of warrants to HSBC Securities (USA), Inc. in connection
with a credit facility established by the Company in 2001; (ii) the issuance of
warrants to Mr. Perlmutter in connection with the aforementioned credit facility
(see "Certain Relationships and Related Transactions -- Guaranty, Warrant
Agreement, Registration Rights Agreement, Notes Purchase Agreement," below); and
(iii) an increase in the number of shares covered by the Company's stock
incentive plan.
The Audit Committee has considered whether the services described above
are compatible with maintaining the independent accountant's independence and
has determined that such services are compatible with maintaining the
independence of Ernst & Young LLP.
Pre-Approval of Audit and Non-Audit Services
The Audit Committee is ultimately responsible for pre-approving audit
and non-audit services provided by Ernst & Young LLP including the compensation
to be paid for such services. In carrying out this function, the Audit Committee
has delegated its authority to pre-approve audit and non-audit services to its
Chair who reports any such pre-approvals to the Audit Committee at its next
meeting. The Audit Committee has established a policy regarding pre-approval of
audit and non-audit services (the "Policy"). As a general matter, the Policy is
that all audit and non-audit services are separately pre-approved by the Chair.
In accordance with the Policy, the Audit Committee does not engage Ernst & Young
LLP to perform the specific non-audit services which are precluded by law or
regulation or any services which would impair Ernst & Young LLP's independence.
Under certain circumstances permitted by law, the Policy permits the Audit
Committee or its Chair to waive the pre-approval requirement. During the
Company's fiscal year ending December 31, 2003, all audit and non-audit services
provided by Ernst & Young LLP were pre-approved pursuant to the Policy and no
waivers of pre-approval were granted.
16
EXECUTIVE OFFICERS
The following sets forth the positions held with the Company, age as of
March 30, 2004, and selected biographical information for the executive officers
of the Company other than Messrs. Arad and Perlmutter, whose information is set
forth under "Election of Directors," above.
Allen S. Lipson (61) has been the Company's President and Chief
Executive Officer since January 1, 2003. From January 1, 2003 through February
23, 2004, Mr. Lipson also served as the Company's General Counsel. From November
1999 to December 2002, Mr. Lipson was Executive Vice President, Business and
Legal Affairs and Secretary of the Company. From May 1996 until November 1999,
Mr. Lipson was Vice President, Administration, General Counsel and Secretary of
Remington Products Company L.L.C.
Alan Fine (53) served as a director of the Company from June 1997 until
October 1998. Mr. Fine has been President and Chief Executive Officer of the
Company's Toy Biz division since August 2001 and served in that capacity from
October 1998 to April 2001. From April 2001 until August 2001, Mr. Fine was an
independent consultant. Previously, he served as Chief Operating Officer of the
Company, a position to which he was appointed in September 1996.
Gui Karyo (31) has been President, Publishing since November 2003 and
Chief Information Officer since joining Marvel in August 2000 as a Senior Vice
President. Mr. Karyo was promoted to Executive Vice President in January 2002.
From January 1999 to February 2000, Mr. Karyo was the Chief Operating Officer of
Lyrrus, Inc., a technology company for interactive educational music products.
Bruno Maglione (41) has served as President, International since
December 2003. From January 1999 to December 2003, Mr. Maglione was Managing
Director and Senior Vice President of Universal Studios Consumer Products
Europe, Middle East and Africa. During his tenure at Universal, Mr. Maglione was
responsible for all of the operations related to the licensing of Universal's
movie, television, animation and video production for both current production
slates and the Studio's library.
David Maisel (41) has been President and Chief Operating Officer of
Marvel Studios since January 2004. From October 2001 to November 2003, Mr.
Maisel headed Corporate Strategy and Business Development for Endeavor Agency, a
Hollywood literary and talent agency. From September 1999 to September 2001,
Mr. Maisel served as Managing Director of Chello Broadband in Europe. From June
1998 to June 1999, Mr. Maisel served as President of Livent, Inc., a live
theatrical production company. Livent, Inc. filed for protection under chapter
11 of the United States Bankruptcy Code in October 1998.
Timothy Rothwell (45) has been President, Worldwide Consumer Media Group
since September 2003. From October 1996 to August 2003, Mr. Rothwell was Senior
Vice President at Universal Studios Consumer Products Group. During his tenure
at Universal, Rothwell managed the Studio's merchandising, licensing, marketing,
creative and retail development initiatives in all product categories for North
America, South America and Australia.
John Turitzin (48) has been Executive Vice President and General Counsel
of the Company since February 24, 2004. From June 2000 until February 2004, Mr.
Turitzin was a partner in the law firm of Paul, Hastings, Janofsky & Walker LLP.
For more than five years prior to June 2000, Mr. Turitzin was a partner in the
law firm of Battle Fowler LLP, which combined with Paul, Hastings, Janofsky &
Walker in June 2000.
17
Kenneth P. West (45) has been Executive Vice President and Chief
Financial Officer of the Company since June 2002. He served as the Chief
Operating Officer and Chief Financial Officer of McIntyre Associates, Inc., a
personnel staffing company, from October 2000 to May 2002. From January 1996
until September 2000, Mr. West was the Chief Financial Officer of Colin Service
Systems, Inc., a facility maintenance service company.
18
EXECUTIVE COMPENSATION
The following table sets forth information concerning the compensation
for services rendered in all capacities to the Company and its subsidiaries
earned by or paid to (i) the chief executive officer of the Company during 2003
(the "CEO"), (ii) the Company's four most highly compensated executive officers,
other than the CEO, who were serving as executive officers of the Company on
December 31, 2003, and (iii) two additional individuals who would have been
included under clause (ii) of this sentence but for the fact that they were not
serving as an executive officer of the Company on December 31, 2003. The
officers referred to in the preceding sentence are collectively referred to in
this proxy statement as the "Named Executive Officers."
Summary Compensation Table
Annual Compensation Long-Term Compensation
-------------------------------------- ----------------------
Other Restricted Securities
Name and Annual Stock Underlying
Principal Salary Bonus Compensation Awards Options
Position Year ($) ($) (1) ($) (2) ($) (3) (#)
---- ------- ------- ------------ ---------- ----------
Allen S. Lipson 2003 500,000 312,500 51,600(5) 1,190,000 60,000
President and Chief 2002 408,846 250,000 51,600(5) -- 140,000
Executive Officer (4) 2001 321,923 -- 116,069(5) -- 170,000
Avi Arad 2003 375,000 250,000 -- -- 358,500
Chief Creative Officer of 2002 375,000 187,500 75,000 -- 641,500
the Company and Chairman 2001 375,000 -- 75,000 -- 100,000
and Chief Executive Officer
of the Company's Marvel
Studios Division
Alan Fine 2003 450,000 723,000 -- 119,000 --
President and Chief 2002 450,000 669,926 63,195(6) -- --
Executive Officer 2001 500,192 -- 57,215(6) -- 15,000
of the Company's Toy Biz
Division
William Jemas, Jr. (7) 2003 500,000 200,000 -- -- --
Chief Operating Officer 2002 400,000 550,000 -- -- 100,000
of the Company and 2001 325,000 -- -- -- 145,000
President of Publishing,
Consumer Products and
New Media
Timothy Rothwell (8) 2003 122,904 276,375 -- 123,968 162,500
President, Worldwide 2002 -- -- -- -- --
Consumer Media Group 2001 -- -- -- -- --
Richard E. Ungar (9) 2003 348,077 177,083 -- -- --
President of Marvel 2002 451,923 212,500 -- -- --
Characters Group 2001 418,269 -- -- -- 50,000
Kenneth West (10) 2003 300,000 150,000 -- -- --
Executive Vice President 2002 133,269 112,500 -- -- 170,000
& Chief Financial 2001 -- -- -- -- --
Officer
(1) Bonus amounts shown for each year are those accrued for that year, even
if paid after the end of the year.
(2) Includes the value of perquisites and other personal benefits,
securities or property unless the aggregate amount of such compensation
is less than the lesser of $50,000 or 10% of the total of annual salary
and bonus reported for the Named Executive Officer.
(3) All restricted stock awards were approved by the Board of Directors and
were granted in accordance with the Company's 1998 Stock Incentive Plan.
The amounts shown were calculated by multiplying the closing market
price of the Company's common stock on the date of grant by the number
of shares granted. At December 31, 2003, the number and value of the
aggregate restricted stock holdings of the Named Executive Officers were
as follows:
19
Number of
Name Shares Held Value ($)
--------------- --------------- -------------------
Allen S. Lipson ............. 40,000 $1,164,400
Alan Fine ................... 4,000 116,440
Timothy Rothwell ............ 4,167 121,301
The restrictions on the shares held by Messrs. Lipson and Fine lapse
only if certain performance goals of the Company are met. In the event
that the goals are met, the restrictions lapse in the same manner as in
the case of the shares held by Mr. Rothwell. The restrictions on the
shares held by Mr. Rothwell lapse on the third anniversary of the
November 6, 2003 grant except that they may vest earlier (but no earlier
than the second anniversary of the grant) if certain performance goals
are achieved. Holders of restricted shares are entitled to receive any
cash dividends paid on such shares. Stock dividends are restricted in
the same manner as the underlying shares.
(4) Mr. Lipson became President and Chief Executive Officer of the Company
on January 1, 2003. Prior to such date, he served as Executive Vice
President, Business and Legal Affairs of the Company.
(5) Amounts shown for 2002 and 2003 include $37,200 for an apartment
provided by the Company and $14,400 in car allowance. Amounts shown for
2001 include $100,417 for an apartment and taxes associated therewith
provided by the Company, $14,400 in car allowance and $1,252 in Company
matching contributions to the Company's 401(k) Plan.
(6) Amounts shown for 2002 include $51,195 for an apartment and furniture
provided by the Company and $12,000 in car allowance. Amounts shown for
2001 include $47,060 for an apartment and taxes associated therewith
provided by the Company, $8,500 in car allowance and $1,655 in Company
matching contributions to the Company's 401(k) Plan.
(7) Mr. Jemas resigned as an officer of the Company in October 2003.
(8) Mr. Rothwell's employment by the Company began in September 2003.
(9) Mr. Ungar's employment by the Company terminated in October 2003.
Amounts shown include payments to a personal service company owned by
Mr. Ungar.
(10) Mr. West's employment by the Company began in June 2002.
Option Grants Table
The following table shows the Company's grants of stock options to the
Named Executive Officers in 2003. Each stock option grant was made under the
Company's 1998 Stock Incentive Plan. No SARs (stock appreciation rights) were
granted by the Company in 2003.
Number of
Shares of Potential Realizable
Common Percent of Value at Assumed Annual
Stock Total Rates of Stock Price
Underlying Options Appreciation for Option
Options Granted to Exercise Terms
Granted in Employees Price per Expiration -------------------------
Name 2003 in 2003 share Date 5% 10%
- ------------ ---------- ---------- --------- ---------- ------------ ----------
Timothy Rothwell (1) .............. 150,000 9.7% $ 17.36 7/25/13 $ 1,637,656 $4,150,099
Timothy Rothwell (2) .............. 12,500 0.8% 29.75 11/5/08 102,749 227,030
Allen S. Lipson (2) ............... 60,000 3.9% 29.75 11/5/08 493,196 1,089,743
Avi Arad (3) ...................... 358,500 23.2% 10.80 1/13/13 2,434,975 6,170,643
- -----------------
(1) Options become exercisable in three installments: one-third on July 25,
2004, one-third on July 25, 2005 and one-third on July 25, 2006.
(2) Options are exercisable immediately, but the shares underlying the options
cannot be sold until the following dates: with respect to one-third of the
shares, November 6, 2004, with respect to one-third of the shares, November
6, 2005, and with respect to one-third of the shares, November 6, 2006.
(3) Options become exercisable in three installments: one-third on January 13,
2004, one-third on January 13, 2005 and one-third on January 13, 2006.
20
Aggregated Option Exercises and Year-End 2003 Option Value Table
The following table shows the number and value of exercisable and
unexercisable stock options held by the Named Executive Officers at December 31,
2003.
Value of
Number of Shares of --------------------------
Common Stock Underlying Unexercised
Shares Acquired Value Realized Unexercised Options at In-the-Money Options at
Name on Exercise (#) ($) Year-End (#) (1) Year-End ($)
- ------------------------ ----------------- ---------------- -------------------------- --------------------------
Exercisable Unexercisable Exercisable Unexercisable
----------- ------------- ----------- -------------
Allen S. Lipson......... 106,200 $ 1,874,500 345,467 93,333 $6,677,982 $2,716,924
Alan Fine............... 150,000 2,031,340 365,000 -- 8,393,900 --
Avi Arad................ -- -- 1,313,833 786,167 30,095,865 22,885,321
Timothy Rothwell........ -- -- 12,500 150,000 -- 4,366,500
Kenneth P. West......... 50,000 819,535 6,667 113,333 138,740 2,740,124
William Jemas, Jr....... 353,333 6,214,706 -- 66,667 -- 1,557,341
Richard E. Ungar........ 190,000 2,823,080 -- -- -- --
- ----------------
(1) Represents shares of Common Stock underlying stock options. None of the
Named Executive Officers holds SARs.
Employment Agreements
The Company has entered into employment agreements with each of the
Named Executive Officers. Those agreements are described below.
Employment Agreement with Mr. Lipson. Pursuant to his amended employment
agreement, Mr. Lipson (the Company's executive vice president, business and
legal affairs during 2002) has agreed, effective January 1, 2003, to render his
exclusive and full-time services to the Company as the Company's President and
Chief Executive Officer for a term of employment expiring on January 1, 2005.
Under his amended employment agreement, Mr. Lipson receives a base salary of no
less than $500,000. Mr. Lipson is eligible to earn an annual bonus equal to 50%
of his base salary, subject to the attainment of certain performance goals. Mr.
Lipson also receives a $1,200 monthly automobile allowance and is entitled to
participate in employee benefit plans generally available to the Company's
employees. The Company reimburses Mr. Lipson for the rent of a suitable
apartment in Manhattan, monthly parking garage fees and other related utility
charges. Mr. Lipson's agreement provides that, in the event that he retires
after December 31, 2003 and before the completion of his term of employment, he
shall render his part-time services to the Company, for a two-year term, as
special advisor to the Company's chief executive officer. In such event, the
agreement provides that Mr. Lipson would receive a salary of $200,000 per year.
Employment and License Agreements with Mr. Arad. Pursuant to an
amendment to his employment agreement dated as of December 9, 2002, Mr. Arad has
agreed to render his exclusive and full-time services to the Company for a term
of employment expiring on December 31, 2004. Under his employment agreement, as
amended, Mr. Arad receives a base salary, subject to discretionary increases, of
no less than $375,000 and an annual bonus in the amount of $250,000, subject to
the attainment of certain performance goals. With respect to each media project
for which Mr. Arad performs significant services, Avi Arad Productions LLC, a
company wholly owned by Mr. Arad, is entitled to certain customary executive
producer and/or producer fees including $350,000 per motion picture project (or,
if greater, 50% of the entire producer fee), $10,000 per episode for animated
network television projects, $7,500 per episode for animated syndicated
television projects and $20,000 per episode for one hour live action television
projects. Mr. Arad is entitled to discretionary bonuses and participation in the
Company's stock incentive plan as determined by the Board of Directors. Mr. Arad
is entitled to participate in employee benefit plans generally available to the
Company's employees. Mr. Arad's employment
21
agreement provides that, in the event of termination other than for cause, Mr.
Arad is entitled to his salary earned through the date of termination and the
greater of the compensation due for the remaining term of the employment
agreement or twelve months. Mr. Arad's employment agreement replaced his
consulting agreement with the Company, under which Mr. Arad also earned $375,000
per year.
In addition, the Company and Avi Arad & Associates ("Arad Associates"),
of which Mr. Arad is the sole proprietor, are parties to a license agreement
which provides that Arad Associates is entitled to receive royalty payments on
net sales of Marvel-character-based toys and on net sales of
non-Marvel-character-based toys of which Mr. Arad is the inventor of record. In
no event, however, may the total royalties payable to Arad Associates during any
calendar year exceed $7,500,000. The Company incurred royalty expense due to Mr.
Arad for toys he invented or designed of approximately $866,000, $684,000 and
$867,000 during the years ended December 31, 2001, 2002 and 2003, respectively.
Employment Agreement with Mr. Fine. Pursuant to his employment
agreement, Mr. Fine has agreed to render his exclusive and full-time services to
the Company for a term of employment expiring on August 12, 2005. Under his
employment agreement, Mr. Fine receives a base salary of no less than $450,000.
Mr. Fine is eligible to earn an annual bonus equal to 50% of his base salary,
subject to the attainment of certain performance goals. Mr. Fine also receives a
$1,000 monthly automobile allowance and is entitled to participate in employee
benefit plans generally available to the Company's employees. The Company
reimburses Mr. Fine for the rent of a suitable apartment in Manhattan, monthly
parking garage fees and other related utility charges up to a maximum of $4,000
per month, until the earlier of the expiration of his employment or the
relocation of his primary residence to the New York City metropolitan area.
Prior to April 2001, Mr. Fine served as the Company's Chief Operating Officer, a
position to which he was appointed in September 1996. From April 2001 until
August 2001, Mr. Fine was an independent consultant, during which time the
Company paid Mr. Fine what had been his monthly salary. The employment agreement
provides for the continued vesting of all options previously granted to Mr. Fine
as if no break in employment service had occurred.
Employment Agreement with Mr. Rothwell. Pursuant to his employment
agreement, Mr. Rothwell has agreed to render his exclusive and full-time
services to the Company for a term of employment expiring on September 3, 2005.
Under his employment agreement, Mr. Rothwell receives a base salary of no less
than $385,000. Mr. Rothwell is eligible to earn an annual bonus equal to 50% of
his base salary, subject to the attainment of certain performance goals. Mr.
Rothwell also receives a $1,100 monthly automobile allowance and is entitled to
participate in employee benefit plans generally available to the Company's
employees.
Employment Agreement with Mr. West. Pursuant to his employment
agreement, Mr. West has agreed to render his exclusive and full-time services to
the Company for a term of employment expiring on May 27, 2005. Under his
employment agreement, Mr. West receives a base salary of no less than $225,000.
Mr. West is eligible to earn an annual bonus equal to 50% of his base salary,
subject to the attainment of certain performance goals. Mr. West also receives a
$1,000 monthly automobile allowance and is entitled to participate in employee
benefit plans generally available to the Company's employees.
Employment Agreement with Mr. Jemas. The Company's employment agreement
with Mr. Jemas terminated in February 2004. Mr. Jemas has served as a part-time
consultant to the Company since that time.
Employment Agreement with Mr. Ungar. The Company's employment agreement
with Mr. Ungar terminated in October 2003.
22
Termination Provisions. The employment agreements of the Named Executive
Officers provide that, in the event of termination, the employee is entitled to
certain payments and benefits depending on the circumstances of the termination.
Upon a change in control of the Company, the employee is entitled to a severance
payment equal to two times the sum of his then-current base salary and the
average of the two most recent annual bonuses paid, and all of the employee's
unvested stock options vest immediately. If any payments to the employee under
his employment agreement ("Parachute Payments") would be subject to the excise
tax imposed by Section 4999 of the Internal Revenue Code, then the employee will
be entitled to receive an additional payment from the Company (a "Gross-Up
Payment") in an amount such that the employee retains, after the payment of all
taxes, an amount of the Gross-Up Payment equal to the excise tax imposed on the
Parachute Payments.
Confidential Information. The employment agreements of the executive
officers prohibit disclosure of proprietary and confidential information
regarding the Company and its business to anyone outside the Company both during
and subsequent to employment and otherwise provide that all inventions made by
the employees during their employment belong to the Company.
23
- --------------------------------------------------------------------------------
REPORT ON EXECUTIVE COMPENSATION
The Compensation Committee met twice in 2003, in addition to actions it
took by unanimous written consent, and made all compensation decisions for the
Company's executive officers. The Company's executive compensation during 2003
was comprised of three elements: annual base salary, annual bonus compensation
and long-term incentive compensation. The compensation paid to the Company's
executive officers was designed to be competitive with the compensation paid to
executive officers of similarly situated public companies. In making executive
compensation decisions, the Compensation Committee in general considered the
level of responsibility, knowledge and experience required and undertook to
structure compensation packages so as to attract, motivate and retain executives
of the highest caliber who will contribute to the long-term performance and
success of the Company. The Compensation Committee believes that the salaries
paid to the Named Executive Officers in 2003 were commensurate with prevailing
salaries for similar positions in the entertainment and licensing industries and
served the Company's goal of retaining its experienced executive officers.
The Compensation Committee has established an annual incentive program
("AIP") pursuant to which cash bonuses for all of the Company's employees,
including executive officers, are awarded based on achievement of certain
quantitative and qualitative criteria, some of which relate to the Company's
performance and others of which relate to the performance of the individual
employee. The Company's performance criteria are selected by the Compensation
Committee. Awards to executive officers are based on achievement of Company and
individual performance criteria.
The Company's performance criterion selected by the Compensation
Committee under the AIP for 2003 was earnings before income taxes, depreciation
and amortization ("EBITDA"). For this criterion, the Compensation Committee
approved the establishment of "minimum" and "target" award levels. The
Compensation Committee approved the making of awards under the AIP for 2003
performance on the basis of the Company's EBITDA having been in excess of the
"target" award level.
With respect to the compensation of Mr. Lipson, who became the Company's
President and Chief Executive Officer on January 1, 2003, his 2003 base salary
was set at $500,000, and he received a cash bonus with respect to 2003 in the
amount of $312,500.
Under Section 162(m) of the Internal Revenue Code of 1986, as amended,
and regulations thereunder, no federal income tax deduction by a publicly held
company is allowed for certain types of compensation paid to certain highly
compensated employees to the extent that the amount of such compensation for a
taxable year for any such individual exceeds $1 million.
The limitations of Section 162(m) did not affect the deductibility of
compensation paid by the Company to any of its employees during 2003. The
Compensation Committee believes that while tax deductibility is an important
factor, it is not the sole factor to be considered in setting executive
compensation policy. Nevertheless, the Compensation Committee intends to
continue to evaluate the Company's compensation programs in light of the Section
162(m) requirements.
Compensation Committee
James F. Halpin Morton E. Handel Sid Ganis
- --------------------------------------------------------------------------------
24
PERFORMANCE GRAPH
The following graph compares the Company's cumulative total stockholder
return on shares of Common Stock with that of (i) the Standard & Poor's Midcap
400 Index (the "S&P Midcap 400 Index"), (ii) a composite peer group index
comprised of publicly traded companies, weighted by equity capitalization,
selected by the Company for inclusion in the Company's proxy statement for its
2003 annual meeting of stockholders (the "Old Peer Group Index") and (iii) the
Media index published by MGFS, Inc. (the "Media Index"). The Company has
selected the Media Index, in place of the Old Peer Group Index, as being more
reflective of the Company's business and as providing a broader and more
diversified comparison group. The companies in the Old Peer Group Index, which
were selected in 2003 as comparable companies in the licensing business, are The
Walt Disney Company, Martha Stewart Living Omnimedia, Inc., Viacom Inc. and
World Wrestling Entertainment, Inc. The Media Index currently includes the
stocks of most of the companies in the Old Peer Group Index, along with more
than 200 other publicly traded stocks.
The comparison, in which each year's dollar amount is as of December 31
of that year, assumes that, on January 1, 1999, $100 was invested in shares of
Common Stock and in the stocks included in the S&P Midcap 400 Index, the Old
Peer Group Index and the Media (or "MG Group") Index, and that all dividends
were reinvested. These indexes, which reflect formulas for dividend reinvestment
and weighting of individual stocks, do not necessarily reflect returns that
could be achieved by individual investors.
[GRAPHIC OMITTED]
Value of $100
invested over period represented:
Marvel Enterprises, Inc. Common Stock $480.06
S&P Midcap 400 Index $155.34
Old Peer Group $ 83.68
MGFS, Inc. Media ("MG Group") Index $ 87.62
25
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth certain information regarding the
beneficial ownership of Common Stock on March 24, 2004 (based on 72,639,927
(pre-split) shares of Common Stock outstanding on that date), by (i) each person
known by the Company to be the beneficial owner of 5% or more of the outstanding
Common Stock (based, in part, upon copies of all Schedules 13D and 13G filed
with the SEC); (ii) each of the Company's directors; (iii) each of the Named
Executive Officers (as defined in "Executive Compensation," above); and (iv) all
of the Company's executive officers and directors as a group. The number of
shares of Common Stock listed in the table and the accompanying footnotes below
are pre-split.
Shares
Five Percent Stockholders, Directors Beneficially Percentage
and Executive Officers Owned Owned
------------------------------------ ----- -----
Avi Arad (1)..................................... 3,581,353 4.83%
F. Peter Cuneo (2)............................... 1,130,000 1.54%
Alan Fine (3).................................... 369,000 *
Sid Ganis (4) ................................... 68,000 *
James F. Halpin (5).............................. 97,500 *
Morton E. Handel (6)............................. 126,000 *
William Jemas, Jr................................ 0 *
Timothy Rothwell (7)............................. 16,667 *
Allen S. Lipson (8) ............................. 415,466 *
Isaac Perlmutter (9)............................. 21,692,941 28.32%
Richard L. Solar (10)............................ 50,000 *
Richard E. Ungar................................. 0 *
Kenneth West (11) ............................... 6,667 *
All current executive officers and directors
as a group (15 persons) ....................... 27,717,552 34.73%
- ---------
* Less than 1%.
(1) Figures include 1,433,333 shares of Common Stock in respect of stock
options granted pursuant to the 1998 Stock Incentive Plan that are
immediately exercisable.
(2) Figures include 760,000 shares of Common Stock in respect of stock
options granted pursuant to the 1998 Stock Incentive Plan that are
immediately exercisable.
(3) Figures include 365,000 shares of Common Stock in respect of stock
options granted pursuant to the 1998 Stock Incentive Plan that are
immediately exercisable.
(4) Figures include 68,000 shares of Common Stock in respect of stock
options granted pursuant to the 1998 Stock Incentive Plan that are
immediately exercisable.
(5) Figures include 75,000 shares of Common Stock in respect of stock
options granted pursuant to the 1998 Stock Incentive Plan that are
immediately exercisable.
(6) Figures include 25,000 shares of Common Stock in respect of stock
options granted pursuant to the 1998 Stock Incentive Plan that are
immediately exercisable.
26
(7) Figures include 12,500 shares of Common Stock in respect of stock
options granted pursuant to the 1998 Stock Incentive Plan that are
immediately exercisable.
(8) Figures include 375,466 shares of Common Stock in respect of stock
options granted pursuant to the 1998 Stock Incentive Plan that are
immediately exercisable or are scheduled to become exercisable within 60
days after March 24, 2004.
(9) Mr. Perlmutter may be deemed to possess the sole power to vote and
dispose of an aggregate amount of 21,692,941 shares of Common Stock. Mr.
Perlmutter owns directly (i) 2,024,017 currently outstanding shares of
Common Stock and (ii) options, granted pursuant to the 1998 Stock
Incentive Plan, that are immediately exercisable for 3,950,000 shares of
Common Stock.
The sole stockholder of Zib Inc., a Delaware corporation, is Isaac
Perlmutter Trust 01/28/1993, a Florida revocable trust (the "Perlmutter
Trust"). Mr. Perlmutter is a trustee and the sole beneficiary of the
Perlmutter Trust, and is also president of Zib, Inc. Mr. Perlmutter is
the sole stockholder and president of Object Trading Corp., a Delaware
corporation. Mr. Perlmutter may be deemed to possess the power to vote
and dispose of the shares of Common Stock directly held by Zib Inc.,
Object Trading Corp., and the Perlmutter Trust.
As the sole stockholder of Object Trading Corp., Mr. Perlmutter
beneficially owns 9,748,453 shares of Common Stock directly owned by
this entity. Finally, because the Perlmutter Trust is the sole
stockholder of Zib, Inc., which directly owns 5,129,763 shares of Common
Stock, and because Mr. Perlmutter is a trustee and the sole beneficiary
of the Perlmutter Trust, which directly owns 840,708 shares of Common
Stock, he may be deemed to beneficially own the combined amount of
5,970,471 shares of Common Stock directly owned by these two entities.
Object Trading Corp. may be deemed to possess the power to vote and
dispose of 9,748,453 shares of Common Stock. The Perlmutter Trust may be
deemed to possess the power to vote and dispose of an aggregate amount
of 5,970,471 shares of Common Stock. Zib, Inc. may be deemed to possess
the power to vote and dispose of 5,129,763 shares of Common Stock.
(10) Figures include 50,000 shares of Common Stock in respect of stock
options granted pursuant to the 1998 Stock Incentive Plan that are
immediately exercisable.
(11) Figures include 6,667 shares of Common Stock in respect of stock options
granted pursuant to the 1998 Stock Incentive Plan that are immediately
exercisable.
27
The following table sets forth the securities authorized for issuance
under the Company's equity compensation plan.
Equity Compensation Plan Information as of December 31, 2003
Number of Weighted Number of
securities to average securities
be issued upon exercise price remaining
exercise of of outstanding available for
outstanding options, warrants future
options, and rights issuance under
warrants and equity
rights compensation plans
(excluding
securities
reflected in
column (a))
Plan Category (a) (b) (c)
Equity compensation plans
approved by security holders 9,750,276 $ 7.56 2,720,683
Equity compensation plans not
approved by security holders -- -- --
Total 9,750,276 $ 7.56 2,720,683
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
Employment of Ari Arad
Ari Arad, the son of Avi Arad (a director of the Company and a Named
Executive Officer), is employed by the Company on a full-time basis as Vice
President, Production, and receives an annual base salary of $125,000.
Registration Rights Agreements
The Company is a party to registration rights agreements (one dated as
of October 1, 1998, and the other dated as of December 8, 1998) with Mr. Arad,
Mr. Perlmutter, certain affiliates of Mr. Perlmutter, certain affiliates of an
individual who was a director of the Company during 2002 but is no longer a
director of the Company, and certain other parties (the "Registration Rights
Agreements"). Under the terms of each of the Registration Rights Agreements, the
Company agreed to file a shelf registration statement under the Securities Act
of 1933, as amended, registering the resale of all shares of Common Stock and 8%
Preferred Stock issued to the stockholder parties thereto pursuant to the plan
of reorganization pursuant to which the Company acquired Marvel Entertainment
Group, Inc. on October 1, 1998, all shares of Common Stock issuable upon
conversion of those shares of 8% Preferred Stock, certain convertible debt
securities that the Company was entitled to exchange for the 8% Preferred Stock
and the Common Stock issuable upon conversion thereof and all shares of Common
Stock otherwise owned by the stockholder parties to the respective Registration
Rights Agreement as of the date thereof. The Registration Rights Agreements also
give the stockholder parties thereto piggyback registration rights with respect
to underwritten public offerings by the Company of its equity securities. Mr.
Perlmutter also received registration rights in 2001 with respect to stock
underlying certain warrants; see "Guaranty, Warrant Agreement, Registration
Rights Agreement, Notes Purchase Agreement," below in this section.
28
Tangible Media Advertising Services
Tangible Media, a corporation which is wholly owned by Mr. Perlmutter,
acts as the Company's media consultant in placing certain of the Company's
advertising and receives certain fees and commissions based on the cost of the
placement of such advertising. In conjunction with the actual placement of the
advertising, Tangible Media also provides the Company with the planned research,
advertising plans, competitive spending analysis and services related to the
delivery of commercials and instructions to broadcast outlets at no additional
cost to the Company. Tangible Media received payments of fees and commissions
from the Company totaling approximately $159,000, $102,000 and $157,000 in 2001,
2002 and 2003, respectively.
Employee, Office Space and Overhead Cost Sharing Arrangements
The Company and Tangible Media share certain space at the Company's
principal executive offices and related overhead expenses. Since 1994, Tangible
Media and the Company have been parties to an employee, office space and
overhead cost sharing agreement (the "Cost Sharing Agreement"). Under the Cost
Sharing Agreement, any party thereto may through its employees provide services
to another party, upon request, whereupon the party receiving services shall be
obligated to reimburse the providing party for the cost of such employees'
salaries and benefits accrued for the time devoted by such employees to
providing services. Under the Cost Sharing Agreement, Tangible Media is
obligated to reimburse the Company for rent paid under the sublease for the
space, any related overhead expenses comprised of commercial rent tax, repair
and maintenance costs and telephone and facsimile services, in proportion to its
percentage occupancy. The Cost Sharing Agreement is coterminous with the term of
the Company's sublease for its executive offices. Under this Agreement, Tangible
Media paid approximately $133,000, $95,000 and $96,000 to the Company in 2001,
2002 and 2003, respectively.
Guaranty, Warrant Agreement, Registration Rights Agreement, Notes
Purchase Agreement
In connection with the Company's establishment of an $80 million senior
credit facility with HSBC (the "Credit Facility") on November 30, 2001, Mr.
Perlmutter agreed to guaranty the payment of the Company's obligations under the
Credit Facility in an amount equal to 25% of all principal obligations relating
to the Credit Facility plus an amount, not to exceed $10 million, equal to the
difference between (i) the amount of cash in a reserve account required to be
maintained by the Company as security for the Credit Facility, and (ii) the
actual amount on deposit in such cash reserve account at the end of each fiscal
quarter; provided that the aggregate amount guarantied by Mr. Perlmutter will
not exceed $30 million (the "Credit Guaranty").
In consideration of the Credit Guaranty and Mr. Perlmutter's guaranty up
to a maximum of $4,365,000 of the Company's obligations under its lease for its
executive offices (the "Office Guaranty"), the Company and Mr. Perlmutter
entered into (i) a warrant agreement (the "Warrant Agreement"), pursuant to
which the Company granted Mr. Perlmutter warrants to purchase up to a maximum of
five million shares of Common Stock on or before November 30, 2006, at an
initial exercise price per share equal to $3.11 (the "Warrants"), subject to
stockholder approval, and (ii) a registration rights agreement, pursuant to
which the Company gave Mr. Perlmutter certain registration rights with respect
to the shares of Common Stock issuable to him under the Warrant Agreement. The
Company also agreed to purchase a total of approximately $43 million in
principal amount of the Company's Senior Notes (the "Notes") at an average price
of 53% of the face amount of the Notes held by Mr. Perlmutter pursuant to a
Notes Purchase Agreement dated as of November 30, 2001. Mr. Perlmutter had
purchased those Notes with personal funds. In December 2001, the Company
purchased the Notes from Mr. Perlmutter and in January 2002, the Company's
stockholders approved the issuance of the Warrants to Mr. Perlmutter. Pursuant
to
29
the terms of the Warrant Agreement, the Warrants were ultimately exercisable
with respect to 4,603,309 shares of Common Stock. All of the Warrants were
exercised during 2003.
Employment Agreement
On November 30, 2001, the Company entered into an employment agreement
with Mr. Perlmutter pursuant to which Mr. Perlmutter is to be employed for a
six-year term as the Company's Vice Chairman of the Board of Directors. Pursuant
to the terms of the employment agreement, Mr. Perlmutter received, subject to
stockholder approval, options to purchase 3,950,000 shares of Common Stock at an
exercise price per share equal to $3.62 pursuant to a nonqualified stock option
agreement under the Company's 1998 Stock Incentive Plan. In January 2002, the
Company's stockholders approved the issuance of the options to Mr. Perlmutter.
The options are immediately exercisable, but the shares of Common Stock issuable
on exercise of the options are non-transferable and subject to repurchase by the
Company at the exercise price paid by Mr. Perlmutter. These restrictions lapse
in one-third increments on the fourth, fifth and sixth anniversaries of the
grant date. As compensation for his services, Mr. Perlmutter is entitled to a
salary of $1 per year, fringe benefits generally offered to the Company's
executive officers, and the possibility of an annual bonus at the discretion of
the Company.
Loan Out Agreement
The Company and Brentwood Television Funnies, Inc. ("Brentwood"), a
company wholly owned by Richard Ungar, a former executive officer of the
Company, were parties to a Loan Out Agreement under which Brentwood agreed to
provide the services of Mr. Ungar as Executive Producer on all television
programs involving Marvel characters for a term that expired on October 25,
2003. Under the agreement, Brentwood received a producer fee of $175,000 per
year, subject to discretionary increases.
ADDITIONAL INFORMATION
The Company will make available a copy of its Annual Report on Form 10-K
for the fiscal year ended December 31, 2003, filed with the SEC on March 11,
2004, without charge, upon written request to the Secretary, Marvel Enterprises,
Inc., 10 East 40th Street, New York, New York 10016. Each such request must set
forth a good-faith representation that, as of the Record Date, March 24, 2004,
the person making the request was a beneficial owner of shares of Common Stock
entitled to vote at the Annual Meeting.
In order to ensure timely delivery of documents prior to the Annual
Meeting, any request should be received by the Company promptly.
SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Section 16(a) of the Securities Exchange Act of 1934 (the "Exchange
Act") requires the Company's officers and directors, and persons who own more
than 10% of a registered class of the Company's equity securities ("10%
Stockholders"), to file reports of ownership and changes in ownership on Forms
3, 4 and 5 with the SEC and the New York Stock Exchange. Officers, directors and
10% Stockholders are required to furnish the Company with copies of all Forms 3,
4 and 5 they file.
Based solely on the Company's review of the copies of such forms it has
received and written representations from certain reporting persons that they
were not required to file such forms, the Company believes that, except as noted
below, all of its officers, directors and 10% Stockholders complied with all
filing requirements applicable to them with respect to transactions during the
fiscal year ended December 31, 2003.
30
The following information notes all late filings of Forms 3, 4 and 5 by
persons who were directors, officers or 10% Stockholders of the Company in 2003,
late filings in 2002 not previously reported and any late filings in 2004 to
date. Alan Fine, Morton Handel, Gui Karyo and Timothy Rothwell each filed one
late report on Form 4, each such report being filed solely to report a single
transaction in which they were granted options or restricted stock pursuant to
the Company's 1998 Stock Incentive Plan. James Halpin, Lawrence Mittman and
Richard Solar each filed two late reports on Form 4, each such report being
filed solely to report a single transaction in which they were granted options
or restricted stock pursuant to the Company's 1998 Stock Incentive Plan. Sid
Ganis filed three late reports on Form 4 reporting six transactions. Richard
Ungar filed one late report on Form 4 reporting nine transactions. Corrective
filings have been made for each of the above described transactions.
STOCKHOLDER PROPOSALS
The eligibility of stockholders to submit proposals, the proper subjects
of stockholder proposals and other issues governing stockholder proposals are
regulated by the rules adopted under Section 14 of the Exchange Act. Stockholder
proposals submitted pursuant to Rule 14a-8 under the Exchange Act for inclusion
in the Company's proxy materials for the 2005 Annual Meeting of Stockholders
must be received by the Company at its principal executive offices at 10 East
40th Street, New York, New York 10016, no later than December 7, 2004.
Under the By-Laws, and as permitted by the rules of the SEC, certain
procedures are provided which a stockholder must follow to nominate people for
election as directors or to introduce an item of business at the Annual Meeting
of Stockholders. These procedures provide that, in the case of a meeting such as
this Annual Meeting, notice for nominations or stockholder proposals must be
received by the Company not later than the close of business on the 60th day
prior to the first anniversary of the preceding year's annual meeting. The 2003
annual meeting of stockholders was held on May 8, 2003. The persons designated
as proxies by the Company in connection with the 2004 Annual Meeting of
Stockholders will have discretionary voting authority with respect to any
proposal of which the Company did not receive timely notice.
The chairman of the meeting may refuse to allow the transaction of any
business not presented beforehand, or to acknowledge the nomination of any
person not made in compliance with the foregoing procedures.
31
INCORPORATION OF DOCUMENTS BY REFERENCE
This proxy statement incorporates by reference the financial statements,
supplementary financial information, management's discussion and analysis of
financial condition and results of operations and quantitative and qualitative
disclosures about market risk included in the Company's Annual Report on Form
10-K for the fiscal year ended December 31, 2003, as filed with the Commission
on March 11, 2004.
Any statement contained in a document incorporated by reference in this
proxy statement will be deemed to be modified or superseded for purposes of this
proxy statement to the extent that a statement contained in this proxy statement
or in any other subsequently filed document which is also incorporated by
reference in this proxy statement modifies or supersedes such statement. Any
statements so modified or superseded will not be deemed, except as modified or
superseded, to constitute a part of this proxy statement.
OTHER BUSINESS
The Board of Directors is not aware of any matters other than those set
forth in this proxy statement that will be presented for action at the Annual
Meeting. If any matters properly come before the meeting, the persons named as
proxies intend to vote the shares of Common Stock they represent in accordance
with their best judgment.
32
[Proxy Card]
MARVEL ENTERPRISES, INC.
THIS PROXY IS SOLICITED BY THE BOARD OF DIRECTORS
FOR AN ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD ON MAY 5, 2004.
The undersigned, as a holder as of the close of business on March 24, 2004
of common stock, par value $.01 per share ("Common Stock"), of Marvel
Enterprises, Inc., a Delaware corporation (the "Company"), hereby appoints each
of John N. Turitzin and Benjamin Dean, with full power of substitution, to vote
all shares of Common Stock that the undersigned is entitled to vote through the
execution of a proxy with respect to the 2004 Annual Meeting of Stockholders of
the Company (the "Annual Meeting") to be held at 10:00 a.m., local time, on May
5, 2004 at the offices of Paul, Hastings, Janofsky & Walker LLP, 75 East 55th
Street, New York, New York, 10022 or any and all adjournments or postponements
thereof, and authorizes and instructs said proxies to vote in the manner
directed on the reverse side.
Returned proxy cards will be voted (1) as specified on the matters listed
on the reverse side; (2) FOR approval of each of the proposals listed on the
reverse side if no instructions to the contrary are made; and (3) in accordance
with the judgment of the persons named as proxies on any other matters that may
properly come before the Annual Meeting.
(Continued and to be signed on reverse side)
ANNUAL MEETING OF STOCKHOLDERS OF
MARVEL ENTERPRISES, INC.
May 5, 2004
Please detach along perforated line and mail in the envelope provided.
- --------------------------------------------------------------------------------
The Board of Directors recommends that you vote "FOR" all the nominees listed
under Item No. 1 and "FOR" Item No. 2, Item No. 3, and Item No. 4.
PLEASE SIGN, DATE AND RETURN PROMPTLY IN THE ENCLOSED ENVELOPE.
PLEASE MARK YOUR VOTE IN BLUE OR BLACK INK AS SHOWN HERE |X|
- --------------------------------------------------------------------------------
FOR AGAINST ABSTAIN
1. Election of Directors 2. On the proposal to approve and adopt [_] [_] [_]
an amendment and restatement of the
NOMINEES: Company's certificate of incorporation
|_| FOR ALL NOMINEES o Morton E. Handel eliminating certain no-longer
o F. Peter Cuneo applicable provisions, as set forth in
|_| WITHHOLD AUTHORITY o Isaac Perlmutter the proxy statement as "The Charter
FOR ALL NOMINEES Proposal".
|_| FOR ALL EXCEPT 3. On the proposal to approve and adopt [_] [_] [_]
(See instructions below) an amendment of the Company's 1998 Stock
Incentive Plan to increase the number of
shares of Common Stock issuable pursuant
to awards made thereunder and to extend
the term thereof, as set forth in the
proxy statement as "The Stock Incentive
Plan Proposal".
4. On the proposal to ratify the appointment [_] [_] [_]
of Ernst & Young LLP as the Company's
independent accountants for the fiscal
year ending December 31, 2004.
You may revoke this proxy at any time before it is voted by (i) filling in a
INSTRUCTION: To withhold authority to vote revocation with the Secretary of the Company; (ii) submitting a duly executed
for any individual nominee(s), proxy bearing a later date or time than the date or time of the proxy being
mark "FOR ALL EXCEPT" and fill revoked; or (iii) attending the Annual Meeting and voting in person.
in the circle next to each
nominee you wish to withhold, A stockholder's attendance at the Annual Meeting will not by itself revoke a
as shown here: o proxy given by the stockholder.
- ------------------------------------------------
PLEASE MARK, SIGN, DATE AND RETURN THIS PROXY IN THE ENCLOSED POSTAGE-PAID
ENVELOPE TODAY.
- ------------------------------------------------
To change the address on your account,
please check the box at right and indicate |_|
your new address in the address space above.
Please note that changes to the registered
name(s) on the account may not be submitted
via this method.
- -------------------------------------------------
-------------------------- -------- --------------------------- --------
Signature of Stockholder: Date: Signature of Stockholder: Date:
-------------------------- -------- --------------------------- --------
Note: Please sign exactly as your name or names appear on this Proxy. When shares are held jointly, each holder should sign. When
signing as executor, administrator, attorney, trustee or guardian, please give full title as such. If the signer is a
corporation, please sign full corporate name by duly authorized officer, giving full title as such. If signer is a
partnership, please sign in partnership name by authorized person.
Appendix A
RESTATED CERTIFICATE OF INCORPORATION
OF
MARVEL ENTERPRISES, INC.
Marvel Enterprises, 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 Marvel Enterprises, Inc.
The Corporation was originally incorporated under the name "Toy Biz Acquisition,
Inc.," and its original certificate of incorporation was filed with the office
of the Secretary of State of the State of Delaware on March 18, 1993.
2. This Restated Certificate of Incorporation was duly adopted in
accordance with Sections 242 and 245 of the GCL, after an annual meeting of
stockholders called and held upon notice in accordance with Section 222 of the
GCL and after a vote of stockholders thereat.
3. This Restated Certificate of Incorporation restates and
integrates and further amends the certificate of incorporation of the
Corporation, as heretofore amended, supplemented, and/or restated (the
"Certificate of Incorporation").
4. The text of the Certificate of Incorporation is hereby restated
and integrated and further amended to read in its entirety as follows:
ARTICLE I
NAME
The name of the Corporation is Marvel Enterprises, Inc. (the
"Corporation").
ARTICLE II
REGISTERED OFFICE
The address of the registered office of the Corporation in the State
of Delaware is 1013 Centre Road, in the City of Wilmington, County of New
Castle, and the name of the registered agent of the Corporation at such address
is The Prentice-Hall Corporation System, Inc.
ARTICLE III
PURPOSES
The nature of the business or purposes of the Corporation is to
engage in any lawful act or activity for which corporations may be organized
under the GCL.
ARTICLE IV
CAPITAL STRUCTURE
4.1 Authorized Capital Stock. The total number of shares of capital
stock which the Corporation shall have authority to issue is 350,000,000 shares,
consisting of two classes of capital stock:
(a) 250,000,000 shares of common stock, par value $.01 per share
(the "Common Stock"); and
(b) 100,000,000 shares of preferred stock, par value $.01 per
share (the "Preferred Stock").
4.2 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.
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
-2-
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.
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
-3-
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 Class A Junior Participating Preferred Stock; Designation and
Amount. The shares of such series shall be designated as Class A Junior
Participating Preferred Stock, $.01 par value per share (the "Class A Preferred
Stock"), and the number of shares constituting the Class A Preferred Stock shall
be two million five hundred thousand (2,500,000). Such number of shares may be
increased or decreased by resolution of the Board of Directors; provided, that
no decrease shall reduce the number of shares of Class A Preferred Stock to a
number less than the number of shares then outstanding plus the number of shares
reserved for issuance upon the exercise of outstanding options, rights or
warrants or upon the conversion of any outstanding securities issued by the
Corporation convertible into Class A Preferred Stock.
6.2 Dividends and Distributions
(a) Subject to the prior and superior rights of the holders of
any shares of any class or series of stock of this Corporation ranking prior and
superior to the Class A Preferred Stock with respect to dividends, the holders
of shares of Class A Preferred Stock, in preference to the holders of Common
Stock and of any other stock ranking junior to the Class A Preferred Stock,
shall be entitled to receive, when, as and if authorized by the Board of
Directors out of funds legally available for the purpose, quarterly dividends
payable in cash on the fifteenth day of January, April, July and October of each
year (each such date being referred to herein as a "Quarterly Dividend Payment
Date"), commencing on the first Quarterly Dividend Payment Date after the first
issuance of a share or fraction of a share of Class A Preferred Stock, in an
amount per share (rounded to the nearest cent) equal to the greater of (a) $0.10
or (b) an amount, subject to the provision for adjustment hereinafter set forth,
equal to 100 times the aggregate per share amount of all cash dividends, and 100
times the aggregate per share amount (payable in kind) of all non-cash dividends
or other distributions other than a dividend payable in shares of Common Stock
or a subdivision of the outstanding shares
-4-
of Common Stock (by reclassification or otherwise), declared on the Common Stock
since the immediately preceding Quarterly Dividend Payment Date or, with respect
to the first Quarterly Dividend Payment Date, since the first issuance of any
share or fraction of a share of Class A Preferred Stock. In the event the
Corporation shall at any time declare or pay any dividend on the Common Stock
payable in shares of Common Stock, or effect a subdivision, combination or
consolidation of the outstanding shares of Common Stock (by reclassification or
otherwise than by payment of a dividend in shares of Common Stock) into a
greater or lesser number of shares of Common Stock, then in each such case the
amount to which holders of shares of Class A Preferred Stock were entitled
immediately prior to such event under clause (b) of the preceding sentence shall
be adjusted by multiplying such amount by a fraction, the numerator of which is
the number of shares of Common Stock outstanding immediately after such event
and the denominator of which is the number of shares of Common Stock that were
outstanding immediately prior to such event.
(b) The Corporation shall declare a dividend or distribution on
the Class A Preferred Stock as provided in paragraph (a) of this Section 6.2
immediately after it declares a dividend or distribution on the Common Stock
(other than a dividend payable in shares of Common Stock); provided that, in the
event no dividend or distribution shall have been declared on the Common Stock
during the period between any Quarterly Dividend Payment Date and the next
subsequent Quarterly Dividend Payment Date, a dividend of $0.10 per share on the
Class A Preferred Stock shall nevertheless be payable on such subsequent
Quarterly Dividend Payment Date.
(c) Dividends shall begin to accrue and be cumulative on
outstanding shares of Class A Preferred Stock from the Quarterly Dividend
Payment Date next preceding the date of issue of such shares, unless the date of
issue of such shares is prior to the record date for the first Quarterly
Dividend Payment Date, in which case dividends on such shares shall begin to
accrue from the date of issue of such shares, or unless the date of issue is a
Quarterly Dividend Payment Date or is a date after the record date for the
determination of holders of shares of Class A Preferred Stock entitled to
receive a quarterly dividend and before such Quarterly Dividend Payment Date, in
either of which events such dividends shall begin to accrue and be cumulative
from such Quarterly Dividend Payment Date. Accrued but unpaid dividends shall
not bear interest. Dividends paid on the shares of Class A 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 Board of Directors may fix a
record date for the determination of holders of shares of Class A Preferred
Stock entitled to receive payment of a dividend or distribution declared
thereon, which record date shall be not more than 60 days prior to the date
fixed for the payment thereof.
(d) In determining whether a distribution (other than upon
voluntary or involuntary liquidation), by dividend, redemption or other
acquisition of shares of stock
-5-
of the Corporation or otherwise, is permitted under the DGCL, amounts that would
be needed, if the Corporation were to be dissolved at the time of the
distribution, to satisfy the preferential rights upon dissolution of holders of
the Class A Preferred Stock shall not be added to the Corporation's total
liabilities.
6.3 Voting Rights. The holders of shares of Class A Preferred Stock
shall have the following voting rights:
(a) Subject to the provision for adjustment hereinafter set
forth, each share of Class A Preferred Stock shall entitle the holder thereof to
100 votes on all matters submitted to a vote of the holders of Common Stock. In
the event the Corporation shall at any time declare or pay any dividend on the
Common Stock payable in shares of Common Stock, or effect a subdivision,
combination or consolidation of the outstanding shares of Common Stock (by
reclassification or otherwise than by payment of a dividend in shares of Common
Stock) into a greater or lesser number of shares of Common Stock, then in each
such case the number of votes per share to which holders of shares of Class A
Preferred Stock were entitled immediately prior to such event shall be adjusted
by multiplying such number by a fraction, the numerator of which is the number
of shares of Common Stock outstanding immediately after such event and the
denominator of which is the number of shares of Common Stock that were
outstanding immediately prior to such event.
(b) Except as otherwise provided herein, or in any Certificate
of Designation, Preferences and Rights creating a series of Preferred Stock or
any similar stock, the holders of shares of Class A Preferred Stock and the
holders of shares of Common Stock and any other shares of stock of the
Corporation having general voting rights shall vote together as one class on all
matters submitted to a vote of stockholders of the Corporation.
(c) Except as set forth herein, or as otherwise provided by law,
holders of Class A Preferred Stock shall have no special voting rights and their
consent shall not be required (except to the extent they are entitled to vote
with holders of Common Stock as set forth herein) for taking any corporate
action.
6.4 Certain Restrictions.
(a) Whenever quarterly dividends or other dividends or
distributions payable on the Class A Preferred Stock as provided in Section 6.2
are in arrears, thereafter and until all accrued and unpaid dividends and
distributions, whether or not declared, on shares of Class A Preferred Stock
outstanding shall have been paid in full, the Corporation shall not:
(i) declare or pay dividends, or make any other
distributions, on any shares of stock ranking junior
(either as to dividends
-6-
or upon liquidation, dissolution or winding up) to the
Class A Preferred Stock;
(ii) declare or pay dividends, or make any other
distributions, on any shares of stock ranking on a
parity (either as to dividends or upon liquidation,
dissolution or winding up) with the Class A Preferred
Stock, except dividends paid ratably on the Class A
Preferred Stock and all such parity stock on which
dividends are payable or in arrears in proportion to
the total amounts to which the holders of all such
shares are then entitled;
(iii) redeem or purchase or otherwise acquire for
consideration shares of any stock ranking junior
(either as to dividends or upon liquidation,
dissolution or winding up) to the Class A Preferred
Stock, provided that the Corporation may at any time
redeem, purchase or otherwise acquire shares of any
such junior stock in exchange for shares of any stock
of the Corporation ranking junior (both as to
dividends and upon dissolution, liquidation or winding
up) to the Class A Preferred Stock; or
(iv) redeem or purchase or otherwise acquire for
consideration any shares of Class A Preferred Stock,
or any shares of stock ranking on a parity with the
Class A Preferred Stock, except in accordance with a
purchase offer made in writing or by publication (as
determined by the Board of Directors) to all holders
of such shares upon such terms as the Board of
Directors, after consideration of the respective
annual dividend rates and other relative rights and
preferences of the respective series and classes,
shall determine in good faith will result in fair and
equitable treatment among the respective series or
classes.
(b) The Corporation shall not permit any subsidiary of the
Corporation to purchase or otherwise acquire for consideration any shares of
stock of the Corporation unless the Corporation could, under paragraph (a) of
this Section 6.4, purchase or otherwise acquire such shares at such time and in
such manner.
6.5 Reacquired Shares. Any shares of Class A Preferred Stock
purchased or otherwise acquired by the Corporation in any manner whatsoever
shall become authorized but unissued shares of Preferred Stock and may be
reissued as part of a new series of Preferred Stock subject to the conditions
and restrictions on issuance set forth
-7-
herein or in any Certificate of Designation, Preferences and Rights creating a
series of Preferred Stock or any similar stock or as otherwise required by law.
6.6 Liquidation, Dissolution or Winding Up.
(a) Upon any liquidation, dissolution or winding up of the
Corporation, voluntary or otherwise, no distribution shall be made (1) to the
holders of shares of stock ranking junior (either as to dividends or upon
liquidation, dissolution or winding up) to the Class A Preferred Stock unless,
prior thereto, the holders of shares of Class A Preferred Stock shall have
received an amount per share (the "Class A Liquidation Preference") equal to $10
per share, plus an amount equal to accrued and unpaid dividends and
distributions thereon, whether or not declared, to the date of such payment
provided that the holders of shares of Class A Preferred Stock shall be entitled
to receive an aggregate amount per share, subject to the provision for
adjustment hereinafter set forth, equal to 100 times the aggregate amount to be
distributed per share to holders of shares of Common Stock, or (2) to the
holders of shares of stock ranking on a parity (either as to dividends or upon
liquidation, dissolution or winding up) with the Class A Preferred Stock, except
distributions made ratably on the Class A Preferred Stock and all 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. In the event the
Corporation shall at any time declare or pay any dividend on the Common Stock
payable in shares of Common Stock, or effect a subdivision, combination or
consolidation of the outstanding shares of Common Stock (by reclassification or
otherwise than by payment of a dividend in shares of Common Stock) into a
greater or lesser number of shares of Common Stock, then in each such case the
aggregate amount to which holders of shares of Class A Preferred Stock were
entitled immediately prior to such event under the proviso in clause (1) of the
preceding sentence shall be adjusted by multiplying such amount by a fraction
the numerator of which is the number of shares of Common Stock outstanding
immediately after such event and the denominator of which is the number of
shares of Common Stock that are outstanding immediately prior to such event.
(b) In the event, however, that there are not sufficient assets
available to permit payment in full of the Class A Liquidation Preference and
the liquidation preferences of all other classes and series of stock of the
Corporation, if any, that rank on a parity with the Class A Preferred Stock in
respect thereof, then the assets available for such distribution shall be
distributed ratably to the holders of the Class A Preferred Stock and the
holders of such parity shares in proportion to their respective liquidation
preferences.
(c) Neither the merger or consolidation of the Corporation into
or with another corporation nor the merger or consolidation of any other
corporation into or with the Corporation shall be deemed to be a liquidation,
dissolution or winding up of the Corporation within the meaning of this Section
6.6.
-8-
6.7 Consolidation, Merger, etc. In case the Corporation shall enter
into any consolidation, merger, combination or other transaction in which the
shares of Common Stock are exchanged for or changed into other stock or
securities, cash and/or any other property, then in any such case each share of
Class A Preferred Stock shall at the same time be similarly exchanged or changed
into an amount per share, subject to the provision for adjustment hereinafter
set forth, equal to 100 times the aggregate amount of stock, securities, cash
and/or any other property (payable in kind), as the case may be, into which or
for which each share of Common Stock is changed or exchanged. In the event the
Corporation shall at any time declare or pay any dividend on the Common Stock
payable in shares of Common Stock, or effect a subdivision, combination or
consolidation of the outstanding shares of Common Stock (by reclassification or
otherwise than by payment of a dividend in shares of Common Stock) into a
greater or lesser number of shares of Common Stock, then in each such case the
amount set forth in the preceding sentence with respect to the exchange or
change of shares of Class A Preferred Stock shall be adjusted by multiplying
such amount by a fraction, the numerator of which is the number of shares of
Common Stock outstanding immediately after such event and the denominator of
which is the number of shares of Common Stock that were outstanding immediately
prior to such event.
6.8 No Redemption. The shares of Class A Preferred Stock shall not
be redeemable by the Company.
6.9 Rank. The Class A Preferred Stock shall rank, with respect to
the payment of dividends and the distribution of assets upon liquidation,
dissolution or winding up, junior to all series of any other class of the
Corporation's Preferred Stock, except to the extent that any such other series
specifically provides that it shall rank on a parity with or junior to the Class
A Preferred Stock.
6.10 Amendment. At any time any shares of Class A Preferred Stock
are outstanding, this Certificate of Incorporation shall not be amended in any
manner which would materially alter or change the powers, preferences or special
rights of the Class A Preferred Stock, as set forth herein, so as to affect them
adversely without the affirmative vote of the holders of at least two-thirds of
the outstanding shares of Class A Preferred Stock, voting separately as a single
class.
6.11 Fractional Shares. Class A Preferred Stock may be issued in
fractions of a share that shall entitle the holder, in proportion to such
holder's fractional shares, to exercise voting rights, receive dividends,
participate in distributions and to have the benefit of all other rights of
holders of Class A Preferred Stock.
-9-
ARTICLE VII
MANAGEMENT OF THE CORPORATION
7.1 Except as otherwise provided herein, the business and affairs of
the Corporation shall be managed by or under the direction of the Board of
Directors. The Board of Directors shall be divided into three classes: Class I,
Class II and Class III. The classes shall be as nearly equal in number as the
then total number of directors constituting the entire Board of Directors
permits, with the three-year term of service of each class staggered to expire
in successive years. The directors shall be assigned to a class at the time of
their election.
At each annual meeting of stockholders, the successors to the class
of directors whose term shall then expire shall be elected to hold office for a
term expiring at the third succeeding annual meeting of stockholders and each
director so elected shall hold office until his successor is elected and
qualified, or until his earlier resignation or removal. If the number of
directors is changed, any increase or decrease in the number of directors shall
be apportioned among the three classes so as to make all classes as nearly equal
in number as possible, and the Board of Directors shall decide which class shall
contain an unequal number of directors.
7.2 Any vacancies in the Board of Directors for any reason, and any
directorships resulting from any increase in the number of directors, may be
filled only by the Board of Directors, acting by a majority of the directors
then in office (even though such number of directors may constitute less than a
quorum) and any directors so chosen shall hold office until the next election of
the class for which such directors shall have been chosen and until their
successors shall be elected and qualified.
7.3 Election of directors need not be by written ballot unless the
By-Laws so provide.
7.4 The Board of Directors shall have the power to adopt, amend, and
repeal the By-Laws of the Corporation.
7.5 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.
7.6 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 stockholders.
-10-
7.7 Notwithstanding anything to the contrary contained in the
By-Laws, 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 of Directors, 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. Except as provided in the immediately following sentence of this
Section 7.7, special meetings may not be called by any other person or persons.
At any special meetings, no business shall be transacted and no corporate action
shall be taken other than as stated in the notice of the meeting.
7.8 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 VIII
AMENDMENTS
The Corporation reserves the right to amend or repeal any provisions
contained in this Certificate of Incorporation from time to time and at any time
in the manner now or hereafter prescribed in this Certificate of Incorporation
or the By-Laws or required by the laws of the State of Delaware, and all rights
herein conferred upon stockholders are granted subject to such reservation.
ARTICLE IX
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 IX is in effect shall be deemed to be doing so in reliance on
the provisions of this Article IX. Any
-11-
repeal or modification of this Article IX shall not adversely affect any right
or protection of a director existing prior to such repeal or modification. The
provisions of this Article IX are cumulative and shall be in addition to and
independent of any and all other limitations on or eliminations of the
liabilities of directors of the Corporation, as such, whether such limitations
or eliminations arise under or are created by any law, rule, regulation, by-law,
agreement, vote of stockholders or directors, or otherwise.
IN WITNESS WHEREOF, the Corporation has caused this Certificate of
Incorporation to be duly executed and acknowledged, this day of , 200 .
MARVEL ENTERPRISES, INC.
By:
-------------------------------------
Name: Allen S. Lipson
Title: President and Chief
Executive Officer
-12-
Appendix B
MARVEL ENTERPRISES, INC.
1998 STOCK INCENTIVE PLAN
TABLE OF CONTENTS
-----------------
Page
----
1. Purpose.....................................................................1
2. Definitions.................................................................1
3. Administration..............................................................3
4. Stock Subject to the Plan...................................................4
5. Option Grants for Eligible Individuals......................................5
5.1 Authority of Committee..............................................5
5.2 Purchase Price......................................................5
5.3 Maximum Duration....................................................5
5.4 Vesting.............................................................5
5.5 Method of Exercise..................................................5
5.6 Modification or Substitution........................................6
5.7 Non-transferability.................................................6
5.8 Rights of Optionees.................................................6
5.9 Effect of Change in Control.........................................6
5.10 Dividend Equivalent Rights.........................................6
5.11 Grants to Certain Outside Directors................................7
6. Stock Appreciation Rights...................................................7
6.1 Time of Grant.......................................................7
6.2 Stock Appreciation Right Related to an Option.......................7
(a) Exercise.........................................................7
(b) Amount Payable...................................................7
(c) Treatment of Related Options and Stock Appreciation Rights
Upon Exercise....................................................7
6.3 Stock Appreciation Right Unrelated to an Option.....................7
6.4 Method of Exercise..................................................8
6.5 Form of Payment.....................................................8
6.6 Modification or Substitution........................................8
6.7 Effect of Change in Control.........................................8
7. Restricted Stock............................................................8
7.1 Grant...............................................................8
7.2 Rights of Grantee...................................................8
7.3 Non-transferability.................................................9
7.4 Lapse of Restrictions...............................................9
(a) Generally........................................................9
(b) Effect of Change in Control......................................9
7.5 Modification or Substitution........................................9
7.6 Treatment of Dividends..............................................9
7.7 Delivery of Shares..................................................9
8. Performance Awards..........................................................9
8.1 Performance Objectives..............................................9
8.2 Performance Units..................................................10
i
Page
(a) Vesting and Forfeiture..........................................10
(b) Payment of Awards...............................................10
8.3 Performance Shares.................................................10
(a) Rights of Grantee...............................................10
(b) Non-transferability.............................................11
(c) Lapse of Restrictions...........................................11
(d) Treatment of Dividends..........................................11
(e) Delivery of Shares..............................................11
8.4 Effect of Change in Control........................................11
8.5 Non-transferability................................................12
8.6 Modification or Substitution.......................................12
9. Effect of a Termination of Employment or Service..........................12
10. Adjustment Upon Changes in Capitalization.................................12
11. Effect of Certain Transactions............................................12
12. Interpretation............................................................13
13. Pooling Transactions......................................................13
14. Termination and Amendment of the Plan.....................................13
15. Non-Exclusivity of the Plan...............................................13
16. Limitation of Liability...................................................14
17. Regulations and Other Approvals; Governing Law............................14
18. Miscellaneous.............................................................15
18.1 Multiple Agreements...............................................15
18.2 Withholding of Taxes..............................................15
19. Effective Date............................................................15
20. Termination of 1995 Stock Option Plan.....................................15
ii
MARVEL ENTERPRISES, INC.
1998 STOCK INCENTIVE PLAN
1. Purpose.
-------
The purpose of this Plan is to strengthen Marvel Enterprises, Inc.
(the "Company") by providing an incentive to its officers, employees,
consultants and directors and thereby encouraging them to devote their abilities
and industry to the success of the Company's business enterprise. It is intended
that this purpose be achieved by extending to officers, employees, consultants
and directors of the Company and its subsidiaries an added long-term incentive
for high levels of performance and unusual efforts through the grant of
Incentive Stock Options, Nonqualified Stock Options, Stock Appreciation Rights,
Restricted Stock, Performance Units and Performance Shares (as each term is
hereinafter defined).
2. Definitions.
-----------
For purposes of the Plan:
2.1 "Agreement" means the written agreement between the Company and
an Optionee or Grantee evidencing the grant of an Option or Award and setting
forth the terms and conditions thereof.
2.2 "Award" means a grant of Restricted Stock, a Stock Appreciation
Right, a Performance Award or any or all of them.
2.3 "Board" means the Board of Directors of the Company.
2.4 "Cause" means, unless otherwise defined in the Agreement
evidencing a particular Award, an individual's (i) intentional failure to
perform reasonably assigned duties, (ii) dishonesty or willful misconduct in the
performance of duties, (iii) involvement in a transaction in connection with the
performance of duties to the Company or any of its Subsidiaries thereof which
transaction is adverse to the interests of the Company or any of its
Subsidiaries and which is engaged in for personal profit, (iv) willful violation
of any law, rule or regulation in connection with the performance of duties
(other than traffic violations or similar offenses), or (v) the commission of an
act of fraud or intentional misappropriation or conversion of assets or
opportunities of the Company or any Subsidiary.
2.5 "Change in Capitalization" means any increase or reduction in
the number of Shares, or any change in the Shares or exchange of Shares for a
different number or kind of shares or other securities of the Company, by reason
of a reclassification, recapitalization, merger, consolidation, reorganization,
spin-off, split-up, issuance of warrants or rights or debentures, stock
dividend, stock split or reverse stock split, cash dividend, property dividend,
combination or exchange of shares, repurchase of shares, change in corporate
structure or otherwise.
2.6 "Code" means the Internal Revenue Code of 1986, as amended.
2.7 "Committee" means a committee as described in Section 3.1
hereof consisting of at least two (2) Nonemployee Directors appointed by the
Board to administer the Plan and to perform the functions set forth herein.
2.8 "Company" means Marvel Enterprises, Inc.
2.9 "Dividend Equivalent Right" means a right to receive all or
some portion of the cash dividends that are or would be payable with respect to
Shares.
2.10 "Division" means any of the operating units or divisions of
the Company designated as a Division by the Committee.
2.11 "Eligible Individual" means any officer, employee, consultant
or director of the Company or a Subsidiary designated by the Committee as
eligible to receive Options or Awards subject to the conditions set forth
herein.
2.12 "Exchange Act" means the Securities Exchange Act of 1934, as
amended.
2.13 "Fair Market Value" per Share as of a particular date shall
mean (i) the closing sales price per Share on a national securities exchange for
the last preceding date on which there was a sale of such Shares on such
exchange, or (ii) if the Shares are then traded on an over-the-counter market,
the average of the closing bid and asked prices for the Shares in such
over-the-counter market for the last preceding date on which there was a sale of
such Shares in such market, or (iii) if the Shares are not then listed on a
national securities exchange or traded in an over-the-counter market, such value
as the Committee in its discretion may determine.
2.14 "Grantee" means a person to whom an Award has been granted
under the Plan.
2.15 "Incentive Stock Option" means an Option satisfying the
requirements of Section 422 of the Code and designated by the Committee as an
Incentive Stock Option.
2.16 "Nonqualified Stock Option" means an Option which is not an
Incentive Stock Option.
2.17 "Option" means an Incentive Stock Option, a Nonqualified Stock
Option or either or both of them.
2.18 "Optionee" means a person to whom an Option has been granted
under the Plan.
2.19 "Parent" means any corporation which is a parent corporation
(within the meaning of Section 424(e) of the Code) with respect to the Company.
2.20 "Performance Awards" means Performance Units, Performance
Shares or either or both of them.
2.21 "Performance Cycle" means the time period specified by the
Committee at the time a Performance Award is granted during which the
performance of the Company, a Subsidiary or a Division will be measured.
2.22 "Performance Shares" means Shares issued or transferred to an
Eligible Individual under Section 8.3 hereof.
2.23 "Performance Unit" means Performance Units granted to an
Eligible Individual under Section 8.2 hereof.
2.24 "Plan" means the Marvel Enterprises Inc. 1998 Stock Incentive
Plan.
2.25 "Pooling Transaction" means an acquisition of the Company in a
transaction which is intended to be treated as a "pooling of interests" under
generally accepted accounting principles.
2
2.26 "Restricted Stock" means Shares issued or transferred to an
Eligible Individual pursuant to Section 7 hereof.
2.27 "Shares" means the common stock, par value $0.01 per share, of
the Company.
2.28 "Stock Appreciation Right" (SAR) means a right to receive all
or some portion of the increase in the value of the Shares as provided in
Section 6 hereof.
2.29 "Subsidiary" means any corporation which is a subsidiary
corporation (within the meaning of Section 424(f) of the Code) with respect to
the Company.
2.30 "Successor Corporation" means a corporation, or a parent or
subsidiary thereof within the meaning of Section 424(a) of the Code, which
issues or assumes a stock option in a transaction to which Section 424(a) of the
Code applies.
2.31 "Ten-Percent Stockholder" means an Eligible Individual, who,
at the time an Incentive Stock Option is to be granted to him or her, owns
(within the meaning of Section 422(b)(6) of the Code) stock possessing more than
ten percent (10%) of the total combined voting power of all classes of stock of
the Company, or of a Parent or a Subsidiary.
3. Administration.
--------------
3.1 The Plan shall be administered by the Committee, which shall
hold meetings at such times as may be necessary for the proper administration of
the Plan. The Committee shall keep minutes of its meetings. A quorum shall
consist of not less than two members of the Committee and a majority of a quorum
may authorize any action. Any decision or determination reduced to writing and
signed by a majority of all of the members shall be as fully effective as if
made by a majority vote at a meeting duly called and held. Each member of the
Committee shall be a nonemployee director within the meaning of Rule 16b-3
promulgated under the Exchange Act. To the extent compliance with Section 162(m)
of the Code is desired, such Committee members shall also be "outside directors"
within the meaning of Section 162(m) of the Code. No member of the Committee
shall be liable for any action, failure to act, determination or interpretation
made in good faith with respect to this Plan or any transaction hereunder,
except for liability arising from his or her own willful misfeasance, gross
negligence or reckless disregard of his or her duties. The Company hereby agrees
to indemnify each member of the Committee for all costs and expenses and, to the
extent permitted by applicable law, any liability incurred in connection with
defending against, responding to, negotiating for the settlement of or otherwise
dealing with any claim, cause of action or dispute of any kind arising in
connection with any actions in administering this Plan or in authorizing or
denying authorization to any transaction hereunder.
3.2 Subject to the express terms and conditions set forth herein,
the Committee shall have the power from time to time to:
(a) determine those Eligible Individuals to whom Options shall
be granted under the Plan and the number of Incentive Stock Options and/or
Nonqualified Stock Options to be granted to each Eligible Individual and to
prescribe the terms and conditions (which need not be identical) of each Option,
including the purchase price per Share subject to each Option, and make any
amendment or modification to any Agreement consistent with the terms of the
Plan; and
(b) select those Eligible Individuals to whom Awards shall be
granted under the Plan and to determine the number of Stock Appreciation Rights,
Performance Units, Performance Shares, and/or Shares of Restricted Stock to be
granted pursuant to each Award, the terms and conditions of each Award,
including the restrictions or performance criteria relating to such Performance
Units or Performance Shares, the maximum
3
value of each Performance Unit and Performance Share and make any amendment or
modification to any Agreement consistent with the terms of the Plan.
3.3 Subject to the express terms and conditions set forth herein,
the Committee shall have the power from time to time:
(a) to construe and interpret the Plan and the Options and
Awards granted hereunder and to establish, amend and revoke rules and
regulations for the administration of the Plan, including, but not limited to,
correcting any defect or supplying any omission, or reconciling any
inconsistency in the Plan or in any Agreement, in the manner and to the extent
it shall deem necessary or advisable to make the Plan fully effective and comply
with applicable law including Rule 16b-3 under the Exchange Act and the Code to
the extent applicable. All decisions and determinations by the Committee in the
exercise of this power shall be final, binding and conclusive upon the Company,
its Subsidiaries, the Optionees and Grantees, and all other persons having any
interest therein;
(b) to determine the duration and purposes for leaves of
absence which may be granted to an Optionee or Grantee on an individual basis
without constituting a termination of employment or service for purposes of the
Plan;
(c) to exercise its discretion with respect to the powers and
rights granted to it as set forth in the Plan;
(d) generally, to exercise such powers and to perform such acts
as are deemed necessary or advisable to promote the best interests of the
Company with respect to the Plan; and
(e) to provide for the limited transferability of Options to
certain family members, family trusts or family partnerships of Optionees.
4. Stock Subject to the Plan.
-------------------------
4.1 The maximum number of Shares that may be made the subject of
Options and Awards granted under the Plan is 16,000,000; provided, however, that
the maximum number of Shares that may be the subject of Options and Awards
granted to any Eligible Individual during any calendar year may not exceed
4,000,000 Shares. Upon a Change in Capitalization the maximum number of Shares
which may be made the subject of Options and Awards granted under the Plan and
which may be granted to any Eligible Individual during any calendar year shall
be adjusted in number and kind pursuant to Section 10 hereof. The Company shall
reserve for the purposes of the Plan, out of its authorized but unissued Shares
or out of Shares held in the Company's treasury, or partly out of each, such
number of Shares as shall be determined by the Board.
4.2 Upon the granting of an Option or an Award, the number of
Shares available under Section 4.1 hereof for the granting of further Options
and Awards shall be reduced as follows:
(a) In connection with the granting of an Option or an Award (other
than the granting of a Performance Unit denominated in dollars), the number of
Shares shall be reduced by the number of Shares in respect of which the Option
or Award is granted or denominated.
(b) In connection with the granting of a Performance Unit
denominated in dollars, the number of Shares shall be reduced by an amount equal
to the quotient of (i) the dollar amount in which the Performance Unit is
denominated, divided by (ii) the Fair Market Value of a Share on the date the
Performance Unit is granted.
4
4.3 Whenever any outstanding Option or Award or portion thereof
expires, is canceled or is otherwise terminated for any reason without having
been exercised or payment having been made in respect of the entire Option or
Award, the Shares allocable to the expired, canceled or otherwise terminated
portion of the Option or Award may again be the subject of Options or Awards
granted hereunder.
5. Option Grants for Eligible Individuals.
--------------------------------------
5.1 Authority of Committee. Subject to the provisions of the Plan
and to Section 4.1 hereof, the Committee shall have full and final authority to
select those Eligible Individuals who will receive Options, the terms and
conditions of which shall be set forth in an Agreement; provided, however, that
no person shall receive any Incentive Stock Options unless he or she is an
employee of the Company, a Parent or a Subsidiary at the time the Incentive
Stock Option is granted. The aggregate Fair Market Value (determined as of the
date of grant of an Incentive Stock Option) of the Shares with respect to which
Incentive Stock Options granted under this Plan and all other option plans of
the Company, any Parent and any Subsidiary become exercisable for the first time
by an Optionee during any calendar year shall not exceed $100,000. Any such
Options granted in excess of the $100,000 limitation shall be deemed to be
Nonqualified Stock Options.
5.2 Purchase Price. The purchase price or the manner in which the
purchase price is to be determined for Shares under each Option shall be
determined by the Committee and set forth in the Agreement; provided, however,
that the purchase price per Share under each Option shall not be less than 100%
of the Fair Market Value of a Share on the date the Option is granted (110% in
the case of an Incentive Stock Option granted to a Ten-Percent Stockholder).
5.3 Maximum Duration. Options granted hereunder shall be for such
term as the Committee shall determine, provided that an Incentive Stock Option
shall not be exercisable after the expiration of ten (10) years from the date it
is granted (five (5) years in the case of an Incentive Stock Option granted to a
Ten-Percent Stockholder) and a Nonqualified Stock Option shall not be
exercisable after the expiration of ten (10) years from the date it is granted.
The Committee may, subsequent to the granting of any Option, extend the term
thereof, but in no event shall the term as so extended exceed the maximum term
provided for in the preceding sentence.
5.4 Vesting. Subject to Section 5.9 hereof, each Option shall
become exercisable in such installments (which need not be equal) and at such
times as may be designated by the Committee and set forth in the Agreement. If
the Committee does not so designate, Options shall become exercisable in three
equal or nearly equal installments on the first, second and third anniversaries
of the date of grant. To the extent not exercised, installments shall accumulate
and be exercisable, in whole or in part, at any time after becoming exercisable,
but not later than the date the Option expires. The Committee may accelerate the
exercisability of any Option or portion thereof at any time.
5.5 Method of Exercise. The exercise of an Option shall be made
only by a written notice delivered in person or by mail to the Secretary of the
Company at the Company's principal executive office, specifying the number of
Shares to be purchased and accompanied by payment therefor and otherwise in
accordance with the Agreement pursuant to which the Option was granted. The
purchase price for any Shares purchased pursuant to the exercise of an Option
shall be paid in full upon such exercise by any one or a combination of the
following: (i) cash or (ii) with the consent of the Committee, transferring
Shares to the Company upon such terms and conditions as determined by the
Committee (such as, for example, a requirement that such Shares have been held
for at least six months if necessary to avoid adverse accounting consequences).
Any Shares transferred to the Company as payment of the purchase price under an
Option shall be valued at their Fair Market Value on the day preceding the date
of exercise of such Option, unless otherwise provided in an Agreement.
Notwithstanding the foregoing, the Committee shall have discretion to determine
at the time of grant of each Option or at any later date (up to and including
the date of exercise) the form of payment acceptable in respect of the exercise
of such Option. The written notice pursuant to this Section 5.5 may also provide
instructions from the Optionee to the Company that upon receipt of the purchase
price in cash from the Optionee's broker or dealer, designated as such on the
written
5
notice, in payment for any Shares purchased pursuant to the exercise of an
Option, the Company shall issue such Shares directly to the designated broker or
dealer. If requested by the Committee, the Optionee shall deliver the Agreement
evidencing the Option to the Secretary of the Company who shall endorse thereon
a notation of such exercise and return such Agreement to the Optionee. No
fractional Shares (or cash in lieu thereof) shall be issued upon exercise of an
Option and the number of Shares that may be purchased upon exercise shall be
rounded to the nearest number of whole Shares.
5.6 Modification or Substitution. The Committee may, in its
discretion, modify outstanding Options or accept the surrender of outstanding
Options (to the extent not exercised) and grant new Options in substitution for
them. Notwithstanding the foregoing, no modification of an Option shall
adversely alter or impair any rights or obligations under the Option without the
Optionee's consent.
5.7 Non-transferability. No Option granted hereunder shall be
transferable by the Optionee to whom granted otherwise than by will or the laws
of descent and distribution unless specifically authorized by the Committee, and
unless transferred in a manner permitted by the Committee an Option may be
exercised during the lifetime of such Optionee only by the Optionee or his or
her guardian or legal representative. The terms of such Option shall be final,
binding and conclusive upon the beneficiaries, executors, administrators, heirs
and successors of the Optionee.
5.8 Rights of Optionees. No Optionee shall be deemed for any
purpose to be the owner of any Shares subject to any Option unless and until (i)
the Option shall have been exercised pursuant to the terms thereof, (ii) the
Company shall have issued and delivered the Shares to the Optionee and (iii) the
Optionee's name shall have been entered as a stockholder of record on the books
of the Company. Thereupon, the Optionee shall have full voting, dividend and
other ownership rights with respect to such Shares, subject to such terms and
conditions as may be set forth in the applicable Agreement.
5.9 Effect of Change in Control. Notwithstanding anything contained
in the Plan to the contrary, the Committee may provide in an Agreement for the
accelerated vesting of all or any portion of an Option in the event of a change
in control of the Company.
5.10 Dividend Equivalent Rights. Dividend Equivalent Rights may be
granted to Eligible Individuals in tandem with an Option. The terms and
conditions applicable to each Dividend Equivalent Right shall be specified in
the Agreement under which the Dividend Equivalent Rights may be payable
currently or deferred until the lapsing of restrictions on such Dividend
Equivalent Rights or until the vesting, exercise, payment, settlement or other
lapse of restrictions on the Option to which the Dividend Equivalent Rights
relate. In the event that the amounts payable in respect of Dividend Equivalent
Rights are to be deferred, the Committee shall determine whether such amounts
are to be held in cash or reinvested in Shares or deemed (notionally) to be
reinvested in Shares. If amounts payable in respect to Dividend Equivalent
Rights are to be held in cash, there may be credited at the end of each year (or
portion thereof) interest on the amount of the account at the beginning of the
year at a rate per annum as the Committee, in its discretion, may determine.
Dividend Equivalent Rights may be settled in cash or Shares or a combination
thereof, in a single installment or multiple installments.
5.11 Grants to Certain Outside Directors. In the event a Director
of the Company is required by contract to deliver any compensation from the
Company to the Director's employer, the Director may elect, with the consent of
the Committee to have Awards pursuant to this Plan made to such Director's
employer. In such case, the vesting, exercisability and termination provisions
shall be applied with respect to the service of the Director.
6. Stock Appreciation Rights. The Committee may, in its discretion,
either alone or in connection with the grant of an Option, grant Stock
Appreciation Rights in accordance with the Plan, the terms and conditions of
which shall be set forth in an Agreement. If granted in connection with an
Option, a Stock Appreciation Right shall cover the same Shares covered by the
Option (or such lesser number of Shares as the
6
Committee may determine) and shall, except as provided in this Section 6, be
subject to the same terms and conditions as the related Option.
6.1 Time of Grant. A Stock Appreciation Right may be granted (i) at
any time if unrelated to an Option, or (ii) if related to an Option, either at
the time of grant, or at any time thereafter during the term of the Option.
6.2 Stock Appreciation Right Related to an Option.
(a) Exercise. Subject to Section 6.7 hereof, a Stock
Appreciation Right granted in connection with an Option shall be exercisable at
such time or times and only to the extent that the related Option is
exercisable, and will not be transferable even if the related Option is
transferable. A Stock Appreciation Right granted in connection with an Incentive
Stock Option shall be exercisable only if the Fair Market Value of a Share on
the date of exercise exceeds the purchase price specified in the related
Incentive Stock Option Agreement.
(b) Amount Payable. Upon the exercise of a Stock Appreciation
Right related to an Option, the Grantee shall be entitled to receive an amount
determined by multiplying (A) the excess of the Fair Market Value of a Share on
the date preceding the date of exercise of such Stock Appreciation Right over
the per Share purchase price under the related Option, by (B) the number of
Shares as to which such Stock Appreciation Right is being exercised.
Notwithstanding the foregoing, the Committee may limit in any manner the amount
payable with respect to any Stock Appreciation Right by including such a limit
in the Agreement evidencing the Stock Appreciation Right at the time it is
granted.
(c) Treatment of Related Options and Stock Appreciation Rights
Upon Exercise. Upon the exercise of a Stock Appreciation Right granted in
connection with an Option, the Option shall be canceled to the extent of the
number of Shares as to which the Stock Appreciation Right is exercised, and upon
the exercise of an Option granted in connection with a Stock Appreciation Right,
the Stock Appreciation Right shall be canceled to the extent of the number of
Shares as to which the Option is exercised.
6.3 Stock Appreciation Right Unrelated to an Option. The Committee
may grant to Eligible Individuals Stock Appreciation Rights unrelated to
Options. Stock Appreciation Rights unrelated to Options shall contain such terms
and conditions as to exercisability (subject to Section 6.7 hereof), vesting and
duration as the Committee shall determine, but in no event shall they have a
term of greater than ten (10) years. If the Committee does not designate a
vesting schedule, the schedule shall be in equal or nearly equal installments on
the first, second and third anniversaries of the date of grant. Upon exercise of
a Stock Appreciation Right unrelated to an Option, the Grantee shall be entitled
to receive an amount determined by multiplying (A) the excess of the Fair Market
Value of a Share on the date preceding the date of exercise of such Stock
Appreciation Right over the Fair Market Value of a Share on the date the Stock
Appreciation Right was granted, by (B) the number of Shares as to which the
Stock Appreciation Right is being exercised. Notwithstanding the foregoing, the
Committee may limit in any manner the amount payable with respect to any Stock
Appreciation Right by including such a limit in the Agreement evidencing the
Stock Appreciation Right at the time it is granted.
6.4 Method of Exercise. Stock Appreciation Rights shall be
exercised by a Grantee only by a written notice delivered in person or by mail
to the Secretary of the Company at the Company's principal executive office,
specifying the number of Shares with respect to which the Stock Appreciation
Right is being exercised. If requested by the Committee, the Grantee shall
deliver the Agreement evidencing the Stock Appreciation Right being exercised
and the Agreement evidencing any related Option to the Secretary of the Company
who shall endorse thereon a notation of such exercise and return such Agreement
to the Grantee.
6.5 Form of Payment. Payment of the amount determined under
Sections 6.2(b) or 6.3 hereof may be made in the discretion of the Committee,
solely in whole Shares in a number determined at their Fair Market Value on the
date preceding the date of exercise of the Stock Appreciation Right, or solely
in cash, or in
7
a combination of cash and Shares. If the Committee decides to make full payment
in Shares and the amount payable results in a fractional Share, payment for the
fractional Share will be made in cash.
6.6 Modification or Substitution. Subject to the terms of the Plan,
the Committee may modify outstanding Awards of Stock Appreciation Rights or
accept the surrender of outstanding Awards of Stock Appreciation Rights (to the
extent not exercised) and grant new Awards in substitution for them.
Notwithstanding the foregoing, no modification of an Award shall adversely alter
or impair any rights or obligations under the Agreement without the Grantee's
consent.
6.7 Effect of Change in Control. Notwithstanding anything contained
in this Plan to the contrary, the Committee may provide in an Agreement for the
accelerated vesting of all or a portion of any Stock Appreciation Right in the
event of a change in control of the Company.
7. Restricted Stock.
----------------
7.1 Grant. The Committee may grant to Eligible Individuals Awards
of Restricted Stock, and may issue Shares of Restricted Stock in payment in
respect of vested Performance Units (as hereinafter provided in Section 8.2
hereof), which shall be evidenced by an Agreement between the Company and the
Grantee. Each Agreement shall contain such restrictions, terms and conditions as
the Committee may, in its discretion, determine and (without limiting the
generality of the foregoing) such Agreements may require that an appropriate
legend be placed on Share certificates. Awards of Restricted Stock shall be
subject to the terms and provisions set forth below in this Section 7.
7.2 Rights of Grantee. Shares of Restricted Stock granted pursuant
to an Award hereunder shall be issued in the name of the Grantee as soon as
reasonably practicable after the Award is granted provided that the Grantee has
executed an Agreement evidencing the Award, the appropriate blank stock powers
and, in the discretion of the Committee, an escrow agreement and any other
documents which the Committee may require as a condition to the issuance of such
Shares. If a Grantee shall fail to execute the Agreement evidencing a Restricted
Stock Award, the appropriate blank stock powers and, in the discretion of the
Committee, an escrow agreement and any other documents which the Committee may
require within the time period prescribed by the Committee at the time the Award
is granted, the Award shall be null and void. At the discretion of the
Committee, Shares issued in connection with a Restricted Stock Award shall be
deposited together with the stock powers with an escrow agent (which may be the
Company) designated by the Committee. Unless the Committee determines otherwise
and as set forth in the Agreement, upon delivery of the Shares to the escrow
agent, the Grantee shall have all of the rights of a stockholder with respect to
such Shares, including the right to vote the Shares and to receive all dividends
or other distributions paid or made with respect to the Shares.
7.3 Non-transferability. Until any restrictions upon the Shares of
Restricted Stock awarded to a Grantee shall have lapsed in the manner set forth
in Section 7.4 hereof, such Shares shall not be sold, transferred or otherwise
disposed of and shall not be pledged or otherwise hypothecated, nor shall they
be delivered to the Grantee.
7.4 Lapse of Restrictions.
(a) Generally. Restrictions upon Shares of Restricted Stock
awarded hereunder shall lapse at such time or times and on such terms and
conditions as the Committee may determine, which restrictions shall be set forth
in the Agreement evidencing the Award. If the Committee does not so provide,
restrictions shall lapse in three equal or nearly equal installments on the
first, second and third anniversaries of the date of grant.
8
(b) Effect of Change in Control. Notwithstanding anything
contained in the Plan to the contrary, the Committee may provide in an Agreement
for the lapsing of all restrictions imposed upon any or all Shares of Restricted
Stock in the event of a change in control of the Company.
7.5 Modification or Substitution. Subject to the terms of the Plan,
the Committee may modify outstanding Awards of Restricted Stock or accept the
surrender of outstanding Shares of Restricted Stock (to the extent the
restrictions on such Shares have not yet lapsed) and grant new Awards in
substitution for them. Notwithstanding the foregoing, no modification of an
Award shall adversely alter or impair any rights or obligations under the
Agreement without the Grantee's consent.
7.6 Treatment of Dividends. At the time the Award of Shares of
Restricted Stock is granted, the Committee may, in its discretion, determine
that the payment to the Grantee of dividends, or a specified portion thereof,
declared or paid on such Shares by the Company shall be (i) deferred until the
lapsing of the restrictions imposed upon such Shares and (ii) held by the
Company for the account of the Grantee until such time. In the event that
dividends are to be deferred, the Committee shall determine whether such
dividends are to be reinvested in Shares (which shall be held as additional
Shares of Restricted Stock) or held in cash. If deferred dividends are to be
held in cash, there may be credited at the end of each year (or portion thereof)
interest on the amount of the account at the beginning of the year at a rate per
annum as the Committee, in its discretion, may determine. Payment of deferred
dividends in respect of Shares of Restricted Stock (whether held in cash or as
additional Shares of Restricted Stock), together with interest accrued thereon,
if any, shall be made upon the lapsing of restrictions imposed on the Shares in
respect of which the deferred dividends were paid, and any dividends deferred
(together with any interest accrued thereon) in respect of any Shares of
Restricted Stock shall be forfeited upon the forfeiture of such Shares.
7.7 Delivery of Shares. Upon the lapse of the restrictions on
Shares of Restricted Stock, the Committee shall cause a stock certificate to be
delivered to the Grantee with respect to such Shares, free of all restrictions
hereunder.
8. Performance Awards.
------------------
8.1 Performance Objectives. Performance objectives for Performance
Awards may be expressed in terms of (i) earnings per Share, (ii) pre-tax
profits, (iii) net earnings or net worth, (iv) return on equity or assets, (v)
any combination of the foregoing, or (vi) any other standard or standards deemed
appropriate by the Committee at the time the Award is granted. Performance
objectives may be in respect of the performance of the Company and its
Subsidiaries (which may be on a consolidated basis), a Subsidiary or a Division.
Performance objectives may be absolute or relative and may be expressed in terms
of a progression within a specified range. Prior to the end of a Performance
Cycle, the Committee, in its discretion, may adjust the performance objectives
to reflect a Change in the Capitalization, a change in the tax rate or book tax
rate of the Company or any Subsidiary, or any other event which may materially
affect the performance of the Company, a Subsidiary or a Division, including,
but not limited to, market conditions or a significant acquisition or
disposition of assets or other property by the Company, a Subsidiary or a
Division.
8.2 Performance Units. The Committee, in its discretion, may grant
Awards of Performance Units to Eligible Individuals, the terms and conditions of
which shall be set forth in an Agreement between the Company and the Grantee.
Performance Units may be denominated in Shares or a specified dollar amount and,
contingent upon the attainment of specified performance objectives within the
Performance Cycle, represent the right to receive payment as provided in Section
8.2(b) hereof of (i) in the case of Share-denominated Performance Units, the
Fair Market Value of a Share on the date the Performance Unit was granted, the
date the Performance Unit became vested or any other date specified by the
Committee, (ii) in the case of dollar-denominated Performance Units, the
specified dollar amount or (iii) a percentage (which may be more than 100%) of
the amount described in clause (i) or (ii) depending on the level of performance
objective attainment; provided, however, that the Committee may at the time a
Performance Unit is granted, specify a maximum amount payable in
9
respect of a vested Performance Unit. Each Agreement shall specify the number of
the Performance Units to which it relates, the performance objectives which must
be satisfied in order for the Performance Units to vest and the Performance
Cycle within which such objectives must be satisfied.
(b) Vesting and Forfeiture. A Grantee shall become vested with
respect to the Performance Units to the extent that the performance objectives
set forth in the Agreement are satisfied for the Performance Cycle.
(c) Payment of Awards. Payment to Grantees in respect of vested
Performance Units shall be made within sixty (60) days after the last day of the
Performance Cycle to which such Award relates unless the Agreement evidencing
the Award provides for the deferral of payment, in which event the terms and
conditions of the deferral shall be set forth in the Agreement. Subject to
Section 8.4 hereof, such payments may be made entirely in Shares valued at their
Fair Market Value as of the last day of the applicable Performance Cycle or such
other date specified by the Committee, entirely in cash, or in such combination
of Shares and cash as the Committee in its discretion, shall determine at any
time prior to such payment; provided, however, that if the Committee in its
discretion determines to make such payment entirely or partially in Shares of
Restricted Stock, the Committee must determine the extent to which such payment
will be in Shares of Restricted Stock and the terms of such Restricted Stock at
the time the Award is granted.
8.3 Performance Shares. The Committee, in its discretion, may grant
Awards of Performance Shares to Eligible Individuals, the terms and conditions
of which shall be set forth in an Agreement between the Company and the Grantee.
Each Agreement may require that an appropriate legend be placed on Share
certificates. Awards of Performance Shares shall be subject to the following
terms and provisions:
(a) Rights of Grantee. The Committee shall provide at the time
an Award of Performance Shares is made, the time or times at which the actual
Shares represented by such Award shall be issued in the name of the Grantee;
provided, however, that no Performance Shares shall be issued until the Grantee
has executed an Agreement evidencing the Award, the appropriate blank stock
powers and, in the discretion of the Committee, an escrow agreement and any
other documents which the Committee may require as a condition to the issuance
of such Performance Shares. If a Grantee shall fail to execute the Agreement
evidencing an Award of Performance Shares, the appropriate blank stock powers
and, in the discretion of the Committee, an escrow agreement and any other
documents which the Committee may require within the time period prescribed by
the Committee at the time the Award is granted, the Award shall be null and
void. At the discretion of the Committee, Shares issued in connection with an
Award of Performance Shares shall be deposited together with the stock powers
with an escrow agent (which may be the Company) designated by the Committee.
Except as restricted by the terms of the Agreement, upon delivery of the Shares
to the escrow agent, the Grantee shall have, in the discretion of the Committee,
all of the rights of a stockholder with respect to such Shares, including the
right to vote the Shares and to receive all dividends or other distributions
paid or made with respect to the Shares.
(b) Non-transferability. Until any restrictions upon the
Performance Shares awarded to a Grantee shall have lapsed in the manner set
forth in Sections 8.3(c) or 8.4 hereof, such Performance Shares shall not be
sold, transferred or otherwise disposed of and shall not be pledged or otherwise
hypothecated, nor shall they be delivered to the Grantee. The Committee may also
impose such other restrictions and conditions on the Performance Shares, if any,
as it deems appropriate.
(c) Lapse of Restrictions. Subject to Section 8.4 hereof,
restrictions upon Performance Shares awarded hereunder shall lapse and such
Performance Shares shall become vested at such time or times and on such terms,
conditions and satisfaction of performance objectives as the Committee may, in
its discretion, determine at the time an Award is granted.
(d) Treatment of Dividends. At the time the Award of
Performance Shares is granted, the Committee may, in its discretion, determine
that the payment to the Grantee of dividends, or a specified
10
portion thereof, declared or paid on actual Shares represented by such Award
which have been issued by the Company to the Grantee shall be (i) deferred until
the lapsing of the restrictions imposed upon such Performance Shares and (ii)
held by the Company for the account of the Grantee until such time. In the event
that dividends are to be deferred, the Committee shall determine whether such
dividends are to be reinvested in Shares (which shall be held as additional
Performance Shares) or held in cash. If deferred dividends are to be held in
cash, there may be credited at the end of each year (or portion thereof)
interest on the amount of the account at the beginning of the year at a rate per
annum as the Committee, in its discretion, may determine. Payment of deferred
dividends in respect of Performance Shares (whether held in cash or in
additional Performance Shares), together with interest accrued thereon, if any,
shall be made upon the lapsing of restrictions imposed on the Performance Shares
in respect of which the deferred dividends were paid, and any dividends deferred
(together with any interest accrued thereon) in respect of any Performance
Shares shall be forfeited upon the forfeiture of such Performance Shares.
(e) Delivery of Shares. Upon the lapse of the restrictions on
Performance Shares awarded hereunder, the Committee shall cause a stock
certificate to be delivered to the Grantee with respect to such Shares, free of
all restrictions hereunder.
8.4 Effect of Change in Control. Notwithstanding anything contained
in the Plan to the contrary:
(a) With respect to the Performance Units, the Committee may
determine that a Grantee shall (i) become vested in a percentage of Performance
Units as a result of a change in control of the Company and (ii) be entitled to
receive in respect of all Performance Units which become vested as a result of a
change in control of the Company, a cash payment in an amount as determined by
the Committee and as set forth in the Agreement.
(b) With respect to the Performance Shares, the Committee may
provide in an Agreement for the lapse of restrictions imposed upon all or a
portion of the Performance Shares in the event of a change in control of the
Company.
(c) The Agreements evidencing Performance Shares and
Performance Units shall provide for the treatment of such Awards (or portions
thereof) which do not become vested as the result of a change in control of the
Company, including, but not limited to, provisions for the adjustment of
applicable performance objectives.
8.5 Non-transferability. No Performance Awards shall be
transferable by the Grantee otherwise than by will or the laws of descent and
distribution.
8.6 Modification or Substitution. Subject to the terms of the Plan,
the Committee may modify outstanding Performance Awards or accept the surrender
of outstanding Performance Awards and grant new Performance Awards in
substitution for them. Notwithstanding the foregoing, no modification of a
Performance Award shall adversely alter or impair any rights or obligations
under the Agreement without the Grantee's consent.
9. Effect of a Termination of Employment or Service.
------------------------------------------------
The Agreement evidencing the grant of each Option and each Award
shall set forth the terms and conditions applicable to such Option or Award upon
a termination or change in the status of the employment or service of the
Optionee or Grantee by the Company, a Subsidiary or a Division (including a
termination or change by reason of the sale of a Subsidiary or a Division or a
change in status from employee or director to consultant), as the Committee may,
in its discretion, determine at the time the Option or Award is granted or
thereafter. Notwithstanding the foregoing and unless specifically set forth in
an Agreement to the contrary, (i) in the event an Optionee's or Grantee's
employment or service with the Company is terminated for Cause, the Option
11
or Award granted to the Optionee or Grantee hereunder shall immediately
terminate in full and in the case of Options, no rights thereunder may be
exercised, and in all other cases, no payment will be made with respect thereto,
and (ii) in the event the Optionee's or Grantee's employment or service with the
Company is terminated other than for Cause, the Option or Award granted to the
Optionee or Grantee hereunder shall terminate in full on the ninetieth (90th)
day following such termination and in the case of Options, no rights thereunder
may be exercised, and in all other cases, no payment will be made with respect
thereto.
10. Adjustment Upon Changes in Capitalization.
-----------------------------------------
(a) In the event of a Change in Capitalization, the Committee
shall conclusively determine the appropriate adjustments, if any, to the (i)
maximum number and class of Shares or other stock or securities with respect to
which Options or Awards may be granted under the Plan, (ii) maximum number of
class of Shares or other stock or securities with respect to which Options may
be granted to any Eligible Individual during the term of the Plan and (iii) the
number and class of Shares or other stock or securities which are subject to
outstanding Options or Awards granted under the Plan, and the purchase price
therefor, if applicable.
(b) Any such adjustment in the Shares or other stock or
securities subject to outstanding Incentive Stock Options (including any
adjustments in the purchase price) shall be made in such manner as not to
constitute a modification as defined by Section 424(h)(3) of the Code and only
to the extent otherwise permitted by Sections 422 and 424 of the Code.
(c) If, by reason of a Change in Capitalization, a Grantee of
an Award shall be entitled to, or an Optionee shall be entitled to exercise an
Option with respect to, new, additional or different shares of stock or
securities, such new, additional or different shares shall thereupon be subject
to all of the conditions, restrictions and performance criteria which were
applicable to the Shares subject to the Award or Option, as the case may be,
prior to such Change in Capitalization.
11. Effect of Certain Transactions. Subject to Sections 5.9, 6.7,
7.4(b) and 8.4 hereof, in the event of (i) the liquidation or dissolution of the
Company or (ii) a merger or consolidation of the Company (a "Transaction"), the
Plan and the Options and Awards issued hereunder shall continue in effect in
accordance with their respective terms except that following a Transaction each
Optionee and Grantee shall be entitled to receive in respect of each Share
subject to any outstanding Options or Awards, as the case may be, upon exercise
of any Option or SAR or payment or transfer in respect of any Award, the same
number and kind of stock, securities, cash, property, or other consideration
that each holder of a Share was entitled to receive in the Transaction in
respect of a Share; provided, however, that such stock, securities, cash,
property, or other consideration shall remain subject to all of the conditions,
restrictions and performance criteria which were applicable to the Options or
Awards prior to such Transaction.
12. Interpretation.
--------------
(a) Awards under the Plan are intended to comply with Rule
16b-3 promulgated under the Exchange Act and the Committee shall interpret and
administer the provisions of the Plan or any Agreement in a manner consistent
therewith. Any provisions inconsistent with such Rule shall be inoperative and
shall not affect the validity of the Plan.
(b) Unless otherwise expressly stated in the relevant
Agreement, each Award granted under the Plan (other than Restricted Stock) is
intended to be performance-based compensation within the meaning of Section
162(m)(4)(C) of the Code. Except in cases of the death, disability or change in
control, the Committee shall not be entitled to exercise any discretion
otherwise authorized hereunder with respect to such Awards if the ability to
exercise such discretion or the exercise of such discretion itself would cause
the compensation attributable to such Awards to fail to qualify as
performance-based compensation.
12
13. Pooling Transactions. Notwithstanding anything contained in the
Plan or any Agreement to the contrary, in the event of a change in control of
the Company which is also intended to constitute a Pooling Transaction, the
Committee shall take such actions, if any, which are specifically recommended by
an independent accounting firm retained by the Company to the extent reasonably
necessary in order to assure that the Pooling Transaction will qualify as such,
including but not limited to (i) deferring the vesting, exercise, payment or
settlement with respect to any Option or Award, (ii) providing that the payment
or settlement in respect of any Option or Award be made in the form of cash,
Shares or securities of a successor or acquired of the Company, or a combination
of the foregoing and (iii) providing for the extension of the term of any Option
or Award to the extent necessary to accommodate the foregoing, but not beyond
the maximum term permitted for any Option or Award.
14. Termination and Amendment of the Plan.
-------------------------------------
The Plan shall terminate on the day preceding the tenth
anniversary of the date of its adoption by the Board and no Option or Award may
be granted thereafter. The Board may sooner terminate the Plan and the Board may
at any time and from time to time amend, modify or suspend the Plan; provided,
however, that:
(a) No such amendment, modification, suspension or termination
shall impair or adversely alter any Options, SARs or Awards theretofore granted
under the Plan, except with the consent of the Optionee or Grantee, nor shall
any amendment, modification, suspension or termination deprive any Optionee or
Grantee of any Shares which he or she may have acquired through or as a result
of the Plan; and
(b) To the extent necessary under Section 16(b) of the Exchange
Act and the rules and regulations promulgated thereunder or applicable law or
securities exchange rule, no amendment shall be effective unless approved by the
stockholders of the Company in accordance with applicable law and regulations.
15. Non-Exclusivity of the Plan.
---------------------------
The adoption of the Plan by the Board shall not be construed as
amending, modifying or rescinding any previously approved incentive arrangement
or as creating any limitations on the power of the Board to adopt such other
incentive arrangements as it may deem desirable, including, without limitation,
the granting of stock options otherwise than under the Plan, and such
arrangements may be either applicable generally or only in specific cases.
16. Limitation of Liability.
-----------------------
As illustrative of the limitations of liability of the Company,
but not intended to be exhaustive thereof, nothing in the Plan shall be
construed to:
(a) give any person any right to be granted an Option or Award
other than at the sole discretion of the Committee;
(b) give any person any rights whatsoever with respect to
Shares except as specifically provided in the Plan;
(c) limit in any way the right of the Company to terminate the
employment of any person at any time; or
(d) be evidence of any agreement or understanding, expressed or
implied, that the Company will employ any person at any particular rate of
compensation or for any particular period of time.
13
17. Regulations and Other Approvals; Governing Law.
----------------------------------------------
17.1 Except as to matters of federal law, this Plan and the rights
of all persons claiming hereunder shall be construed and determined in
accordance with the laws of the State of New York without giving effect to
conflicts of law principles thereof.
17.2 The obligation of the Company to sell or deliver Shares with
respect to Options and Awards granted under the Plan shall be subject to all
applicable laws, rules and regulations, including all applicable federal and
state securities laws, and the obtaining of all such approvals by governmental
agencies as may be deemed necessary or appropriate by the Committee.
17.3 The Board may make such changes as may be necessary or
appropriate to comply with the rules and regulations of any government
authority, or to obtain for Eligible Individuals granted Incentive Stock Options
the tax benefits under the applicable provisions of the Code and regulations
promulgated thereunder.
17.4 Each Option and Award is subject to the requirement that, if
at any time the Committee determines, in its discretion, that the listing,
registration or qualification of Shares issuable pursuant to the Plan is
required by any securities exchange or under any state or federal law, or the
consent or approval of any governmental regulatory body is necessary or
desirable as a condition of, or in connection with, the grant of an Option or
Award or the issuance of Shares, no Options or Awards shall be granted or
payment made or Shares issued, in whole or in
part, unless listing,
registration, qualification, consent or approval has been effected or obtained
free of any conditions as acceptable to the Committee.
17.5 Notwithstanding anything contained in the Plan or any
Agreement to the contrary, in the event that the disposition of Shares acquired
pursuant to the Plan is not covered by a then current registration statement
under the Securities Act of 1933, as amended, (the "Securities Act") and is not
otherwise exempt from such registration, such Shares shall be restricted against
transfer to the extent required by the Securities Act and Rule 144 or other
regulations thereunder. The Committee may require any individual receiving
Shares pursuant to an Option or Award granted under the Plan, as a condition
precedent to receipt of such Shares or Awards, to represent and warrant to the
Company in writing that the Shares acquired by such individual are acquired
without a view to any distribution thereof and will not be sold or transferred
other than pursuant to an effective registration thereof under said Act or
pursuant to an exemption applicable under the Securities Act or the rules and
regulations promulgated thereunder. The certificates evidencing any of such
Shares or Awards shall be appropriately amended to reflect their status as
restricted securities as aforesaid.
18. Miscellaneous.
-------------
18.1 Multiple Agreements. The terms of each Option or Award may
differ from other Options or Awards granted under the Plan at the same time, or
at some other time. The Committee may also grant more than one Option or Award
to a given Eligible Individual during the term of the Plan, either in addition
to, or in substitution for, one or more Options or Awards previously granted to
that Eligible Individual.
18.2 Withholding of Taxes. (a) The Company may make such provisions
and take such steps as it may deem necessary or appropriate for the withholding
of any taxes which the Company is required by any law or regulation of any
governmental authority, whether federal, state or local, domestic or foreign, to
withhold in connection with any Option or the exercise thereof, any Stock
Appreciation Right or the exercise thereof, or the grant of any other Award,
including, but not limited to, the withholding of cash or Shares which would be
paid or delivered pursuant to such exercise or Award or another exercise of
Award under this Plan until the Grantee reimburses the Company for the amount
the Company is required to withhold with respect to such taxes, or canceling any
portion of such Award or another Award under this Plan in an amount sufficient
to reimburse itself for the amount it is required to so withhold. The Committee
may permit a Grantee (or any
14
beneficiary or other person authorized to act) to elect to pay a portion or all
of any amounts required or permitted to be withheld to satisfy federal, state,
local or foreign tax obligations by directing the Company to withhold a number
of whole Shares which would otherwise be distributed and which have a Fair
Market Value sufficient to cover the amount of such required or permitted
withholding taxes.
(b) If an Optionee makes a disposition, within the meaning of
Section 424(c) of the Code and regulations promulgated thereunder, of any Share
or Shares issued to such Optionee pursuant to the exercise of an Incentive Stock
Option within the two-year period commencing on the day after the date of the
grant or within the one-year period commencing on the day after the date of
transfer of such Share or Shares to the Optionee pursuant to such exercise, the
Optionee shall, within ten (10) days of such disposition, notify the Company
thereof, by delivery of written notice to the Company at its principal executive
office.
(c) The Committee shall have the authority, at the time of
grant of an Option or Award under the Plan or at any time thereafter, to award
tax bonuses to designated Optionees or Grantees, to be paid upon their exercise
of Options or payment in respect of Awards granted hereunder. The amount of any
such payments shall be determined by the Committee. The Committee shall have
full authority in its absolute discretion to determine the amount of any such
tax bonus and the terms and conditions affecting the vesting and payment
thereof.
19. Effective Date. The effective date of the Plan shall be the date of
its adoption by the Board, subject only to the approval by the holders of a
majority of the securities of the Company in accordance with the applicable laws
of the State of Delaware within twelve (12) months of such adoption.
20. Termination of 1995 Stock Option Plan. Upon the effectiveness of
the Plan, the Company's 1995 Stock Option Plan shall terminate.
15
Appendix C
Amendment No. 2
to the
MARVEL ENTERPRISES, INC.
1998 STOCK INCENTIVE PLAN
This Amendment No. 2 to the Marvel Enterprises, Inc. 1998 Stock
Incentive Plan (this "Amendment") was adopted by the board of directors (the
"Board of Directors") of Marvel Enterprises, Inc. (the "Company") on February
24, 2004.
Preliminary Statements:
The Board of Directors adopted the Marvel Enterprises, Inc. 1998 Stock
Incentive Plan (the "Plan") on November 11, 1998 and the stockholders of the
Company approved the Plan in December of 1998. Capitalized terms used herein and
not otherwise defined shall have the meanings ascribed to them in the Plan.
The Plan was amended pursuant to Amendment No. 1 to the Marvel
Enterprises, Inc. 1998 Stock Incentive Plan adopted by the Board of Directors on
September 5, 2001 and approved by the stockholders of the Company in January of
2002.
Pursuant to Section 4.1 of the Plan, as amended, the maximum number of
shares of common stock, par value $.01 per share, of the Company ("Common
Stock") that may be made the subject of Options or Awards granted under the Plan
is 16,000,000. This figure does not account for the three-for-two stock
split-up, to be effected in the form of a dividend, that is scheduled for March
26, 2004 (the "Stock Split"). After giving effect to the Stock Split, the number
in the first sentence of this paragraph would be 24,000,000.
Pursuant to Section 14 of the Plan, as amended, the Plan terminates on
November 10, 2008, the day preceding the tenth anniversary of the date of its
adoption by the Board of Directors.
The Board of Directors desires to increase the number of shares of
Common Stock issuable pursuant to Options or Awards granted under the Plan by
7,500,000 (without giving effect to the Stock Split), and to extend the term of
the Plan so that the Plan's termination date is December 31, 2013.
Accordingly, the Plan is hereby amended as follows:
Section 1. Amendments to Plan.
(a) The first sentence of Section 4.1 of the Plan is hereby
deleted and the following sentence shall be substituted in lieu thereof
(with the numbers in the following sentence being expressed without
giving effect to the Stock Split; for purposes of clarity, those
numbers would be 35,250,000 and 6,000,000, respectively, after giving
effect to the Stock Split):
"The maximum number of Shares that may be made the
subject of Options and Awards granted under the Plan is
23,500,000; provided, however, that the maximum number of
Shares that may be the subject of Options and Awards granted
to any Eligible Individual during any calendar year may not
exceed 4,000,000 Shares."
(b) The first sentence of Section 14 of the Plan is hereby
deleted and the following sentence shall be substituted in lieu
thereof:
"The Plan shall terminate on December 31, 2013 and no
Option or Award may be granted thereafter."
Section 2. Instruments To Be Read Together. This Amendment shall be
deemed incorporated into and made a part of the Plan. This Agreement and the
Plan shall henceforth be read together.
Section 3. Effective Date. The effective date of this Amendment shall
be the date of its adoption by the Board of Directors, subject only to the
approval by the holders of a majority of the outstanding shares of Common Stock
in accordance with the applicable laws of the State of Delaware within twelve
(12) months of such adoption.
Section 4. Effect on the Plan. Except as specifically modified above,
the terms of the Plan shall remain in full force and effect.
Appendix D
MARVEL ENTERPRISES, INC.
CHARTER OF THE AUDIT COMMITTEE
OF THE BOARD OF DIRECTORS
PURPOSE
The Board of Directors (the "Board") of Marvel Enterprises, Inc. (the "Company")
has constituted and established an Audit Committee (the "Committee") with
authority, responsibility, and specific duties as described in this Audit
Committee Charter (the "Charter").
The primary purpose of the Committee is to:
(A) directly appoint, retain, compensate, evaluate and, where appropriate,
terminate the Company's independent auditors (the "Independent Auditors"). In
connection with this duty, the Committee shall have the sole authority to
approve all audit engagement fees and terms. The Committee may submit its
appointment of the Independent Auditors for stockholder ratification in the
Company's annual proxy statement;
(B) assist the Board's oversight of:
(1) the integrity of the Company's financial statements,
(2) the Company's compliance with legal and regulatory requirements,
(3) the Independent Auditors' qualifications and independence, and
(4) the performance of the Company's internal audit function and the
Independent Auditors; and
(C) prepare the report required by the Securities and Exchange
Commission's ("SEC") proxy rules to be included in the Company's annual proxy
statement.
While the Committee has the powers and responsibilities set forth in this
Charter, it is not the duty of the Committee to plan or conduct audits or to
determine that the Company's
financial statements are complete and accurate and are in accordance with
generally accepted accounting principles. This is the responsibility of
management and the Independent Auditors.
The Committee shall also serve as the Qualified Legal Compliance Committee of
the Board (the "Qualified Legal Compliance Committee") if authorized to do so by
the Board.
ORGANIZATION
1. COMMITTEE COMPOSITION:
o Number and Financial Acumen of Committee Members - The Committee shall be
appointed by the Board upon the recommendation of the Nominating and
Corporate Governance Committee and shall be comprised of not less than
three members of the Board. The Committee's composition will meet the
audit committee requirements of the corporate governance standards set
forth in the Listed Company Manual of the New York Stock Exchange (the
"NYSE"), as amended from time to time.
o Independence of Committee Members - All of the members of the Committee
will be directors who are "independent" within the meaning of Rule
10A-3(b)(1) under the Securities Exchange Act of 1934 (the "Exchange
Act"), Section 303A(2) and 303A(6) of the NYSE Listed Company Manual, and,
so long as such sections continue to apply, Section 303.01(B)(2)(a) and
Section 303.01(B)(3) of the NYSE Listed Company Manual, and who otherwise
comply with the requirements for Committee membership outlined in such
sections.
o Audit Committee Financial Expert - At least one member of the Committee
shall be an "audit committee financial expert" as such term is defined in
Item 401(h) of Regulation S-K and is "independent" as such term is used in
Item 7(d)(3)(iv) of Schedule 14A.
2
2. GENERAL ORGANIZATION AND MEETINGS
o Committee Chairperson - The Chairman of the Board shall appoint one member
of the Committee as Chairperson, such appointment to be subject to the
approval of the Board.
o Meetings - The Committee will meet on a quarterly basis and as often as
necessary to carry out its responsibilities. A majority of members shall
constitute a quorum of the Committee and shall be empowered to act on
behalf of the Committee. The Committee may delegate its authority, other
than its authority to act as the Qualified Legal Compliance Committee, to
any subcommittee or member when appropriate. The Committee shall report
regularly to the Board and shall review with the Board any issues which
arise with respect to the quality or integrity of the Company's financial
statements, the Company's compliance with legal or regulatory
requirements, the performance and independence of the Independent
Auditors, or the performance of the internal audit function.
3. ANNUAL REVIEW PROCESS
o Board Determination of Committee Member Independence - The Board will
determine annually that the Committee's members are independent, as
defined by law and relevant SEC and NYSE rules, and will determine whether
the Committee has fulfilled its duties and responsibilities.
o Assessment of Charter - The Committee and the Board will review and assess
the adequacy of this Charter annually.
3
FUNCTIONS
The Committee's job is one of oversight and it recognizes that the Company's
management is responsible for preparing the Company's financial statements and
that the Independent Auditors are responsible for auditing those financial
statements. Additionally, the Committee recognizes that financial management,
including the internal audit staff, as well as the Independent Auditors, have
more time, knowledge and more detailed information about the Company than do
Committee members; consequently, in carrying out its oversight responsibilities,
the Committee is not providing any expert or special assurance as to the
Company's financial statements or any professional certification as to the
Independent Auditors' work.
In performing its duties, the Committee will maintain free and open
communication, including private executive sessions at least annually, with the
Independent Auditors, internal auditors and management as required by the NYSE
Listed Company Manual. In discharging its oversight role, the Committee is
empowered to investigate any matter brought to its attention with full access to
all books and records of the Company and the power to retain outside legal,
accounting or other advisors, at the expense of the Company. The Committee shall
be provided by the Company with appropriate funding for the payment of
compensation to the Independent Auditors and to any legal, accounting or other
advisors retained by the Committee, and for the payment of the ordinary
administrative expenses of the Committee that are necessary or appropriate in
carrying out its duties.
The following functions shall be the common recurring activities of the
Committee in carrying out its oversight function. These functions are set forth
as a guide with the understanding that the Committee may diverge from this guide
as appropriate given the circumstances:
4
1. OVERSIGHT OF AUDITORS
o Direct Oversight of Independent Auditors - The Committee shall directly
appoint, retain, compensate, evaluate and, where appropriate, terminate
the Company's independent auditors. The Independent Auditors shall report
directly to the Committee. The Committee shall be directly responsible for
oversight of the Company's Independent Auditors, including resolution of
disagreements between the Company's management and the Independent
Auditors. The Committee's evaluation shall include the review and
evaluation of the lead audit partner of the Independent Auditors. In
addition to assuring the regular rotation of the lead audit partner as
required by law, the Committee shall consider whether, in order to insure
continuing auditor independence, there should be regular rotation of the
audit firm itself. The Committee shall present its conclusions with
respect to the Independent Auditors to the full board.
o Obtaining Annual Statement from Independent Auditors - The Committee will
obtain annually from its Independent Auditors a formal written statement
to the Committee (i) describing the Independent Auditors' internal
quality-control procedures and any material issues raised by the most
recent internal quality-control review, or peer review of the Independent
Auditors or by any inquiry or investigation by governmental or
professional authorities, within the preceding five years, respecting one
or more independent audits carried out by the Independent Auditors, and
any steps taken to deal with any such issues, and (ii) setting forth all
relationships between the Independent Auditors and the Company, consistent
with the Independence Standards Board Standard No. 1. The Committee will
discuss with the Independent Auditors any disclosed relationships or
services which may impact the objectivity and independence of the
Independent Auditors.
5
o Pre-Approval of Services Provided by the Independent Auditors - As
required by the SEC, generally the Committee approves all audit and
non-audit services provided by the Independent Auditors including the
compensation to be paid. The SEC permits certain limited exceptions to the
general rule which the Committee may apply. Details of this pre-approval
process are outlined in the Committee's "Policy Regarding Pre-Approval of
Audit and Non-Audit Services." The Committee may delegate this
responsibility to a member or subcommittee which will report any
pre-approvals made to the full Committee at its next meeting.
o Guidelines for Hiring Former Employees of the Independent Auditors - The
Committee shall set clear hiring policies for employees or former
employees of the Independent Auditors.
2. AUDIT COMMITTEE'S REVIEW FUNCTION
o Review Audited Financial Statements - The Committee will review the
Company's audited financial statements (including the Company's disclosure
under "Management's Discussion and Analysis of Financial Condition and
Results of Operations") and discuss them with management and the
Independent Auditors. Based on the review, the Committee shall make its
recommendation to the Board as to the inclusion of the Company's audited
financial statements in the Company's Annual Report on Form 10-K.
o Review Quarterly Financial Statements - The Committee will review with
management and the Independent Auditors the Company's quarterly financial
information (including the Company's disclosure under "Management's
Discussion and Analysis of Financial Condition and Results of Operations")
prior to the Company's filing of its Quarterly Report on Form 10-Q.
6
o Review Alternative Treatments and Critical Accounting Policies - In
connection with each review or examination of the Company's financial
statements, the Committee will require that the Independent Auditors
timely report to and document for the Committee: (i) all critical
accounting policies and practices to be used; (ii) all alternative
treatments of financial information within generally accepted accounting
principles that have been discussed with management; (iii) the
ramifications of the use of such alternative disclosures and treatments;
and the treatment preferred by the Independent Auditors; (iv) and other
material written communications between the Independent Auditors and
management, such as any management letter or schedule of unadjusted
differences; (v) major issues regarding accounting principals and
financial statement presentations, including any significant changes in
the Company's selection or application of accounting principles, and major
issues as to the adequacy of the Company's internal controls and any
special audit steps adopted in light of material control deficiencies; and
(vi) analysis prepared by management and/or the Independent Auditors
setting forth significant financial reporting issues and judgments made in
connection with the preparation of the financial statements, including
analyses of the effects of alternative GAAP methods on the financial
statements. The Committee shall review with Independent Auditors any
differences encountered in the course of the audit work including any
restrictions on the scope of the Independent Auditors activities or on
access to requested information and any significant disagreement with
management.
o Review of Internal Controls - The Committee will review with management,
internal auditors and the Independent Auditors their assessments of the
adequacy of internal controls and the resolution of identified material
weaknesses and reportable conditions in internal controls.
7
o Discuss Regulatory Initiatives and Off-Balance Sheet Structures - The
Committee will discuss with management and the Independent Auditors the
effects of regulatory and accounting initiatives as well as off-balance
sheet structures on the Company's financial statements.
o Discuss Earnings Press Releases and Guidance - The Committee will discuss
earnings press releases, as well as financial information and earnings
guidance provided to analysts and rating agencies including a discussion
of the type and presentation of information to be included in earnings
press releases (paying particular attention to any use of "pro forma" or
"adjusted" non-GAAP information). The Committee need not discuss in
advance each earnings release or each instance in which the Company may
provide earnings guidance.
o Discuss Pending Litigation - The Committee will discuss with management,
corporate counsel and the Independent Auditors, and shall review, material
pending litigation and taxation matters and other areas of oversight in
the legal and compliance area that may have a material impact on the
Company's financial statements, as appropriate.
o Discuss Policies with Respect to Risk Assessment and Risk Management - The
Committee will discuss the Company's guidelines and policies that govern
risk assessment and risk management.
3. COMPLAINT PROCEDURES
o Complaint Procedures - The Committee will implement procedures for (1) the
receipt, retention, and treatment of complaints received by the Company
regarding accounting, internal accounting controls, or auditing matters,
and (2) the confidential, anonymous submission by employees of the Company
8
regarding questionable accounting or auditing matters. The current
complaint procedures can be found in the Committee's "Complaint Procedure
for Accounting and Audit Matters" which shall be made publicly available.
4. ANNUAL REPORT
o Annual Report for Inclusion in Proxy - The Committee will issue annually a
report to be included in the Company's proxy statement (including
appropriate oversight conclusions) for the submission to stockholders.
5. POST-AUDIT REVIEW
o Management Letter - The Committee will review with management and the
Independent Auditors the annual Management Letter comments and
management's responses to each.
6. OVERSIGHT OF INTERNAL AUDIT FUNCTION
o Oversight of Internal Audit Function - The Committee will review the
activities, organizational structure, and qualifications (including a
discussion of the responsibilities, budget and staffing) of the Company's
internal audit function. The most senior internal auditor shall have a
direct line of communication to the Committee. The Committee will provide
the most senior internal auditor the authority to examine all records and
issue independent reports in order to supply objectivity to the internal
audit process.
o Review of Adequacy of Internal Audit Function - The Committee will review
with management, the Independent Auditors and the most senior internal
auditor the adequacy of the Company's internal audit function.
9
o Review of Internal Audit Reports - The Committee will receive and review
internal audit repots which will be prepared at least once every quarter.
7. QUALIFIED LEGAL COMPLIANCE COMMITTEE
o Qualified Legal Compliance Committee- When authorized by resolution of the
Board to serve as the Qualified Legal Compliance Committee, the Committee
shall also have the authority and responsibility provided in that Board
resolution.
8. OTHER ACTIVITIES
o Other Activities - The Committee will perform any other activities
required by applicable law, rules or regulations, including the rules of
the SEC and the NYSE, and perform such other activities that are
consistent with this Charter, the Company's Certificate of Incorporation,
By-Laws, as amended and restated from time to time, and governing laws, as
the Committee or the Board deems necessary or appropriate.
10