COMES NOW Plaintiff Anthony J. Fant ("Plaintiff"), by and through his undersigned counsel, and for his complaint against defendants, makes the following allegations upon information and belief, except with respect to the allegations pertaining to himself which are based upon personal knowledge, based on the facts alleged below, which are predicated upon, inter alia, a review of relevant filings made with the Securities and Exchange Commission ("SEC"), press releases and reports and an investigation undertaken by Plaintiff's counsel.

1. This is a securities fraud class action brought on behalf of all persons and entities, other than defendants and related parties, who purchased certain bonds secured by the stock of Marvel Entertainment Group, Inc. ("Marvel" or the "Company"), during the time period from October 8, 1996 through November 12, 1996, inclusive, (the "Class Period"), seeking to pursue remedies under the federal securities laws.

2. At all times during this action, Marvel was 80% owned by defendant Ronald O. Perelman ("Perelman") through an interconnected web of corporate relationships, which is described more specifically in the succeeding paragraphs of this complaint. This action concerns the making of materially false and misleading misrepresentations and omissions concerning a contemplated financial restructuring of Marvel by Perelman and certain Perelman-related entities.

3. In 1993 and 1994, Marvel, through certain affiliated entities, caused the issuance of various series of bonds which were secured by Marvel stock and which generated funds which financed the operations and/or commitments of various Perelman-related entities other than Marvel. The bonds were issued by the following Perelman-controlled entities: Marvel III Holdings, Inc. ("Marvel III"); Marvel (Parent) Holdings, Inc. ("Parent"); and Marvel Holdings, Inc. ("Holdings") (the bonds are collectively referred to as the "Marvel Bonds" or the "Bonds"). Perelman's controlling stock holdings of Marvel were provided as collateral for the Bonds.

4. Among other things, the terms of the Bond indentures, which were disclosed to and relied upon by public investors and the marketplace, explicitly provided that any proposed restructuring of Marvel that involved Perelman or a Perelman-related entity would be on terms that would be "at least as favorable to Marvel ... as terms that would be obtainable at the time for a comparable transaction or series of similar transactions in arm's length dealings with an unrelated third person." (Emphasis added.)

5. On October 8, 1996, Marvel, while announcing its preliminary results for its third quarter of 1996, revealed that as a result of greater than expected operating losses, the Company would have to affect a financial restructuring. Specifically, the Company disclosed that any proposed restructuring would "require an infusion of new equity capital" and that the Company had begun discussions with "certain affiliated entities to obtain necessary funds." Then, on October 17, 1996, defendant The Andrews Group Inc. ("Andrews"), another Perelman- controlled entity, announced, among other things, that it would be making a proposal to purchase equity in Marvel. These statements were designed to be, and were, highly reassuring to purchasers and holders of the Bonds and to the investing public at large and in no way displaced or diminished the public assurance that any such transaction would be comparable to an arms-length arrangement with a third party.

6. Neither of these widely-disseminated statements revealed that, at all relevant times, defendants had a pre-determined plan whereby Perelman would purchase newly- issued Marvel common stock on highly preferential terms, including a huge discount from the stock's pre-announcement market price, and which stock would not be subject to the pledge of Marvel stock that otherwise secured the Bonds -- thereby severely diluting class members' interest in the Company and entrenching and extending Perelman's control of Marvel's valuable assets. Moreover, as detailed herein, Perelman, and others acting under his control, selectively informed other Marvel bondholders, including Fidelity Investments (or their affiliates) ("Fidelity") and Putnam Investments (or their affiliates) ("Putnam"), of the true nature of their plans for Marvel prior to the Company's public announcement in order, among other things, to maintain their ties to valuable sources of financing for any future Perelman deals and otherwise curry favor with those financial players. Fidelity and Putnam sold their position in the Bonds shortly after receiving this information and avoided substantial losses as a result.

7. On November 12, 1996, in stark contrast to the representations made in the Bond indentures and the impression conveyed by defendants' statements, Marvel shocked the market by announcing a proposed "restructuring" of the Company which bore absolutely no resemblance to the expectations in the market which defendants had caused or cultivated. According to the announcement, Perelman was to purchase, through Perelman-related entities, 410 million shares of newly-issued Marvel common for $0.85 per share -- a staggering 81% discount to the then prevailing market price of $4.625. The newly-issued stock would not be subject to the pledge of Perelman-owned Marvel stock that otherwise secured the Bonds. The announcement of this self-dealing transaction, which was in no way foreshadowed by defendants' prior public statements and which conflicted with the covenants in the indentures to the Bonds, caused the market prices of the Bonds to decline precipitously as the collateral that supported the Bonds, Perelman's Marvel common stock holdings pre-proposed transaction, was diluted from 80% of the equity in Marvel to less than 16%. In effect, Marvel bondholders were divested of virtually the whole of their collateral while Perelman would maintain 80% ownership of the Company, purchasing the newly-issued shares at grossly sub-market prices while preserving the ability to write off Marvel's losses against the reported income in his other consolidated enterprises due to the maintenance of his 80% ownership of the Company.

8. The claims asserted herein arise under and pursuant to Sections 10(b) and 20(a) of the Securities Exchange Act of 1934 (the "Exchange Act") [15 U.S.C. §§ 78j(b) and 78t(a)] and Rule 10b-5 promulgated thereunder by the SEC [17 C.F.R. § 240.10b-5].

9. This Court has jurisdiction over the claims asserted in this complaint pursuant to § 27 of the Exchange Act as amended [15 U.S.C. § 78aa], 28 U.S.C. §§ 1331 and 1337.

10. Venue is properly laid in this judicial district pursuant to § 27 of the Exchange Act and 28 U.S.C. §§ 1391(b) and (c). Plaintiff resides in this District. In addition, Marvel and its subsidiaries conduct substantial business in this District.

11. In connection with the acts and conduct alleged in this complaint, defendants, directly or indirectly, used the means and instrumentalities of interstate commerce including, but not limited to, the mails, interstate telephone communications and the facilities of the national securities markets.

12. Plaintiff, Anthony J. Fant, as set forth in the accompanying certification incorporated by reference herein, purchased Marvel Bonds during the Class Period and was damaged thereby.13. (a) Defendant Perelman owns and controls an inter-connected and diversified corporate empire. By virtue of his securities holdings and memberships on and, in some cases, chairmanships of their boards, and through his control of members of the boards, each of whom he has handpicked, Perelman exercises domination and control over the individuals and corporate entities identified herein. Defendant Perelman holds the following relevant corporate positions:

(b) As of March 29, 1996, through his ownership and control of the Corporate Defendants, as defined below, Perelman was the beneficial owner of 81,618,392 shares (or approximately 80.2%) of Marvel's outstanding common stock.

14. Perelman, by virtue of his influence, ownership and control of Marvel, Mafco, MacAndrews and Andrews, controlled and substantially participated in all aspects of the acts and conduct complained of, including the preparation, issuance and dissemination of materially false and misleading information to the investing public.

15. Perelman participated in the drafting, preparation, and/or approval of the various press releases and other communications complained of herein and was aware of or recklessly disregarded the misstatements contained therein and omissions therefrom, and was aware of their materially misleading nature. Because of Perelman's Board memberships and/or executive, managerial and controlling positions with Marvel, Andrews, MacAndrews and/or Mafco, he had access to the adverse non-public information about these companies' business prospects, management and financial condition as particularized herein and knew that these adverse facts rendered the positive statements challenged herein materially false and misleading.

16. Perelman because of his positions of control and authority as an officer and/or director or controlling person of Marvel, Andrews, MacAndrews and/or Mafco, was able to and did control the contents of the various quarterly and annual financial reports, press releases and presentations to securities analysts pertaining to these companies and their affiliates. Perelman was provided with copies of press releases and other disseminations alleged herein to be misleading prior to or shortly after their issuance and had the ability and opportunity to prevent their issuance or cause them to be corrected. Perelman was also advised of, permitted and/or had the ability to prevent the advance notification of certain favored market participants as to the undisclosed adverse facts set forth herein. As a result, Perelman was responsible for the accuracy of the public reports and releases detailed herein and is therefore primarily liable for the misrepresentations and omissions identified in this complaint.

17. The following defendants, which are all dominated and controlled by defendant Perelman, are referred to herein as the "Corporate Defendants":

(a) Defendant Mafco is a holding company which is wholly-owned by Perelman, incorporated under the laws of the State of Delaware and headquartered in New York. Mafco, through its direct subsidiaries, is engaged in several diverse businesses which include: manufacturing beauty products, flavors, and cigars; a film processor; the publisher of comic books, trade paperbacks, and novels; and a television broadcaster and producer. Mafco also holds 100% of defendant MacAndrews. Defendant Perelman is the sole shareholder of Mafco.

(b) Defendant MacAndrews is a holding company incorporated in Delaware and is a wholly-owned subsidiary of Mafco. MacAndrews owns 100% of Andrews.

(c) Defendant Andrews is incorporated in Delaware and maintains its principal executive office at 3200 Windy Hill Road, Suite 1100-West, Atlanta, Georgia. Andrews is a wholly-owned subsidiary of MacAndrews (which is a wholly-owned subsidiary of Mafco - which is 100% owned by Perelman).

18. On December 27, 1996, Marvel, Marvel III, Parent and Holdings (the "Marvel Debtors") filed for bankruptcy protection in the United States Bankruptcy Court for the District of Delaware seeking to reorganize under Chapter 11 of the Bankruptcy code. As a result of that filing, the Marvel Debtors, the issuers of the Marvel Bonds, have not been named defendants in this action.

19. (a) Marvel is a Delaware corporation, with its principal offices located at 387 Park Avenue South, New York, New York 10016. Marvel is a leading creator, publisher, and distributor of youth-entertainment products for domestic and international markets based on action adventure characters owned by Marvel. It also has licenses to use and markets products using images of professional athletes, sports teams and leagues, and popular entertainment characters and properties owned by third parties. Marvel's products include comic books, sports and entertainment trading cards, and children's activity stickers.

(b) Marvel common stock is listed and actively traded on the New York Stock Exchange. According to Marvel's Proxy Statement dated April 18, 1996, Marvel had 101,790,657 shares of common stock outstanding as of March 29, 1996.

20. Marvel III, a wholly-owned subsidiary of Andrews, is a holding company incorporated in Delaware and the sole owner of Parent. Marvel III has no operations and merely serves as a corporate shell.

21. Parent, a wholly-owned subsidiary of Marvel III, is a holding company incorporated in Delaware and owns 100% of Holdings. At all relevant times, Parent held 29,302,326 shares of Marvel's common stock, representing 28.78% of Marvel's outstanding shares. Twenty (20) million of these shares are pledged as collateral to secure the Bonds issued by Parent, and nine (9) million have been pledged to secure the Bonds issued by Marvel III.

22. Holdings, a wholly-owned subsidiary of Parent, is a holding company incorporated in Delaware. Holdings owns approximately 50.3% of the shares of Marvel common stock, the majority of which are pledged as collateral to secure the Bonds issued by Holdings.

23. Toy Biz, Inc. ("Toy Biz") designs, markets and distributes toys based on, among other things, Marvel's comic book characters and proprietary designs. Toy Biz holds the exclusive license to Marvel's characters on a royalty-free, perpetual world-wide basis for use in a broad range of toy-based products and had net revenue for 1995, 1994, and 1993 of $196.4 million, $156.5 million, and $89.7 million, respectively. Toy Biz has not filed for bankruptcy. At all relevant times, Marvel owned an approximate 26% equity interest in Toy Biz, representing a 78% voting interest.

24. The following diagram sets out the current relationships among the various Perelman-related entities involved in the matters set forth herein:

25. Each of the defendants is liable as a participant in a fraudulent scheme and course of business that operated as a fraud or deceit on purchasers of Marvel Bonds, by disseminating materially false and misleading statements and/or concealing material, adverse facts. The scheme: (i) deceived the investing public concerning the true scope and nature of the contemplated restructuring and recapitalization of Marvel by Perelman and/or certain Perelman-related affiliates; (ii) misled investors regarding Perelman's intention to evade the terms of the indentures governing the Bonds and largely divest the Bonds of the collateral securing their repayment, and (iii) caused Plaintiff and other members of the Class to purchase Marvel Bonds at artificially inflated prices. When the true facts finally emerged, the market price of the Bonds suddenly collapsed.

26. Plaintiff brings this action on his own behalf and as a class action pursuant to Federal Rule of Civil Procedure 23(a) and (b)(3) on behalf of all individuals and/or entities who purchased Marvel Bonds from October 8, 1996, through November 12, 1996, inclusive (the "Class Period"), and who were damaged thereby, (excluding defendants, any person, firm, trust, corporation, or other entity related to or affiliated with any defendant or with the Marvel Debtors and Fidelity and Putnam and/or their affiliates), and their successors in interest, who have suffered damage as a result of the wrongs complained of herein.

27. This action is properly maintainable as a class action for the following reasons:

(a) The Class is so numerous that joinder of all members is impracticable. There are more than $894.1 million in face amount of the Bonds outstanding and in public hands. The Bonds are actively and publicly traded in an over-the-counter market through at least six market makers, including Asiel & Co., Bear Steams & Co. and McDonald & Co. Securities. It is estimated that there are hundreds, if not thousands, of members of the Class.

(b) The members of the Class are so numerous that joinder of all members is impracticable. While the exact number of Class members is unknown to Plaintiff at this time and can only be ascertained through appropriate discovery, Plaintiff believes that there are hundreds, if not thousands, of members of the Class.

28. Plaintiff's claims are typical of the claims of the members of the Class as all members of the Class are similarly affected by defendants' wrongful conduct in violation of federal law that is complained of herein.

29. Plaintiff will fairly and adequately protect the interests of the members of the Class and has retained counsel competent and experienced in class and securities litigation.

30. Common questions of law and fact exist as to all members of the Class and predominate over any questions solely affecting individual members of the Class. Among the questions of law and fact common to the Class are:

(a) Whether the federal securities laws were violated by defendants' acts and omissions as alleged herein;

(b) Whether defendants knowingly or recklessly participated in and pursued the common course of conduct complained of herein and/or controlled other persons who committed primary violations;

(c) Whether documents, press releases and other statements disseminated to the investing public and the Company's Bondholders during the Class Period misrepresented material facts about defendants' predetermined intentions regarding the magnitude, value and/or source of the financial restructuring of Marvel and Perelman's intent to subvert the protections contained in the Bond indentures;

(d) Whether the market prices of Marvel Bonds and Marvel common stock were artificially inflated during the Class Period due to the material misrepresentations and omissions complained of herein; and

(e) To what extent the members of the Class have sustained damages and the proper measure of damages.

31. A class action is superior to all other available methods for the fair and efficient adjudication of this controversy since joinder of all members is impracticable. Further- more, as the damages suffered by individual Class members may be relatively small or disproportionate to the costs of litigation, the expense and burden of individual litigation make it impossible for members of the Class to individually redress the wrongs done to them. There will be no difficulty in the management of this class action.

32. Plaintiff hereby invokes the presumption of reliance established by the fraud-on-the-market doctrine in that, among other things, at all times:

(a) Marvel Bonds trade in the over-the-counter market, an efficient automated market;

(b) As regulated issuers, Marvel, Marvel III, Holdings and Parent filed periodic public reports with the SEC;

(c) The trading volume of the Bonds was substantial, reflecting numerous trades each day;

(d) The Bonds were followed by securities analysts employed by several major brokerage firms who wrote reports which were distributed to the sales force and certain customers of such firms and which were available to various automated data retrieval services;

(e) The market quickly assimilated and reflected in the prices of the Bonds all publicly-available information; and

(f) The misrepresentations alleged would tend to induce a reasonable investor to misjudge the value of the Marvel Bonds.

33. Based upon the foregoing, Plaintiff and the other members of the Class are entitled to a presumption of reliance upon the integrity of the market for the purpose of class certification as well as for ultimate proof of the claims on their merits. Plaintiff will also rely upon the presumption of reliance established by material omission and upon the actual reliance of the class members.

34. Marvel is the largest creator and publisher of comic books in North America. It has published comic books since 1939, developing a roster of more than 3,500 characters, including Spider-Man, Ironman, X-Men, Captain America, the Incredible Hulk and the Fantastic Four among them. Marvel's publications are primarily distributed through comic book specialty stores, traditional retail outlets or subscription sales. Marvel's net publishing revenues were $ 147.7 million, $129.4 million and $160.2 million for the years ended December 31, 1995, 1994 and 1993, respectively.

35. In 1993 and 1994, Marvel III, Parent, and Holdings issued approximately $894.1 million, collectively, in face amount of Marvel Bonds to the public. According to the registration statements filed in connection with the offerings, the Marvel Bonds were collateralized by Perelman's Marvel common stock holdings, which at that time represented 81% of the voting stock of Marvel. Notably, the proceeds of each offering of Bonds benefitted entities controlled by Perelman other than Marvel, Marvel III, Parent or Holdings.

36. Thus, on or about May 11, 1994, Marvel III, jointly with Parent, filed with the SEC a Form S-1 Registration Statement concerning the issuance of $125,000,000 (face amount) of 9.125% senior secured notes due February 15, 1998. According to the registration statement, the Bonds were secured by 9,302,326 shares of Marvel common stock, or approximately 9% of Marvel's then outstanding shares, that were owned by Parent and by all shares of Holdings that would be owned or acquired by Marvel III in the future. Likewise, the Bonds issued by Parent ($251,678,000 face value) and Holdings ($517,447,000) were collateralized by the balance of Perelman's direct and indirect Marvel common stock holdings at that time. Parent filed a Form S-1 Registration Statement with the SEC on or about October 13, 1993 and Holdings filed a Form S-1 Registration Statement with the SEC on or about May 7, 1993 with respect to their respective bond issuances of each.

37. (a) The registration statements and prospectuses filed in connection with the issuance of the Marvel Bonds contained and/or referred to the indentures (the "Indentures") under which the Bonds were issued. The Indentures represented that any future transactions between Marvel and any other Perelman-related entities would be subject to certain protections. With respect to these protections, the Indentures stated:

shall not permit Marvel ... to ... enter into any transaction or series of similar transactions (including the purchase, sale, lease or exchange of any property ... ) with any Affiliate of [Marvel III, Parent and/or Holdings] or any legal or beneficial owner of 10% or more of the Voting Stock of [Marvel III and/or Parent and/or Holdings] or with an Affiliate of any such owner unless "(i) the terms of such business, transaction or series of transactions are ... (B) at least as favorable to Marvel or such Subsidiary as terms that would be obtainable at the time for a comparable transaction or series of similar transactions in arm's-length dealings with an unrelated third Person"

(Emphasis added.)

(b) The Indentures also provided that a Perelman-related transaction could not be consummated unless: (i) it was approved by "a majority of those members of the Board of Directors of Marvel having no personal stake in such business, transaction or series of transactions"; and (ii) Marvel III, Parent and/or Holdings receives and delivers to the indenture trustee an opinion from "a nationally recognized investment banking firm" that the transaction is financially "fair" to [Marvel, Parent and/or Holdings]. (Marvel III Indenture, § 4.06(b); Parent Indenture, § 4.06(b).) The terms of the Indentures were part of the total mix of information available to and considered by purchasers of the Bonds and the marketplace.

38. Based on these representations and contractual obligations, investors were led to believe that any future transaction, including a restructuring transaction, involving Marvel and any Perelman-related entity would be the product of arm's-length dealing and be at least as favorable to the Company as would be obtainable at the time for a comparable transaction or series of similar transactions in arm's-length dealings with an unrelated third-party.

39. During the Class Period, defendants' statements were materially false and misleading because, at all relevant times, defendants had a predetermined plan whereby Perelman would purchase newly-issued unpledged Marvel common stock at an inadequate and unfair price -- not representative of an arm's-length negotiation or on terms that could be received from a third party, in direct contravention of the contractual obligations contained in the Indentures -- thereby diluting Marvel Bondholders' equitable interest in the Company and diluting and impairing the value of the Bonds.

40. (a) The Class Period begins on October 8, 1996, when Marvel announced its preliminary results for its third quarter ending September 30, 1996. Marvel reported that it expected to incur a net loss within a range of $0.07 to $0.12 per common share, including a $22 million nonrecurring pre-tax gain. In that announcement, defendants stated with respect to the contemplated restructuring and recapitalization of Marvel:

As a result of the greater than expected operating losses, the Company has failed to satisfy certain financial covenants contained in its bank credit facilities and has commenced discussions with its agent bank seeking waivers of these covenants and a restructuring of the facilities to provide for its cash requirements. The Company believes that such a restructuring will ultimately require an infusion of new equity capital and has also begun discussions with certain affiliated entities to obtain the necessary funds to meet its current and long-term needs,

(Emphasis added.)

41. This statement was materially false and misleading because at the very time the Company indicated that any "restructuring" would ultimately necessitate and involve an infusion of new equity capital into Marvel, defendants had already formulated a plan, which they were then implementing, whereby Perelman or Perelman-related entities would purchase newly- issued, unpledged Marvel common-stock at a substantial discount to the prevailing market price, which was then $4.625 per share, severely diluting the market value of the outstanding Marvel common stock and the value of the Marvel Bonds purportedly collateralized by that stock.

42. In response to the Company's October 8th announcement, the market price of the Bonds declined somewhat as investors took note that Marvel had suffered a loss and that the Company would be seeking additional equity capital. Defendants' statements, however, in no way apprised the market of Perelman's plan to purchase newly-issued Marvel common stock at fire-sale prices in a transaction not representative of an arm's-length transaction or on terms that could be received from a third-party. Moreover, defendants did not disclose that Perelman and his associates were actively engaged in taking steps to subvert the contractual obligations and protections set forth in the Indentures to the detriment of Bondholders.

43. Despite the fact that Marvel had reported losses, analysts recommended that investors purchase the Bonds given Marvel's unique and valuable intellectual properties and licenses and the impression cultivated by defendants that Perelman-affiliated entities would be infusing additional capital and thus bolstering Marvel's financial condition. For example, on October 10, 1996, Max Holmes, head of high-yield research at Natwest Markets stated that: "[T]he bonds are an outright buy at this level."

44. Shortly thereafter, on October 17, 1996, Andrews announced that it had agreed to buy an additional 67% of Toy Biz's Class A common stock, or approximately 13.6 million shares -- for a total price of approximately $191 million in cash and $40 million in Andrews debt. Andrews also announced that Marvel intended to acquire the remaining Toy Biz shares that were not owned by it "at a cash price approximating current market and that Toy Biz [would] become a wholly owned subsidiary of Marvel."

45. In that announcement, Andrews and the other defendants continued to misrepresent and conceal Perelman's plan to purchase newly-issued unpledged Marvel stock at below market prices, thus impairing the security of the Bonds. In connection with the October 17th announcement, Andrews further stated that it anticipated making a proposal to Marvel pursuant to which Andrews (or an affiliate) would purchase more equity capital in Marvel. Andrews noted that although there can be no assurance that agreement would be reached on the terms of the proposed equity purchase, "it is expected that any such purchading the Marvel shares which serve as collateral for Marvel Holding Company lenders."

46. Because the market was led to believe that this statement added nothing new concerning the scope or nature of any restructuring of Marvel, the price of the Bonds remained fairly stable in its aftermath. Analysts echoed this sentiment. For example, on November 4, 1996, Alexander Paris, an analyst at Barrington Research stated that: "Marvel's stock price fully reflects all of the company's negative news . . ." Indeed, the prices of the Bonds had stabilized because of investors' faith that Perelman was in fact coming to the rescue of the Company and was constrained from acting in any way contrary to the Indentures.

47. This statement was materially false and misleading because at the very time the Company indicated that any purchase of equity capital would dilute existing Marvel shares, defendants had already formulated a plan whereby Perelman or Perelman-related entities would purchase hundreds of millions of shares of newly-issued Marvel common-stock at a price of only $0.85 per share when the prevailing market price was $4.625 per share, a huge discount to market which would inevitably have catastrophic consequences for the market value of the pre-existing Marvel shares and the market value of the Marvel Bonds secured by those shares. In addition, defendants did not disclose that Perelman had no intention of complying with his contractual obligations as set forth in the Indentures. In direct conflict with the covenants contained in the Indentures, upon which investors had relied and which the market had fully assimilated in pricing the Bonds, the prospective restructuring transaction with a Perelman selected entity, in this case Andrews, would in no way approximate terms that represented in an arm's-length transaction -- not at a price level 81 % below the prevailing market price.. In addition, because the newly-issued Marvel shares were not only sold by Marvel at an unfair and inadequate price but would not be pledged as collateral for the Bonds, not only the shares were diluted but the Bonds were diluted as well.

48. On or about November 8, 1996, just days before the end of the Class Period, a representative of Andrews met with representatives of Fidelity and Putnam, holders of large positions in the Bonds, with whom defendants expected to engage in advantageous future business dealings, and imparted to them material non-public adverse information about the pending announcement of a restructuring transaction which, contrary to prior public representations and expectations, would have devastating consequences for investors in the Bonds. Specifically, the representative told Fidelity and Putnam that "things are bad" and that the soon to be announced restructuring transaction is not "as sanguine as what people are hoping." Quickly acting on this information, Fidelity and Putnam sold $70 million face amount of their Bonds just days before the announcement of the expected transaction, thereby avoiding tens of millions of additional losses in diminished value that would have followed and been suffered had they continued to hold the Bonds at the time that the already existing facts were revealed.

49. On November 12, 1996, Marvel publicly announced that Andrews had formally proposed a transaction whereby Andrews would buy 410 million newly-issued and unencumbered shares of Marvel common stock, for $350 million, or $0.85 per share. Prior to that time, Marvel had approximately 100 million shares outstanding which closed at $4.625 per share. These newly issued shares would represent 80.1 % of the outstanding shares of Marvel post-transaction. The proposed restructuring was conditioned on Toy Biz becoming a wholly-owned subsidiary of Marvel. In that regard, Andrews had agreed to purchase the 67% interest of Toy Biz stock owned by its two largest shareholders.

50. The purchase price for the shares was to be $350 million in cash, or, at the option of Andrews, an equal value of shares of Class A common stock of Toy Biz, or a combination of the foregoing. The expected issuance of the Marvel shares to Andrews would result in the substantial dilution of Marvel's public stockholders and the holders of the Bonds.

51. The proposal also stated that "in light of overlapping equity ownership between Andrews and Marvel" a purported "special committee" had been formed comprised of purportedly independent directors to consider the self-dealing investment by Andrews. However, in light of the irremediable conflict of interests present between the Andrews Board and the Marvel Board, and Perelman's iron-clad control over both Boards, any attempt to create a purported "special committee" was a sham and approval was a foregone conclusion.

52. The consideration of $350 million was grossly unfair, inadequate and not representative of Marvel's true and present value.

53. Incredibly, the terms of the prospective transaction required Marvel to increase the number of its outstanding shares to approximately 511.6 million shares from 101.8 million, thereby substantially diluting Marvel common stockholders and greatly reducing the value of the shares that were pledged as collateral for the Bonds, thus greatly impairing and reducing the value of the Bonds.

54. Public reaction to the announcement that Marvel bondholders would, in effect, be stripped of their collateral was swift and negative. Although the market had been conditioned by defendants to expect the announcement of a restructuring transaction, the terms were not what the market had been led to believe or could have been reasonably expected based on what had been previously disclosed. On November 12, 1996, the market price of each series of the Bonds fell substantially (all prices in this paragraph are for each $ 100 of face value):

(a) The Marvel III Bonds fell 60%, from a price of $45 to $18 on the announcement.

(b) The Parent Bonds fell 55%, from a price of $40 to $18 on the announcement.

(c) The Holdings Bonds fell 57%, from a price of $45 to $19 on the announcement.

55. Each series of Marvel Bonds suffered a significant deterioration in the value of its respective collateral in consequence of the transaction as announced. The following chart illustrates the collateral changes due to the proposed transaction:

56. Similarly, the price of Marvel common stock dropped precipitously, falling from $4.625 per share to $2.75 per share on heavy trading volume and averaged $2.27 per share in the ninety (90) days following the November 12, 1996 announcement.

57. On November 20, 1996 Standard & Poor's lowered its debt ratings on the Marvel Bonds from "CCC+" to "C+," one of its lowest grades for rated bonds. On November 25, 1996, Moody's downgraded the Marvel Bonds to comparably low ratings.

58. The price of the Bonds continued to languish in the ninety days following the November 12, 1996 announcement by Marvel. The mean trading price for the Bonds during that time is as follows: Marvel III Bonds -- $16.98; Parent Bonds -- $17.47; and Holdings Bonds -- $16.635.

59. Public reaction to the announcement of the proposed transaction was severe and analysts slammed the deal. Phelps Hoyt, an analyst at KDP Investment Advisors, described the proposal as "offensive" and a "very low blow." A New York Times article, on November 13, 1996, contained the following quote concerning the proposal:

Jill Krutick, who follows Marvel for Smith Barney said that "the deal that Mr. Perelman has offered dilutes the shareholders and debt holders far more significantly than we envisioned."

60. On December 27, 1996, Perelman, in an effort to cram-down his proposed restructuring, caused Marvel, Marvel III, Parent, and Holdings to file voluntary petitions for bankruptcy protection in the United States Bankruptcy Court for the District of Delaware. Along with its petition, Marvel filed a pre-packaged plan of reorganization, the principal purpose of which was to effect a "restructuring of [Marvel's] obligations to its banks and to implement the transactions described in the Plan under which Andrews (or an affiliate thereof) will provide a $365 million capital infusion in Marvel."

61. A driving force and motivation for the challenged transaction was to preserve the 80% or more ownership of Marvel possessed by Perelman and his affiliates. By reason of their 80% threshold ownership of Marvel, Perelman and his affiliates were and are able to enjoy favorable tax and financial reporting privileges and opportunities, through such mechanisms as filing consolidated tax returns and financial statements which they would not enjoy if their threshold ownership fell below 80%. Perelman and his affiliates would thereby be able to recoup a substantial portion of the cost of buying hundreds of millions of shares of newly- issued Marvel stock. Thus, the net cost of the transaction to Perelman and other defendants would be significantly reduced, without any corresponding ameliorating effect on the dilution of the bondholders' investment and the enormous losses which the bondholders would suffer therefrom.

62. In knowing or reckless disregard of the truth and/or as part of their ongoing efforts to continue the illusion that any Company restructuring would not be out of the ordinary course, and would be in accordance with the contractual obligations set forth in the Indentures, having long-term beneficial consequences for holders of the Marvel Bonds and stock, defendants continued to issue and/or participate in the issuance of materially false and misleading statements to the investing public as particularized above. These representations were materially false and misleading when made for the reasons set forth above in that they falsely stated and/or failed to disclose the following material, adverse facts about the plan and recapitalization which was already initiated by Perelman and his associates and affiliates, which facts were known to or recklessly disregarded by all defendants at all relevant times:

(a) that defendants had already decided upon a plan to maintain their 80% control over Marvel by a highly dilutive issuance of newly-issued shares of Marvel which Perelman, through his affiliates, would acquire at exorbitantly discounted prices;

(b) that the material terms of the restructuring transaction, which provided for the sale of hundreds of millions of newly-issued unpledged shares of Marvel stock to Perelman's affiliated entities at a price which was 80% of the prevailing market price, had already been determined and defendants were simply finishing the details and assuring that the mechanics were in place to cram down their proposal when it was announced;

(c) that defendants' predetermined plan was not on terms as favorable to Marvel as terms that could be obtained at the time for a comparable transaction or series of similar transactions in arm's-length dealings with an unrelated third person, and was thus contrary to the protections set forth in the Indentures;

(d) that defendant Perelman, instead of standing behind the Bonds and lending his capital to a restoration of the Company's finances, would, instead, utilize his control and dominance to prepare and implement a transaction which was heavily biased in favor of his own interests and exceedingly damaging to the interest of the other public investors and the market value of Marvel's common stock and the value of the Bonds secured thereby; and

(e) that defendants' predetermined plan and scheme was designed to and would strip Marvel bondholders of the collateral supporting their Bonds.

63. As alleged herein, defendants acted with scienter in that defendants knew that the public documents and statements issued or disseminated relating to the contemplated restructuring were materially false and misleading; knew that such statements or documents would be issued or disseminated to the investing public; and knowingly and substantially participated or acquiesced in the issuance or dissemination of such statements or documents as primary violations of the federal securities laws. As set forth elsewhere herein in detail, Perelman and the Corporate Defendants, as set forth and documented herein in detail, knew at all relevant times of their true and intentions regarding the proposed restructuring of Marvel and were privy to, and implemented the plan whereby the security for the Bonds would be diluted and impaired.

64. Defendants' knowing or wrongful involvement in a course of deception is further evidenced and exemplified by their advance notification of Fidelity and Putnam as to the plan and scheme underway and the restructuring transaction which was imminently to be announced, thereby permitting Fidelity and Putnam to unload their holdings before suffering the huge decline in value that the announcement of the proposed transaction entailed.

65. Defendants' knowledge or conscious disregard of the falsity of their public portrayals of the restructuring proposal during the Class Period is further evidenced by the complex, interrelated and multiple components of the proposed transaction, which defendants determined had to be put in place before making a public announcement of their plans. Given the intricacy of those arrangements, including the number of participating persons and entities whose agreements and involvement had to be delineated and defined, there is at least a strong inference that defendants at all times were aware of and had formed the intention to implement their scheme and knowingly or recklessly misrepresented or omitted the actual facts in their public statements concerning this matter. In speaking publicly to the likelihood of a major restructuring transaction within the near future, defendants voluntarily assumed the duty to speak fully and candidly regarding that matter and not to omit material facts which were necessary to make their statements not false and misleading. They violated this duty by the wrongful course of conduct described above.

66. Defendants were motivated to conceal the true parameters of Perelman's restructuring proposal at all relevant times because of their belief that an announcement of that transaction as a virtual fait accompli would ensure their ability to achieve the implementation of their plan.

67. At all relevant times, the true facts regarding the proposed restructuring were material information that was wrongfully denied to investors. At all relevant times, the proposed transaction, in terms of its price, structure and implementing arrangements, had achieved a sufficient level of detail and agreed format that reasonable investors would have considered such information important in their decisions to purchase the Bonds. The magnitude of the proposed transaction and the fact that defendants, who controlled its implementation at all relevant times, had determined to proceed with its announcement and effectuation as promptly as practicable, rendered the undisclosed facts material and important to investors. Investors would not have purchased the Bonds during the Class Period or would have required and paid highly discounted prices had they received timely and full disclosure of the facts which defendants delayed disclosing until the end of the Class Period.

68. The market for the Marvel Bonds was open, well-developed and efficient at all relevant times. As a result of the above-described false and misleading statements and failures to disclose the full truth about the proposed restructuring, the Marvel Bonds traded at artificially inflated prices during the entire Class Period until the time the adverse information described above was finally provided to and digested by the securities market. Plaintiff and other members of the Class purchased or otherwise acquired Marvel Bonds relying upon the integrity of the market price of Marvel Bonds and market information related to the Company, or, in the alternative, upon defendants' false and misleading statements, and in ignorance of the adverse, undisclosed information and false statements known to defendants, and have been damaged thereby. Upon disclosure of the true facts regarding the restructuring transaction, the market valuation of the Marvel Bonds declined precipitously. Had Plaintiff and other members of the Class known of the materially adverse information not disclosed by defendants, they would not have purchased or acquired Marvel Bonds at the artificially inflated prices that they did during the Class Period.

69. At all relevant times, the misrepresentations and omissions particularized in this complaint directly or proximately caused or were a substantial contributing cause of the damages sustained by Plaintiff and other members of the Class. As described herein, during the Class Period, defendants made or caused to be made a series of false statements and omissions about the proposed restructuring and financial condition of Marvel. These misstatements and omissions had the cause and effect of creating in the market an unrealistically positive assessment of the value of Marvel Bonds, thus causing such securities to be materially overvalued by the market and artificially inflated at all relevant times. Defendants' false portrayal of the anticipated restructuring and Marvel's financial condition throughout the Class Period resulted in Plaintiff and other members of the Class purchasing Marvel's Bonds at a disparity between their market price and their actual value, thus causing the damage complained of herein. When full disclosure of defendants' plan and scheme was made, the market price of the Bonds plummeted in immediate and direct reaction thereto and did not thereafter recover in value.

70. Plaintiff repeats and realleges each and every allegation set forth above.

71. This claim is brought against the defendants with respect to the entire Class Period and on behalf of the Class.

72. The defendants individually and in concert, directly and indirectly, by the use of means or instrumentalities of interstate commerce and/or of the mails, engaged and participated in a continuous course of conduct to conceal adverse material information specified herein. The defendants employed devices, schemes and artifices to defraud, while in possession of material adverse non-public information and engaged in acts, practices, and a course of conduct as alleged herein in an effort to assure investors of Marvel Bonds' future viability and value, which included the making of, or the participation in the making of, untrue statements of material facts and omitting to state material facts necessary in order to make the statements made about Marvel and its future restructuring plans in the light of the circumstances under which they were made, not misleading, and engaged in transactions, practices and course of business which operated as a fraud and deceit upon the purchasers of Marvel Bonds during the Class Period.

73. The defendants had actual knowledge of the misrepresentations and omissions of material facts set forth herein, or acted with reckless disregard for the truth in that they failed to ascertain and to disclose such facts, even though such facts were available to them. Such defendants' material misrepresentations and/or omissions were done knowingly or recklessly and for the purpose and effect of concealing defendants' specific plans for restructuring Marvel's outstanding obligations from the investing public and supporting the artificially inflated price of the Marvel Bonds and Marvel stock. As demonstrated by defendants' material misstatements and omissions throughout the Class Period as to defendants' restructuring plans and the financial condition of Marvel, defendants, if they did not have actual knowledge of the misrepresentations and omissions alleged, were reckless in failing to obtain such knowledge by deliberately refraining from taking those steps necessary to discover whether those statements were false or misleading.

74. As a result of the dissemination of the materially false and misleading information and failure to disclose material facts, as set forth above, the market prices of Marvel Bonds were artificially inflated during the Class Period. In ignorance of the materially false and misleading nature of the reports and statements described above, Plaintiff and other members of the Class relied, to their damage, on the reports and statements described above and/or on the integrity of the market prices of Marvel Bonds and the completeness and accuracy of the information disseminated to Marvel investors in connection with their purchases of the Company's securities.

75. At the times of said misrepresentations and omissions, Plaintiff and other members of the Class were ignorant of their falsity, and believed them to be true. Plaintiff and other class members could not in the exercise of reasonable diligence have known the actual facts. In reliance on said misrepresentations and in reliance upon the superior knowledge and expertise of defendants and on the integrity of the market, Plaintiff and other members of the Class were induced to and did purchase Marvel Bonds at artificially inflated prices. Had Plaintiff and other members of the Class known the truth, they would not have taken such action.

76. By virtue of the foregoing, defendants have violated Section 10(b) of the Exchange Act and Rule 10b-5 promulgated thereunder.

77. Plaintiff and other members of the Class have been damaged by defendants' violations as described in this Count and seek recovery for the damages caused thereby.

78. Plaintiff repeats and realleges each and every allegation made above.

79. This Count is brought by Plaintiff against all defendants in their capacities as controlling persons of persons and entities who are primarily liable for securities violations as set forth herein or, but for the imposition of bankruptcy protections, would be primarily liable (the "Control Person Defendants").

80. By reason of their control over the operations of Marvel and/or Andrews, the Control Person Defendants are "controlling persons" within the meaning of § 20(a) of the Exchange Act and had the power and influence (which they exercised) to cause Marvel and Andrews (or their agents, employees or representatives) to engage in the unlawful conduct complained of herein, and could have prevented such violations from taking place but failed to do so.

81. By reason of the Control Person Defendants each being a "controlling person," as that term is defined in Section 20(a) of the Exchange Act, of other persons primarily liable to Plaintiff and the Class pursuant to the claims arising under Section 1O(b) of the Exchange Act alleged above, or who would be primarily liable but for the imposition of bankruptcy protections, the Control Person Defendants are secondarily liable for such securities law violations pursuant to Section 20(a) of the Exchange Act.

82. As set forth above, the Control Person Defendants, violated Section 10(b), Rule 10b-5 and Section 20(a) by their acts and omissions as alleged in this Complaint. By virtue of their positions as controlling persons, the Control Person Defendants are liable pursuant to Section 20(a) of the Exchange Act. As a direct and proximate result of the Control Person Defendants' wrongful conduct, Plaintiff and other members of the Class suffered damages in connection with their purchases of the Company's Bonds during the Class Period.

WHEREFORE, Plaintiff prays for relief and judgment, as follows:

a) Determining that this action is a proper action, certifying Plaintiff as class representative under Rule 23 of the Federal Rules of Civil Procedure and his counsel as class counsel;

(b) Awarding compensatory damages in favor of Plaintiff and the other Class members against all defendants, jointly and severally, for all damages sustained as a result of defendants' wrongdoing, in an amount to be proven at trial, including interest thereon;

(c) Awarding Plaintiff and the Class their reasonable costs and expenses incurred in this action, including counsel fees and expert fees; and

(d) Such other and further relief as the Court may deem just and proper.

Plaintiff hereby demands a trial by jury.

Defendants addresses are as follows:

Ronald O. Perelman
36 East 63rd Street
New York, New York 10021

Mafco Holdings, Inc.
36 East 63rd Street
New York, New York 10021

MacAndrews & Forbes Holdings, Inc.
36 East 63rd Street
New York, New York 10021

The Andrews Group, Inc.
3200 Windy Hill Road
Suite 1100 West
Atlanta, Georgia 30339

Anthony J. Fant ("plaintiff") declares, as to the claims asserted under the federal securities laws, that:

1. Plaintiff has reviewed the complaint prepared by counsel in the above-captioned case and has authorized its filing.

2. Plaintiff did not purchase the security that is the subject of the complaint at the direction of plaintiff's counsel or in order to participate in any private action arising under the federal securities laws.

3. Plaintiff is willing to serve as a representative party on behalf of a class, including providing testimony at deposition and trial, if necessary.

4. During the Class Period alleged in the' accompanying complaint, plaintiff purchased 1,600 Marvel Holdings, Inc. Senior Secured Discount Series B Bonds, maturing April 15, 1998, at a price of $56.875 per bond, representing a total cost of $910,000.00 and $3.00 handling charge for the purchase of bonds totaling $1.6 million in principal amount.

5. In the past three years, plaintiff has not sought to serve nor has served as a representative party on behalf of a class in an action filed under the federal securities laws.

6. Plaintiff will not accept any payment for serving as a representative party on behalf of a class beyond plaintiff's pro rata share of any recovery, except such reasonable costs and expenses (including lost wages) directly relating to the representation of the Class as ordered or approved by the Court.

I declare under penalty of perjury that the foregoing is true and correct. Executed this 18th day of July, 1997.

Source: Scanned paper copy of court-stamped document