<PAGE>
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON SEPTEMBER 18, 1996
REGISTRATION NO. 333-
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
------------------------
FORM S-1
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
------------------------
PANAVISION INC.
(Exact name of registrant as specified in its charter)
<TABLE>
<S> <C> <C>
DELAWARE 5043 13-3593063
(State or other jurisdiction (Primary Standard Industrial (I.R.S. Employer
of incorporation or Classification Code Number) Identification No.)
organization)
</TABLE>
------------------------
6219 DE SOTO AVENUE
WOODLAND HILLS, CALIFORNIA 91367
(818) 316-1000
(Address, including zip code, and telephone number, including
area code, of registrant's principal executive offices)
------------------------------
WILLIAM C. SCOTT
CHAIRMAN AND CHIEF EXECUTIVE OFFICER
PANAVISION INC.
140 EAST 45TH STREET
NEW YORK, NEW YORK 10017
(212) 867-5420
(Name, address, including zip code, and telephone number,
including area code, of agent for service)
------------------------------
COPIES TO:
<TABLE>
<S> <C>
CHRISTOPHER E. MANNO, ESQ. SAMUEL F. PRYOR, III, ESQ.
WILLKIE FARR & GALLAGHER DAVIS POLK & WARDWELL
ONE CITICORP CENTER 450 LEXINGTON AVENUE
153 EAST 53RD STREET NEW YORK, NEW YORK 10017
NEW YORK, NEW YORK 10022 (212) 450-4000
(212) 821-8000
</TABLE>
------------------------
APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO THE PUBLIC: As soon as
practicable after the effective date of this Registration Statement.
If any of the securities being registered on this Form are to be offered on
a delayed or continuous basis pursuant to Rule 415 under the Securities Act of
1933, check the following box. / /
If this Form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, please check the following box
and list the Securities Act registration statement number of the earlier
effective registration statement for the same offering. / / ___________________
If this Form is a post-effective amendment filed pursuant to Rule 462(c)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. / / ___________________
If delivery of the prospectus is expected to be made pursuant to Rule 434,
please check the following box. / /
------------------------
CALCULATION OF REGISTRATION FEE
<TABLE>
<CAPTION>
PROPOSED MAXIMUM PROPOSED MAXIMUM
TITLE OF EACH CLASS OF AMOUNT TO BE OFFERING PRICE AGGREGATE OFFERING AMOUNT OF
SECURITIES TO BE REGISTERED REGISTERED(1) PER SHARE(2) PRICE(2) REGISTRATION FEE
<S> <C> <C> <C> <C>
Common Stock, $.01 par value $ $69,000,000 $23,794
</TABLE>
(1) Includes shares issuable upon exercise of the Underwriters' over-allotment
option. The shares of Common Stock are not being registered for the purpose
of sales outside of the United States.
(2) Estimated solely for purposes of calculating the registration fee pursuant
to Rule 457(o).
------------------------
THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR DATES
AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT SHALL FILE
A FURTHER AMENDMENT THAT SPECIFICALLY STATES THAT THIS REGISTRATION STATEMENT
SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(A) OF THE
SECURITIES ACT OF 1933, AS AMENDED, OR UNTIL THIS REGISTRATION STATEMENT SHALL
BECOME EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING PURSUANT TO SAID SECTION
8(A), MAY DETERMINE.
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<PAGE>
Information contained herein is subject to completion or amendment. A
registration statement relating to these securities has been filed with the
Securities and Exchange Commission. These securities may not be sold nor may
offers to buy be accepted prior to the time the registration statement
becomes effective. This prospectus shall not constitute an offer to sell or the
solicitation of an offer to buy nor shall there be any sale of these securities
in any State in which such offer, solicitation or sale would be unlawful prior
to registration or qualification under the securities laws of any such State.
<PAGE>
SUBJECT TO COMPLETION, DATED SEPTEMBER 18, 1996
SHARES
[LOGO]
PANAVISION INC.
COMMON STOCK
(PAR VALUE $0.01 PER SHARE)
------------------
Of the shares of Common Stock offered, shares are being offered
hereby in the United States and shares are being offered in a concurrent
international offering outside the United States. The initial public offering
price and the aggregate underwriting discount per share will be identical for
both Offerings. See "Underwriting."
All of the shares of Common Stock offered hereby are being sold by the
Company. Prior to the Offerings, there has been no public market for the Common
Stock of the Company. It is currently estimated that the initial public offering
price per share will be between $ and $ . For factors to be
considered in determining the initial public offering price, see "Underwriting."
SEE "RISK FACTORS" BEGINNING ON PAGE 7 FOR CERTAIN CONSIDERATIONS RELEVANT
TO AN INVESTMENT IN THE COMMON STOCK.
Application will be made for approval for listing of the Common Stock on the
New York Stock Exchange under the symbol "PVI."
------------------
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS
THE SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES
COMMISSION PASSED UPON THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS.
ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
------------------
<TABLE>
<CAPTION>
INITIAL PUBLIC UNDERWRITING PROCEEDS TO
OFFERING PRICE DISCOUNT (1) COMPANY(2)
--------------- -------------- -------------
<S> <C> <C> <C>
Per Share........................................... $ $ $
Total (3)........................................... $ $ $
</TABLE>
- --------------------
(1) The Company has agreed to indemnify the Underwriters against certain
liabilities, including liabilities under the Securities Act of 1933.
(2) Before deducting estimated expenses of $ payable by the Company.
(3) The Company has granted the U.S. Underwriters an option for 30 days to
purchase up to an additional shares of Common Stock at the initial
public offering price per share, less the underwriting discount, solely to
cover over-allotments. Additionally, the Company has granted the
International Underwriters a similar option with respect to an additional
shares as part of the concurrent International Offering. If such
options are exercised in full, the total initial public offering price,
underwriting discount and proceeds to Company will be $ , $
and $ , respectively. See "Underwriting."
------------------
The shares offered hereby are offered severally by the U.S. Underwriters, as
specified herein, subject to receipt and acceptance by them and subject to their
right to reject any order in whole or in part. It is expected that certificates
for the shares will be ready for delivery in New York, New York on or about
, 1996, against payment therefor in immediately available funds.
GOLDMAN, SACHS & CO.
SCHRODER WERTHEIM & CO.
COWEN & COMPANY
------------------
The date of this Prospectus is , 1996.
<PAGE>
[PICTURES OF CAMERA SYSTEMS]
Panavision-Registered Trademark-, PRIMO PRIME-Registered Trademark-, PRIMO
ZOOM-Registered Trademark-, Panaflex-Registered Trademark-,
Panahead-Registered Trademark-, 3-Perf-Registered Trademark-,
Panastar-Registered Trademark- and Lee Filters-TM- are registered trademarks of
the Company. Oscar-Registered Trademark- is a registered trademark of the
Academy of Motion Picture Arts and Sciences.
------------------------
The Company intends to furnish its stockholders annual reports containing
audited financial statements and quarterly reports containing unaudited interim
financial information for the first three fiscal quarters of each fiscal year of
the Company.
------------------------
IN CONNECTION WITH THE OFFERINGS, THE UNDERWRITERS MAY OVER-ALLOT OR EFFECT
TRANSACTIONS WHICH STABILIZE OR MAINTAIN THE MARKET PRICE OF THE COMMON STOCK
OFFERED HEREBY AT A LEVEL ABOVE THAT WHICH MIGHT OTHERWISE PREVAIL IN THE OPEN
MARKET. SUCH TRANSACTIONS MAY BE EFFECTED ON THE NEW YORK STOCK EXCHANGE, OR
OTHERWISE. SUCH STABILIZING, IF COMMENCED, MAY BE DISCONTINUED AT ANY TIME.
------------------------
<PAGE>
PROSPECTUS SUMMARY
THE FOLLOWING SUMMARY IS QUALIFIED IN ITS ENTIRETY BY, AND SHOULD BE READ IN
CONJUNCTION WITH, THE MORE DETAILED INFORMATION, INCLUDING "RISK FACTORS" AND
THE PRO FORMA AND HISTORICAL CONSOLIDATED FINANCIAL STATEMENTS AND NOTES
THERETO, APPEARING ELSEWHERE IN THIS PROSPECTUS. EXCEPT AS OTHERWISE INDICATED
HEREIN, THE INFORMATION IN THIS PROSPECTUS (I) ASSUMES NO EXERCISE OF THE
UNDERWRITERS' OVER-ALLOTMENT OPTION, (II) GIVES EFFECT TO A : 1 STOCK SPLIT OF
THE COMMON STOCK TO BE EFFECTED PRIOR TO THE CLOSING OF THE OFFERINGS AND (III)
GIVES EFFECT TO AN AMENDMENT AND RESTATEMENT OF THE COMPANY'S CERTIFICATE OF
INCORPORATION TO BE EFFECTED PRIOR TO THE CLOSING OF THE OFFERINGS. UNLESS THE
CONTEXT INDICATES OR REQUIRES OTHERWISE, AS USED IN THIS PROSPECTUS, THE
"COMPANY" OR "PANAVISION" MEANS PANAVISION INC. AND ALL OF ITS SUBSIDIARIES AND
ITS RESPECTIVE PREDECESSORS.
THE COMPANY
Panavision Inc. (the "Company" or "Panavision") is a leading designer and
manufacturer of high-precision film camera systems, comprising cameras, lenses
and accessories for the motion picture and television industries. The Company's
camera systems are not available for sale and are rented exclusively through its
domestic and international owned and operated facilities and agent network.
Panavision-Registered Trademark- is recognized in the motion picture and
television industries as the preeminent brand name for cinematography equipment.
Since the Company was founded, Panavision has received two OSCARS and 17 Awards
for Scientific and Technical Achievement from the Academy of Motion Picture Arts
and Sciences. Since 1990, two-thirds of the Academy Award nominees for Best
Cinematography, and five of the six cinematographers who have won the OSCAR for
Best Cinematography, used Panavision camera systems.
Panavision camera systems were used to film all of the 1995 top 10 U.S. box
office movies requiring film cameras, including BATMAN FOREVER, APOLLO 13, DIE
HARD WITH A VENGEANCE and ACE VENTURA: WHEN NATURE CALLS. Similarly, many of the
top box office films in 1996, including MISSION: IMPOSSIBLE, INDEPENDENCE DAY,
ERASER, TWISTER, THE ROCK and A TIME TO KILL, were filmed with Panavision camera
systems. In addition to the Company's involvement in the motion picture
industry, a predominant number of U.S. prime time episodic, or "series,"
television programs that are shot on film use Panavision camera systems,
including FRIENDS, SEINFELD, FRASIER and E.R.
The Company believes that its position as an industry leader results from
its broad range of technologically superior and innovative products, its
longstanding collaborative relationships with filmmakers, the breadth of its
inventory of camera equipment and its dedication to customer service. Panavision
is the only supplier of cinematography equipment that manufactures a complete
camera system incorporating its own range of proprietary prime and zoom lenses,
the most critical components of a camera system. The Company continuously
addresses the technical and creative needs of its customers by designing and
manufacturing unique accessories that in many instances have become the industry
standard.
The motion picture and television industries have shown steady growth over
the past several years, and the Company expects the industries to continue to
grow for the foreseeable future. The Company has been successful in providing
camera systems to these industries, capturing over 75% of the market in 1995 for
major studio feature films and episodic television programs in North America. In
addition, the Company estimates that in 1995 it serviced over one-third of the
independent feature film market and 10%-15% of the television commercial market
in North America as well as 15% of the feature film market in the United Kingdom
and Europe and 10%-15% of the television commercial market in the United
Kingdom, Europe and Japan.
While the Company has been successful in growing its business, its ability
to capture a larger share of the U.S., U.K. and European feature film and
commercial markets has been inhibited by rental
3
<PAGE>
equipment shortages resulting from limited manufacturing capacity and capital
expenditure constraints imposed by the Company's credit facilities. With the
Company's relocation to a new manufacturing facility, its recent
recapitalization and proceeds from the Offerings, the Company believes it will
be well-positioned to (i) significantly increase its production of camera
systems, (ii) increase its leading share of the North American feature film
market, (iii) increase its share of the international feature film market with
an emphasis on Europe and (iv) increase its share of the North American and
international commercial markets.
In addition to manufacturing and renting camera systems, the Company also
rents lighting, lighting grip, power generation and related transportation
equipment through Lee Lighting Limited, the largest lighting rental company in
the United Kingdom, as well as through two owned and operated facilities in
Orlando and Toronto. The Company also manufactures and sells lighting filters
and other color-correction and diffusion filters through Lee Filters, a leading
manufacturer of these products. On a pro forma basis in 1995, the Company had
revenue of $115.1 million.
Panavision Inc. was incorporated in Delaware in 1990. Predecessors of the
Company have been engaged in the design and manufacturing of cinematography
equipment since 1954. The Company's principal executive office is located at
6219 De Soto Avenue, Woodland Hills, California 91367, and its telephone number
is (818) 316-1000.
THE RECAPITALIZATION
The Company conducts its business through Panavision International, L.P.
("PILP") and PILP's subsidiaries. In May 1996, the Company effected a
recapitalization (the "Recapitalization"), pursuant to which it acquired all of
the interests in PILP it did not previously own and retired all of PILP's
outstanding debt securities other than those owned by Warburg, Pincus Capital
Company, L.P. (together with its wholly owned subsidiaries, "Warburg, Pincus"),
for a total of $126.1 million in cash. As part of the Recapitalization, Warburg,
Pincus and management contributed to the Company $12.5 million in the form of
subordinated debt, and the Company borrowed $110.0 million through a credit
arrangement. The balance of the funds required came from the Company's cash on
hand.
THE OFFERINGS
The offering of shares of Common Stock initially being offered in
the United States (the "U.S. Offering") and the offering of shares of
Common Stock initially being offered in a concurrent international offering
outside the United States (the "International Offering") are collectively
referred to as the "Offerings." The closing of each of the Offerings is
conditioned upon the closing of the other Offering.
<TABLE>
<S> <C>
Common Stock offered:
U.S. Offering................................. shares
International Offering........................ shares
Total....................................... shares
Common Stock to be outstanding after the
Offerings:.................................... shares(1)
Use of Proceeds................................. Repayment of outstanding indebtedness and
for working capital and general corporate
purposes. See "Use of Proceeds."
Proposed NYSE symbol............................ "PVI"
</TABLE>
- ------------------------
(1) Excludes shares of Common Stock reserved for issuance under the Company's
stock option plan, of which options for shares have been granted or will
be issued upon completion of the Offerings. See "Management--Compensation
Pursuant to Plans." Assumes the Underwriters' over-allotment option is not
exercised. If such over-allotment is exercised, up to an additional
shares will be issued and sold by the Company.
4
<PAGE>
SUMMARY PRO FORMA FINANCIAL INFORMATION
(IN THOUSANDS, EXCEPT SHARE AND PER SHARE DATA)
The following pro forma statement of operations information gives effect to
the Recapitalization and the July 1996 acquisition (the "Lee Lighting
Acquisition") of Lee Lighting Limited ("Lee Lighting"), in each case as if such
transactions had occurred at the beginning of the period presented. The pro
forma balance sheet information gives effect to the Lee Lighting Acquisition and
is then further adjusted to give effect to the Offerings as if such transactions
had occurred on June 30, 1996. The pro forma financial information should be
read in conjunction with "Management's Discussion and Analysis of Financial
Condition and Results of Operations," the Unaudited Pro Forma Condensed
Consolidated Financial Statements and the Consolidated Financial Statements of
the Company and Lee Lighting and the notes thereto included elsewhere in this
Prospectus.
<TABLE>
<CAPTION>
SIX MONTHS ENDED
JUNE 30,
YEAR ENDED --------------------
DECEMBER 31, 1995 1995 1996
---------------------------------- --------- ---------
<S> <C> <C> <C>
STATEMENT OF OPERATIONS DATA:
Revenue:
Camera rental........................ $ 75,083 $ 34,828 $ 38,740
Lighting rental...................... 22,081 10,199 11,036
Sales and other rental............... 17,913 9,087 9,884
---------- --------- ---------
Total............................ 115,077 54,114 59,660
Gross margin............................. 55,163 25,018 28,204
Operating income......................... 20,750 7,739 10,967
Net income............................... 10,382 3,460 5,316
Net income per share.....................
Shares used in computation...............
OTHER DATA:
EBITDA (1)............................... $ 40,616 $ 17,711 $ 21,272
Capital expenditures..................... 20,936 8,295 11,066
EBITDA margin percentage (2)............. 35.3% 32.7% 35.7%
Gross margin percentage (2).............. 47.9 46.2 47.3
Operating income percentage (2).......... 18.0 14.3 18.4
</TABLE>
<TABLE>
<CAPTION>
JUNE 30, 1996
-----------------------------
<S> <C> <C>
PRO FORMA AS
PRO FORMA ADJUSTED(3)
------------ ---------------
BALANCE SHEET DATA:
Total assets........................................................... $ 154,866
Total current liabilities.............................................. 25,671
Long-term debt......................................................... 111,112
Stockholders' equity................................................... 17,439
</TABLE>
- ------------------------
(1) Income before income taxes, depreciation and amortization and net interest
("EBITDA"). The Company believes that EBITDA serves as an important
financial analysis tool for measuring financial information such as
liquidity, operating performance and leverage. EBITDA should not be
considered by the reader as an alternative to net income as an indicator of
Panavision's performance or as an alternative to cash flows as a measure of
liquidity.
(2) EBITDA margin percentage is defined as EBITDA as a percentage of revenue,
gross margin percentage is defined as gross margin as a percentage of
revenue and operating income percentage is defined as operating income as a
percentage of revenue.
(3) Adjusted to reflect (i) the sale of shares of Common Stock in the
Offerings and (ii) the application of the estimated net proceeds therefrom.
See "Use of Proceeds."
5
<PAGE>
SUMMARY HISTORICAL FINANCIAL INFORMATION
(IN THOUSANDS, EXCEPT SHARE AND PER SHARE DATA)
<TABLE>
<CAPTION>
SIX MONTHS ENDED
YEAR ENDED DECEMBER 31, JUNE 30,
--------------------------------- --------------------
<S> <C> <C> <C> <C> <C>
1993 1994 1995(1) 1995 1996
--------- --------- ----------- --------- ---------
STATEMENT OF OPERATIONS DATA:
Revenue:
Camera rental................................ $ 54,031 $ 61,642 $ 75,083 $ 34,828 $ 38,740
Lighting rental.............................. 933 1,160 4,121 1,816 1,374
Sales and other rental....................... 11,746 14,298 16,124 8,053 9,146
--------- --------- ----------- --------- ---------
Total.................................... 66,710 77,100 95,328 44,697 49,260
Gross margin..................................... 30,278 36,105 50,959 22,969 25,925
Operating income................................. 9,131 14,453 19,487 7,285 10,219
Income before non-controlling partners' interest
in PILP and income taxes....................... 4,085 9,800 14,286 5,152 7,523
Net income....................................... 3,305 7,078 5,563 1,805 2,427
Net income per share.............................
Shares used in the computation...................
OTHER DATA:
EBITDA (2)....................................... $ 23,910 $ 30,149 $ 37,381 $ 16,329 $ 19,647
Capital expenditures............................. 12,678 16,251 19,454 7,340 9,916
EBITDA margin percentage (3)..................... 35.8% 39.1% 39.2% 36.5% 39.9%
Gross margin percentage (3)...................... 45.4 46.8 53.5 51.4 52.6
Operating income percentage (3).................. 13.7 18.7 20.4 16.3 20.7
</TABLE>
<TABLE>
<CAPTION>
DECEMBER 31,
1995 JUNE 30, 1996
--------------- ---------------
<S> <C> <C>
BALANCE SHEET DATA:
Total assets....................................................... $ 165,751 $ 143,915
Total current liabilities.......................................... 25,162 22,884
Long-term debt..................................................... 124,678 111,112
Stockholders' equity............................................... 6,456 9,415
</TABLE>
- ------------------------
(1) During January 1995, the Company acquired Panavision Canada Corporation, its
former agent.
(2) EBITDA before non-controlling partners' interest in PILP. The Company
believes that EBITDA serves as an important financial analysis tool for
measuring financial information such as liquidity, operating performance and
leverage. EBITDA should not be considered by the reader as an alternative to
net income as an indicator of Panavision's performance or as an alternative
to cash flows as a measure of liquidity.
(3) EBITDA margin percentage is defined as EBITDA as a percentage of revenue,
gross margin percentage is defined as gross margin as a percentage of
revenue and operating income percentage is defined as operating income as a
percentage of revenue.
6
<PAGE>
RISK FACTORS
PROSPECTIVE PURCHASERS OF THE COMMON STOCK OFFERED HEREBY SHOULD CONSIDER
CAREFULLY ALL OF THE INFORMATION SET FORTH IN THIS PROSPECTUS, AND, IN
PARTICULAR, SHOULD EVALUATE THE FOLLOWING RISKS IN CONNECTION WITH AN INVESTMENT
IN THE COMMON STOCK.
DEPENDENCE ON FEATURE FILM INDUSTRY
The Company's operations are dependent on the feature film market,
including, in particular, that in the United States. Over the past four years,
the Company has benefited from an increase in the number of major studio feature
films (and especially large-budget action films), which tend to use larger
camera packages than the feature films made by independent producers. A
significant reduction in the total number of feature films produced, including,
in particular, major studio or large-budget action films, could have a material
adverse impact on the Company's operations.
COMPETITION
The market for the Company's cinematography equipment is highly competitive,
primarily driven by technology, customer service and, to a lesser extent, price.
The Company's continued success will depend on its ability to develop,
manufacture and market its products. As a manufacturer of equipment, the
Company's primary competitors are Arriflex Corporation ("Arriflex") and Moviecam
F.G. Bauer G.m.b.H ("Moviecam"). As a renter of equipment, the Company competes
with numerous rental houses, which purchase equipment from other manufacturers
and then rent that equipment to their customers. There can be no assurance that
the Company will be able to continue to develop, manufacture and market its
products successfully against existing or new competitors. See "Business--
Competition."
TECHNOLOGICAL CHANGE
The motion picture and television industries are subject to technological
change, evolving industry standards, changing customer requirements and
improvements in and expansion of product offerings. The Company's ability to
anticipate changes in technology, industry standards, customer requirements and
product offerings and to develop and introduce new and enhanced products will be
significant factors in the Company's ability to remain a leader in the
manufacturing and rental of cinematography equipment. Although the Company
believes it is well-positioned to meet the changing needs of the motion picture
and television industries, there can be no assurance that products or
technologies developed by others will not render the Company's products or
technologies noncompetitive or obsolete. See "Business--Products--Research and
Product Development."
DEPENDENCE ON KEY PERSONNEL
The Company is dependent upon the continued services of certain key officers
and management personnel. The loss of key personnel could have a material
adverse effect on the Company. The Company believes that its future success also
will depend significantly upon its ability to attract, motivate and retain
additional highly skilled managerial, operational, technical and sales and
marketing personnel. Competition for such personnel is intense, and there can be
no assurance that the Company will be successful in attracting, assimilating and
retaining the personnel it requires to develop, manufacture and market its
products or expand its operations. See "Business--Employees,"
"Management--Executive Officers and Directors" and "--Other Key Employees."
DEPENDENCE UPON KEY SUPPLIERS
The Company uses outside vendors for the manufacture of certain components
used in its products, such as the grinding, manufacture and polishing of certain
camera lens elements. Although the
7
<PAGE>
Company believes that such vendors could be replaced, the loss of one or more of
such vendors could disrupt the Company's business. See
"Business--Products--Manufacturing and Assembly."
INTERNATIONAL SALES; FOREIGN EXCHANGE RISK
In 1993, 1994 and 1995, approximately 39%, 45% and 45% of the Company's
revenue, respectively, was generated outside of the United States. The Company
intends to expand the scope of its operations outside of the United States and
expects that international operations will continue to account for a significant
portion of its revenue in future periods. The results of operations of the
Company's U.K. subsidiaries are translated from pounds sterling to United States
dollars. Therefore, the Company's results of operations are affected by
fluctuations in exchange rates between such currencies.
DEPENDENCE ON MANUFACTURING FACILITY
The Company's manufacturing facility is located in Woodland Hills,
California. Since the Company is dependent on its manufacturing facility, a
disruption of the Company's manufacturing operations could have a material
adverse effect on the Company's business, financial condition and results of
operations. Such disruption could result from various factors including human
error or a natural disaster such as earthquake, fire or flood. The Company does
not maintain business interruption insurance that would reimburse the Company in
the event of an earthquake.
INFLUENCE BY EXISTING STOCKHOLDERS
Upon completion of the Offerings, the Company's existing stockholders,
including its executive officers, will beneficially own approximately % of
the outstanding shares of the Company's voting stock. As a result, existing
stockholders will be able to continue to elect the Company's Board of Directors
and take other corporate actions requiring stockholder approval, as well as
dictate the direction and policies of the Company. Such concentration of
ownership also could delay, deter or prevent a change in control of the Company.
In addition, pursuant to a stockholders agreement, Warburg, Pincus and
management have the right to designate three persons to be appointed or
nominated to the Company's Board of Directors. See "Management--Stockholders
Agreement" and "Principal Stockholders."
ABSENCE OF PRIOR PUBLIC MARKET; POSSIBLE VOLATILITY OF STOCK PRICE
Prior to the Offerings, there has been no public market for the Common
Stock. Although application will be made for approval for listing of the Common
Stock on the New York Stock Exchange ("NYSE"), there can be no assurance that an
active trading market for the Common Stock will develop or be sustained
following the Offerings or that the market price of the Common Stock will not
decline below the initial public offering price. The initial public offering
price will be determined by negotiation between the Company and the
Representatives of the Underwriters based upon several factors and may not be
indicative of future market prices. The price at which the Common Stock will
trade will depend upon a number of factors, some of which are beyond the
Company's control. Such factors include, but are not limited to, the Company's
historical and anticipated operating results, general market and economic
conditions, quarterly fluctuations in the Company's financial and operating
results, announcements by the Company or others and developments affecting the
Company, its products, its clients, the markets in which it competes or the
industry generally. In addition, the stock market has from time to time
experienced extreme price and volume fluctuations. These broad market
fluctuations may adversely affect the market price of the Common Stock. See
"Underwriting."
8
<PAGE>
SHARES ELIGIBLE FOR FUTURE SALE; POTENTIAL FOR ADVERSE EFFECT ON STOCK PRICE;
REGISTRATION RIGHTS
Sales of a substantial number of shares of Common Stock in the public market
or the prospect of such sales could adversely affect prevailing market prices
for the Common Stock. Upon completion of the Offerings, the Company will have
outstanding shares of Common Stock. Of these shares, the shares of
Common Stock to be sold in the Offerings will be freely tradable without
restriction under the Securities Act of 1933, as amended (the "Securities Act"),
except for any such shares which may be acquired by an "affiliate" of the
Company. The Company and certain stockholders, who will own an aggregate of
approximately shares of Common Stock after the Offerings, have agreed not
to sell or otherwise dispose of any shares of Common Stock or substantially
similar securities for 180 days after the date of this Prospectus without the
prior written consent of Goldman, Sachs & Co. Subject to such lock-up
arrangements, approximately shares of Common Stock will be eligible for
sale in the public market pursuant to Rule 701 under the Securities Act 90 days
after the date of the Offerings, an additional shares will be eligible for
sale in the public market subject to compliance with the resale volume
limitations and other restrictions of Rule 144 under the Securities Act in
and an additional shares will be eligible for sale in the public
market under Rule 144 under the Securities Act in . Promptly after the
closing of the Offerings, the Company intends to file a registration statement
under the Securities Act covering the sale of shares of Common Stock
reserved for issuance under its stock option plan. Upon completion of the
Offerings, there will be outstanding options to purchase a total of shares
of Common Stock. See "Management--Compensation Pursuant to Plans." The Company
has granted certain stockholders registration rights with respect to
approximately shares of Common Stock. See "Description of Capital
Stock--Registration Rights." The sale of such shares could have a material
adverse effect on the Company's ability to raise capital in the public markets.
See "Shares Eligible for Future Sale."
IMMEDIATE AND SUBSTANTIAL DILUTION TO NEW INVESTORS
Investors purchasing shares of Common Stock in the Offerings will incur
substantial and immediate dilution of $ per share in the pro forma net
tangible book value of the Common Stock from the initial public offering price.
In addition, these investors will incur additional dilution upon the exercise of
outstanding stock options. See "Dilution."
ANTI-TAKEOVER EFFECT OF CERTAIN CHARTER AND BY-LAW PROVISIONS
The Company's Certificate of Incorporation authorizes the issuance of
Preferred Stock without stockholder approval and upon such terms as the Board of
Directors may determine. The issuance of Preferred Stock could have the effect
of making it more difficult for a third party to acquire, or of discouraging a
third party from acquiring or making a proposal to acquire, a majority of the
outstanding stock of the Company and could adversely affect the prevailing
market price of the Common Stock. The rights of the holders of Common Stock will
be subject to, and may be adversely affected by, the rights of holders of
Preferred Stock that may be issued in the future. The Company has no present
plans to issue any shares of Preferred Stock. See "Description of Capital
Stock--Preferred Stock."
9
<PAGE>
USE OF PROCEEDS
The net proceeds to the Company from the sale of the shares of Common
Stock offered hereby, based upon an assumed initial public offering price of
$ per share, are estimated to be $ ($ if the Underwriters'
over-allotment option is exercised in full), after deducting the underwriting
discount and estimated offering expenses. The net proceeds of the Offerings will
be used to repay indebtedness of the Company of approximately $ and for
working capital and general corporate purposes.
Of the debt to be repaid, (i) $ is indebtedness under the Company's
senior bank loan which was incurred in the Recapitalization and bears interest
at a floating rate (8.53% per annum as of September 18, 1996) with a maturity
date of March 31, 2004, and (ii) $ is indebtedness which was incurred in
the Recapitalization and is owed to certain members of management and the
Company's principal stockholder pursuant to subordinated demand notes which bear
interest at 6.83% per annum. See "Certain Transactions."
DIVIDEND POLICY
The Company has never paid a cash dividend on its Common Stock and does not
anticipate paying any cash dividends on the Common Stock in the foreseeable
future. The current policy of the Company's Board of Directors is to retain
earnings to finance the operations and expansion of the Company's business. In
addition, the Company's existing credit agreement restricts the Company's
ability to pay dividends to its stockholders. See "Management's Discussion and
Analysis of Financial Condition and Results of Operations--Liquidity and Capital
Resources."
10
<PAGE>
CAPITALIZATION
The following table sets forth the capitalization of the Company as of June
30, 1996, the unaudited pro forma capitalization after giving effect to the Lee
Lighting Acquisition and as adjusted to reflect the issuance and sale of the
shares of Common Stock offered hereby by the Company and the application of the
estimated net proceeds therefrom. See "Use of Proceeds."
<TABLE>
<CAPTION>
JUNE 30, 1996
---------------------------------------
<S> <C> <C> <C>
PRO FORMA
ACTUAL PRO FORMA AS ADJUSTED
---------- ------------ -------------
<CAPTION>
(IN THOUSANDS, EXCEPT SHARE DATA)
<S> <C> <C> <C>
Long-term debt:
Term bank loan............................................ $ 92,750 $ 92,750 $
Revolving credit facility................................. 10,000 10,000
Notes to affiliates....................................... 8,362 8,362
---------- ------------ -------------
Total long-term debt.................................... 111,112 111,112
Stockholders' equity:
Preferred stock, par value $.01 per share, shares
authorized, no shares issued and outstanding............ -- --
Common stock, par value $.01 per share, shares
authorized, shares issued and outstanding(1)...... -- --
Additional paid-in capital................................ 5,520 13,544
Retained earnings......................................... 4,131 4,131
Foreign currency translation adjustment................... (236) (236)
---------- ------------ -------------
Total stockholders' equity.............................. 9,415 17,439
Total capitalization.................................... $ 120,527 $ 128,551 $
---------- ------------ -------------
---------- ------------ -------------
</TABLE>
- ------------------------
(1) Excludes an aggregate of shares of Common Stock reserved for issuance
under the Company's stock option plan, including shares of Common Stock
subject to outstanding options. See "Management--Compensation Pursuant to
Plans."
11
<PAGE>
DILUTION
The pro forma net tangible book value of the Company at June 30, 1996 was
$ or approximately $ per share of Common Stock. Pro forma net
tangible book value per share represents the amount of total tangible assets
less total liabilities, divided by the aggregate number of shares of Common
Stock outstanding as of June 30, 1996, after giving effect to the Lee Lighting
Acquisition. Without taking into account any changes in the Company's pro forma
net tangible book value after June 30, 1996, other than to give effect to the
receipt of the net proceeds from the sale of the shares of Common Stock
offered hereby, assuming an initial public offering price of $ per share
and after deducting the underwriting discount and estimated offering expenses to
be paid by the Company, the pro forma net tangible book value of the Company at
June 30, 1996 would have been $ , or $ per share. This represents an
immediate increase in pro forma net tangible book value of $ per share
of Common Stock to existing stockholders and an immediate dilution of
approximately $ per share to new investors purchasing shares in the
Offerings. The following table illustrates the per share dilution:
<TABLE>
<S> <C> <C>
Assumed initial public offering price per share....................... $
Pro forma net tangible book value before the Offerings.............. $
Increase per share attributable to the Offerings....................
Pro forma net tangible book value per share after the Offerings.......
Dilution per share to new investors................................... $
---------
---------
</TABLE>
The following table sets forth, on a pro forma basis as of June 30, 1996,
the number of shares of Common Stock purchased from the Company, the total
consideration paid to the Company and the average price per share paid by
existing stockholders and by the new investors purchasing shares of Common Stock
from the Company in the Offerings (before deducting the underwriting discount
and estimated offering expenses):
<TABLE>
<CAPTION>
TOTAL CONSIDERATION
SHARES PURCHASED
------------------------ ------------------------ AVERAGE PRICE PER
NUMBER PERCENT AMOUNT PERCENT SHARE
----------- ----------- ----------- ----------- -----------------
<S> <C> <C> <C> <C> <C>
Existing stockholders.................................... % $ % $
New investors............................................ $
Total................................................ 100% $ 100%
--- --- ----------- ---
--- --- ----------- ---
</TABLE>
The foregoing calculations exclude shares subject to outstanding options
and shares subject to options that will be issued upon completion of the
Offerings. As of June 30, 1996, there were options outstanding to purchase an
aggregate of shares at a weighted average exercise price of $ per
share. To the extent that outstanding options are exercised in the future, there
will be further dilution to new investors. See "Management--Compensation
Pursuant to Plans."
12
<PAGE>
SELECTED CONSOLIDATED FINANCIAL DATA
(IN THOUSANDS, EXCEPT SHARE AND PER SHARE DATA)
The following selected financial data for the seven months ended December
31, 1991 and for the four years ended December 31, 1995 are derived from the
audited consolidated financial statements of the Company. The financial data of
the Company as of June 30, 1996 and for the six months ended June 30, 1995 and
1996 are derived from unaudited financial statements. The unaudited financial
statements include all adjustments, consisting of normal recurring accruals,
which the Company considers necessary for a fair presentation of the financial
position and the results of operations for these periods. Operating results for
the six months ended June 30, 1996 are not necessarily indicative of the results
that may be expected for the entire year. The data should be read in conjunction
with the consolidated financial statements, related notes and other financial
information included herein.
<TABLE>
<CAPTION>
SIX
MONTHS
ENDED
SEVEN MONTHS YEAR ENDED DECEMBER 31, JUNE 30,
ENDED ------------------------------------------ ---------
DECEMBER 31, 1991 1992 1993 1994 1995(1) 1995
------------------- --------- --------- --------- --------- ---------
<S> <C> <C> <C> <C> <C> <C>
STATEMENT OF OPERATIONS DATA:
Revenue:
Camera rental.................................... $ 30,355 $ 48,511 $ 54,031 $ 61,642 $ 75,083 $ 34,828
Sales and lighting rental........................ 7,544 14,049 12,679 15,458 20,245 9,869
-------- --------- --------- --------- --------- ---------
Total rental revenue and sales................. 37,899 62,560 66,710 77,100 95,328 44,697
Cost of rental and sales and depreciation of rental
assets........................................... 22,045 38,005 36,432 40,995 44,369 21,728
-------- --------- --------- --------- --------- ---------
Gross margin....................................... 15,854 24,555 30,278 36,105 50,959 22,969
Selling, general and administrative expenses....... 13,782 21,648 18,875 19,210 28,486 14,131
Research and development expenses.................. 1,408 2,000 2,272 2,442 2,986 1,553
-------- --------- --------- --------- --------- ---------
Operating income................................... 664 907 9,131 14,453 19,487 7,285
Net interest expense............................... (3,797) (5,453) (5,229) (5,318) (5,616) (2,979)
Net other income (expense)......................... 728 (1,655) 183 665 415 846
-------- --------- --------- --------- --------- ---------
Income (loss) before non-controlling partners'
interest in PILP and income taxes................ (2,405) (6,201) 4,085 9,800 14,286 5,152
Non-controlling partners' interest in PILP......... (795) (958) (327) (879) (7,348) (2,901)
-------- --------- --------- --------- --------- ---------
Income (loss) before income taxes.................. (3,200) (7,159) 3,758 8,921 6,938 2,251
Income tax (provision) benefit..................... 426 686 (453) (1,843) (1,375) (446)
-------- --------- --------- --------- --------- ---------
Net income (loss).................................. $ (2,774) $ (6,473) $ 3,305 $ 7,078 $ 5,563 $ 1,805
-------- --------- --------- --------- --------- ---------
-------- --------- --------- --------- --------- ---------
Net income (loss) per share........................
-------- --------- --------- --------- --------- ---------
-------- --------- --------- --------- --------- ---------
Shares used in computation.........................
OTHER DATA:
EBITDA (2)......................................... $ 10,087 $ 14,665 $ 23,910 $ 30,149 $ 37,381 $ 16,329
EBITDA margin percentage (3)....................... 26.6% 23.4% 35.8% 39.1% 39.2% 36.5%
Gross margin percentage (3)........................ 41.8 39.3 45.4 46.8 53.5 51.4
Operating income percentage (3).................... 1.8 1.4 13.7 18.7 20.4 16.3
<CAPTION>
1996
---------
<S> <C>
STATEMENT OF OPERATIONS DATA:
Revenue:
Camera rental.................................... $ 38,740
Sales and lighting rental........................ 10,520
---------
Total rental revenue and sales................. 49,260
Cost of rental and sales and depreciation of rental
assets........................................... 23,335
---------
Gross margin....................................... 25,925
Selling, general and administrative expenses....... 13,813
Research and development expenses.................. 1,893
---------
Operating income................................... 10,219
Net interest expense............................... (3,111)
Net other income (expense)......................... 415
---------
Income (loss) before non-controlling partners'
interest in PILP and income taxes................ 7,523
Non-controlling partners' interest in PILP......... (4,500)
---------
Income (loss) before income taxes.................. 3,023
Income tax (provision) benefit..................... (596)
---------
Net income (loss).................................. $ 2,427
---------
---------
Net income (loss) per share........................
---------
---------
Shares used in computation.........................
OTHER DATA:
EBITDA (2)......................................... $ 19,647
EBITDA margin percentage (3)....................... 39.9%
Gross margin percentage (3)........................ 52.6
Operating income percentage (3).................... 20.7
</TABLE>
13
<PAGE>
<TABLE>
<CAPTION>
DECEMBER 31,
----------------------------------------------------------
1991 1992 1993 1994 1995 JUNE 30, 1996
---------- ---------- ---------- ---------- ---------- --------------
<S> <C> <C> <C> <C> <C> <C>
BALANCE SHEET DATA:
Total assets........................................... $ 150,990 $ 138,697 $ 140,075 $ 149,707 $ 165,751 $ 143,915
Total current liabilities.............................. 13,238 13,017 13,419 18,230 25,162 22,884
Long-term debt......................................... 137,000 134,500 131,000 127,000 124,678 111,112
Stockholders' equity (deficiency)...................... (5,928) (10,481) (6,706) 922 6,456 9,415
</TABLE>
- ------------------------
(1) During January 1995, the Company acquired Panavision Canada Corporation, a
former agent.
(2) Income before non-controlling partners' interest in PILP and income taxes
plus depreciation and amortization and interest ("EBITDA"). The Company
believes that EBITDA serves as an important financial analysis tool for
measuring financial information such as liquidity, operating performance and
leverage. EBITDA should not be considered by the reader as an alternative to
net income as an indicator of Panavision's performance or as an alternative
to cash flows as a measure of liquidity.
(3) EBITDA margin percentage is defined as EBITDA as a percentage of revenue,
gross margin percentage is defined as gross margin as a percentage of
revenue and operating income percentage is defined as operating income as a
percentage of revenue.
14
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
THE FOLLOWING DISCUSSION AND ANALYSIS SHOULD BE READ IN CONJUNCTION WITH THE
PRO FORMA AND HISTORICAL CONSOLIDATED FINANCIAL STATEMENTS AND NOTES THERETO AND
THE OTHER FINANCIAL INFORMATION INCLUDED ELSEWHERE IN THIS PROSPECTUS.
INTRODUCTION
The Company believes the transactions described in the Overview will have a
significant effect on the Company's future results of operations. As such, the
Company has prepared "Management's Discussion and Analysis of Financial
Condition and Results of Operations" on both a pro forma and historical basis
for each of the three years in the period ended December 31, 1995 and for each
of the two six-month periods ended June 30, 1995 and June 30, 1996.
OVERVIEW
The Company is a leading designer and manufacturer of high-precision film
camera systems, which it rents to the motion picture and television industries
through its domestic and international owned and operated facilities and agent
network. The Company also rents lighting equipment in the United Kingdom through
Lee Lighting, as well as through two of its owned and operated facilities in
Orlando and Toronto, and manufactures and sells lighting filters and other
color-correction and diffusion filters through Lee Filters.
The Company believes that its future results of operations will be affected
by (i) the number and box-office success of feature film productions in the
North American and international motion picture, television and home video
markets, (ii) the demand for episodic television programs produced on film due
to the increase in the number of cable and network channels, including FOX, WB
and UPN, which require additional original programming, and (iii) the continued
health of the U.S. and U.K. economies, and their effect on spending for
television commercial advertising.
The Company believes there are significant growth opportunities in the North
American and international feature film and commercial markets. Since 1993,
market demand for Panavision's camera systems exceeded the Company's ability to
supply them due to previously limited manufacturing capacity and credit facility
covenants which restricted capital expenditures. In order to address these
constraints, the Company effected its Recapitalization in May 1996, relocated in
June 1996 from its former 75,000 square-foot facility to an upgraded 150,000
square-foot facility and began hiring additional manufacturing personnel. The
Company estimates that by the end of 1996, it will have the capacity to
manufacture 50% more camera systems annually than in previous years. The Company
is also in the process of hiring electronic, software and mechanical research
and product development personnel to introduce new rental products more rapidly.
15
<PAGE>
The Company competes in a number of motion picture and television markets
worldwide. In 1995, approximately 65%, 19% and 16% of the Company's pro forma
total revenue was generated from camera rental, lighting rental, and sales and
other revenue, respectively; and 55% and 45% of the Company's pro forma total
revenue was derived from the North American and international markets,
respectively. The chart below illustrates these markets in more detail, based on
estimates derived from the Company's records of its owned and operated
facilities and its estimates of third-party agents' revenues:
<TABLE>
<CAPTION>
PERCENTAGES OF 1995 PRO FORMA TOTAL REVENUE
- ------------------------------------------------------------------------------------------------
NORTH AMERICA INTERNATIONAL TOTAL
--------------------- ----------------- -----
<S> <C> <C> <C>
Camera rental revenue:
Feature films....................................... 22% 9% 31%
Commercials......................................... 9 6 15
Episodic television................................. 13 * 13
MOWs................................................ 3 * 3
Other............................................... 3 * 3
-- --
---
Sub-total......................................... 50 15 65
Lighting rental revenue............................... 3 16 19
Sales and other revenue............................... 2 14 16
-- --
---
Total revenue..................................... 55% 45% 100%
-- --
-- --
---
---
</TABLE>
- ------------------------------
* Less than 1%.
In 1995, approximately 77% of the Company's camera rental revenue was
generated in North America. The Company estimates that in 1995 it provided
camera systems to 46% of the feature films produced in North America, which
generated 34% of its camera rental revenue. The television industry is comprised
of commercials, episodic or series programs and movies of the week. The Company
estimates that in 1995 it provided camera systems to 79% of the episodic
programs produced using film in North America, which generated 20% of its camera
rental revenue. The Company estimates that in 1995 it provided camera systems to
between 10% and 15% of television commercial productions in North America, which
generated 14% of its camera rental revenue.
The Company also provides camera systems to feature film and television
commercial productions outside of North America primarily in the United Kingdom,
Europe and the Pacific Rim. In 1995, approximately 14% of the Company's camera
rental revenue was generated in the United Kingdom and 9% was generated in all
other territories. The Company estimates that in 1995 it supplied camera systems
to 15% of the feature film productions in the United Kingdom and Europe and to
between 10% and 15% of the commercial productions in the United Kingdom, Europe
and Japan.
In 1995, North American and international agent camera rental revenue was
$7.5 million, or 10% of camera rental revenue, and $6.5 million, or 9% of camera
rental revenue, respectively. Agents are paid a commission equal to 40% of the
rental revenue generated from their customers. In order to increase its control
over camera systems distribution, in January 1995, the Company acquired
Panavision Canada Corporation ("Panavision Canada"), its Canadian agent, which
operates facilities in Toronto and Vancouver. The Company expects to allocate
the additional camera systems it manufactures primarily to owned and operated
facilities.
In July 1996, the Company acquired Lee Lighting, which had an estimated 35%
share in 1995 of the U.K. lighting market. In 1995, on a pro forma basis, the
Company estimates that 84% of its lighting rental revenue and 17% of its total
revenue were generated by Lee Lighting. In 1995, on a pro forma basis,
approximately 53% of the Company's sales and other revenue was generated by Lee
Filters, with the
16
<PAGE>
remainder consisting primarily of sales of film stock, consummable lighting
products and Panavision logo merchandise.
PRO FORMA RESULTS OF OPERATIONS
The following pro forma statement of operations information is presented as
if the Recapitalization, the January 1995 acquisition of Panavision Canada and
the Lee Lighting Acquisition had occurred as of the beginning of each period
presented. The pro forma information is presented for illustrative purposes only
and may not be indicative of the results that would have occurred if the
transactions discussed above had occurred on the dates indicated or which may be
obtained in the future.
<TABLE>
<CAPTION>
SIX MONTHS ENDED
YEAR ENDED DECEMBER 31, JUNE 30,
------------------------------- --------------------
<S> <C> <C> <C> <C> <C>
1993 1994 1995 1995 1996
--------- --------- --------- --------- ---------
<CAPTION>
(IN THOUSANDS)
<S> <C> <C> <C> <C> <C>
STATEMENT OF OPERATIONS DATA:
Revenue:
Camera rental........................................ $ 57,079 $ 64,871 $ 75,083 $ 34,828 $ 38,740
Lighting rental...................................... 19,003 22,605 22,081 10,199 11,036
Sales and other rental............................... 13,577 16,540 17,913 9,087 9,884
--------- --------- --------- --------- ---------
Total.............................................. 89,659 104,016 115,077 54,114 59,660
Cost of rental and sales and depreciation of rental
assets............................................... 54,204 58,770 59,914 29,096 31,456
Gross margin........................................... 35,455 45,246 55,163 25,018 28,204
Selling, general and administrative expenses........... 23,722 24,383 31,427 15,726 15,344
Research and development expenses...................... 2,272 2,442 2,986 1,553 1,893
--------- --------- --------- --------- ---------
Operating income....................................... 9,461 18,421 20,750 7,739 10,967
Net interest expense................................... (9,519) (9,429) (9,458) (4,732) (4,744)
Net other income....................................... 243 472 483 876 423
--------- --------- --------- --------- ---------
Income before income taxes............................. 185 9,464 11,775 3,883 6,646
Income tax provision................................... (265) (1,336) (1,393) (423) (1,330)
--------- --------- --------- --------- ---------
Net income (loss)...................................... $ (80) $ 8,128 $ 10,382 $ 3,460 $ 5,316
--------- --------- --------- --------- ---------
--------- --------- --------- --------- ---------
OTHER DATA:
EBITDA................................................. $ 27,495 $ 37,013 $ 40,616 $ 17,711 $ 21,272
--------- --------- --------- --------- ---------
--------- --------- --------- --------- ---------
</TABLE>
17
<PAGE>
PRO FORMA SIX MONTHS ENDED JUNE 30, 1996 COMPARED TO PRO FORMA SIX MONTHS
ENDED JUNE 30, 1995
Camera rental revenue increased $3.9 million, or 11.2%, to $38.7 million for
the six months ended June 30, 1996 from $34.8 million for the six months ended
June 30, 1995. The increase resulted primarily from the rental of newly
manufactured camera systems and specialty lenses to supply the increased demand
in the North American and international feature film and commercial markets as
well as the North American episodic television market. Revenue also increased as
a result of a small increase in rental rates.
Lighting rental revenue increased $0.8 million, or 7.8%, to $11.0 million
for the six months ended June 30, 1996 from $10.2 million for the six months
ended June 30, 1995. The increase was primarily due to strong demand in the U.K.
feature film and commercial markets, partially offset by a decrease in the North
American lighting rental revenue of $0.4 million.
Sales and other revenue increased $0.8 million, or 8.8%, to $9.9 million for
the six months ended June 30, 1996 from $9.1 million for the six months ended
June 30, 1995. The increase was primarily due to increased sales of Lee Filters
through the Company's U.S. distribution operation.
Cost of rental and sales and depreciation of rental assets increased $2.4
million, or 8.2%, to $31.5 million for the six months ended June 30, 1996 from
$29.1 million for the six months ended June 30, 1995. This increase was
primarily due to the increase in maintenance, service and labor costs required
to service additional rental customers, the increase in cost of sales related to
the increase in sales of Lee Filters and small increases in third-party camera
agent rental commissions and rental asset depreciation.
Gross margin increased $3.2 million, or 12.8%, to $28.2 million for the six
months ended June 30, 1996 from $25.0 million for the six months ended June 30,
1995. The increase was primarily due to the factors discussed above.
Selling, general and administrative expenses decreased $0.4 million, or
2.5%, to $15.3 million for the six months ended June 30, 1996 from $15.7 million
for the six months ended June 30, 1995. The 1995 results include non-recurring
charges relating to the early lease termination for the Company's former
facility of $1.5 million and the write-down of the carrying value of certain
real property owned by the Company's U.K. rental operation of $1.3 million. The
1996 results include a $1.3 million increase in costs related to additional
personnel to support the Company's anticipated revenue growth, costs associated
with the June 1996 relocation to new facilities and a one-time compensation
charge of $0.5 million for shares of Common Stock issued to certain members of
senior management.
Research and development expenses increased $0.3 million, or 18.8%, to $1.9
million for the six months ended June 30, 1996 from $1.6 million for the six
months ended June 30, 1995. The increase related to additional personnel costs
incurred in connection with the development of a new sync-sound camera system
and a digital video assist device. The Company expects research and development
costs to continue to increase as the Company hires additional personnel to
develop new specialty lens and accessory products targeted primarily to service
the feature film and commercial markets.
Operating income increased $3.2 million, or 41.0%, to $11.0 million for the
six months ended June 30, 1996 from $7.8 million for the six months ended June
30, 1995. The increase was primarily due to the factors discussed above.
The effective tax rate increased to 20.0% for the six months ended June 30,
1996 from 10.9% for the six months ended June 30, 1995 due to certain
non-deductible expenses in 1996 and the reduced impact of changes in valuation
reserve for deferred tax assets.
18
<PAGE>
PRO FORMA YEAR ENDED DECEMBER 31, 1995 COMPARED TO PRO FORMA YEAR ENDED
DECEMBER 31, 1994
Camera rental revenue increased $10.2 million, or 15.7%, to $75.1 million
for the year ended December 31, 1995 from $64.9 million for the year ended
December 31, 1994. The increase resulted primarily from the rental of newly
manufactured camera systems and specialty lenses to supply the increased demand
in the North American and U.K. feature film and commercial markets as well as
the North American episodic television market. Revenue also increased as a
result of a small increase in rental rates.
Lighting rental revenue decreased $0.5 million, or 2.2%, to $22.1 million
for the year ended December 31, 1995 from $22.6 million for the year ended
December 31, 1994. The decrease was primarily due to a decrease in feature film
revenue in the United Kingdom.
Sales and other revenue increased $1.4 million, or 8.5%, to $17.9 million
for the year ended December 31, 1995 from $16.5 million for the year ended
December 31, 1994. The increase was primarily due to increased sales of Lee
Filters and sales of consumable products by the various rental operations.
Cost of rental and sales and depreciation of rental assets increased $1.1
million, or 1.9%, to $59.9 million for the year ended December 31, 1995 from
$58.8 million for the year ended December 31, 1994. This increase was primarily
due to the increase in cost of sales related to the increase in sales of Lee
Filters and an increase in depreciation of rental assets.
Gross margin increased $9.9 million, or 21.9%, to $55.2 million for the year
ended December 31, 1995 from $45.3 million for the year ended December 31, 1994.
The increase was primarily due to the factors discussed above.
Selling, general and administrative expenses increased $7.0 million, or
28.7%, to $31.4 million for the year ended December 31, 1995 from $24.4 million
for the year ended December 31, 1994. The increase was partially due to
non-recurring charges in 1995 including a $1.8 million charge for the early
lease termination for the Company's former facility and a $1.7 million write
down of the carrying value of certain real property owned by the Company's U.K.
rental operation. The remaining increase was due to an increase in incentive
compensation costs, the acceleration of the amortization of leasehold
improvements in the Company's former facility and increased marketing costs.
Research and development expenses increased $0.5 million, or 20%, to $3.0
million for the year ended December 31, 1995 from $2.5 million for the year
ended December 31, 1994. This increase was due to the addition of staff and
other expenses related to the development of a new camera system, specialty
lenses and accessories.
Operating income increased $2.3 million, or 12.4%, to $20.8 million for the
year ended December 31, 1995 from $18.5 million for the year ended December 31,
1994. The increase was primarily due to the factors discussed above.
The income tax provision for 1995 and 1994 is principally comprised of
foreign withholding tax, foreign income tax and state income tax. The effective
tax rate declined to 11.8% in 1995 from 14.1% in 1994 due to the decrease in
foreign withholding as a percentage of pre-tax income.
PRO FORMA YEAR ENDED DECEMBER 31, 1994 COMPARED TO PRO FORMA YEAR ENDED
DECEMBER 31, 1993
Camera rental revenue increased $7.8 million, or 13.7%, to $64.9 million for
the year ended December 31, 1994 from $57.1 million for the year ended December
31, 1993. The increase resulted primarily from the rental of newly manufactured
camera systems and specialty lenses to supply the increased demand in the North
American and U.K. feature film and commercial markets as well as the
19
<PAGE>
North American episodic television market. Revenue also increased as a result of
a small increase in rental rates.
Lighting rental revenue increased $3.6 million, or 18.9%, to $22.6 million
for the year ended December 31, 1994 from $19.0 million for the year ended
December 31, 1993. The increase was primarily due to increased feature film and
commercial demand in the U.K. and Canadian markets.
Sales and other revenue increased $3.0 million, or 22.2%, to $16.5 million
for the year ended December 31, 1994 from $13.5 million for the year ended
December 31, 1993. The increase was primarily due to the increase in sales of
Lee Filters and sales of consumable products by the various rental operations.
Cost of rental and sales and depreciation of rental assets increased $4.6
million, or 8.5%, to $58.8 million for the year ended December 31, 1994 from
$54.2 million for the year ended December 31, 1993. This increase was primarily
due to the increase in cost of sales related to increased sales of Lee Filters
and an increase in depreciation of rental assets.
Gross margin increased $9.8 million, or 27.6%, to $45.3 million for the year
ended December 31, 1994 from $35.5 million for the year ended December 31, 1993.
The increase was primarily due to the factors discussed above.
Selling, general and administrative expenses increased $0.7 million, or
3.0%, to $24.4 million for the year ended December 31, 1994 from $23.7 million
for the year ended December 31, 1993. This small increase resulted from general
cost increases throughout the Company.
Research and development expenses increased $0.2 million, or 8.7%, to $2.5
million for the year ended December 31, 1994 from $2.3 million for the year
ended December 31, 1993. This increase was due primarily to the development of a
new sync-sound camera system.
Operating income increased $9.0 million, or 94.7%, to $18.5 million for the
year ended December 31, 1994 from $9.5 million for the year ended December 31,
1993. The increase was primarily due to the factors discussed above.
The income tax provision for 1993 was principally comprised of foreign
withholding tax. The income tax provision for 1994 was principally comprised of
foreign withholding tax, foreign income tax and state income tax.
HISTORICAL RESULTS OF OPERATIONS
The Company is a holding company that owns 100% of the non-voting Class A
and voting Class B limited partnership units of PILP. All business operations of
the Company are conducted within PILP. In May 1996, the Company effected its
Recapitalization, pursuant to which all of PILP's outstanding debt and equity
securities other than those owned by Warburg, Pincus and management were
acquired. Prior to the Recapitalization, the non-controlling partners owned 70%
of the non-voting Class A and 30% of the voting Class B limited partnership
units. However, since the non-controlling partners had a deficit in their
capital accounts at the formation of PILP, such deficit was allocated entirely
to the Company as the general partner of PILP. In addition, PILP's losses for
1991 and 1992 and distributions made by PILP to various taxing authorities on
behalf of the non-controlling partners were charged to the Company's capital
account. In 1993, 1994 and 1995, as PILP generated earnings before the
non-controlling partners' interest, a portion of their interest in those
earnings was allocated to the Company's capital account to restore the
proportionate amount of the non-controlling partners' deficits and distributions
for taxes previously charged to the Company's capital account. The significant
increase in the non-controlling partners' interest in PILP from $0.9 million in
1994 to $7.3 million in 1995 reflects the substantial completion of the
restoration of the Company's capital account.
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After the Recapitalization, no additional provision for non-controlling
partners' interest in PILP will be made in the Company's statement of
operations.
SIX MONTHS ENDED JUNE 30, 1996 COMPARED TO SIX MONTHS ENDED JUNE 30, 1995
Camera rental revenue increased $3.9 million, or 11.2%, to $38.7 million for
the six months ended June 30, 1996 from $34.8 million for the six months ended
June 30, 1995. The increase resulted primarily from the rental of newly
manufactured camera systems and specialty lenses to supply the increased demand
in the North American and international feature film and commercial markets as
well as the North American episodic television market. Revenue also increased as
a result of a small increase in rental rates.
Sales and lighting rental revenue increased $0.7 million, or 7.1%, to $10.5
million for the six months ended June 30, 1996 from $9.8 million for the six
months ended June 30, 1995. This increase was primarily due to increased sales
of Lee Filters through the Company's U.S. distribution operation, which
contributed revenue of approximately $1.0 million, partially offset by a
decrease in the North American lighting rental revenue of $0.4 million.
Cost of rental and sales and depreciation of rental assets increased $1.6
million, or 7.4%, to $23.3 million for the six months ended June 30, 1996 from
$21.7 million for the six months ended June 30, 1995. This increase was
primarily due to the increase in maintenance, service and labor costs required
to service additional camera rental customers, the increase in cost of sales
related to the increase in sales of Lee Filters and small increases in
third-party agent commissions and rental asset depreciation.
Gross margin increased $3.0 million, or 13.1%, to $25.9 million for the six
months ended June 30, 1996 from $22.9 million for the six months ended June 30,
1995. The increase was primarily due to the factors discussed above.
Selling, general and administrative expenses decreased $0.3 million, or
2.1%, to $13.8 million for the six months ended June 30, 1996 from $14.1 million
for the six months ended June 30, 1995. The 1995 results included non-recurring
charges relating to the early lease termination for the Company's former
facility of $1.5 million and the write-down of the carrying value of certain
real property owned by the Company's U.K. rental operation of $1.3 million. The
1996 results include a $1.3 million increase in costs related to the addition of
personnel to support the Company's anticipated revenue growth, costs associated
with the June 1996 relocation to new facilities and a one-time compensation
charge of $0.5 million for shares of Common Stock issued to certain members of
senior management.
Research and development expenses increased $0.3 million, or 18.8%, to $1.9
million for the six months ended June 30, 1996 from $1.6 million for the six
months ended June 30, 1995. The increase related to additional personnel costs
incurred in connection with the development of a new camera system and a digital
video assist device. The Company expects research and development costs to
continue to increase as the Company hires additional personnel to develop new
specialty lens and accessory products targeted primarily to service the feature
film and commercial markets.
Operating income increased $2.9 million, or 39.7%, to $10.2 million for the
six months ended June 30, 1996 from $7.3 million for the six months ended June
30, 1995. The increase was primarily due to the factors discussed above.
Net interest expense increased $0.1 million, or 3.3%, to $3.1 million for
the six months ended June 30, 1996 from $3.0 million for the six months ended
June 30, 1995. This increase was the result of additional outstanding
interest-bearing term debt as a result of the Recapitalization.
The effective tax rate for the six months ended June 30, 1996 and 1995 was
19.7% and 19.8%, respectively, and was lower than the statutory rate principally
due to the reduction in valuation allowance for deferred tax assets.
21
<PAGE>
YEAR ENDED DECEMBER 31, 1995 COMPARED TO YEAR ENDED DECEMBER 31, 1994
Camera rental revenue increased $13.5 million, or 21.9%, to $75.1 million
for the year ended December 31, 1995 from $61.6 million for the year ended
December 31, 1994. The increase resulted primarily from the rental of newly
manufactured camera systems and specialty lenses to supply the increased demand
in the North American and U.K. feature film and commercial markets as well as
the North American episodic television market. The acquisition of Panavision
Canada in January 1995 resulted in increased camera rental revenue of $3.7
million during the year.
Sales and lighting rental revenue increased $4.8 million, or 31.0%, to $20.3
million for the year ended December 31, 1995 from $15.5 million for the year
ended December 31, 1994. The increase was primarily due to an increase in
lighting rental revenue of $3.5 million resulting from the acquisition of
Panavision Canada. The remaining increase was primarily due to a $0.9 million
increase in sales of Lee Filters.
Cost of rental and sales and depreciation of rental assets increased $3.4
million, or 8.3%, to $44.4 million for the year ended December 31, 1995 from
$41.0 million for the year ended December 31, 1994. The increase was primarily
due to the increase in maintenance and service costs required to service
additional camera rental customers, increased rental asset depreciation of $1.5
million and $1.0 million in additional net operating costs relating to
Panavision Canada.
Gross margin increased $14.9 million, or 41.3%, to $51.0 million for the
year ended December 31, 1995 from $36.1 million for the year ended December 31,
1994. The increase was primarily due to the factors discussed above.
Selling, general and administrative expenses increased $9.3 million, or
48.4%, to $28.5 million for the year ended December 31, 1995 from $19.2 million
for the year ended December 31, 1994. The increase was partially due to
non-recurring charges in 1995 including a $1.8 million charge for the early
lease termination for the Company's former facility and a $1.7 million
write-down of the carrying value of certain real property owned by the Company's
U.K. rental operation. Additionally, the acquisition of Panavision Canada
resulted in a $1.7 million increase in selling, general and administrative
expenses. The remaining increase was due to an increase in incentive
compensation costs, the acceleration of the amortization of leasehold
improvements in the Company's former facility and increased marketing costs.
Research and development expenses increased $0.5 million, or 20.0%, to $3.0
million for the year ended December 31, 1995 from $2.5 million for the year
ended December 31, 1994. This increase was due to the addition of staff and
other expenses related to the development of a new camera system, specialty
lenses and accessories.
Operating income increased $5.0 million, or 34.5%, to $19.5 million for the
year ended December 31, 1995 from $14.5 million for the year ended December 31,
1994. The increase was primarily due to the factors discussed above.
Net interest expense increased $0.3 million, or 5.7%, to $5.6 million for
the year ended December 31, 1995 from $5.3 million for the year ended December
31, 1994. The increase was due to interest expense related to Panavision
Canada's credit facility.
The effective tax rate for 1995 and 1994 was 19.8% and 20.7%, respectively,
and was lower than the statutory rate principally due to a change in the
valuation allowance for deferred tax assets and certain other non-taxable and
non-deductible items.
YEAR ENDED DECEMBER 31, 1994 COMPARED TO YEAR ENDED DECEMBER 31, 1993
Camera rental revenue increased $7.6 million, or 14.1%, to $61.6 million for
the year ended December 31, 1994 from $54.0 million for the year ended December
31, 1993. The increase resulted
22
<PAGE>
primarily from the rental of newly manufactured camera systems and specialty
lenses to supply the increased demand in the North American and U.K. feature
film and commercial markets as well as the North American episodic television
market. Revenue also increased as a result of a small increase in rental rates.
Sales and lighting rental revenue increased $2.8 million, or 22.0%, to $15.5
million for the year ended December 31, 1994 from $12.7 million for the year
ended December 31, 1993. The increase was primarily due to the increased sales
of Lee Filters and sales of consumable products by the various rental
operations.
Cost of rental and sales and depreciation of rental assets increased $4.6
million, or 12.6%, to $41.0 million for the year ended December 31, 1994 from
$36.4 million for the year ended December 31, 1993. The increase was primarily
due to the increase in maintenance and service costs required to service
additional camera rental customers, increased rental asset depreciation and an
increase in cost of sales related to increased sales of Lee Filters and other
consumable products.
Gross margin increased $5.8 million, or 19.1%, to $36.1 million, for the
year ended December 31, 1994 from $30.3 million for the year ended December 31,
1993. This increase was primarily due to the factors discussed above.
Selling, general and administrative expenses increased $0.3 million, or
1.6%, to $19.2 million for the year ended December 31, 1994 from $18.9 million
for the year ended December 31, 1993. This small increase resulted from general
cost increases throughout the Company.
Research and development expenses increased $0.2 million, or 8.7%, to $2.5
million for the year ended December 31, 1994 from $2.3 million for the year
ended December 31, 1993. This increase was primarily due to the development of a
new sync-sound camera system.
Operating income increased $5.3 million, or 57.6%, to $14.5 million for the
year ended December 31, 1994 from $9.2 million for the year ended December 31,
1993. The increase was primarily due to the factors discussed above.
Net interest expense increased $0.1 million, or 1.9%, to $5.3 million for
the year ended December 31, 1994 from $5.2 million for the year ended December
31, 1993. This increase was primarily due to a small increase in the interest
rates on the Company's outstanding debt.
The effective tax rate for 1994 and 1993 was 20.7% and 12.1%, respectively.
The increase in the effective rate for 1994 was primarily due to federal tax
provision which was not fully offset by a reduction in valuation allowance for
deferred tax assets.
LIQUIDITY AND CAPITAL RESOURCES
The Company has relied primarily upon cash provided by operations to finance
its operations, repay long-term indebtedness and fund capital expenditures
primarily for manufacturing camera rental systems and purchasing other rental
equipment.
In conjunction with the Company's Recapitalization, the Company obtained a
new credit facility (the "Credit Facility"), which is comprised of a term loan
in the amount of $100 million with two $50 million tranches ("Term Loan A" and
"Term Loan B") and a revolving credit facility (the "Revolving Facility") of $20
million. Borrowings under the Credit Facility at September 18, 1996 were $107.0
million. Interest is payable at rates equal to a margin, in excess of the prime
rate or LIBOR, which fluctuates directly with the Company's total debt ratio, as
defined in the Credit Facility. The prime rate margin ranges between 0% to 1.25%
for the Term Loan A and the Revolving Facility and between 1.5% to 1.75% for the
Term Loan B. The LIBOR margin ranges between 1.25% to 2.5% for the Term Loan A
and the Revolving Facility and between 2.75% to 3.0% for the Term Loan B. At
September 18, 1996, the average interest rate for the borrowings outstanding
under the Credit Facility was approximately 8.53%. Principal repayments under
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<PAGE>
the Credit Facility are payable quarterly beginning March 1997 through March
2004. The Company intends to use approximately $ million of the net proceeds
from the Offerings to repay certain amounts outstanding under the Credit
Facility. See "Use of Proceeds." The Company anticipates that its Revolving
Facility will be available for future borrowings. The Company's obligations
under the Credit Facility are secured by substantially all of the Company's
assets.
As required by the Credit Facility, the Company entered into two interest
rate protection agreements to guard the Company from LIBOR increases. One
agreement covering a notional amount of $45,000,000 expires on June 10, 1997 and
protects the Company from LIBOR increases above 6.44%. The other agreement for a
notional amount of $50,000,000 expires on June 10, 1998 and protects the Company
from LIBOR increases above 7.37%. The Credit Facility also requires the Company
to meet certain financial tests and contains other restrictive covenants,
including certain limitations on the Company's ability to incur debt, pay
dividends, repurchase its equity securities, sell assets and make investments,
acquisitions, dispositions and capital expenditures. The financial covenants
regarding capital expenditures are significantly less restrictive than those
included in the Company's credit facility prior to the Recapitalization. As a
result of this covenant relief, the Company anticipates making additional
capital expenditures to manufacture camera systems at a faster rate in 1996 than
in 1995.
As of September 18, 1996, the Company owes approximately $11,900,000 and
$850,000 under subordinated notes payable to Warburg, Pincus and the Company's
senior management, respectively, including accrued interest at a rate of 6.83%
per annum. The Company intends to use approximately $ of the net
proceeds from the Offerings to repay these notes together with the interest
accrued thereon.
The following table sets forth certain information from the Company's
Consolidated Statement of Cash Flows for the periods indicated:
<TABLE>
<CAPTION>
YEAR ENDED SIX MONTHS ENDED
DECEMBER 31, 1995 JUNE 30,1996
------------------- ------------------
(IN THOUSANDS)
<S> <C> <C>
Net cash provided by (used in):
Operating activities................................. $ 34,317 $ 11,463
Investing activities................................. (15,699) (17,018)
Financing activities................................. (9,724) (19,674)
</TABLE>
For the six months ended June 30, 1996, cash provided by operating
activities was $11.5 million. Net income of $2.4 million, adjusted for
depreciation and amortization of $9.0 million and the non-controlling partners'
interest in PILP of $4.5 million, provided $15.9 million, which was partially
offset by a use of $3.6 million resulting from the net change in non-cash
working capital items and miscellaneous non-cash items of $0.8 million. Total
investing activities of $17.0 million were comprised of capital expenditures of
$9.9 million, offset by $1.0 million of proceeds received from the disposition
of certain equipment. The majority of the capital expenditures were used to
manufacture camera rental systems and to purchase other rental equipment, with
approximately $1.0 million incurred to complete the leasehold improvements at
the new facility. In addition, $8.1 million was used to acquire the non-
controlling partners' interest in PILP in connection with the Recapitalization.
Cash used in financing activities of $19.7 million was comprised of the
reduction in outstanding borrowings in connection with the Recapitalization and
$1.5 million of distributions to taxing authorities on behalf of the
non-controlling partners in PILP.
For the year ended December 31, 1995, cash provided by operating activities
was $34.3 million. Net income of $5.6 million, adjusted for depreciation and
amortization of $17.5 million, the non-controlling partners' interest in PILP of
$7.4 million and the net change in non-cash working capital items of $3.0
million, provided $33.5 million of the total. Total investing activities of
$15.7 million were comprised of capital expenditures of $19.5 million, offset by
$2.2 million of proceeds received from the disposition of
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<PAGE>
certain equipment. Approximately $15.5 million of the capital expenditures were
used to manufacture camera rental systems and to purchase other rental equipment
and $3.4 million was incurred for leasehold improvements to renovate the
Company's new facility. The net investing activities also reflect a benefit of
$1.6 million for cash on the balance sheet of Panavision Canada, which was
acquired in January 1995. Financing activities of $9.7 million were comprised of
$7.5 million in repayments of borrowings under the credit facilities existing
prior to the Recapitalization and $2.2 million of distributions to taxing
authorities on behalf of the non-controlling partners in PILP.
The Company intends to use the cash provided by operating activities to make
additional capital expenditures to manufacture camera systems and purchase other
rental equipment. The Company expects to increase capital expenditures from
$19.5 million in 1995 to approximately $22.0 million in 1996 and $31.0 million
in 1997 in order to significantly increase its production of camera systems in
1997. The Company also intends to increase research and development expenses
incurred in developing new rental products from $3.0 million in 1995 to
approximately $3.3 million in 1996 and $4.3 million in 1997.
Additional cash flow provided by operating activities will be used to repay
debt outstanding under the Credit Facility. The Company intends to commence
discussions with its lenders to increase its Revolving Facility. The increased
revolving facility will be used for general working capital purposes and
potential acquisitions.
The Company believes that its existing working capital together with net
proceeds from the Offerings, borrowings under the Credit Agreement and
anticipated cash flow from operating activities will be sufficient to meet its
expected operating and capital spending requirements for at least the next
twelve months.
SEASONALITY
The Company's revenue is subject to small seasonal fluctuations experienced
primarily in the first and second calendar quarters. Feature film and commercial
production activity typically reaches its peak in the third and fourth quarters.
In North America, episodic television programs cease filming in the second
quarter for several months, and typically resume production in August.
IMPACT OF INFLATION
The Company's results of operations and financial condition are presented
based upon historical cost. While it is difficult to accurately measure the
impact of inflation due to the imprecise nature of the estimates required, the
Company believes that the effects of inflation, if any, on its results of
operations and financial condition have been minor.
25
<PAGE>
BUSINESS
OVERVIEW
Panavision is a leading designer and manufacturer of high-precision film
camera systems, comprising cameras, lenses and accessories, for the motion
picture and television industries. The Company's camera systems are not
available for sale and are rented exclusively through its domestic and
international owned and operated facilities and agent network.
Panavision-Registered Trademark- is recognized in the motion picture and
television industries as the preeminent brand name for cinematography equipment.
Since the Company was founded, Panavision has received two OSCARS and 17 Awards
for Scientific and Technical Achievement from the Academy of Motion Picture Arts
and Sciences. Since 1990, two-thirds of the Academy Award nominees for Best
Cinematography, and five of the six cinematographers who have won the OSCAR for
Best Cinematography, used Panavision camera systems.
Panavision camera systems were used to film all of the 1995 top 10 U.S. box
office movies requiring film cameras, including BATMAN FOREVER, APOLLO 13, DIE
HARD WITH A VENGEANCE and ACE VENTURA: WHEN NATURE CALLS. Similarly, many of the
top box office films in 1996, including MISSION: IMPOSSIBLE, INDEPENDENCE DAY,
ERASER, TWISTER, THE ROCK and A TIME TO KILL, were filmed with Panavision camera
systems. In addition to the Company's involvement in the motion picture
industry, a predominant number of U.S. prime time episodic, or "series,"
television programs that are shot on film use Panavision camera systems,
including FRIENDS, SEINFELD, FRASIER and E.R.
The Company believes that its position as an industry leader results from
its broad range of technologically superior and innovative products, its
longstanding collaborative relationships with filmmakers, the breadth of its
inventory of camera equipment and its dedication to customer service. Panavision
is the only supplier of cinematography equipment that manufactures a complete
camera system incorporating its own range of proprietary prime and zoom lenses,
the most critical components of a camera system. The Company continuously
addresses the technical and creative needs of its customers by designing and
manufacturing unique accessories that in many instances have become the industry
standard.
In addition to manufacturing and renting camera systems, the Company also
rents lighting, lighting grip, power generation and related transportation
equipment through Lee Lighting, the largest lighting rental company in the
United Kingdom, as well as through two owned and operated facilities in Orlando
and Toronto. The Company also manufactures and sells lighting filters and other
color-correction and diffusion filters through Lee Filters, a leading
manufacturer of these products. On a pro forma basis in 1995, the Company had
revenue of $115.1 million.
Certain of the information contained under this caption "Business" and in
the "Prospectus Summary" regarding the size of the Company's share of markets in
which it participates and the Company's general expectations concerning the
definition, size and development of such markets, both domestically and
internationally, is based on estimates prepared by the Company using data from
various sources. Such data and certain information concerning the sources of the
Company's revenue are also based on assumptions and estimates made by the
Company on the basis of its knowledge of the markets and its business which the
Company believes are reasonable.
COMPETITIVE STRENGTHS
The Company believes that it is well-positioned to address the needs of
filmmakers throughout the world due to the following competitive strengths:
CONTROL OVER ENTIRE MANUFACTURING AND DISTRIBUTION PROCESS. The Company
manufactures most of its components and products internally and rents its camera
systems directly to customers. This control over the entire process
distinguishes Panavision from its competitors and enables it to protect and
enhance its highly recognized brand name. Through its team of marketing, design,
research and
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manufacturing personnel, Panavision is the only company to provide complete
systems that integrate fully-compatible cameras, lenses and accessories. This
strategy also enables the Company to (i) rapidly incorporate technological
developments and filmmakers' suggestions into new products, (ii) maintain
product exclusivity and (iii) offer products with greater quality and higher
performance at a competitive price.
REPUTATION FOR QUALITY AND TECHNOLOGICALLY ADVANCED PRODUCTS. The Company
continuously works to provide its customers with the most reliable and
innovative products. This effort has resulted in Panavision's recognition as the
industry leader in the development of high quality, technologically advanced
camera systems. The Company has developed and introduced proprietary products
throughout its history while continuing to upgrade and enhance its existing
product lines as illustrated by its introduction of the Panaflex sync-sound
camera, which won an Academy Award in 1978, and the introduction of the PRIMO
PRIME and PRIMO ZOOM lenses in 1987, which received technical awards from the
Academy of Motion Picture Arts and Sciences in 1990, 1991, 1994 and 1995.
Consistent with this tradition, the Company recently introduced the
Panavision/Frazier Lens System and plans to introduce a smaller, lighter and
quieter sync-sound camera in 1997. See "--Products--Research and Product
Development" and "--Camera Systems."
CLOSE RELATIONSHIPS WITH FILMMAKERS. Located near Hollywood, the center of
the U.S. film industry, the Company often develops new product designs in
collaboration with cinematographers, directors and producers to ensure that its
technology serves the needs of its customers. In certain cases, a filmmaker's
association with the Company begins at training and education seminars for film
students that the Company sponsors at its facilities. As a result of these
relationships and its significant research and development activities,
Panavision is better able to continually upgrade its products to meet changing
market demands, thereby reducing obsolescence, achieving better control of
inventory and product availability and providing customers with access to the
latest technological advances. The Company believes that these relationships and
collaborative efforts provide it with a competitive advantage over its
manufacturing competitors, which are located in Munich and Vienna, as well as
over its rental competitors, which do not engage in substantial research and
development activities and must rely instead on third-party suppliers.
RANGE AND DEPTH OF CAMERA EQUIPMENT. The Company has the world's largest
inventory of camera systems with over 800 cameras and 5,000 lenses. It also
offers a broad range of choices, with equipment that is exclusively available
through Panavision and its agents. The Company believes that the range and depth
of its camera inventory provides it with the ability to serve larger, as well as
a greater number of, productions throughout the world than its competitors.
DEDICATION TO CUSTOMER SERVICE. The Company places special emphasis on
customer service. In order to provide filmmakers with a high level of support,
the Company sends marketing representatives and technicians to film production
sites to provide advice or immediate assistance with any equipment needs or
questions. The Company assigns to each filmmaker a sales representative who
possesses particular skills and experience appropriate to that filmmaker's needs
in an attempt to foster a strong working relationship. Many of the Company's
product development, marketing and customer service personnel have been
collaborating with the same filmmakers throughout their careers. See
"--Marketing and Customer Service."
COMPANY STRATEGY
The Company's growth strategy is to manufacture additional camera systems
and value-added proprietary accessories to rent to its existing and new domestic
and international customers. The Company intends to allocate its new camera
equipment and focus its specialized marketing and sales approach specifically to
(i) increase its leading share of the North American feature film market, (ii)
increase its share of the international feature film market with an emphasis on
Europe and
27
<PAGE>
(iii) increase its share of the North American and international commercials
markets. The key elements of the Company's strategy are as follows:
INCREASE AVAILABILITY OF EQUIPMENT. Since 1993, the Company's growth has
been inhibited by equipment shortages resulting from limited manufacturing
capacity and capital expenditure constraints imposed by its credit facilities.
With its relocation to a new manufacturing facility, the Recapitalization and
the proceeds from the Offerings, the Company intends to significantly increase
its production of camera systems. The Company believes that this additional
equipment will help it capture a larger share of all markets that it currently
serves, with particular emphasis on the feature film and commercials markets.
TARGET FEATURE FILM AND COMMERCIAL MARKETS. Increased inventory will allow
the Company to dedicate equipment and marketing efforts toward expanding its
share of the feature film market, both domestically and internationally. The
Company estimates that in 1995, it provided camera systems to 46% of all feature
films in North America which comprised 75% of the major studio feature films and
34% of the independent feature films. The Company estimates that in 1995 it also
supplied camera systems to 15% of all feature films made in the United Kingdom
and Europe. The Company believes that these markets offer significant growth
potential.
The Company estimates that there are over 15,000 television commercials shot
on film in North America each year, with major commercial production houses
located in Los Angeles and New York. Internationally, the Company estimates that
there are over 15,000 television commercials shot on film in the United Kingdom,
Europe and Japan each year, with major commercial production houses located in
London, Paris, Berlin and Tokyo. The Company estimates that it has a 10%-15%
share of these commercial markets in the aggregate, with significant
opportunities to increase its market share.
EXPAND NEW PRODUCT DEVELOPMENT. The Company intends to continue developing
and manufacturing the next generation of technologically superior cameras,
lenses and accessories. In particular, the Company expects to expand its
development of value-added accessories that increase the overall rental price of
the camera package while providing cinematographers and directors with
additional creative tools which are designed to provide a favorable cost/benefit
relationship. Panavision's new Woodland Hills facility has allowed the Company
to hire additional personnel and significantly increase its research and
development of new products in an effort to extend its leadership in technology
and product development and to further strengthen design collaboration with
filmmakers.
CAMERA RENTAL MARKETS
The motion picture and television industries have shown steady growth over
the past several years, and the Company expects the industries to continue to
grow for the foreseeable future. The motion picture industry is comprised of
feature films produced by major studios and independent producers; the
television industry is comprised of commercials, episodic or series programs and
movies of the week ("MOWs").
The Company rents its products through its 10 owned and operated facilities
in the United States, Canada and the United Kingdom, as well as through an agent
network in the United States, Europe, Asia, Australia and Mexico. In 1995,
approximately two-thirds of the Company's camera rental revenue was derived from
productions based in the United States and the remainder was from international
rentals, primarily in the United Kingdom and Europe. The following table depicts
the Company's 1995 camera rental revenue by market, based on estimates derived
from the Company's records of its owned and operated facilities and its
estimates of third-party agents' revenues:
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1995 PRO FORMA REVENUE
(DOLLARS IN MILLIONS)
<TABLE>
<CAPTION>
NORTH % OF TOTAL
AMERICA REVENUES INTERNATIONAL % OF TOTAL REVENUES TOTAL
----------- --------------- ------------- ------------------- ---------
<S> <C> <C> <C> <C> <C>
Camera rental revenue:
Feature films......................... $ 25.2 22% $ 9.9 9% $ 35.1
Commercials........................... 10.6 9 6.2 6 16.8
Episodic television................... 14.5 13 0.4 * 14.9
MOWs.................................. 4.0 3 0.1 * 4.1
Other................................. 3.6 3 0.6 * 4.2
-- --
----- ----- ---------
Sub-total........................... 57.9 50 17.2 15 75.1
Lighting rental revenue................. 4.1 3 18.0 16 22.1
Sales and other revenue................. 1.7 2 16.2 14 17.9
-- --
----- ----- ---------
Total revenue....................... $ 63.7 55% $ 51.4 45% $ 115.1
-- --
-- --
----- ----- ---------
----- ----- ---------
<CAPTION>
% OF TOTAL REVENUES
-------------------
<S> <C>
Camera rental revenue:
Feature films......................... 31%
Commercials........................... 15
Episodic television................... 13
MOWs.................................. 3
Other................................. 3
---
Sub-total........................... 65
Lighting rental revenue................. 19
Sales and other revenue................. 16
---
Total revenue....................... 100%
---
---
</TABLE>
- ------------------------
* Less than 1%.
FEATURE FILMS
The number of major studio feature films produced in North America increased
from 104 in 1992 to 118 in 1995. The number of independent feature films
produced in North America increased from 246 in 1992 to 318 in 1995. The Company
estimates that during this period feature film production activity in the United
Kingdom and Europe also increased, with approximately 500 feature film
productions in 1995. Major studio feature films are typically large-budget
productions with camera rental budgets that require greater depth of product and
experienced customer service personnel. The Company expects that the production
of large-budget action films will continue due in large part to their success in
the international theater, television and home video markets. In 1995, 31% of
the Company's total revenue and 47% of its camera rental revenue were generated
from feature films. In addition, the Company estimates that its camera rental
revenue from feature films has grown 39% since 1992. The Company believes the
feature film market, particularly independent productions, offers significant
growth opportunities.
COMMERCIALS
Although commercial shoots generally last for only one to seven days, daily
rental rates for camera systems are equivalent to feature films and represent a
significant part of the camera equipment rental market. Many of the creative
people involved in the filming of commercials seek to distinguish their products
by using innovative techniques requiring technologically advanced equipment--the
ability to achieve a unique "look," which the Company believes can in many cases
only be achieved by using Panavision products. Many feature film directors and
cinematographers began their careers filming television commercials and continue
to be so involved. As such, identification with a brand name product at this
first stage of a filmmakers' professional development often gives rise to
beneficial long-term relationships in the industry. In 1995, approximately 15%
of the Company's total revenue and 22% of its camera rental revenue were
generated from commercials. The Company estimates that its camera rental revenue
from commercials has grown 47% since 1992. The Company believes this market
offers significant opportunities for growth.
EPISODIC TELEVISION
The episodic or series television market in North America is comprised
primarily of dramas, situation comedies and action programs produced on film
which are aired in both prime and non-prime time slots.
29
<PAGE>
These programs are broadcast on the four major television networks as well as on
the WB, UPN and cable networks. The number of episodic shows produced on film
has increased by approximately 67% since 1992, resulting primarily from the
advent of new broadcast networks and increased original programming on cable
networks. Over the same period, the Company believes that the use of film in
episodic television has increased over videotape because of a number of factors.
Film is an excellent storage or archival medium and may be digitally transferred
to other media, such as the evolving high definition television technologies,
with greater resolution than videotape. The image quality that film offers is
very important to television programs that will be syndicated into many markets.
In contrast, videotape may not be fully compatible with high definition
television and may deteriorate more rapidly over time.
In 1995, approximately 13% of the Company's total revenue and approximately
20% of its camera rental revenue were generated from episodic television. The
Company estimates that it provided camera systems to 79% of the episodic
productions shot on film and that its revenue has grown 38% since 1992. The
Company believes it will continue to make inroads in this market as a result of
new network programming requirements and innovative Panavision products such as
the 3-Perf System, the Pedestal Camera System and a 2,000-foot film magazine.
MOVIES OF THE WEEK
In addition to episodic television, there are also movies of the week shot
for network and cable television. The number of movies of the week productions
in North America has increased from 187 in 1992 to 252 in 1995. However, due to
the relatively low budgets associated with these productions, overall cost is a
major factor in the selection of the camera equipment that is used and,
accordingly, the dollar size of this market is relatively small.
In 1995, approximately 3% of the Company's total revenue and 5% of its
camera rental revenue were generated from movies of the week. The Company
estimates it supplied camera systems to over 55% of movies of the week made in
North America. The Company estimates that its camera rental revenue from movies
of the week has grown 4% since 1992. While the Company will continue to serve
this market, given its size and price sensitivity, the Company expects to focus
on higher-budget productions.
PRODUCTS
RESEARCH AND PRODUCT DEVELOPMENT
The Company is in the process of expanding its research and development
group, which currently comprises approximately 34 mechanical, software,
electronic and optical engineers, draftsmen and machinists. Additionally, the
research and development group has a dedicated machine shop that manufactures
prototype equipment. These internal capabilities enable the Company to develop
proprietary technology in collaboration with filmmakers to address their unique
requirements. Frequently, such collaborations with filmmakers develop into
widely used products such as the Pedestal Camera System, which reduces labor
requirements by combining a film camera with a video pedestal system. Other
examples of such collaboration include an underwater, deep sea camera developed
for the filming of TITANIC, the Panavision/Frazier Lens which allows previously
impossible shots to be made, a system developed for JFK which allow cameras to
be mounted on the hoods and fenders of cars and trucks and digital encoders used
to control pan and tilt motion which facilitated the filming of special effects
in BATMAN FOREVER.
The Company has long been a leader in the research and development of film
camera lenses. Since
the first Panavision lens was introduced in 1957, the Company has introduced
many innovative spherical and anamorphic lenses, including the PRIMO series
which won Academy Awards in 1990, 1991, 1994 and 1995. During 1997, the Company
expects to complete the development of a new macro close-focus, wide-angle zoom
lens. This new lens is designed to address the need within the commercial market
for a
30
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compact lens with the ability to operate in low light environments and maintain
focus at extremely close ranges (E.G., table-top or other close-up work). In
1997, the Company also plans to introduce a new sync-sound camera which is
smaller, lighter and quieter than current Panavision cameras and incorporates
enhanced viewfinding and video monitoring capabilities. In addition, the Company
is in the process of developing a digital video assist device.
CAMERA SYSTEMS
The Company is the only provider of camera systems with an integrated design
that provides customers with compatible products that are available worldwide.
The Company maintains the largest inventory of motion picture cameras in the
world, with over 800 cameras and 5,000 lenses.
Each camera package is comprised of a number of camera systems, each of
which includes cameras, lenses and accessories. A cinematographer's needs may
include a sync-sound camera, such as the Platinum Panaflex, as well as a
hand-held camera, and a Panastar camera for special effects. Each camera's
rental price includes a variety of accessories such as eyepieces, viewfinders,
cables, brackets and grips. The weekly rental cost of the most popular Panaflex
cameras ranges from approximately $1,000 to $2,000. A number of other
accessories which are considered integral to the camera's operation, such as
magazines, specialized eye-pieces and video-assist monitors, are also available.
Rental prices for these individual accessories range from approximately $100 to
$700 per week. Most importantly, each camera system is comprised of a variety of
lenses which will usually include a number of PRIMO PRIME and PRIMO ZOOM lenses.
The rental costs of the PRIMO lenses range from approximately $100 to $1,000 per
week.
CAMERAS. There are two basic types of motion picture cameras--Synchronous,
or "sync-sound," and Mit Out Sound ("MOS"). Sync-sound cameras are used to shoot
pictures while recording dialogue. MOS cameras are used primarily to shoot
high-speed footage and special effects and may also be used as backup cameras in
situations where dialogue is not being recorded. The Company's camera inventory
consists of both sync-sound and MOS cameras with various features and at a range
of prices. While the majority of the Company's sync-sound cameras are 35mm
cameras, the Company also manufactures 16mm cameras, which are used primarily on
episodic television shows, and 65mm cameras, which are used primarily for
special effects and special venue presentations. Panavision has consistently set
industry standards in the design and refinement of cinematography equipment.
The following is a representative listing and description of significant
35mm Panavision cameras:
<TABLE>
<S> <C>
PLATINUM PANAFLEX As the flagship of the Panavision camera line, the
PLATINUM PANAFLEX is used primarily for large-budget
feature films and commercial productions.
GOLDEN PANAFLEX II As the workhorse of the Panavision camera line, the
GOLDEN PANAFLEX II is used across all markets.
GOLDEN PANAFLEX The GOLDEN PANAFLEX is used primarily for episodic
television, movies of the week and low-budget feature
films.
PANASTAR The PANASTAR is a high-speed MOS special effects and
commercial camera.
</TABLE>
The Company's inventory also includes a limited number of non-Panavision
cameras which are used to supplement the Company's product line. Due to its
ability to purchase non-Panavision cameras if there is a business need to do so,
the Company is able to compete with independent renters of cinematography
equipment on the same level and with the same equipment. Its competitors, on the
other hand, do not have a corresponding ability, as Panavision equipment is not
available to rental companies other than the Company's agents.
31
<PAGE>
LENSES. Panavision develops, designs and manufactures its own prime (fixed
focal length) and zoom lenses, the most critical component affecting picture
quality and an important consideration for the filmmaker. For many years, the
Company specialized in anamorphic lenses, which are used for the wide-screen
movie format. While the Company remains the world's leading supplier of these
lenses, in 1985 a strategic decision was made to design and develop a new series
of prime and zoom lenses specifically for cinematography applications.
Accordingly, the Company created a line of revolutionary spherical lenses for
the non-wide screen format, producing its proprietary PRIMO PRIME and PRIMO ZOOM
lenses. The PRIMO lenses have performance characteristics that exceed the other
lenses available in the marketplace.
The following table describes the most important lenses developed and
manufactured by the Company:
<TABLE>
<S> <C>
PRIMO PRIMES PRIMO PRIME lenses are color-matched, high-contrast and
resolution spherical lenses ranging from 10mm to 150mm.
They are also available in anamorphic lenses.
PRIMO ZOOMS: PRIMO ZOOM lenses have performance equal to the PRIMO
PRIMO 3:1 ZOOM LENS PRIMES, enabling seamless intercutting. Due to the PRIMO
PRIMO 4:1 ZOOM LENS ZOOM lenses' flexibility, they are suitable for virtually
PRIMO 11:1 ZOOM LENS any type of production.
PANAVISION/FRAZIER LENS This new lens system is extremely versatile and enables a
SYSTEM continual image rotation while the camera system remains
stationary in extreme depth of field, allowing previously
impossible camera shots and placements to be made.
</TABLE>
ACCESSORIES. In order to provide its customers with a fully integrated
camera system, the Company frequently introduces new camera accessories and
currently offers an extensive range of products requested by and developed in
conjunction with filmmakers. Certain accessories may reduce overall production
costs by lowering the labor intensiveness of the production process and thereby
decreasing the shooting days. Moreover, an accessory product often achieves such
widespread acceptance among the Company's customers that the Company
incorporates it into the base camera package, thereby increasing the overall
package price.
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<PAGE>
The following list and descriptions provide a sample of the hundreds of
accessories the Company offers as part of its camera systems and illustrate the
range of accessories available:
<TABLE>
<S> <C>
PANAVISION COLOR VIDEO The PANAVISION COLOR VIDEO ASSIST captures a video image
ASSIST of the scene being filmed, which can be simultaneously
monitored by the director. It comes in a compact package
utilizing the latest technology in video cameras and
processing.
PEDESTAL CAMERA SYSTEM The PEDESTAL CAMERA SYSTEM was developed to shoot multi-
camera television shows enabling a single operator to
control the entire camera system.
FTZSAC FTZSAC, or Focus, T-Stop, Zoom, Speed Aperture Control,
is a digital remote control system.
SUPER PANAHEAD The camera body is mounted to a SUPER PANAHEAD (geared
head), which is used to control the panning and tilt
motion of the camera.
MAGAZINES Magazines are used with every camera system to hold film
and are available in 250, 500, 1000 and 2000 foot sizes.
</TABLE>
EQUIPMENT INVENTORY MANAGEMENT
The Company developed and uses a proprietary computerized inventory control
and management system to track its camera equipment. Each camera, lens and
accessory is serialized for identification purposes and bar coded to initiate
and expedite the billing process. This system enables the Company to locate its
camera equipment at all times anywhere in the world. Camera equipment
utilization is centrally monitored at the Company's headquarters to determine
(i) which products are in highest demand in various geographic markets and
whether certain equipment should be relocated to increase utilization and
revenue, (ii) whether product shortages that require the production of
additional units exist and (iii) whether current pricing is at the appropriate
level for a particular camera system or an individual value-added product.
The maximum utilization rates of the Company's equipment are affected by
production scheduling requirements of the motion picture and television
industries. Utilization rates are also limited by the need for maintenance and
service, time required by film crews to "prep" their camera systems and shipping
time. The Company's inventory control system helps the Company maximize its
utilization rates in light of these factors in order to satisfy customer
requirements while maximizing revenue.
MANUFACTURING AND ASSEMBLY
The Company manufactures and assembles its products in Woodland Hills,
California. The Company develops and designs all the critical components for its
camera systems, including the camera movement and lens. An entire camera system
consists of hundreds of parts, each carefully produced, assembled and tested.
The manufacturing process takes up to four months and primarily involves the
fabrication and assembly of camera and lens components by over 100 highly
skilled workers, each of whom generally has an area of specialization. Following
the assembly process, each camera system is rigorously tested to achieve the
high standard of performance that customers expect from Panavision.
While the Company manufactures most of the components internally, certain
components and sub-assembly work, including glass grinding, lens element
polishing and die casting, are outsourced to selected suppliers. The Company has
developed long-term relationships with its significant suppliers and believes
that they will continue to supply high-quality products in quantities sufficient
to satisfy its
33
<PAGE>
requirements. Since certain components, particularly the lens element, require
long lead times, precise production schedules are critical. Inventory levels are
determined based on input from marketing, operations and the agent network. The
Company maintains a fairly constant production schedule in order to efficiently
utilize its resources and service its customers' requirements.
MARKETING AND CUSTOMER SERVICE
The principal decisionmakers in the selection of camera packages are
cinematographers, directors and producers, who view their cameras and related
equipment as critical artistic tools. Camera packages typically comprise a very
small percentage of a production budget, ranging from approximately 5% for
commercials to less than 1% for large-budget action films. Accordingly, absent
budget constraints, the selection of equipment is driven by its suitability,
technological capabilities and reliability, as well as by the degree to which
the manufacturer or renter is able to rapidly service the technical needs of the
filmmaker, both before and during film production.
The Company's skilled sales representatives have established close working
relationships with numerous filmmakers. To cultivate these relationships, the
Company assigns each filmmaker a sales representative who possesses the
experience and skills that match the needs of the filmmaker. Based on
discussions with the filmmaker, the sales representative recommends a camera
package tailored to achieve the filmmaker's desired visual effect and meet the
production budget. In addition, sales representatives provide further advice and
support by visiting film production sites. As a result of providing high-quality
customer service, many of the Company's representatives have been working with
the same filmmakers throughout their careers and in some instances the
collaborative effort with a filmmaker has led to new product designs.
After preliminary decisions have been made with respect to the proper camera
systems, the camera equipment will be delivered to a preparation room reserved
for that filmmaker. The filmmaker, together with his own and Panavision's
representatives, may then inspect the equipment as well as test and experiment
with its use at the facility's prep floor, sound stage, filming studio and
screening room.
DISTRIBUTION
Camera packages are rented to the motion picture and television industries
through rental houses owned and operated by the manufacturer as well as by
independent agents. These rental houses serve as a single point of contact for
the cinematographers and often provide services including maintenance and
technical advice. Panavision is the only manufacturer to have a significant
portion of its revenue generated through owned and operated rental houses,
primarily because of the Company's choice not to sell its equipment.
Panavision owns and operates camera rental facilities domestically in
Woodland Hills and Hollywood, California, Orlando, Florida and Wilmington, North
Carolina and internationally, in Toronto and Vancouver, Canada, Dublin, Ireland
and London (two) and Manchester, United Kingdom. The Orlando and Toronto
facilities also provide lighting, lighting grip and power generation equipment.
In addition to its owned and operated facilities, the Company serves its
customers through a network of domestic and international third-party agents who
are responsible for the rental of the Company's equipment in locations that are
not serviced by the owned and operated facilities. Agents pay 60% of their
rental revenue to the Company and retain the other 40%, which is charged as a
commission expense in the Company's statement of operations. The Company uses 11
third-party agents to facilitate the rental of its products, accounting for
approximately 12% of the Company's revenue in 1995. All of the Company's agents
are well-versed in the use of Panavision equipment and are supported by the
Company's technical staff.
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<PAGE>
The Company's domestic third-party agent network includes agents in Atlanta,
Chicago, Dallas, Miami, New York and San Francisco. In addition, the Company has
an international agent network that includes agents in Canada, Mexico, France,
Italy, Spain, Australia, Hong Kong, Japan and South Africa. The Hong Kong agent
has offices in China, Thailand, Malaysia and the Philippines, while the
Australian agent also maintains an office in New Zealand.
COMPETITION
The market for high-precision cinematography equipment is highly
competitive, primarily driven by technology, customer service and, to a lesser
extent, price. As a manufacturer of cinematography equipment, the Company's
primary competitors are Arriflex, based in Munich, Germany, and Moviecam, based
in Vienna, Austria. Both of these companies manufacture only cameras and certain
accessories, primarily for sale to rental houses and individuals, who are not
the end users. Because it manufactures lenses, cameras, and a full range of
accessories, has close relationships with filmmakers and has in-house design and
manufacturing capabilities, the Company believes that it is better able to
provide the innovative camera systems demanded by its customers.
As a renter of cinematography equipment, the Company competes with numerous
rental facilities which must purchase their equipment from other manufacturers
and then rent that equipment to their customers. While the overall rental
business is price competitive and subject to discounting, the Company has chosen
to compete on the basis of its large inventory base, technologically advanced
proprietary products, broad product line, extensive sales and marketing force
and commitment to customer service. The Company believes that, as the
manufacturer, it is able to respond to many user requests on shorter notice than
its rental competitors.
In addition to its existing competitors, the Company may encounter
competition from new competitors, as well as from new types of equipment. There
can be no assurance that the Company will be able to continue to develop,
manufacture and market its products successfully against existing or new
competitors.
LIGHTING RENTAL
The Company rents lighting, lighting grip, transportation and distribution
equipment and mobile generators used in the production of feature films,
television programs and commercials, outside broadcasts and other events from
its operations located in the United Kingdom, Canada and Florida. In addition,
the Company sells consumable products including lighting filters, light bulbs
and gaffer tape, which are used in all types of production. The Company owns the
largest lighting rental operation in the United Kingdom, Lee Lighting, which in
1995 had revenue of approximately $19.7 million. The Company's other lighting
rental operations in Canada and Florida had combined 1995 revenue of
approximately $4.8 million.
LEE LIGHTING
Lee Lighting, with its leading 35% market share, is the predominant supplier
of equipment to U.K.-based feature film productions. Lee Lighting purchases
lighting equipment, lighting grip equipment and generators from independent
manufacturers to maintain and build its rental asset base. Lee Lighting
currently has the largest inventory of lampheads, the core element of lighting
equipment used by filmmakers in all areas of the industry, in the United
Kingdom. This large rental asset base and Lee Lighting's experienced management
and electricians allow it to service a number of films which may be shooting
concurrently. Lee Lighting operates lighting rental operations in London,
Bristol, Manchester and Glasgow, which have their own rental inventories. From
these four locations, Lee Lighting is able to service any production in England,
Wales or Scotland. In addition, Lee Lighting maintains a rental base
35
<PAGE>
at Shepperton Studios, the second largest studio complex in the United Kingdom
for the production of feature films.
Lee Lighting also supplies equipment to any U.K.-based production crew which
desires to shoot all or part of a production in Europe, South America or Africa.
Typically, Lee Lighting does not service locally based productions outside of
the United Kingdom, except occasionally in Ireland. Recently, Lee Lighting has
supplied the entire lighting needs of such major feature films as FOUR WEDDINGS
AND A FUNERAL, JUDGE DREDD, ROB ROY, MISSION: IMPOSSIBLE and, scheduled to be
released later in 1996, 101 DALMATIANS, EVITA and THE SAINT.
In addition to providing lighting equipment, Lee Lighting also supplies
power generation and power distribution equipment, which is customized by the
Company's in-house electricians. Industry demand has resulted in smaller
generators capable of producing power more than or comparable to larger models
due to space limitations in many filming locations. Lee Lighting has been very
responsive to this need and recently customized a set of twin 220 kilowatt
generators able to be transported to a film location on a single truck.
COMPETITIVE STRENGTHS. The Company believes Lee Lighting is well positioned
to take advantage of its leading market share in the U.K. lighting rental
industry because of the following competitive strengths:
REPUTATION FOR OUTSTANDING SERVICE. Over the last two decades Lee Lighting
has developed a reputation among U.K. producers of feature films, television
programs and commercials for providing outstanding service. Lee Lighting is
the only lighting company in the United Kingdom which supplies its own labor
in connection with the rental of its equipment. Many of the major U.K.
feature film producers regularly use Lee Lighting's equipment and the
services of its skilled gaffers and electricians. This service force is on
call 24 hours a day, seven days a week and is supplemented by freelance
labor when required. Lee Lighting is currently the only rental company in
the United Kingdom that employs its own electricians. This affords Lee
Lighting the competitive advantage of providing customers with a higher
quality and more consistent service, critical to success in capturing
feature film work. Many of Lee Lighting's technicians are considered to be
among the best in the film industry and their services are requested by some
of the world's leading cinematographers.
DEPTH OF INVENTORY. Lee Lighting maintains the largest rental asset base of
lighting equipment, transport, mobile generators and power distribution
equipment in the United Kingdom. This permits Lee Lighting to service as
many as 15 feature films at the same time. The Company believes that its
extensive inventory of equipment provides it with an important competitive
advantage. Its substantial inventory enables Lee Lighting to service
projects with large-scale equipment and personnel requirements, such as
feature films and outside broadcasts, while still maintaining sufficient
capacity to simultaneously service other projects. Lee Lighting believes
that its position as the inventory market leader makes it the only source
for certain large-scale projects. Lee Lighting intends to add to its rental
asset base while actively pursuing opportunities to increase its share in
the U.K. feature film market as well as the television market, including
commercials and television broadcasts.
EXPERIENCED MANAGEMENT. Lee Lighting currently employs senior management
who have developed important contacts in the U.K. motion picture and
television industries over many years. Under this management there is a
sizable field force of gaffers and electricians who work exclusively for Lee
Lighting.
INDUSTRY BACKGROUND AND COMPETITION. Lee Lighting services both the motion
picture and television industries, including studio programs, outside
broadcasts, commercials and made-for-television movies (equivalent to movies of
the week). These markets require a similar range of lighting products and
related support equipment; however, feature films and episodic television
programs
36
<PAGE>
generally require larger equipment packages than commercials. Equipment packages
are frequently determined by the producer, director or cinematographer, who may
desire a specific type of image or lighting effect.
Although Lee Lighting is the largest lighting rental company in the United
Kingdom, the rental lighting market is price competitive. Lee Lighting estimates
that it and three other companies comprised approximately 90% of the aggregate
market share in the United Kingdom in 1995; the remaining 10% of the market is
shared among many smaller companies.
LEE FILTERS
Lee Filters is a leading manufacturer of light control media for the motion
picture, television and theater industries. Sales of filters or gels used by
lighting directors to control or correct lighting conditions during productions
comprise 80% of Lee Filters' business. The balance consists of photographic
filters and related products. In 1995, Lee Filters' revenue was approximately
$10.0 million.
Lee Filters' lighting filters are available in a wide range of colors and
applications. These lighting filters are made either from polyester or
polycarbonate film purchased from U.K. and European petrochemical companies. Lee
Filters' range of light control filters includes tungsten conversion, daylight
conversion, arc correction, fluorescent, diffusion and ultraviolet grades. The
film base is impervious to water, is totally transparent and has a high melting
point, making it ideal for the manufacture of filter systems. Rolls of film are
coated on both sides with specially prepared lacquers which give them exactly
the color or light management properties demanded by the user. The color
formulas are proprietary to Lee Filters and are computer filed to ensure exact
reproduction from one batch to the next. Lee Filters also makes still
photographic resin and polyester filters and a camera filter holder system for
amateur stills photographers, and produces bellows for still camera
manufacturers.
Lighting filter distribution is handled primarily through a network of third
party dealers who have been selected because of their specific knowledge of the
filters market in their respective countries. Approximately 60% of Lee Filters'
sales are in the United Kingdom and Europe. In the United Kingdom, Lee Filters
sells on a direct basis to end users and rental houses as well as to
distributors and dealers. In Europe, Lee Filters has distributors in France,
Germany, Italy, Spain, Benelux, Portugal, Scandinavia and Switzerland.
Approximately 25% of Lee Filters' sales are in North America where it has
established distribution operations in Burbank, California and Teterboro, New
Jersey to service U.S. dealers. A third party distributor has been established
in Toronto to serve the Canadian market. The remaining 15% of sales are made
primarily in Japan, Hong Kong, Singapore and Australia.
COMPETITIVE STRENGTHS
WIDE RANGE OF FILTER TYPES AND COLORS. Lee Filters believes it manufactures
more types of filters and a wider range of colors than its competitors and is
the only company which does not sell on a private label basis to others. Lee
Filters does not resell filters made by other manufacturers, thereby enabling it
to maintain better quality control.
LARGE INVENTORY. Lee Filters maintains a sizable inventory of filters in
three locations in order to provide same-day service to production companies.
This is especially important in servicing feature films while on location.
Quality and availability of product are the principal reasons Lee Filters is a
preeminent supplier to the U.K., European and U.S. feature film industry.
Lee Filters intends to expand its position in lighting filters for the film,
television and theater markets by improving its distribution and dealer network,
particularly in North and South America and in the Far
37
<PAGE>
East. In addition, it plans to increase its product offerings on a selective
basis to the stills photography market in the United Kingdom and the United
States.
COMPETITION
Lee Filters has one principal competitor and several smaller competitors.
Some of these competitors are contract processors or coaters who supply the end
user through other distributors, and some are sales companies which usually
purchase and resell filters. Its principal competitor offers a full range of
filters, some of which are made in-house and some of which are purchased.
INTELLECTUAL PROPERTY
The Company owns or otherwise has rights to patents and trademarks used in
conjunction with the manufacture and rental of its products, including
Panavision-Registered Trademark-, PRIMO PRIME-Registered Trademark-, PRIMO
ZOOM-Registered Trademark-, Panaflex-Registered Trademark-,
Panahead-Registered Trademark-, 3-Perf-Registered Trademark- and
Panastar-Registered Trademark-. Proprietary protection for the Company's
products and know-how is important to the Company's business. Accordingly, the
Company's policy is to prosecute and enforce its patents and proprietary
technology. The Company intends to continue to file patent applications to
protect technology, inventions and improvements that are considered important to
the development of its business. In addition, the Company relies upon trade
secrets, know-how, continuing technological innovation and licensing
opportunities to develop and maintain its competitive position. To the Company's
knowledge, there are no claims or suits threatened, pending or contemplated
against it for infringement of any patents or trademarks.
PROPERTIES
The Company's headquarters is located at its 150,000 square-foot facility in
Woodland Hills. In addition, the Company operates rental facilities in Woodland
Hills and Hollywood, California, Orlando, Florida and Wilmington, North
Carolina. The Company is in the process of expanding its Hollywood facility,
which it expects to complete by the end of 1996. To service its international
markets, the Company operates rental facilities in Toronto and Vancouver,
Canada, Dublin, Ireland and London (two) and Manchester, England. All of the
Company's facilities are leased, with the exception of one of the Company's
greater London facilities and its facility in Glasgow, which are owned.
ENVIRONMENTAL MATTERS
The Company's manufacturing operations are subject to foreign, federal,
state and local environmental laws and the Company has made, and will continue
to make, expenditures to comply with those laws. In addition, environmental laws
can impose liability on present and former real property owners or operators,
without regard to fault or legality of the original actions, for the cost of
cleaning up or removing contamination caused by hazardous or toxic substances.
Although no material capital or operating expenditures relating to environmental
controls or other environmental matters are currently anticipated, there can be
no assurance that the Company will not be required to make material expenditures
in the future relating to environmental matters.
EMPLOYEES
As of June 30, 1996, the Company had a total of approximately 780 full-time
employees, consisting of 369 employees based in the United States, 58 employees
based in Canada, 345 employees based in the United Kingdom and eight employees
based in France. The Company is not a party to any collective bargaining
agreements. The Company believes that its relationships with its employees are
good.
LITIGATION
The Company is not engaged in any legal proceedings other than ordinary
routine litigation incidental to its business.
38
<PAGE>
MANAGEMENT
EXECUTIVE OFFICERS AND DIRECTORS
The following table sets forth certain information with respect to the
executive officers and directors of the Company.
<TABLE>
<CAPTION>
NAME AGE POSITION
- ------------------------------------------- --- -------------------------------------------
<S> <C> <C>
William C. Scott........................... 62 Chairman of the Board of Directors and
Chief Executive Officer
John S. Farrand............................ 52 President and Chief Operating Officer
Jeffrey J. Marcketta....................... 41 Executive Vice President and Chief
Financial Officer
Christopher M.R. Phillips.................. 36 Controller
Sidney Lapidus............................. 58 Director
Joanne R. Wenig............................ 41 Director
</TABLE>
WILLIAM C. SCOTT has been the Chairman and Chief Executive Officer of the
Company since 1988. From 1972 until 1987, Mr. Scott was President and Chief
Operating Officer of Western Pacific Industries Inc., a company listed on the
NYSE. Prior to 1972, Mr. Scott was a Group Vice President of Cordura Corporation
(a business information company) for three years, a Vice President of Booz Allen
& Hamilton Inc. (management consulting firm) for five years and an
owner/operator of several small businesses for eight years.
JOHN S. FARRAND has been the President and Chief Operating Officer of the
Company since 1985. From 1980 to 1985, Mr. Farrand was employed by Warner
Communications Inc. in several senior executive positions. He was President of
their Atari Coin-Operated Games Division and subsequently was appointed
President and Chief Operating Officer of Atari Holdings, Inc. Prior to 1980, Mr.
Farrand spent 14 years with Music Hire Group Limited, a U.K. company
specializing in coin-operated music systems (juke boxes), and since 1973 served
as Managing Director. Mr. Farrand is a member of the Academy of Motion Picture
Arts and Sciences, a member of the Society of Motion Picture and Television
Engineers and an associate member of the American Society of Cinematographers.
JEFFREY J. MARCKETTA has been Executive Vice President and Chief Financial
Officer of the Company since 1993. From 1991 to 1993, Mr. Marcketta served as
the President of Panavision Europe Limited, a wholly owned subsidiary of the
Company, and was responsible for the general management of the Company's
European operations. From 1989 until 1991, he was Vice President of Corporate
Development, assisting the Chief Executive Officer in the restructuring and
rationalization of the Company's business operations. Prior to joining the
Company in 1989, he worked for Ernst & Young LLP for almost ten years, the last
three of which were spent in the Mergers and Acquisitions Consulting Group of
the New York office.
CHRISTOPHER M.R. PHILLIPS has served as Controller of the Company since
1993. Mr. Phillips was the controller for the domestic operations of the Company
from 1989 to 1993 and the assistant controller for the domestic operations of
the Company from 1986 to 1989.
SIDNEY LAPIDUS has been a director of the Company since its incorporation in
1990. Mr. Lapidus has been employed since 1967 by E.M. Warburg, Pincus & Co.,
Inc., a private investment firm, where he has served as a Managing Director
since 1982. He is also a director of Renaissance Communications Corp., Pacific
Greystone Corporation, Caribiner International, Inc. and a number of privately
held companies.
JOANNE R. WENIG has served as a director of the Company since its
incorporation in 1990. Ms. Wenig has been employed since 1986 by E.M. Warburg,
Pincus & Co., Inc., a private investment firm, where she has served as a
Managing Director since 1991. She is also a director of Renaissance
Communications Corp. and a number of privately held companies.
39
<PAGE>
In addition, the Company expects to appoint two independent directors.
Each director serves until the expiration of his or her term and thereafter
until his or her successor is duly elected and qualified. Pursuant to a
stockholders agreement, Warburg, Pincus and management have the right to
designate three persons to be appointed or nominated to the Company's Board of
Directors. See "--Stockholders Agreement." Executive officers of the Company are
elected annually by the Board of Directors and serve at its discretion or until
their successors are duly elected and qualified.
OTHER KEY EMPLOYEES
The following individuals are key employees within the Company's Woodland
Hills division. A brief description of their responsibilities is provided below.
PHILIP RADIN has been Executive Vice President Marketing for the Woodland
Hills division of the Company since 1989. Mr. Radin joined Panavision as a
trainee in 1975. During his first five years with the Company, he was
responsible for instructing film crews on the use and benefits of Panavision
products. In 1980, he became the manager of the camera rental department and in
1986 became a Vice President Marketing.
ROBERT HARVEY has served as Vice President Sales for the Woodland Hills
division of the Company since he joined Panavision in 1985. He has managed the
expansion into new markets, including independent feature films, television
movies and syndicated projects for television. From 1979 through 1985, Mr.
Harvey worked as Director of Sales for the Atari Coin-Operated Games Division.
Mr. Harvey is a member of the Screen Actors Guild and has served on numerous
industry boards and steering committees.
LARRY HEZZELWOOD has been Vice President Marketing & Operations for the
Woodland Hills division of the Company since 1991. He joined Panavision in 1975
where he worked in Panavision's camera rental department for five years before
moving to Paramount Pictures Corporation to manage its camera department. In
1985, Mr. Hezzelwood became a freelance assistant cameraman. In 1989 Mr.
Hezzelwood returned to Panavision, and he assumed his current position of Vice
President Marketing and Operations in 1991.
IAIN NEIL has served as Senior Vice President Optics for the Woodland Hills
division of the Company since he joined Panavision in 1986 after spending two
years with Hughes ELCAN Optical Technologies in Toronto and eight years at Barr
& Stroud Limited in Scotland as head of optical design. Mr. Neil holds over 150
existing worldwide patents and is the recipient of six awards for lenses and
optical systems from the Academy of Motion Picture Arts and Sciences. He is
currently a member of the International Society for Optical Engineering, the
Optical Society of America, the American Society of Cinematographers and the
Academy of Motion Picture Arts and Sciences.
COMMITTEES OF THE BOARD OF DIRECTORS
After the completion of the Offerings, the Board of Directors of the Company
will have three standing committees: the Audit Committee, the Compensation
Committee and the Stock Option Committee.
The Audit Committee will have general responsibility for supervision of
financial controls, as well as for accounting and audit activities of the
Company. The Audit Committee will annually review the qualifications of the
Company's independent certified public accountants, make recommendations to the
Board of Directors as to their selection and review the planning, fees and
results of their audit. The members of the Audit Committee will consist solely
of certain independent directors as and when elected. The Compensation Committee
will make recommendations regarding the compensation and benefit polices and
procedures of the Company. The Stock Option Committee will determine grants
under the Company's stock option plan. See "--Compensation Pursuant to Plans."
40
<PAGE>
DIRECTORS' ANNUAL COMPENSATION
During 1995, members of the Board of Directors received no directors' fees.
The Company is obligated to reimburse its Board members for all reasonable
expenses incurred in connection with their attendance at directors' meetings.
Following the Offerings, members of the Board of Directors who are not officers
or employees of the Company will receive $ per meeting.
EXECUTIVE COMPENSATION
SUMMARY COMPENSATION TABLE. The following table sets forth information
regarding the compensation of the Company's Chief Executive Officer and its
other executive officers for the fiscal year 1995:
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
ANNUAL COMPENSATION
--------------------------
<S> <C> <C> <C> <C>
OTHER ANNUAL
NAME AND PRINCIPAL POSITION YEAR SALARY BONUS(1) COMPENSATION
- -------------------------------------------------------------- --------- ----------- ------------- -------------
William C. Scott.............................................. 1995 $ 600,000 $ 1,172,000 $ 6,930
Chairman of the Board of
Directors and Chief
Executive Officer
John S. Farrand............................................... 1995 400,000 785,000 6,930
President and Chief
Operating Officer
Jeffrey J. Marcketta.......................................... 1995 218,769 314,000 6,930
Executive Vice President
and Chief Financial Officer
Christopher M.R. Phillips..................................... 1995 88,077 45,000 4,842
Controller
</TABLE>
- ------------------------
(1) Paid pursuant to the Company's Executive Incentive Compensation Plan. See
"--Compensation Pursuant to Plans--Executive Incentive Compensation Plan."
41
<PAGE>
COMPENSATION PURSUANT TO PLANS
STOCK OPTION PLAN
In connection with the Recapitalization, the Board of Directors adopted and
the stockholders approved the Company's stock option plan (the "Stock Option
Plan"). The Stock Option Plan is open to participation by directors, officers,
consultants, other key employees of the Company or of its subsidiaries and
certain other key persons who the Stock Option Committee (as defined below)
determines shall receive options under the Stock Option Plan, except members of
the Stock Option Committee.
The Stock Option Plan authorizes (i) the grant of options to purchase Common
Stock intended to qualify as incentive stock options ("Incentive Options"), as
defined in Section 422 of the Internal Revenue Code of 1986, as amended (the
"Code") and (ii) the grant of options that do not so qualify ("Non-Statutory
Options"). The number of shares of Common Stock reserved for issuance under the
Stock Option Plan is shares. As of , 1996, options to purchase
an aggregate of shares having a weighted average exercise price of
$ per share were outstanding under the Stock Option Plan, no options had
been exercised under the Stock Option Plan and options to purchase
shares were available for grant under the Stock Option Plan. The Stock Option
Plan expires in 2006. A certain number of shares under the Stock Option Plan are
subject to performance vesting.
The Stock Option Plan is administered by a Stock Option Committee (the
"Stock Option Committee") appointed by the Board of Directors of the Company. As
of the closing of the Offerings, all members of the Stock Option Committee will
be "disinterested persons" as that term is defined under rules promulgated by
the Securities and Exchange Commission. The Stock Option Committee has the sole
authority, in its absolute discretion: (i) to determine which of the eligible
employees of the Company and its subsidiaries shall be granted options, (ii) to
authorize the granting of both Incentive Options and Non-Statutory Options,
(iii) to determine the times when options shall be granted and the number of
shares to be optioned, (iv) to determine the option price of the shares subject
to each option, which price shall be not less than the fair market value of the
Common Stock at the time the option was granted, (v) to determine the time or
times when each option becomes exercisable, the duration of the exercise period
and any other restrictions on the exercise of options issued under the Stock
Option Plan, (vi) to prescribe the form or forms of the option agreements under
the Stock Option Plan, (vii) to adopt, amend and rescind such rules and
regulations as, in its opinion, may be advisable in the administration of the
Stock Option Plan and (viii) to construe and interpret the Stock Option Plan,
the rules and regulations and the option agreements under the Stock Option Plan
and to make all other determinations deemed necessary or advisable for the
administration of the Stock Option Plan. All decisions, determinations and
interpretations of the Stock Option Committee are final and binding on all
optionees.
Excluding any person who is a member of the Stock Option Committee, (i)
Incentive Options may be granted to officers and other key employees of the
Company or its subsidiaries and (ii) Non-Statutory Options may be granted to
directors, consultants, or other key persons who the Stock Option Committee
determines shall receive options under the Stock Option Plan.
No option may be exercised after the date ten years from the date of grant
of such option (five years in the case of Incentive Options of individuals
holding more than ten percent of the total combined voting power of all classes
of stock of the Company or of any parent or subsidiary thereof
("greater-than-ten-percent-stockholders")) (the "Termination Date"). The
exercise price for Incentive Options may not be less than 110% of fair market
value of the Common Stock on the date of grant in the case of a greater-
than-ten-percent-stockholder. The aggregate fair market value (determined as of
the time the option is granted) of the Common Stock with respect to which any
Incentive Options may be exercisable for the first time by the optionee in any
calendar year (under the Stock Option Plan or any other stock option plan of the
Company or any parent or subsidiary thereof) shall not exceed $100,000.
42
<PAGE>
Options are non-transferable except by will or the laws of descent and
distribution. Generally, options granted under the Stock Option Plan terminate
upon the earliest of: (i) the expiration date of the option, (ii) the date of
voluntary termination of the optionee's employment by the optionee, (iii) the
date of termination of the optionee's employment by the Company for cause, (iv)
three months after the date of termination of the optionee's employment by the
Company without cause, (v) one year after the cessation of the optionee's
employment by reason of a disability within the meaning of Section 22(e)(3) of
the Code and (vi) one year after the death of an optionee prior to the
Termination Date and while employed by the Company or a subsidiary thereof or
while entitled to exercise an option pursuant to (v) above (such option shall be
exercisable by the person to whom the optionee's rights under the option pass by
will or the applicable laws of descent and distribution). If an option may be
exercised during any period after the termination of an optionee's employment
with the Company, such option may be exercised only to the extent that the
optionee was entitled to exercise such option at the time of such termination.
EXECUTIVE INCENTIVE COMPENSATION PLAN
The Company maintains an Executive Incentive Compensation Plan in which the
Chairman and Chief Executive Officer is eligible to participate, as well as
other employees selected by the Chief Executive Officer. The plan allows
participants to earn bonuses up to a stated percentage of their base salary. The
bonuses are paid in part based on the Company's achievement of operating
results, and in part based on achievement of individual goals established for
the participant. The Company presently intends to continue the bonus plan for
1996 and future years.
EMPLOYMENT AGREEMENT OF WILLIAM C. SCOTT
Pursuant to an employment agreement with the Company, William C. Scott
agreed to serve as Chairman of the Board of Directors and Chief Executive
Officer of the Company for an annual salary of $800,000, subject to annual
increases as determined by the Company. The employment agreement provides that
Mr. Scott shall be granted bonuses pursuant to the Executive Incentive
Compensation Plan and Non-Statutory Options pursuant to the terms of the Stock
Option Plan. The employment agreement expires on June 11, 1999. The Company may
terminate the employment agreement for cause. In the event of Mr. Scott's
voluntary termination (except during the six-month period following a change of
control) or termination for cause by the Company, the Company shall pay Mr.
Scott only an amount equal to his base salary and all previously unreimbursed
expenses. Upon a voluntary termination by Mr. Scott during such six-month period
following a change of control, Mr. Scott is entitled to the greater of (x)
$1,600,000 or (y) twice his annual base salary, and all accrued but previously
unpaid salary, bonuses and unreimbursed expenses through the date of
termination. Upon a termination of Mr. Scott by death or disability, the Company
shall make a lump sum payment equal to the greater of $800,000 or Mr. Scott's
base salary currently then in effect, as well as all accrued but previously
unpaid salary, bonuses and unreimbursed expenses through the date of
termination.
The employment agreement contains a covenant prohibiting the improper
disclosure and use of the Company's confidential information. In addition, the
employment agreement contains a covenant prohibiting Mr. Scott from directly or
indirectly competing with Company. This covenant expires two years following Mr.
Scott's voluntary termination.
STOCKHOLDERS AGREEMENT
Under a stockholders agreement (the "Stockholders Agreement") among the
Company and its existing stockholders, the parties have agreed to cause the
Board of Directors of the Company to include (i) two persons designated by
Warburg, Pincus and (ii) William C. Scott or, if he is not an employee of the
Company or is otherwise unavailable, one person designated by the holders of a
majority of the shares of Common Stock held by management who are then employed
by the Company. The Stockholders
43
<PAGE>
Agreement also provides such stockholders with certain registration rights. See
"Description of Capital Stock--Registration Rights."
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
The Company did not have a compensation committee during 1995. Officers'
compensation was determined by the Board of Directors.
44
<PAGE>
CERTAIN TRANSACTIONS
In May 1996, the Company effected the Recapitalization, pursuant to which it
acquired all of the interests in PILP it did not previously own and retired all
of PILP's outstanding debt securities other than those owned by Warburg, Pincus,
for a total of $126.1 million in cash. As part of the Recapitalization:
(i) Warburg, Pincus and Messrs. Scott, Farrand and Marcketta
contributed $11,608,000, $580,400, $165,829 and $82,914, respectively, to
the Company in the form of subordinated debt;
(ii) Mr. Scott exchanged his interests in PILP for shares of Common
Stock;
(iii) Messrs. Farrand and Marcketta were issued and shares of
Common Stock respectively; and
(iv) the Company, Warburg, Pincus and Messrs. Scott, Farrand and
Marcketta entered into the Stockholders Agreement. See
"Management--Stockholders Agreement."
Effective July 1, 1996, Warburg, Pincus acquired substantially all of the
assets of Lee Lighting for approximately $8.0 million and contributed those
assets to the Company. The purchase price equalled the book value of the
acquired assets.
Mr. Farrand, an executive officer of the Company, is the obligor in respect
of a promissory demand note issued to the Company. The principal amount of and
accrued interest on this note were $540,000 and $65,000, respectively, as of
June 30, 1996. This note was originally issued in connection with Mr. Farrand's
purchase of a residence and is secured by a mortgage thereon.
Certain executive management services have been provided by the Company to
Lee International, Inc. ("LII"), an indirect, wholly owned subsidiary of
Warburg, Pincus. The amount received by the Company from LII was $996,000,
$854,000 and $687,000 for the years ended December 31, 1993, 1994 and 1995 and
$348,000 and $432,000 for the six months ended June 30, 1995 and 1996,
respectively. The amounts received have been offset against selling, general and
administrative expenses in the Company's consolidated statement of income. The
agreement with LII expires on September 30, 1996.
45
<PAGE>
PRINCIPAL STOCKHOLDERS
The following table sets forth certain information with regard to the
beneficial ownership of the Common Stock as of , 1996 and as adjusted
to reflect the sale of the shares of Common Stock offered hereby, by (i) each
person known by the Company to own beneficially more than 5% of the outstanding
shares of Common Stock, (ii) each director and executive officer and (iii) all
directors and executive officers of the Company as a group.
<TABLE>
<CAPTION>
PERCENTAGE OF SHARES
BENEFICIALLY OWNED(1)(2)
------------------------------
<S> <C> <C> <C>
NUMBER OF SHARES BEFORE AFTER
NAME AND ADDRESS OF BENEFICIAL OWNER BENEFICIALLY OWNED(1) OFFERINGS OFFERINGS(3)
- ------------------------------------------------------------- --------------------- ------------- ---------------
Warburg, Pincus Capital Company, L.P.(4)..................... 90.0%
466 Lexington Avenue
New York, New York 10017
William C. Scott............................................. 7.0
Panavision Inc.
140 East 45th Street
New York, New York 10017
John S. Farrand.............................................. 2.0
Jeffrey J. Marcketta......................................... 1.0
Christopher M.R. Phillips.................................... *
Sidney Lapidus(5)............................................ 90.0
Joanne R. Wenig(5)........................................... 90.0
All directors and executive officers 10.0
as a group (6 persons).....................................
</TABLE>
- ------------------------
* Less than 1%.
(1) Except as otherwise indicated, the persons in this table have sole voting
and investment power with respect to all shares of Common Stock shown as
beneficially owned by them, subject to community property laws where
applicable and subject to the information contained in the footnotes to this
table.
(2) Based upon shares of Common Stock outstanding prior to the Offerings
and shares of Common Stock outstanding after the Offerings. Shares not
outstanding but deemed beneficially owned by virtue of the right of a person
or group to acquire them within 60 days are treated as outstanding only for
purposes of determining the number of and percent owned by such person or
group.
(3) Amounts shown for each stockholder include all shares of Common Stock
subject to stock options granted to Messrs. Scott, Farrand, Marcketta and
Phillips exercisable within 60 days of , 1996. Not included are
additional shares of Common Stock subject to options granted to Messrs.
Scott, Farrand, Marcketta and Phillips that are not exercisable within 60
days of , 1996.
(4) The sole general partner of Warburg, Pincus Capital Company, L.P. is E.M.
Warburg, Pincus & Co., Inc. a New York general partnership ("WP"). Lionel I.
Pincus is the managing partner of WP and may be deemed to control it.
(5) All of the shares indicated as owned by Mr. Lapidus and Ms. Wenig are owned
directly by Warburg, Pincus and are included because of their affiliation
with Warburg, Pincus. Mr. Lapidus and Ms. Wenig disclaim "beneficial
ownership" of these shares within the meaning of Rule 13d-3 under the
Securities Exchange Act of 1934. The address of Mr. Lapidus and Ms. Wenig is
c/o Warburg, Pincus Capital Company, L.P., 466 Lexington Avenue, New York,
NY 10017.
46
<PAGE>
DESCRIPTION OF CAPITAL STOCK
The following description of the capital stock of the Company and certain
provisions of the Company's Restated Certificate of Incorporation (the
"Certificate") and By-laws (the "By-laws") is a summary and is qualified in its
entirety by the provisions of the Certificate and By-laws, copies of which have
been filed as exhibits to the Registration Statement of which this Prospectus is
a part.
Upon completion of the Offerings, the authorized capital stock of the
Company will consist of (i) shares of Common Stock, par value $.01 per
share, of which shares will be outstanding and (ii) shares of Preferred
Stock, par value $.01 per share ("Preferred Stock"), of which no shares will be
outstanding.
COMMON STOCK
Holders of Common Stock are entitled to one vote per share in all matters to
be voted on by the stockholders of the Company and do not have cumulative voting
rights. Accordingly, holders of a majority of the outstanding shares of Common
Stock entitled to vote in any election of directors may elect all of the
directors standing for election. Subject to preferences that may be applicable
to any Preferred Stock outstanding at the time, holders of Common Stock are
entitled to receive ratably such dividends, if any, as may be declared from time
to time by the Board of Directors out of funds legally available therefor. In
the event of a liquidation, dissolution or winding up of the Company, holders of
Common Stock are entitled to share ratably in all assets remaining after payment
of the Company's liabilities and the liquidation preference, if any, of any
outstanding Preferred Stock. Holders of shares of Common Stock have no
preemptive, subscription, redemption or conversion rights. There are no
redemption or sinking fund provisions applicable to the Common Stock. All of the
outstanding shares of Common Stock are, and the shares offered by the Company in
the Offerings will be, when issued and paid for, fully paid and non-assessable.
The rights, preferences and privileges of holders of Common Stock are subject
to, and may be adversely affected by, the rights of the holders of shares of any
series of Preferred Stock which the Company may designate and issue in the
future.
PREFERRED STOCK
The Board of Directors is authorized to issue Preferred Stock without
stockholder approval and upon such terms as the Board of Directors may
determine. This amendment could have the effect of making it more difficult for
a third party to acquire, or of discouraging a third party from acquiring or
making a proposal to acquire, a majority of the outstanding stock of the
Company. The rights of the holders of Common Stock will be subject to, and may
be adversely affected by, the rights of holders of Preferred Stock that may be
issued in the future. The Company has no present plans to issue any shares of
Preferred Stock. See "Risk Factors--Anti-Takeover Effect of Certain Charter and
By-Law Provisions."
REGISTRATION RIGHTS
Under the Stockholders Agreement, the Company granted certain rights with
respect to the registration of an aggregate of shares of Common Stock
("Registrable Shares") to the stockholders thereunder. At any time after the
completion of the Offerings (subject to the "lock-up" provisions described
herein under the heading "Underwriting"), Warburg, Pincus is entitled to request
that the Company file a registration statement under the Securities Act covering
the sale of some or all of the Registrable Shares held by Warburg, Pincus,
subject to certain conditions. The Company is required to effect no more than
two such registrations. Other holders of shares of Common Stock, pursuant to the
Stockholders Agreement, may request inclusion in such registration and shall
have the right to include such shares in the registration, subject to certain
conditions, including that the underwriter of any such offering shall have the
right, subject to certain conditions, to limit the number of Registrable Shares
included in the registration. In addition, commencing two years after the
closing of the Offerings, and at
47
<PAGE>
any time thereafter, the parties to the Stockholders Agreement have certain
rights to include their shares whenever the Company proposes to file a
registration statement.
LIMITATIONS ON DIRECTORS' LIABILITY
The Certificate and By-laws limit the liability of directors and officers to
the maximum extent permitted by Delaware law. Delaware law provides that
directors of a corporation will not be personally liable for monetary damages
for breach of their fiduciary duties as directors, including gross negligence,
except liability for (i) breach of the directors' and officers' duty of loyalty,
(ii) acts or omissions not in good faith or which involve intentional misconduct
or a knowing violation of the law, (iii) the unlawful payment of a dividend or
unlawful stock purchase or redemption and (iv) any transaction from which the
director or officer derives an improper personal benefit. Delaware law does not
permit a corporation to eliminate a director's or an officer's duty of care, and
this provision of the Company's Certificate has no effect on the availability of
equitable remedies, such as injunction or rescission, based upon a director's
breach of the duty of care.
These provisions will not limit liability under state or federal securities
laws. The Company believes that these provisions will assist the Company in
attracting and retaining qualified individuals to serve as directors.
SECTION 203 OF THE DELAWARE GENERAL CORPORATION LAW
The Company is subject to the provisions of Section 203 of the Delaware
General Corporation Law ("Section 203"). Under Section 203, certain "business
combinations" between a Delaware corporation whose stock generally is publicly
traded or held of record by more than 2,000 stockholders and an "interested
stockholder" are prohibited for a three-year period following the date that such
a stockholder became an interested stockholder, unless (i) the corporation has
elected in its original certificate of incorporation not to be governed by
Section 203 (the Company did not make such an election), (ii) the business
combination was approved by the Board of Directors of the corporation before the
other party to the business combination became an interested stockholder, (iii)
upon consummation of the transaction that made it an interested stockholder, the
interested stockholder owned at least 85% of the voting stock of the corporation
outstanding at the commencement of the transaction (excluding voting stock owned
by directors who are also officers or held in employee benefit plans in which
the employees do not have a confidential right to tender or vote stock held by
the plan) or (iv) the business combination was approved by the Board of
Directors of the corporation and ratified by two-thirds of the voting stock
which the interested stockholder did not own. The three-year prohibition also
does not apply to certain business combinations proposed by an interested
stockholder following the announcement or notification of certain extraordinary
transactions involving the corporation and a person who had not been an
interested stockholder during the previous three years or who became an
interested stockholder with the approval of the majority of the corporation's
directors. The term "business combination" is defined generally to include
mergers or consolidations between a Delaware corporation and an "interested
stockholder," transactions with an "interested stockholder" involving the assets
or stock of the corporation or its majority-owned subsidiaries and transactions
which increase an interested stockholder's percentage ownership of stock. The
term "interested stockholder" is defined generally as a stockholder who,
together with affiliates and associates, owns (or, within three years prior, did
own) 15% or more of a Delaware corporation's voting stock. Section 203 could
prohibit or delay a merger, takeover or other change in control of the Company
and therefore could discourage attempts to acquire the Company.
TRANSFER AGENT AND REGISTRAR
The Transfer Agent and Registrar of the Common Stock is .
48
<PAGE>
SHARES ELIGIBLE FOR FUTURE SALE
Prior to the Offerings there has been no market for the shares of the Common
Stock. The Company can make no predictions as to the effect, if any, that sales
of shares or the availability of shares for sale will have on the market price
prevailing from time to time. Nevertheless, sales of significant amounts of the
Common Stock in the public market, or the perception that such sales may occur,
could adversely affect prevailing market prices. See "Risk Factors--Shares
Eligible for Future Sale; Potential for Adverse Effect on Stock Price;
Registration Rights."
Upon completion of the Offerings, the Company expects to have shares
of Common Stock outstanding, assuming no exercise of the Underwriters'
over-allotment option. Of these shares, the shares of Common Stock sold in
the Offerings will be freely tradeable without restriction under the Securities
Act, except for any such shares which may be acquired by an "affiliate" of the
Company (an "Affiliate") as that term is defined in Rule 144 under the
Securities Act, which shares will be subject to the resale limitations of Rule
144.
An aggregate of approximately shares of Common Stock held by existing
stockholders upon completion of the Offerings will be "restricted securities"
(as that phrase is defined in Rule 144) and may not be resold in the absence of
registration under the Securities Act or pursuant to exemptions from such
registration, including among others, the exemption provided by Rule 144 under
the Securities Act. Except as described below, ninety days after the date of
this Prospectus, approximately shares of Common Stock will be eligible for
sale in the public market pursuant to Rule 701 under the Securities Act. In
addition, approximately shares will be eligible for sale in the public
market under Rule 144, subject to the volume limitations and other restrictions
described below, in [date] and an additional shares will be eligible for
sale under Rule 144 in [date].
In general, under Rule 144 as currently in effect, beginning 90 days after
the date of this Prospectus, if a period of at least two years has elapsed since
the later of the date the "restricted securities" were acquired from the Company
and the date they were acquired from an Affiliate, then the holder of such
restricted securities (including an Affiliate) is entitled to sell a number of
shares within any three-month period that does not exceed the greater of 1% of
the then outstanding shares of the Common Stock (approximately shares
immediately after the Offerings) or the average weekly reported volume of
trading of the Common Stock on the NYSE during the four calendar weeks preceding
such sale. The holder may only sell such shares through unsolicited brokers'
transactions. Sales under Rule 144 are also subject to certain requirements
pertaining to the manner of such sales, notices of such sales and the
availability of current public information concerning the Company. Affiliates
may sell shares not constituting restricted shares in accordance with the
foregoing volume limitations and other requirements but without regard to the
two-year holding period. Under Rule 144(k), if a period of at least three years
has elapsed between the later of the date restricted securities were acquired
from the Company and the date they were acquired from an Affiliate, as
applicable, a holder of such restricted securities who is not an Affiliate at
the time of the sale and has not been an Affiliate for at least three months
prior to the sale would be entitled to sell the shares immediately without
regard to the volume limitations and other conditions described above.
The Commission has proposed certain amendments to Rule 144 that would reduce
by one year the holding periods required for shares subject to Rule 144 to
become eligible for resale in the public market. This proposal, if adopted,
would [substantially] increase the number of shares of Common Stock eligible for
immediate resale following expiration of the lock-up agreements described above.
No assurance can be given concerning whether or when the proposal will be
adopted by the Commission.
Any employee of the Company who purchased his or her shares of Common Stock
pursuant to a written compensation plan or contract may be entitled to rely on
the resale provisions of Rule 701 under the Securities Act, which permits
nonaffiliates to sell their Rule 701 shares without having to comply with the
current public information, holding period, volume limitation or notice
provision of Rule 144 and
49
<PAGE>
permits affiliates to sell their Rule 701 shares without having to comply with
Rule 144's holding period restrictions.
The Company intends to file as soon as practicable after the closing of this
offering a registration statement on Form S-8 under the Securities Act to
register approximately and shares of Common Stock reserved for
issuance under the Stock Option Plan, including, in some cases, shares for which
an exemption under Rule 144 or Rule 701 would also be available, thus permitting
the resale of shares issued under the Stock Option Plan by non-affiliates in the
public market without restriction under the Securities Act. Such registration
statement is expected to become effective immediately upon filing, whereupon
shares registered thereunder will become eligible for sale in the public market,
subject to vesting and, in certain cases, subject to the lock-up agreements
described below. At the date of this Prospectus, options to purchase an
aggregate of shares of Common Stock are outstanding under the Stock Option
Plan.
Notwithstanding the foregoing, in connection with the Offerings, the Company
has agreed during the period beginning from the date of this Prospectus and
continuing to and including the date 180 days after the date of this Prospectus,
not to offer, sell, contract to sell or otherwise dispose of any securities of
the Company (other than pursuant to employee stock option plans existing, or on
the conversion or exchange of convertible or exchangeable securities
outstanding, on the date of this Prospectus) which are substantially similar to
the shares of Common Stock or which are convertible or exchangeable into
securities which are substantially similar to the shares of Common Stock,
without the prior written consent of Goldman, Sachs & Co., except for the shares
of Common Stock offered in connection with the Offerings. The Company's
executive officers and directors and Warburg, Pincus, who will hold in the
aggregate shares of Common Stock following this offering, have agreed not to
offer, sell, contract to sell or otherwise dispose of any shares of Common Stock
or other securities of Panavision Inc. that are substantially similar to the
shares of Common Stock (including but not limited to any securities that are
convertible into or exchangeable for, or that represent the right to receive,
shares of Common Stock or any such substantially similar securities) for a
period of 180 days after the date of this Prospectus without the prior written
consent of Goldman, Sachs & Co.
The holders of approximately shares are entitled to certain
registration rights with respect to their shares. See "Description of Capital
Stock--Registration Rights."
LEGAL MATTERS
Certain legal matters with respect to the validity of the Common Stock
offered hereby will be passed upon for the Company by Willkie Farr & Gallagher,
New York, New York. Certain legal matters relating to the Offerings will be
passed upon for the Underwriters by Davis Polk & Wardwell, New York, New York.
EXPERTS
The consolidated financial statements of Panavision Inc. at December 31,
1994 and 1995, and for each of the three years in the period ended December 31,
1995, appearing in this Prospectus and Registration Statement have been audited
by Ernst & Young LLP, independent auditors, as set forth in their report thereon
appearing elsewhere herein, and are included in reliance upon such report given
upon the authority of such firm as experts in accounting and auditing. The
Financial Statements of Lee Lighting Limited at December 31, 1995 and for the
year then ended, appearing in this Prospectus and Registration Statement have
been audited by Ernst & Young, chartered accountants, as set forth in their
report thereon appearing elsewhere herein, and are included in reliance upon
such report given upon the authority of such firm as experts in accounting and
auditing.
50
<PAGE>
ADDITIONAL INFORMATION
The Company has filed with the Commission under the Securities Act a
Registration Statement on Form S-1 with respect to the Common Stock offered
hereby. This Prospectus does not contain all of the information set forth in the
Registration Statement in accordance with the rules and regulations of the
Commission. For further information pertaining to the Company and the Common
Stock offered hereby, reference is made to the Registration Statement, including
the exhibits thereto and the financial statements, notes and schedule filed as a
part thereof. Statements contained in this Prospectus as to the contents of any
contract or other document are not necessarily complete and, in each instance,
reference is made to the copy of such contract or document filed as an exhibit
to the Registration Statement, each such statement being qualified in all
respects by such reference. The Registration Statement may be inspected and
copied at the public reference facilities maintained by the Commission at 450
Fifth Street, N.W., Washington, D.C. 20549 and at the Commission's Regional
Offices in New York (Seven World Trade Center, New York, New York 10048) and
Chicago (Suite 1400, Citicorp Center, 500 West Madison Street, Chicago, Illinois
60661). Copies of such material can be obtained from the public reference
section of the Commission at prescribed rates by writing to the Public Reference
Section of the Commission at 450 Fifth Street, N.W., Washington, D.C. 20549.
Such materials can also be inspected at the offices of the New York Stock
Exchange, Inc., 20 Broad Street, New York, New York 10005 or on the Internet at
http://www.sec.gov.
51
<PAGE>
INDEX TO FINANCIAL STATEMENTS
PANAVISION INC.
<TABLE>
<CAPTION>
PRO FORMA
<S> <C>
Unaudited Pro Forma Condensed Consolidated Financial Statements...................... F-2
Unaudited Pro Forma Condensed Consolidated Statement of Income for the Six Months
Ended June 30, 1996................................................................ F-3
Unaudited Pro Forma Condensed Consolidated Statement of Income for the Six Months
Ended June 30, 1995................................................................ F-4
Unaudited Pro Forma Condensed Consolidated Statement of Income for the Year Ended
December 31, 1995.................................................................. F-5
Unaudited Pro Forma Condensed Consolidated Balance Sheet as of June 30, 1996......... F-6
HISTORICAL
Report of Independent Auditors....................................................... F-7
Consolidated Statements of Income.................................................... F-8
Consolidated Balance Sheets.......................................................... F-9
Consolidated Statements of Stockholders' Equity...................................... F-10
Consolidated Statements of Cash Flows................................................ F-11
Notes to Consolidated Financial Statements........................................... F-12
LEE LIGHTING LIMITED
Report of Independent Auditors....................................................... F-24
Group Profit and Loss Account........................................................ F-25
Group Balance Sheet.................................................................. F-26
Group Statement of Cash Flows........................................................ F-27
Notes to the Accounts................................................................ F-28
</TABLE>
F-1
<PAGE>
PANAVISION INC.
UNAUDITED PRO FORMA CONDENSED
CONSOLIDATED FINANCIAL STATEMENTS
As more fully described in the notes to the Panavision Inc. historical
consolidated financial statements, the Company effected a recapitalization
transaction (the Recapitalization) in May 1996, and the Company's parent
acquired and contributed to the capital of the Company, substantially all of the
assets of Lee Lighting Limited (Lee Lighting) effective July 1, 1996 (the Lee
Lighting Acquisition). The Recapitalization transaction is already reflected in
the Company's historical balance sheet at June 30, 1996 and therefore no pro
forma adjustments are required for the Recapitalization in the pro forma balance
sheet.
The following unaudited pro forma condensed consolidated statements of
income for the year ended December 31, 1995 and the six months ended June
30,1995 and 1996 have been prepared to illustrate the effects of the
Recapitalization and of the Lee Lighting acquisition, as if they had occurred at
the beginning of each period presented. The pro forma adjustments and the
assumptions on which they are based are described in the accompanying notes. The
following unaudited pro forma condensed consolidated balance sheet has been
prepared to illustrate the effect of the Lee Lighting acquisition, as if it had
occurred as of June 30, 1996.
The amounts for Lee Lighting included in the accompanying unaudited pro
forma condensed consolidated financial statements are based on Lee Lighting's
historical financial statements included elsewhere in this Registration
Statement and have been converted into US dollars at the appropriate exchange
rates (after adjustment for minor differences between the UK and the US
generally accepted accounting principles, as more fully described in Note 18 to
Lee Lighting's financial statements).
These unaudited pro forma condensed consolidated financial statements are
presented for illustrative purposes only and may not be indicative of the
results that would have occurred if the above transactions had occurred on the
dates indicated or which may be obtained in the future. The unaudited pro forma
condensed consolidated financial statements, including the Notes thereto, should
be read in conjunction with the historical consolidated financial statements of
Panavision Inc. and Lee Lighting, which are included elsewhere in this
Registration Statement.
F-2
<PAGE>
PANAVISION INC.
UNAUDITED PRO FORMA CONDENSED CONSOLIDATED STATEMENT OF INCOME
SIX MONTHS ENDED JUNE 30, 1996
(IN THOUSANDS, EXCEPT SHARE AND PER SHARE AMOUNTS)
<TABLE>
<CAPTION>
HISTORICAL PRO FORMA ADJUSTMENTS
------------------------ ----------------------------------
<S> <C> <C> <C> <C> <C>
PANAVISION LEE LEE LIGHTING PRO FORMA
INC. LIGHTING ACQUISITION RECAPITALIZATION ADJUSTED
----------- ----------- --------------- ----------------- -----------
Camera rental................. $ 38,740 $ $ $ $ 38,740
Lighting rental............... 1,374 9,662 11,036
Sales and other rental........ 9,146 738 9,884
----------- ----------- ------- -------- -----------
Total rental revenue and
sales....................... 49,260 10,400 59,660
Cost of rental and sales...... 15,917 7,531 23,448
Depreciation of rental
assets...................... 7,418 590 8,008
----------- ----------- ------- -------- -----------
Gross margin.................. 25,925 2,279 28,204
Selling, general and
administrative expenses..... 13,813 1,391 140(3) 15,344
Research and development
expenses.................... 1,893 -- 1,893
----------- ----------- ------- -------- -----------
Operating income.............. 10,219 888 (140) 10,967
Interest income............... 560 9 (425)(4) 144
Interest expense.............. (3,671) (2,784) 2,784(1) (1,217)(5) (4,888)
Foreign exchange loss......... (117) -- (117)
Other, net.................... 532 8 540
----------- ----------- ------- -------- -----------
Income before non-controlling
partners' interest in PILP
and income taxes............ 7,523 (1,879) 2,784 (1,782) 6,646
Non-controlling partners'
interest in PILP............ (4,500) -- 4,500(6) --
----------- ----------- ------- -------- -----------
Income before income taxes.... 3,023 (1,879) 2,784 2,718 6,646
Income tax provision.......... (596) -- (300)(2) (434)(2) (1,330)
----------- ----------- ------- -------- -----------
Net income (loss)............. $ 2,427 $ (1,879) $ 2,484 $ 2,284 $ 5,316
----------- ----------- ------- -------- -----------
----------- ----------- ------- -------- -----------
Net income per common share... $ [] $ []
Shares used in computation.... [] []
</TABLE>
- ------------------------
(1) To reflect the elimination of Lee Lighting's historical interest expense as
the underlying borrowing was not assumed by the Company.
(2) To adjust the pro forma tax provision to reflect the tax effect of the pro
forma adjustments including the recognition of tax benefits which had
previously been allocated to the non-controlling partners in PILP.
(3) To reflect amortization of deferred financing costs incurred in connection
with the Recapitalization.
(4) To reflect lower interest income earned due to the use of cash in the
Recapitalization.
(5) To reflect higher interest expense due to additional borrowings required for
the Recapitalization.
(6) To reflect the elimination of non-controlling partners' interest in PILP.
F-3
<PAGE>
PANAVISION INC.
UNAUDITED PRO FORMA CONDENSED CONSOLIDATED STATEMENT OF INCOME
SIX MONTHS ENDED JUNE 30, 1995
(IN THOUSANDS, EXCEPT SHARE AND PER SHARE AMOUNTS)
<TABLE>
<CAPTION>
HISTORICAL PRO FORMA ADJUSTMENTS
------------------------ ----------------------------------
<S> <C> <C> <C> <C> <C>
PANAVISION LEE LEE LIGHTING PRO FORMA
INC. LIGHTING ACQUISITION RECAPITALIZATION ADJUSTED
----------- ----------- --------------- ----------------- -----------
Camera rental................. $ 34,828 $ $ $ $ 34,828
Lighting rental............... 1,816 8,383 10,199
Sales and other rental........ 8,053 1,034 9,087
----------- ----------- ------- -------- -----------
Total rental revenue and
sales....................... 44,697 9,417 54,114
Cost of rental and sales...... 14,502 6,808 21,310
Depreciation of rental
assets...................... 7,226 560 7,786
----------- ----------- ------- -------- -----------
Gross margin.................. 22,969 2,049 25,018
Selling, general and
administrative expenses..... 14,131 1,385 210(3) 15,726
Research and development
expenses.................... 1,553 -- 1,553
----------- ----------- ------- -------- -----------
Operating income.............. 7,285 664 (210) 7,739
Interest income............... 758 21 (623)(4) 156
Interest expense.............. (3,737) (2,717) 2,717(1) (1,151)(5) (4,888)
Foreign exchange gain......... 465 -- 465
Other, net.................... 381 30 411
----------- ----------- ------- -------- -----------
Income before non-controlling
partners' interest in PILP
and income taxes............ 5,152 (2,002) 2,717 (1,984) 3,883
Non-controlling partners'
interest in PILP............ (2,901) -- 2,901(6) --
----------- ----------- ------- -------- -----------
Income before income taxes.... 2,251 (2,002) 2,717 917 3,883
Income tax provision.......... (446) -- (236)(2) 259(2) (423)
----------- ----------- ------- -------- -----------
Net income (loss)............. $ 1,805 $ (2,002) $ 2,481 $ 1,176 $ 3,460
----------- ----------- ------- -------- -----------
----------- ----------- ------- -------- -----------
Net income per common share... $ [] $ []
Shares used in computation.... [] []
</TABLE>
- ------------------------
(1) To reflect the elimination of Lee Lighting's historical interest expense as
the underlying borrowing was not assumed by the Company.
(2) To adjust the pro forma tax provision to reflect the tax effect of the pro
forma adjustments including the recognition of tax benefits which had
previously been allocated to the non-controlling partners in PILP.
(3) To reflect amortization of deferred financing costs incurred in connection
with the Recapitalization.
(4) To reflect lower interest income earned due to the use of cash in the
Recapitalization.
(5) To reflect higher interest expense due to additional borrowings required for
the Recapitalization.
(6) To reflect the elimination of non-controlling partners' interest in PILP.
F-4
<PAGE>
PANAVISION INC.
UNAUDITED PRO FORMA CONDENSED CONSOLIDATED STATEMENT OF INCOME
YEAR ENDED DECEMBER 31, 1995
(IN THOUSANDS, EXCEPT SHARE AND PER SHARE AMOUNTS)
<TABLE>
<CAPTION>
HISTORICAL PRO FORMA ADJUSTMENTS
------------------------ ----------------------------------
<S> <C> <C> <C> <C> <C>
PANAVISION LEE LEE LIGHTING PRO FORMA
INC. LIGHTING ACQUISITION RECAPITALIZATION ADJUSTED
----------- ----------- --------------- ----------------- -----------
Camera rental........................ $ 75,083 $ $ $ $ 75,083
Lighting rental...................... 4,121 17,960 22,081
Sales and other rental............... 16,124 1,789 17,913
----------- ----------- ------- -------- -----------
Total rental revenue and sales....... 95,328 19,749 115,077
Cost of rental and sales............. 29,745 14,334 44,079
Depreciation of rental assets........ 14,624 1,211 15,835
----------- ----------- ------- -------- -----------
Gross margin......................... 50,959 4,204 55,163
Selling, general and administrative
expenses........................... 28,486 2,521 420(3) 31,427
Research and development expenses.... 2,986 -- 2,986
----------- ----------- ------- -------- -----------
Operating income..................... 19,487 1,683 (420) 20,750
Interest income...................... 1,597 46 (1,327)(4) 316
Interest expense..................... (7,213) (5,396) 5,396(1) (2,561)(5) (9,774)
Foreign exchange loss................ (32) -- (32)
Other, net........................... 447 68 515
----------- ----------- ------- -------- -----------
Income before non-controlling
partners' interest in PILP and
income taxes....................... 14,286 (3,599) 5,396 (4,308) 11,775
Non-controlling partners' interest in
PILP............................... (7,348) -- 7,348(6) --
----------- ----------- ------- -------- -----------
Income before income taxes........... 6,938 (3,599) 5,396 3,040 11,775
Income tax provision................. (1,375) -- (593)(2) 575(2) (1,393)
----------- ----------- ------- -------- -----------
Net income (loss).................... $ 5,563 $ (3,599) $ 4,803 $ 3,615 $ 10,382
----------- ----------- ------- -------- -----------
----------- ----------- ------- -------- -----------
Net income per common share.......... $[ ] $[ ]
Shares used in computation........... [ ] [ ]
</TABLE>
- ------------------------
(1) To reflect the elimination of Lee Lighting's historical interest expense as
the underlying borrowing was not assumed by the Company.
(2) To adjust the pro forma tax provision to reflect the tax effect of the pro
forma adjustments including the recognition of tax benefits which had
previously been allocated to the non-controlling partners in PILP.
(3) To reflect amortization of deferred financing costs incurred in connection
with the Recapitalization.
(4) To reflect lower interest income earned due to the use of cash in the
Recapitalization.
(5) To reflect higher interest expense due to additional borrowings required for
the Recapitalization.
(6) To reflect the elimination of non-controlling partners' interest in PILP.
F-5
<PAGE>
PANAVISION INC.
UNAUDITED PRO FORMA CONDENSED CONSOLIDATED BALANCE SHEET
JUNE 30, 1996
(IN THOUSANDS)
<TABLE>
<CAPTION>
PANAVISION LEE PRO FORMA PRO FORMA
INC. LIGHTING ADJUSTMENTS ADJUSTED
----------- --------- ------------- -----------
<S> <C> <C> <C> <C>
ASSETS
Current Assets:
Cash and cash equivalents...................... $ 6,451 $ 1,026 $ $ 7,477
Accounts receivable, net....................... 12,302 2,964 (2,964)(1) 12,302
Inventories.................................... 4,575 656 5,231
Prepaid expenses and other current assets...... 927 598 1,525
----------- --------- ------------- -----------
Total current assets......................... 24,255 5,244 (2,964) 26,535
Property, plant and equipment, net............... 112,448 8,671 121,119
Deferred income tax assets....................... 1,762 1,762
Other............................................ 5,450 5,450
----------- --------- ------------- -----------
Total assets................................... $ 143,915 $ 13,915 $ (2,964) $ 154,866
----------- --------- ------------- -----------
----------- --------- ------------- -----------
LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities:
Accounts payable............................... $ 4,454 $ 833 $ $ 5,287
Intercompany payables.......................... -- 61,849 (61,849)(1) --
Accrued liabilities............................ 10,786 1,917 12,703
Current income taxes payable................... -- 186 (186)(1) --
Current maturities of long-term debt........... 7,250 7,250
Other current liabilities...................... 394 37 431
----------- --------- ------------- -----------
Total current liabilities.................... 22,884 64,822 (62,035) 25,671
Notes payable to affiliates...................... 8,362 8,362
Long-term debt................................... 102,750 102,750
Other liabilities................................ 504 140 644
Stockholders' equity:
Common stock and additional paid-in capital.... 5,520 2,898 (2,898)(2)
8,024(3) 13,544
Retained earnings.............................. 4,131 (53,945) 53,945(2) 4,131
Foreign currency translation adjustment........ (236) (236)
----------- --------- ------------- -----------
Total stockholders' equity..................... 9,415 (51,047) 59,071 17,439
----------- --------- ------------- -----------
Total liabilities and stockholders' equity..... $ 143,915 $ 13,915 $ (2,964) $ 154,866
----------- --------- ------------- -----------
----------- --------- ------------- -----------
</TABLE>
- ------------------------
(1) To reflect the elimination of Lee Lighting's assets and liabilities which
were not acquired or assumed.
(2) To reflect the elimination of Lee Lighting's historical equity and
accumulated deficit.
(3) To reflect the contribution of Lee Lighting's net assets to the Company's
capital by its parent.
F-6
<PAGE>
REPORT OF INDEPENDENT AUDITORS
The Board of Directors and Stockholders
Panavision Inc.
We have audited the accompanying consolidated balance sheets of Panavision
Inc. as of December 31, 1994 and 1995, and the related consolidated statements
of income, stockholders' equity, and cash flows for each of the three years in
the period ended December 31, 1995. These financial statements are the
responsibility of the Company's management. Our responsibility is to express an
opinion on these financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly,
in all material respects, the consolidated financial position of Panavision Inc.
at December 31, 1994 and 1995, and the consolidated results of its operations
and its cash flows for each of the three years in the period ended December 31,
1995, in conformity with generally accepted accounting principles.
ERNST & YOUNG LLP
Los Angeles, California
March 4, 1996, except for Note 7, as
to which the date is October , 1996
The foregoing report is in the format that will be signed upon the
effectiveness of the :1 stock split as described in Note 7 of the notes to
the consolidated financial statements.
ERNST & YOUNG LLP
Los Angeles, California
September 18, 1996
F-7
<PAGE>
PANAVISION INC.
CONSOLIDATED STATEMENTS OF INCOME
(IN THOUSANDS, EXCEPT SHARE AND PER SHARE AMOUNTS)
<TABLE>
<CAPTION>
SIX MONTHS ENDED
YEAR ENDED DECEMBER 31, JUNE 30,
------------------------------- --------------------
<S> <C> <C> <C> <C> <C>
1993 1994 1995 1995 1996
--------- --------- --------- --------- ---------
<CAPTION>
(UNAUDITED)
<S> <C> <C> <C> <C> <C>
Camera rental............................... $ 54,031 $ 61,642 $ 75,083 $ 34,828 $ 38,740
Sales and lighting rental................... 12,679 15,458 20,245 9,869 10,520
--------- --------- --------- --------- ---------
Total rental revenue and sales.............. 66,710 77,100 95,328 44,697 49,260
Cost of rental and sales.................... 23,772 27,860 29,745 14,502 15,917
Depreciation of rental assets............... 12,660 13,135 14,624 7,226 7,418
--------- --------- --------- --------- ---------
Gross margin................................ 30,278 36,105 50,959 22,969 25,925
Selling, general and administrative
expenses.................................. 18,875 19,210 28,486 14,131 13,813
Research and development expenses........... 2,272 2,442 2,986 1,553 1,893
--------- --------- --------- --------- ---------
Operating income............................ 9,131 14,453 19,487 7,285 10,219
Interest income............................. 487 725 1,597 758 560
Interest expense............................ (5,716) (6,043) (7,213) (3,737) (3,671)
Foreign exchange gain (loss)................ (723) 597 (32) 465 (117)
Other, net.................................. 906 68 447 381 532
--------- --------- --------- --------- ---------
Income before non-controlling partners'
interest in PILP and income taxes......... 4,085 9,800 14,286 5,152 7,523
Non-controlling partners' interest in
PILP...................................... (327) (879) (7,348) (2,901) (4,500)
--------- --------- --------- --------- ---------
Income before income taxes.................. 3,758 8,921 6,938 2,251 3,023
Income tax provision........................ (453) (1,843) (1,375) (446) (596)
--------- --------- --------- --------- ---------
Net income.................................. $ 3,305 $ 7,078 $ 5,563 $ 1,805 $ 2,427
--------- --------- --------- --------- ---------
--------- --------- --------- --------- ---------
Net income per common share................. [ ] [ ] [ ] [ ] [ ]
--------- --------- --------- --------- ---------
--------- --------- --------- --------- ---------
Shares used in computation.................. [ ] [ ] [ ] [ ] [ ]
</TABLE>
See accompanying notes.
F-8
<PAGE>
PANAVISION INC.
CONSOLIDATED BALANCE SHEETS
(IN THOUSANDS, EXCEPT SHARE AND PER SHARE AMOUNTS)
<TABLE>
<CAPTION>
DECEMBER 31,
-------------------- JUNE 30,
1994 1995 1996
--------- --------- ------------
<S> <C> <C> <C>
(UNAUDITED)
ASSETS
Current assets:
Cash and cash equivalents.............................. $ 22,734 $ 31,685 $ 6,451
Accounts receivable (net of allowance of $1,772 in
1994, $2,043 in 1995 and $1,818 in June of 1996)..... 11,036 13,480 12,302
Inventories............................................ 2,955 4,379 4,575
Prepaid expenses and other current assets.............. 1,546 1,621 927
--------- --------- ------------
Total current assets................................. 38,271 51,165 24,255
Property, plant and equipment, net....................... 108,197 111,801 112,448
Deferred income tax assets............................... -- -- 1,762
Other.................................................... 3,239 2,785 5,450
--------- --------- ------------
Total assets......................................... $ 149,707 $ 165,751 $ 143,915
--------- --------- ------------
--------- --------- ------------
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable....................................... $ 4,278 $ 9,339 $ 4,454
Accrued liabilities.................................... 9,558 11,042 10,786
Current maturities of long-term debt................... 4,000 4,274 7,250
Other current liabilities.............................. 394 507 394
--------- --------- ------------
Total current liabilities............................ 18,230 25,162 22,884
Notes payable to affiliates.............................. -- -- 8,362
Long-term debt........................................... 127,000 124,678 102,750
Deferred income tax liabilities.......................... 1,788 2,409 --
Other liabilities........................................ 1,767 1,897 504
Non-controlling partners' interest in PILP............... -- 5,149 --
Commitments and Contingencies
Stockholders' equity:
Common stock, $.01 par value; 15,000 shares authorized;
[ ] shares issued and outstanding at December 31,
1994 and 1995, and [ ] shares issued and
outstanding at June 30, 1996......................... -- -- --
Additional paid-in capital............................. 5,000 5,000 5,520
Retained earnings (accumulated deficit)................ (3,859) 1,704 4,131
Foreign currency translation adjustment................ (219) (248) (236)
--------- --------- ------------
Total stockholders' equity........................... 922 6,456 9,415
--------- --------- ------------
Total liabilities and stockholders' equity........... $ 149,707 $ 165,751 $ 143,915
--------- --------- ------------
--------- --------- ------------
</TABLE>
See accompanying notes.
F-9
<PAGE>
PANAVISION INC.
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
(IN THOUSANDS, EXCEPT SHARE AMOUNTS)
<TABLE>
<CAPTION>
COMMON STOCK CUMULATIVE
---------------------------- RETAINED FOREIGN
SHARES ISSUED ADDITIONAL EARNINGS CURRENCY STOCKHOLDERS'
AND PAID-IN (ACCUMULATED TRANSLATION EQUITY
OUTSTANDING AMOUNT CAPITAL DEFICIT) ADJUSTMENT (DEFICIENCY)
--------------- ----------- ----------- -------------- ------------- --------------
<S> <C> <C> <C> <C> <C> <C>
Balance at December 31,
1992.................... [9,700] $ -- $ 5,000 $ (14,242) $ (1,239) $ (10,481)
Net income................ -- -- -- 3,305 -- 3,305
Foreign currency
translation
adjustment.............. -- -- -- -- 470 470
------- ----------- ----------- -------------- ------------- --------------
Balance at December 31,
1993.................... [9,700] -- 5,000 (10,937) (769) (6,706)
Net income................ -- -- -- 7,078 -- 7,078
Foreign currency
translation
adjustment.............. -- -- -- -- 550 550
------- ----------- ----------- -------------- ------------- --------------
Balance at December 31,
1994.................... [9,700] -- 5,000 (3,859) (219) 922
Net income................ -- -- -- 5,563 -- 5,563
Foreign currency
translation
adjustment.............. -- -- -- -- (29) (29)
------- ----------- ----------- -------------- ------------- --------------
Balance at December 31,
1995.................... [9,700] -- 5,000 1,704 (248) 6,456
Net income (UNAUDITED).... -- -- -- 2,427 -- 2,427
Compensation recorded in
connection with shares
issued to officers
(UNAUDITED)............. [300] -- 520 -- -- 520
Foreign currency
translation adjustment
(UNAUDITED)............. -- -- -- -- 12 12
------- ----------- ----------- -------------- ------------- --------------
Balance at June 30, 1996
(UNAUDITED)............. [10,000] $ -- $ 5,520 $ 4,131 $ (236) $ 9,415
------- ----------- ----------- -------------- ------------- --------------
------- ----------- ----------- -------------- ------------- --------------
</TABLE>
See accompanying notes.
F-10
<PAGE>
PANAVISION INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(IN THOUSANDS)
<TABLE>
<CAPTION>
SIX MONTHS ENDED JUNE
YEAR ENDED DECEMBER 31, 30,
------------------------------- ---------------------
<S> <C> <C> <C> <C> <C>
1993 1994 1995 1995 1996
--------- --------- --------- --------- ----------
<CAPTION>
(UNAUDITED)
<S> <C> <C> <C> <C> <C>
OPERATING ACTIVITIES
Net income..................................... $ 3,305 $ 7,078 $ 5,563 $ 1,805 $ 2,427
Adjustments to derive net cash provided by
operating activities:
Depreciation and amortization................ 14,596 15,031 17,479 8,198 9,013
Deferred interest............................ 396 (44) (264) (132) (88)
Deferred income taxes........................ 326 1,241 620 (38) (600)
(Gain) loss on sale of property and
equipment.................................. (475) (647) 597 867 (712)
Non-controlling partners' interest in PILP... 327 879 7,348 2,901 4,500
Stock compensation expense................... -- -- -- -- 520
Changes in operating assets and liabilities:
Accounts receivable........................ 1,240 (2,286) (1,498) (1,301) 1,178
Inventories................................ 1 (318) (1,138) (441) (196)
Prepaid expenses and other current
assets................................... (488) 909 17 (622) 694
Accounts payable........................... 254 947 3,629 (2,286) (4,885)
Accrued liabilities........................ (954) 3,355 1,484 897 (256)
Other, net................................... 776 234 480 (169) (132)
--------- --------- --------- --------- ----------
Net cash provided by operating activities...... 19,304 26,379 34,317 9,679 11,463
INVESTING ACTIVITIES
Acquisition of non-controlling partners'
interest in PILP............................. -- -- -- -- (8,126)
Capital expenditures........................... (12,678) (16,251) (19,454) (7,340) (9,916)
Proceeds from dispositions of equipment........ 1,234 1,252 2,139 1,189 1,024
Purchase of Panavision Canada Corp., net of
cash acquired................................ -- -- 1,616 1,616 --
Other.......................................... -- (450) -- -- --
--------- --------- --------- --------- ----------
Net cash used in investing activities.......... (11,444) (15,449) (15,699) (4,535) (17,018)
FINANCING ACTIVITIES
Deferred financing costs....................... -- -- -- -- (2,814)
Distributions to non-controlling partners in
PILP......................................... (327) (879) (2,199) (2,901) (1,523)
Borrowings under notes payable................. -- -- -- -- 110,000
Repayments of notes payable.................... (2,500) (3,500) (7,525) (2,090) (126,166)
Other.......................................... -- -- -- -- 829
--------- --------- --------- --------- ----------
Net cash used in financing activities.......... (2,827) (4,379) (9,724) (4,991) (19,674)
Effect of exchange rate changes on cash........ (54) 65 57 84 (5)
--------- --------- --------- --------- ----------
Net increase (decrease) in cash and cash
equivalents.................................. 4,979 6,616 8,951 237 (25,234)
Cash and cash equivalents at beginning of
period....................................... 11,139 16,118 22,734 22,734 31,685
--------- --------- --------- --------- ----------
Cash and cash equivalents at end of period..... $ 16,118 $ 22,734 $ 31,685 $ 22,971 $ 6,451
--------- --------- --------- --------- ----------
--------- --------- --------- --------- ----------
SUPPLEMENTAL CASH FLOW INFORMATION
Interest paid during the period................ $ 5,372 $ 5,892 $ 7,490 $ 3,731 $ 3,865
Income taxes paid during the period............ $ 304 $ 565 $ 1,075 $ 1,027 $ 1,705
</TABLE>
See accompanying notes.
F-11
<PAGE>
PANAVISION INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(INFORMATION FOR THE PERIOD ENDED JUNE 30, 1995 AND SUBSEQUENT
TO DECEMBER 31, 1995 IS UNAUDITED)
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
DESCRIPTION OF BUSINESS AND BASIS OF PRESENTATION
Panavision Inc. (formerly WP/GP, Inc.) (Panavision or the Company), a
majority owned subsidiary of Warburg, Pincus Capital Company L.P. (Warburg,
Pincus), commenced operations effective June 1, 1991. Prior to the May 1996
recapitalization transaction described below, Panavision owned 100% of the
general partnership interests, 30% of the non-voting Class A limited partnership
interests and 70% of the voting Class B limited partnership interests in
Panavision International, L.P. (PILP), a Delaware limited partnership. PILP was
formed effective June 1, 1991 to own and operate the camera rental and lighting
filters business previously owned by Lee International Inc. (LII), an affiliated
company. This transaction was recorded on a historical cost basis. All of the
Company's operations are conducted through PILP and its subsidiaries.
The consolidated financial statements include the accounts of Panavision,
PILP and PILP's majority owned subsidiaries. All significant intercompany
amounts and transactions have been eliminated.
Panavision is a leading designer and manufacturer of high-precision motion
picture camera systems, including lenses and accessories, for use in the motion
picture and television industries. The Company rents its products through its
owned and operated facilities in the United States, Canada, United Kingdom and a
worldwide agent network. In addition to manufacturing and renting camera
systems, the Company also sells lighting filters under the Lee Filters name.
RECAPITALIZATION
In May 1996, the Company effected a recapitalization (the Recapitalization),
pursuant to which it acquired all of PILP's limited partnership units it did not
previously own and retired all of PILP's outstanding debt securities other than
those owned by Warburg, Pincus, for a total of $126.1 million in cash. As part
of the Recapitalization, Warburg, Pincus and management contributed to the
Company $12.5 million (of which $8.4 million had been contributed through June
30, 1996 and the balance was contributed in July 1996) in the form of
subordinated debt, and the Company borrowed $110 million through a credit
arrangement (See Note 6). The balance of the funds required came from the
Company's cash on hand. As a result of the Recapitalization, the Company owns
all of the general and limited partnership units in PILP.
NON-CONTROLLING PARTNERS' INTEREST IN PILP
The non-controlling partners' interest in PILP represents 70% of the
non-voting Class A limited partnership units and the 30% of the voting Class B
limited partnership units which Panavision did not own prior to the
Recapitalization. The PILP partnership agreement included provisions for the
allocation of the partnership earnings and losses between Panavision and the
non-controlling partners. However, since the non-controlling partners had a
deficit in the partnership capital accounts as of the inception of PILP, such
deficit was allocated to Panavision, as were PILP's losses for 1991 and 1992.
Certain other distributions made by PILP in each year for tax payments, have all
been charged against Panavision's interest in PILP and as a reduction of income
in the accompanying financial statements. Accordingly, as required under
generally accepted accounting principles, the non-controlling partners' share of
PILP's income for 1993, 1994 and 1995 has been reduced to the extent of such
deficit, losses and distributions. As previously described, in connection with
the Recapitalization, Panavision has acquired the non-controlling partners'
equity in PILP.
F-12
<PAGE>
PANAVISION INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
TRANSLATION OF FOREIGN CURRENCIES
The functional currency for the Company's foreign subsidiaries is the local
currency. All assets and liabilities denominated in foreign functional
currencies are translated into U.S. dollars at rates of exchange in effect at
the balance sheet date. Income statement items are translated at the average
rate of exchange prevailing during the period. Translation gains and losses are
recorded as a separate component of stockholders' equity. Gains and losses
resulting from transactions in other than functional currencies are reflected in
net income.
CASH EQUIVALENTS
The Company considers all highly liquid debt instruments purchased with
original maturity dates of three months or less and investments in money market
funds to be cash equivalents. The carrying amount reported in the balance sheet
for cash and cash equivalents approximates fair value.
INVENTORIES
Inventories are valued at the lower of cost or market value and are
determined principally under the first-in, first-out method.
PROPERTY, PLANT AND EQUIPMENT
Property, plant and equipment, including rental equipment, are stated at
cost. Maintenance and repairs are charged to expense as incurred. Additions,
improvements and replacements that extend asset life are capitalized.
Depreciation is provided on a straight-line basis over the estimated useful
lives of the assets. Leasehold improvements are amortized over the shorter of
the useful life of the related asset or the remaining lease term. Cost and
accumulated depreciation applicable to assets retired or otherwise disposed of
are eliminated from the accounts, and any gain or loss on such disposition is
reflected in income.
Depreciation is provided principally over the following useful lives:
<TABLE>
<S> <C>
Buildings and improvements..................................... 10-30 years
Rental assets.................................................. 5-15 years
Machinery and equipment........................................ 5-10 years
Furniture and fixtures......................................... 5-10 years
</TABLE>
INTANGIBLE ASSETS
Intangible assets, consisting primarily of trade names and patents, are
amortized on a straight-line basis over their estimated economic lives ranging
from 5 to 10 years. Amortization expense amounted to $682,000, $694,000 and
$629,000 for the years ended December 31, 1993, 1994 and 1995, respectively, and
$350,000 and $133,000 for the six month periods ended June 30, 1995 and 1996,
respectively. At December 31, 1994 and 1995, and June 30, 1996, accumulated
amortization amounted to $4,373,000, $5,002,000 and $5,135,000, respectively.
F-13
<PAGE>
PANAVISION INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
INCOME TAXES
Income taxes are accounted for using the liability method in accordance with
Statement of Financial Accounting Standard No. 109, "Accounting for Income
Taxes" (Note 5). Under this method, deferred tax liabilities and assets are
recognized for the expected future tax consequences of temporary differences
between the carrying amounts and the tax bases of assets and liabilities.
CONCENTRATION OF CREDIT RISK
Most of the Company's customers are in the entertainment industry. The
Company performs ongoing credit evaluations of its customers and maintains
allowances for potential credit losses. The Company does not generally require
collateral. Actual losses and allowances have been within management's
expectations.
REVENUE RECOGNITION
Rental revenue is recognized over the related equipment rental period. Sales
revenue is recognized upon shipment. Returns and allowances, which have not been
significant, are provided for in the period of sale.
ACCOUNTING FOR LONG-LIVED ASSETS
Effective January 1, 1996, the Company has adopted Statement of Accounting
Standards No. 121, "Accounting for the Impairment of Long-Lived Assets and for
Long-Lived Assets to be Disposed of" (SFAS 121). Long-lived assets, such as
buildings, equipment and identifiable intangibles, are reviewed for impairment
whenever events or changes in circumstances indicate that the net book value of
these assets may not be recoverable. Current and prior period financial
statements have not been affected by the adoption of SFAS 121.
EARNINGS PER SHARE
Earnings per share is computed using the weighted average number of common
stock outstanding and dilutive common stock equivalents. Pursuant to the
Securities and Exchange Commission Staff Accounting Bulletins, all common and
common equivalent shares issued by the Company at an exercise price below the
assumed initial public offering price during the twelve-month period prior to
the offering have been included in the calculation as if they were outstanding
for all periods presented (using the treasury stock method at an assumed initial
public offering price of $ per share for stock options).
STOCK-BASED BENEFITS
Statement of Financial Accounting Standards No. 123, "Accounting for
Stock-Based Compensation" (SFAS 123), must be adopted no later than January 1,
1996. SFAS 123 requires that stock awards granted subsequent to January 1, 1995
be recognized as compensation expense based on their fair value at the date of
grant. Alternatively, a company may use APB 25, "Accounting for Stock Issued to
Employees," and disclose the pro forma income amount which would have resulted
from recognizing such awards at their fair value. The Company will continue to
account for stock-based compensation expense under APB 25 and make the required
pro forma disclosures for compensation.
F-14
<PAGE>
PANAVISION INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
UNAUDITED INTERIM FINANCIAL STATEMENTS
The accompanying unaudited consolidated financial statements at June 30,
1996 and for the six month periods ended June 30, 1995 and June 30, 1996 have
been prepared on the same basis as the audited consolidated financial statements
and, in the opinion of management, include all adjustments (consisting only of
normal and recurring accruals) necessary to present fairly the consolidated
financial information set forth therein, in accordance with generally accepted
accounting principles. The results of operations for the six month period ended
June 30, 1996 are not necessarily indicative of the results to be expected for
the entire fiscal year.
USE OF ESTIMATES AND ASSUMPTIONS
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the amounts reported in the financial statements and
accompanying notes. Actual results could differ from such estimates.
2. PROPERTY, PLANT AND EQUIPMENT
Property, plant and equipment consist of the following (in thousands):
<TABLE>
<CAPTION>
DECEMBER 31,
-------------------- JUNE 30,
1994 1995 1996
--------- --------- ------------
<S> <C> <C> <C>
(UNAUDITED)
Land..................................... $ 783 $ 777 $ 776
Buildings and improvements............... 8,850 6,944 7,025
Rental assets............................ 169,319 185,986 195,200
Machinery and equipment.................. 7,737 8,350 9,506
Furniture and fixtures................... 2,562 2,704 2,998
Construction-in-progress................. -- 3,390 --
Other.................................... 720 791 800
--------- --------- ------------
189,971 208,942 216,305
Less accumulated depreciation and
amortization........................... 81,774 97,141 103,857
--------- --------- ------------
$ 108,197 $ 111,801 $ 112,448
--------- --------- ------------
--------- --------- ------------
</TABLE>
Construction-in-progress represents assets constructed in conjunction with
the Company's relocation of its primary operating facilities in June 1996.
F-15
<PAGE>
PANAVISION INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
3. INVENTORIES
Inventories consist of the following (in thousands):
<TABLE>
<CAPTION>
DECEMBER 31,
-------------------- JUNE 30,
1994 1995 1996
--------- --------- -------------
<S> <C> <C> <C>
(UNAUDITED)
Finished goods............................... $ 1,111 $ 1,853 $ 1,998
Work-in-process.............................. 71 61 101
Component parts.............................. 892 1,236 1,158
Supplies..................................... 881 1,229 1,318
--------- --------- -------------
$ 2,955 $ 4,379 $ 4,575
--------- --------- -------------
--------- --------- -------------
</TABLE>
4. ACCRUED LIABILITIES
Accrued liabilities consist of the following (in thousands):
<TABLE>
<CAPTION>
DECEMBER 31,
-------------------- JUNE 30,
1994 1995 1996
--------- --------- -------------
<S> <C> <C> <C>
(UNAUDITED)
Interest payable............................ $ 727 $ 675 $ 668
Professional fees........................... 916 809 713
Taxes other than income taxes............... 280 330 251
Payroll and related costs................... 3,106 5,058 3,208
Customer deposits........................... 97 64 1,850
Accrued marketing and other................. 4,432 4,106 4,096
--------- --------- -------------
$ 9,558 $ 11,042 $ 10,786
--------- --------- -------------
--------- --------- -------------
</TABLE>
F-16
<PAGE>
PANAVISION INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
5. INCOME TAXES
The provision for income taxes includes the following (in thousands):
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
------------------------------- SIX MONTHS ENDED
1993 1994 1995 JUNE 30, 1996
--------- --------- --------- -------------------
<S> <C> <C> <C> <C>
(UNAUDITED)
Current provision:
Federal............................... $ 114 $ 300 $ 515 $ 750
State................................. 47 107 154 250
Foreign............................... 59 195 86 196
--------- --------- --------- -------
Total current provision................. 220 602 755 1,196
--------- --------- --------- -------
Deferred provision (benefit):
Federal............................... (114) 711 537 (600)
State................................. 434 195 83
Foreign............................... (87) 335 -- --
--------- --------- --------- -------
Total deferred provision................ 233 1,241 620 (600)
--------- --------- --------- -------
$ 453 $ 1,843 $ 1,375 $ 596
--------- --------- --------- -------
--------- --------- --------- -------
</TABLE>
A reconciliation from the provision for income taxes based on the federal
statutory rate of 35% to the actual rate follows:
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
------------------------------- SIX MONTHS ENDED
1993 1994 1995 JUNE 30, 1996
--------- --------- --------- -------------------
<S> <C> <C> <C> <C>
(UNAUDITED)
Statutory rate applied to income before
income taxes.......................... 35.0% 35.0% 35.0% 35.0%
State income taxes, net of federal
income tax benefit.................... 7.2 5.1 2.2 5.4
Reduction of valuation allowance........ (34.8) (29.5) (3.7) (31.7 )
Non-deductible (non-taxable) differences
in allocation of earnings to
non-controlling partners.............. 3.0 3.4 (14.9) --
Other non-deductible expenses........... 2.6 5.8 1.2 11.0
Other, net.............................. (0.9) 0.9 -- --
--------- --------- --------- -------
12.1% 20.7% 19.8% 19.7%
--------- --------- --------- -------
--------- --------- --------- -------
</TABLE>
Deferred income taxes reflect the net tax effects of net operating loss
carryforwards and temporary differences between the carrying amounts of assets
and liabilities for financial reporting purposes and
F-17
<PAGE>
PANAVISION INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
5. INCOME TAXES (CONTINUED)
the amounts used for income tax purposes. Significant components of the
Company's deferred tax assets and liabilities as of December 31, 1994, 1995 and
June 30, 1996 are as follows (in thousands):
<TABLE>
<CAPTION>
DECEMBER 31,
-------------------- JUNE 30,
1994 1995 1996
--------- --------- ------------
<S> <C> <C> <C>
(UNAUDITED)
Deferred tax assets:
Domestic net operating loss carryforwards......... $ 1,987 $ 1,169 $ 5,635
Foreign net operating loss carryforwards.......... 3,720 3,464 3,114
Tax credit carryforwards (primarily alternative
minimum tax credits)............................ 1,090 1,830 7,456
Expense accruals.................................. 853 1,613 1,526
Other............................................. -- 76 66
State income taxes................................ 78 115 --
--------- --------- ------------
Total deferred tax assets........................... 7,728 8,267 17,797
Valuation allowance................................. (4,727) (4,471) (11,418)
--------- --------- ------------
Net deferred tax assets............................. 3,001 3,796 6,379
Deferred tax liabilities:
Fixed assets...................................... (2,175) (3,067) (4,284)
Differences in allocations of income to
non-controlling partners........................ (2,614) (3,138) --
State income taxes................................ -- -- (333)
--------- --------- ------------
Total deferred tax liabilities...................... (4,789) (6,205) (4,617)
--------- --------- ------------
Net deferred tax (liabilities) assets............... $ (1,788) $ (2,409) $ 1,762
--------- --------- ------------
--------- --------- ------------
</TABLE>
The net decrease in the valuation allowance for deferred tax assets during
the years ended December 31, 1994 and 1995 was $2,638,000 and $256,000,
respectively. The change primarily relates to the realization of net operating
loss carryforwards and management's judgment that certain deferred assets had
become realizable.
At December 31, 1995, the Company had operating loss carryforwards available
to reduce future federal income of $3,170,000 which expire from 2006 to 2009.
At December 31, 1995, the Company had alternative minimum tax (AMT) credit
carryforwards of $1,444,000, which may be used indefinitely, and foreign tax
credit (FTC) carryforwards of $317,000 which expire in 1996 to 2000.
In connection with the Recapitalization, additional federal net operating
loss carryforwards of $11,343,000, which expire from 2006 to 2009, AMT credit
carryforwards of $3,444,000, which may be used indefinitely, and FTC
carryforwards of $956,000, which expire from 1996 to 2000, became available to
the Company. All such tax attributes are subject to annual limitations under
Internal Revenue Code (the Code) Section 382.
The Company has assessed the realizability of all of its tax attributes,
including those which became available as a result of the Recapitalization, and
has accordingly adjusted the valuation allowance as of
F-18
<PAGE>
PANAVISION INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
5. INCOME TAXES (CONTINUED)
June 30, 1996. The Company's assessment took into account the limitations on the
deductibility of tax attributes under Section 382 and the alternative minimum
tax provisions of the Code, as well as the uncertainty of realizing taxable
income in certain foreign jurisdictions.
Additional deferred tax assets in the amount of $3,572,000 (net of related
valuation allowance) were recognized in connection with the Recapitalization.
It is the Company's policy to not provide U.S. federal income taxes on
undistributed earnings of foreign subsidiaries, as such earnings, if any, are
intended to be permanently reinvested in those operations. As of June 30, 1996,
there are no accumulated foreign earnings. The Company's pretax income (loss)
from foreign operations for 1993, 1994 and 1995 and the six months ended June
30, 1996 were ($2,122,000), $1,106,000, $2,719,000 and $1,400,000, respectively.
6. LONG-TERM DEBT
As part of the Company's Recapitalization, as described in Note 1, effective
May 1996, all of the Company's then outstanding notes to banks were repaid for a
total of $126.1 million in cash. Such notes had average effective interest rates
ranging from 0% to 8% and original scheduled maturity dates ranging from June
1999 through June 2001.
In conjunction with the Recapitalization, the Company obtained a credit
agreement (the Credit Agreement) which provides for a term loan in the amount of
$100 million (Term Loan A and Term Loan B for $50 million each) and a revolving
credit loan (Revolving Loan) of up to $20 million. Borrowings under the Credit
Agreement at June 30, 1996 were $110 million. Interest is payable at rates equal
to a margin in excess of the prime rate or LIBOR. The amount of this margin
fluctuates directly with the Company's "total debt ratio", as defined. The prime
rate margin ranges are from 0% to 1.25% for Term Loan A and the Revolving Loan
and from 1.50% to 1.75% for Term Loan B. LIBOR margin ranges are from 1.25% to
2.5% for Term Loan A and the Revolving Loan and 2.75% to 3.00% for Term Loan B.
Principal repayments under the Credit Agreement are payable quarterly beginning
March 1997 through March 2004. At June 30, 1996, the interest rate under the
Credit Agreement was 8.2%. The Company believes the carrying value of its
amounts payable under the Credit Agreement approximate fair value based upon
current yields for debt issues of similar quality and terms.
At June 30, 1996, the aggregate principal maturities of the Company's debt
are as follows (in thousands):
<TABLE>
<S> <C>
1997.......................................................... $ 10,750
1998.......................................................... 8,250
1999.......................................................... 9,250
2000.......................................................... 10,250
2001.......................................................... 11,250
Thereafter.................................................... 60,250
------------
$ 110,000
------------
------------
</TABLE>
The Company's obligations under the Credit Agreement are secured by
substantially all of the Company's assets. The Credit Agreement requires that
the Company meet certain financial tests and contains other restrictive
covenants including certain limitations on the Company's ability to incur debt,
F-19
<PAGE>
PANAVISION INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
6. LONG-TERM DEBT (CONTINUED)
pay dividends and make capital expenditures and requires the Company to maintain
certain total debt and interest coverage ratio levels.
As required by the Credit Agreement, the Company entered into two interest
rate protection agreements to guard the Company from LIBOR increases. One
agreement covering a notional amount of $45,000,000 expires on June 10, 1997 and
protects the Company from LIBOR increases above 6.44%. The other agreement for a
notional amount of $50,000,000 expires on June 10, 1998 and protects the Company
from LIBOR increases above 7.37%.
Notes payable to affiliates consist of amounts due to Warburg, Pincus and
the Company's senior management and bear interest at 6.83%. The notes are due on
demand; however, the noteholders have indicated that they do not intend to
demand payment prior to December 31, 1997. It is the Company's intent to repay
these notes in full upon the successful completion of the Company's proposed
initial public offering of common stock.
7. STOCKHOLDERS' EQUITY
COMMON STOCK
In May 1996, the Board of Directors declared a 90:1 stock split of the
Company's common stock. In October , 1996, the Board of Directors approved an
increase in the Company's authorized shares of common stock to shares
and declared a [ ]:1 stock split of the Company's common stock. All
applicable share and per share amounts have been adjusted for these stock
splits.
STOCK OPTION PLAN
In connection with the Recapitalization, the Board of Directors adopted a
stock option plan (the Plan) which is open to participation by directors,
officers, consultants, other key employees of the Company or of its subsidiaries
and certain other key persons. The Plan provides for the issuance of incentive
and nonqualified stock options under the Code. An aggregate of ( ) shares
of common stock are reserved for issuance under the Plan. Options to purchase
( ) shares were available for grant under the Plan. No options have been
exercised under the Plan as of June 30, 1996. The options may be granted for a
term of up to ten years, five years in the case of incentive options. If an
incentive stock option is granted to an individual owning more than 10% of the
total combined voting power of all stock, the exercise price of the option may
not be less than 110% of the fair market value of the underlying shares on the
date of grant and the term of the option may not exceed five years.
The Plan provides that the aggregate fair market value (determined as of the
time the option is granted) of the common stock with respect to which incentive
stock options are exercisable for the first time by an optionee during any
calendar year shall not exceed $100,000.
Certain members of management have been granted nonqualified options for an
aggregate of [ ] shares of common stock. These options will vest [ ], upon
the Company's proposed public offering if it is completed before the end of May
1997. The balance, up to [ ], will vest upon the Company meeting certain
earnings targets during 1996, 1997 and 1998. If such targets are not met, all
such options will vest at the end of eight years from the date of grant.
F-20
<PAGE>
PANAVISION INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
7. STOCKHOLDERS' EQUITY (CONTINUED)
The following table summarizes stock option transactions under the Plan:
<TABLE>
<CAPTION>
STOCK OPTIONS:
- ------------------------------------------------------------
<S> <C>
Granted................................................. [ ]
Canceled................................................ 0
Outstanding............................................. [ ]
Exercisable............................................. 0
Available for grant..................................... 0
Price................................................... [$ ]
--------------
</TABLE>
The Company has also reserved approximately [ ] shares of common stock
for sale to employees.
In connection with the Recapitalization (see Note 1), the Company issued
[ ] shares of common stock to certain members of management. The Company has
recorded compensation expense in the amount of $520,000 during the six months
ended June 30, 1996. The compensation expense represents the Company's best
estimate of the fair market value of the stock as of the date of issuance, based
in part on value attributed to the equity securities of PILP which were acquired
in the Recapitalization, in an arms-length transaction.
8. EMPLOYEE BENEFIT PLANS
The Company sponsors a defined contribution 401(k) plan covering a majority
of its domestic employees. Eligible employees may contribute from 1% to 16% of
their base compensation. The Company makes matching contributions equal to 75%
of employee before-tax contributions from 1% to 6%. For the years ended December
31, 1993, 1994 and 1995 and the six months ended June 30, 1995 and 1996, the
Company expensed $225,000, $453,000, $503,000, $255,000 and $300,000
respectively, representing the Company's contributions to the Plan.
In addition, the Company sponsors a defined contribution retirement plan,
which covers certain foreign employees. Participating employees contribute from
5% to 15% of their base compensation. The Company contributes 13.4% of base
compensation for participating employees regardless of their level of
contribution. For the years ended December 31, 1993, 1994 and 1995 and the
six-months ended June 30, 1995 and 1996, the Company expensed $112,000,
$136,000, $189,000, $100,000 and $111,000, respectively, representing the
Company's contributions.
F-21
<PAGE>
PANAVISION INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
9. GEOGRAPHICAL INFORMATION
Information as to the Company's operations in different geographical areas
is as follows (in thousands):
<TABLE>
<CAPTION>
UNITED UNITED
STATES KINGDOM OTHER(1) ELIMINATIONS TOTAL
--------- ----------- --------- ------------ ---------
<S> <C> <C> <C> <C> <C>
DECEMBER 31, 1993
Revenue............................. $ 52,022 $ 14,747 $ 2,432 $ (2,491) $ 66,710
Operating income (loss)............. 10,694 1,159 (588) (2,134) 9,131
Identifiable assets................. 129,523 19,889 1,303 (10,640) 140,075
DECEMBER 31, 1994
Revenue............................. 58,389 20,523 2,180 (3,992) 77,100
Operating income (loss)............. 14,350 3,724 (20) (3,601) 14,453
Identifiable assets................. 137,845 23,868 1,093 (13,099) 149,707
DECEMBER 31, 1995
Revenue............................. 68,102 23,004 14,227 (10,005) 95,328
Operating income.................... 17,996 3,492 5,877 (7,878) 19,487
Identifiable assets................. 145,300 17,708 10,420 (7,677) 165,751
</TABLE>
- ------------------------
(1) The 1995 amounts are principally comprised of Panavision Canada, which was
acquired in January 1995.
10. COMMITMENTS AND CONTINGENCIES
The Company leases real estate, equipment, and vehicles under noncancelable
operating leases. Future minimum payments under noncancelable operating leases
with initial or remaining terms of one year or more are presented below (in
thousands):
<TABLE>
<S> <C>
1996....................................................... $ 2,920
1997....................................................... 1,112
1998....................................................... 1,508
1999....................................................... 1,414
2000....................................................... 1,407
Thereafter................................................. 19,864
---------------
$ 28,225
---------------
---------------
</TABLE>
In June 1995, the Company entered into a 16-year lease for its principal
operating facility in Woodland Hills, California; the Company relocated to this
facility during June 1996. The above table reflects the Company's commitment for
the entire 16-year lease term. In connection with this new lease, the Company
negotiated a settlement for its existing leases covering its prior operating
facility and recorded a $1,800,000 liability representing the cost of the
settlement. The liability was paid in January 1996.
During the years ended December 31, 1993, 1994 and 1995, rental expense
under operating leases was $1,789,000, $1,811,000 and $2,274,000, respectively,
and $1,118,000 and $1,192,000 for the six months ended June 30, 1995 and 1996,
respectively.
F-22
<PAGE>
PANAVISION INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
10. COMMITMENTS AND CONTINGENCIES (CONTINUED)
The Company and its subsidiaries are defendants in actions for matters
arising out of normal business operations. The Company does not believe that any
such proceedings currently pending will have a materially adverse effect on its
consolidated financial position or results of operations.
11. RELATED PARTY TRANSACTIONS
In accordance with an agreement, certain executive management services have
been provided by the Company to LII. The amount received by the Company from LII
was $996,000, $854,000 and $687,000 for the years ended December 31, 1993, 1994
and 1995, respectively, and $348,000 and $432,000 for the six-month periods
ended June 30, 1995 and 1996, respectively. The amounts received have been
offset against selling, general and administrative expenses in the accompanying
consolidated statements of income. The agreement with LII will expire on
September 30, 1996.
Included in other assets at December 31, 1994 and 1995 is a loan receivable
of $450,000, which bears interest at 9%, from Pany Rental, Inc. (dba Panavision
New York), an agent in which the Company acquired a one-third interest during
1994.
The Company also has a note due from an officer in the amount of $540,000
plus accrued interest of $65,000 as of June 30, 1996 which is included as a
component of other assets. This amount, which is due upon demand, is secured by
real property and bears interest at 7.04% per annum.
12. BUSINESS COMBINATION
On January 20, 1995, the Company completed its acquisition of all of the
outstanding stock of Panavision Canada Corporation (Panavision Canada), a former
agent, for $177,000. The assignment of the purchase price among identifiable
tangible and intangible assets was based on analysis of fair values of those
assets. The fair values of the identifiable tangible and intangible assets
acquired, net of liabilities assumed, exceeded the purchase price, and
accordingly the values of fixed assets were reduced on a PRO RATA basis. This
business combination has been accounted for using the purchase method.
Therefore, the operating results of Panavision Canada are included in the
consolidated financial statements from January 20, 1995. Unaudited revenue, net
income, and net income per share for the Company in 1994 would have increased by
$7,535,000, $1,608,000 and [ ] respectively, if Panavision Canada had been
acquired at the beginning of that year.
13. SUBSEQUENT EVENTS
Effective July 1, 1996, the Company's parent acquired substantially all of
the assets of Lee Lighting Limited (Lee Lighting) and contributed them to
Panavision. The purchase price of the acquisition, $8 million, approximates the
net book value of the assets acquired. Lee Lighting rents lighting equipment,
mobile generators and distribution and sells lighting consumables for the
production of feature films, television programs and other filmed entertainment.
Lee Lighting had revenue of approximately $19,700,000 and $10,400,000 for the
year ended December 31, 1995 and the six months ended June 30, 1996,
respectively.
On September [ ], 1996, the Company's Board of Directors authorized the
filing of a registration statement with the Securities and Exchange Commission,
relating to an initial public offering of [ ] shares of the Company's unissued
common stock at an expected offering price ranging from to .
F-23
<PAGE>
REPORT OF INDEPENDENT AUDITORS
The Directors
Lee Lighting Limited
We have audited the accompanying balance sheet of Lee Lighting Limited as of
December 31, 1995 and the related profit and loss account and statement of cash
flows for the year then ended. These financial statements are the responsibility
of the Company's directors. Our responsibility is to express an opinion on these
financial statements based on our audit.
We conducted our audit in accordance with United Kingdom auditing standards
which do not differ in any significant respect from United States generally
accepted auditing standards. Those standards require that we plan and perform
the audit to obtain reasonable assurances about whether the financial statements
are free of material misstatement. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the financial statements. An
audit also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audit provides a reasonable basis
for our opinion.
In our opinion, the financial statements referred to above present fairly,
in all material respects, the financial position of Lee Lighting Limited as of
December 31, 1995 and the results of its operations and its cash flows for the
year then ended in conformity with accounting principles generally accepted in
the United Kingdom which differ in certain respects from those followed in the
United States (see note 18 of the notes to the financial statements).
ERNST & YOUNG
Chartered Accountants
Registered Auditor
London, United Kingdom
5 September 1996
F-24
<PAGE>
LEE LIGHTING LIMITED
GROUP PROFIT AND LOSS ACCOUNT
(IN THOUSANDS OF BRITISH POUNDS)
<TABLE>
<CAPTION>
YEAR ENDED SIX MONTHS
DECEMBER 31, ENDED JUNE 30,
--------------- ----------------------------
1995 1995 1996
--------------- ------------- -------------
(UNAUDITED)
<S> <C> <C> <C>
Turnover.......................................... 12,516 5,927 6,746
Cost of sales..................................... (9,869) (4,726) (5,284)
------- ------ ------
Gross profit...................................... 2,647 1,201 1,462
Selling, general and administration expenses...... (1,601) (802) (905)
------- ------ ------
1,046 399 557
Other operating income............................ 38 19 5
------- ------ ------
Operating profit.................................. 1,084 418 562
Interest income................................... 29 13 6
Interest expense.................................. (3,420) (1,710) (1,806)
------- ------ ------
Loss on ordinary activities before taxation....... (2,307) (1,279) (1,238)
Tax on loss on ordinary activities................ 69 -- 112
------- ------ ------
Loss attributable to the members of the parent
undertaking..................................... (2,238) (1,279) (1,126)
------- ------ ------
------- ------ ------
STATEMENT OF TOTAL RECOGNISED GAINS AND LOSSES
</TABLE>
There are no recognised gains or losses other than the loss attributable to
the shareholders of the company of L2,238 in the year ended December 1995.
See accompanying notes.
F-25
<PAGE>
LEE LIGHTING LIMITED
GROUP BALANCE SHEET
(IN THOUSANDS OF BRITISH POUNDS)
<TABLE>
<CAPTION>
DECEMBER 31,
1995
--------------- JUNE 30,
1996
-------------
(UNAUDITED)
<S> <C> <C>
FIXED ASSETS
Tangible assets............................................... 5,346 5,587
------- -------------
CURRENT ASSETS
Stock......................................................... 405 423
Debtors....................................................... 1,495 1,910
Cash at bank and in hand...................................... 413 661
Prepayments and other current assets.......................... 233 385
------- -------------
2,546 3,379
CREDITORS: amounts falling due within one year................ (39,455) (41,767)
------- -------------
NET CURRENT LIABILITIES....................................... (36,909) (38,388)
------- -------------
TOTAL ASSETS LESS CURRENT LIABILITIES......................... (31,563) (32,801)
------- -------------
CREDITORS: amounts falling due after more than one year....... (90) (90)
PROVISIONS FOR LIABILITIES AND CHARGES
Deferred taxation............................................. (112) --
------- -------------
(202) (90)
------- -------------
(31,765) (32,891)
------- -------------
------- -------------
CAPITAL AND RESERVES
Called up share capital....................................... 568 568
Merger reserve................................................ 1,133 1,133
Revaluation reserve........................................... 185 166
Profit and loss account....................................... (33,651) (34,758)
------- -------------
(31,765) (32,891)
------- -------------
------- -------------
</TABLE>
See accompanying notes.
F-26
<PAGE>
LEE LIGHTING LIMITED
GROUP STATEMENT OF CASH FLOWS
(IN THOUSANDS OF BRITISH POUNDS)
<TABLE>
<CAPTION>
YEAR ENDED SIX MONTHS ENDED
DECEMBER 31, JUNE 30,
----------------- ----------------------------------------
1995 1995 1996
----------------- ------------------- -------------------
(UNAUDITED)
<S> <C> <C> <C>
NET CASH INFLOW FROM OPERATING ACTIVITIES.... 2,052 1,131 978
------ ----- ---
RETURNS FROM INVESTMENTS AND SERVICING OF
FINANCE
Interest received.......................... 29 13 6
Interest paid.............................. (1,500) (500) --
------ ----- ---
NET CASH OUTFLOW FROM RETURNS ON INVESTMENTS
AND SERVICING OF FINANCE................... (1,471) (487) 6
------ ----- ---
TAXATION
Corporation tax............................ -- -- --
------ ----- ---
INVESTING ACTIVITIES
Payments to acquire tangible fixed
assets..................................... (939) (601) (746)
Receipts from sales of tangible fixed
assets..................................... 46 32 10
------ ----- ---
NET CASH OUTFLOW FROM INVESTING ACTIVITIES... (893) (569) (736)
------ ----- ---
NET CASH (OUT)/INFLOW BEFORE FINANCING
ACTIVITIES................................. (312) 75 248
------ ----- ---
NET CASH INFLOW FROM FINANCING ACTIVITIES.... -- -- --
------ ----- ---
(DECREASE)/INCREASE IN CASH AND CASH
EQUIVALENTS................................ (312) 75 248
------ ----- ---
------ ----- ---
RECONCILIATION OF OPERATING PROFIT TO NET
CASH INFLOW FROM OPERATING ACTIVITIES
Operating profit........................... 1,084 418 562
Depreciation charge........................ 961 452 493
(Profit)/loss on sale of tangible fixed
assets..................................... (16) (14) 2
Balance of unfunded pension obligation..... (5) (5) --
Decrease/(increase) in debtors............. 48 (183) (572)
Increase in creditors...................... 37 538 511
(Increase)/decrease in stock............... (57) (75) (18)
------ ----- ---
NET CASH INFLOW FROM OPERATING ACTIVITIES.... 2,052 1,131 978
------ ----- ---
------ ----- ---
</TABLE>
See accompanying notes.
F-27
<PAGE>
LEE LIGHTING LIMITED
NOTES TO THE ACCOUNTS
(INFORMATION FOR THE PERIOD ENDED JUNE 30, 1995 AND
SUBSEQUENT TO DECEMBER 31, 1995 IS UNAUDITED)
1. ACCOUNTING POLICIES
ACCOUNTING CONVENTION
The accounts are prepared under the historical cost convention as modified
to include the revaluation of rental assets and in accordance with applicable
accounting standards.
BASIS OF CONSOLIDATION
The group accounts consolidate Lee Lighting Limited (the Company) and all
its subsidiary undertakings drawn up to 31 December each year.
DEPRECIATION
Depreciation is provided on all tangible fixed assets at rates calculated to
write off the cost or valuation, less estimated residual value, of each asset
over its useful economic life, as follows:
<TABLE>
<S> <C>
Leasehold buildings.................. 10 years
Motor vehicles....................... 20% on written down value
Furniture, fixtures and equipment.... 15% on written down value
Computer equipment................... 3 years
Rental assets........................ 15-20% on written down value
</TABLE>
STOCKS
Stocks are stated at the lower of cost and net realisable value.
DEFERRED TAXATION
Deferred taxation is provided on the liability method on all timing
differences which are expected to reverse in the future calculated at the rate
at which it is estimated that tax will be payable.
FOREIGN CURRENCIES
Transactions in foreign currencies are recorded at the rate ruling at the
date of the transaction.
Monetary assets and liabilities denominated in foreign currency are
retranslated at the rate of exchange ruling at the balance sheet date.
All differences are taken to the profit and loss account.
LEASING AND HIRE PURCHASE CONSULTANTS
Assets obtained under finance leases and hire purchase contracts are
capitalized in the balance sheet and are depreciated over their useful lives.
The interest element of the rental obligations is charged to the profit and
loss account over the period of the lease and represents a constant proportion
of the balance of capital repayments outstanding.
F-28
<PAGE>
LEE LIGHTING LIMITED
NOTES TO THE ACCOUNTS
1. ACCOUNTING POLICIES (CONTINUED)
Rentals paid under operating leases are charged to income on a straight line
basis over the lease term.
UNAUDITED INTERIM FINANCIAL STATEMENTS
The accompanying unaudited consolidated financial statements at June 30,
1996 and for the six month periods ended June 30, 1995 and June 30, 1996 have
been prepared on the same basis as the audited financial statements and, in the
opinion of management, include all adjustments (consisting only of normal and
recurring accruals) necessary to present fairly the financial information set
forth therein, in accordance with accounting principles generally accepted in
the United Kingdom which differ in certain respects from those followed in the
United States (see note 18). The results of operations for the six month period
ended June 30, 1996 are not necessarily indicative of the results to be expected
for the entire fiscal year.
2. TURNOVER
Turnover, which is stated net of value added tax, represents amounts
invoiced to third parties in respect of the provision of services and equipment
to the film, television and allied industries. An analysis of turnover by
geographical market is given below (in thousands of British pounds):
<TABLE>
<CAPTION>
YEAR ENDED
DECEMBER 31, 1995
-----------------
<S> <C>
UK......................................................................... 12,019
All other.................................................................. 497
-------
12,516
-------
-------
</TABLE>
3. OPERATING PROFIT
This is stated after charging/(crediting) (in thousands of British pounds):
<TABLE>
<CAPTION>
YEAR ENDED
DECEMBER 31, 1995
-------------------
<S> <C>
Auditors' remuneration--audit services..................................... 32
Depreciation of owned fixed assets......................................... 1,034
Profit on disposals of fixed assets........................................ (16)
Operating lease rentals--land and buildings................................ 413
-----
-----
</TABLE>
4. DIRECTORS' REMUNERATION
<TABLE>
<CAPTION>
YEAR ENDED
DECEMBER 31, 1995
-----------------
<S> <C>
Other emoluments, including pension contributions (in thousands of British
pounds)................................................................... 170
-------
-------
</TABLE>
F-29
<PAGE>
LEE LIGHTING LIMITED
NOTES TO THE ACCOUNTS
4. DIRECTORS' REMUNERATION (CONTINUED)
The emolumnets of the chairman, excluding pension contributions, were Lnil.
The emoluments of the highest paid director, excluding pension contributions,
were L93,000. Directors' emoluments excluding pension contributions fell within
the following ranges:
<TABLE>
<CAPTION>
YEAR ENDED
DECEMBER 31, 1995
-----------------
<S> <C>
NO.
Lnil - L5,000.............................................................. 3
L75,001 - L80,000.......................................................... 1
L90,001 - L95,000.......................................................... 1
</TABLE>
5. STAFF COSTS
Staff costs were as follows (in thousands of British pounds):
<TABLE>
<CAPTION>
YEAR ENDED
DECEMBER 31, 1995
-----------------
<S> <C>
Wages and salaries......................................................... 6,021
Social security costs...................................................... 618
Other pension costs........................................................ 150
-------
6,789
-------
-------
</TABLE>
The Company contributes to a number of defined contribution pension schemes
on behalf of its employees. The assets of the schemes are held separately from
those of the Company in independently administered funds. The pension cost
charge represents contributions payable by the Company to the funds and amounted
to L150,000.
The average weekly number of employees during the year was made up as
follows:
<TABLE>
<CAPTION>
YEAR ENDED
DECEMBER 31, 1995
-----------------
<S> <C>
Electricians and generator operators....................................... 103
Maintenance and support.................................................... 49
Selling and distribution................................................... 2
Administration............................................................. 28
-------
182
-------
-------
</TABLE>
6. INTEREST EXPENSE
<TABLE>
<CAPTION>
YEAR ENDED
DECEMBER 31, 1995
-----------------
<S> <C>
Loan from parent undertaking (in thousands of British pounds).............. 3,420
-------
-------
</TABLE>
7. TAX ON LOSS ON ORDINARY ACTIVITIES
<TABLE>
<CAPTION>
YEAR ENDED
DECEMBER 31, 1995
-----------------
<S> <C>
Based on the loss for the year:
Deferred taxation (in thousands of British pounds)......................... (69)
-------
-------
</TABLE>
F-30
<PAGE>
LEE LIGHTING LIMITED
NOTES TO THE ACCOUNTS
8. TANGIBLE FIXED ASSETS
The analysis of tangible fixed assets is as follows (in thousands of British
pounds):
<TABLE>
<CAPTION>
LEASEHOLD, FURNITURE,
LAND AND MOTOR FIXTURES AND
BUILDINGS VEHICLES EQUIPMENT RENTAL ASSETS TOTAL
----------- ----------- --------------- ------------- ---------
<S> <C> <C> <C> <C> <C>
Cost or valuation:
At January 1, 1995................................ 1,213 151 879 10,682 12,925
Additions......................................... -- 76 -- 864 940
Disposals......................................... -- (56) -- (111) (167)
----- --- --- ------------- ---------
At December 31, 1995.............................. 1,213 171 879 11,435 13,698
----- --- --- ------------- ---------
Depreciation:
At January 1, 1995................................ 637 38 749 6,105 7,529
Charge for the year............................... 120 30 26 784 960
Disposals......................................... -- (41) -- (96) (137)
----- --- --- ------------- ---------
At December 31, 1995.............................. 757 27 775 6,793 8,352
----- --- --- ------------- ---------
Net book value
At January 1, 1995................................ 576 113 130 4,577 5,396
----- --- --- ------------- ---------
----- --- --- ------------- ---------
At December 31, 1995.............................. 456 144 104 4,642 5,346
----- --- --- ------------- ---------
----- --- --- ------------- ---------
</TABLE>
Certain lighting rental equipment was revalued at 31 December 1987 by the
directors, based on depreciated replacement cost. The figures disclosed above
for rental assets included the following amounts in respect of revalued lighting
rental equipment (in thousands of British pounds):
<TABLE>
<CAPTION>
HISTORICAL
COST VALUATION
----------- -----------
<S> <C> <C>
Cost or valuation:
At January 1, 1995...................................................................... 7,756 5,209
----- -----
At December 31, 1995.................................................................... 7,598 5,098
----- -----
Accumulated depreciation:
At January 1, 1995...................................................................... 6,311 3,539
----- -----
At December 31, 1995.................................................................... 6,394 3,709
----- -----
Charge for the year..................................................................... 211 250
----- -----
</TABLE>
9. STOCKS
<TABLE>
<CAPTION>
DECEMBER 31,
1995 JUNE 30, 1996
--------------- ---------------
<S> <C> <C>
(UNAUDITED)
Materials and consumables (in thousands of British pounds)......................... 405 423
--- ---
--- ---
</TABLE>
F-31
<PAGE>
LEE LIGHTING LIMITED
NOTES TO THE ACCOUNTS
10. CREDITORS
Amounts falling due within one year were as follows (in thousands of British
pounds):
<TABLE>
<CAPTION>
DECEMBER 31, JUNE 30,
1995 1996
------------- -----------
<S> <C> <C>
(UNAUDITED)
Trade creditors................................................ 300 537
Other taxes and social security costs......................... 476 785
Accrued income taxes.......................................... 120 120
Other creditors............................................... 13 24
Accruals...................................................... 501 450
Amounts owed to parent undertakings........................... 1,196 1,196
Amounts owed to other group undertakings...................... 730 730
Loan from parent undertaking.................................. 36,119 37,925
------------- -----------
39,455 41,767
------------- -----------
------------- -----------
</TABLE>
The loan from the parent undertaking is a loan note of L21,396,095 together
with deferred interest thereon of L14,723,268. The loan is secured on the assets
of the Company and its subsidiaries.
The principal terms are as follows:
1. Interest is charageable at 10% per year on the outstanding principal
and deferred interest.
2. The prinicpal is repayable on June 30, 1996 together with any
deferred interest. However since the audited balance sheet date the
repayment date for prinicpal and deferred interest has been extended to June
30, 1997.
3. Interest may be deferred to the extent that, in the opinion of the
directors, the Company has insufficient resources to make any interest
payments. Any interest so deferred is subject to interest commencing at the
start of the financial year following that in which the deferral was made.
The principal and interest on this loan note become payable immediately in
the event of a default which may arise, inter alia, by failure to pay any amount
due under the agreement or by failure to pay other debts as they fall due.
While no discussions have taken place regarding the renewal of the loan
facility beyond June 30, 1997 the directors are confident that agreement could
be reached to provide adequate facilities for the Company to continue trading
for the foreseeable future, although as detailed in note 17, the intention of
the directors is to place the Company into liquidation following the transfer of
the business and certain trading assets as of July 1, 1996.
If adequate facilities are not available, the going concern basis, upon
which these financial statements are prepared, may not be appropriate and
adjustments would have to be made to reduce the value of assets to their
recoverable amount, to provide for any further liabilities that might arise and
to reclassify fixed assets as current assets and long-term liabilities as
current liabilities.
Amounts falling due after one year was comprised of a provision for unfunded
pension obligations of L90,000.
F-32
<PAGE>
LEE LIGHTING LIMITED
NOTES TO THE ACCOUNTS
11. OBLIGATIONS UNDER OPERATING LEASES
The annnual commitments under non-cancellable operating leases are as
follows (in thousands of British pounds):
<TABLE>
<CAPTION>
DECEMBER 31, 1995
---------------------
<S> <C>
Operating leases which expire:
In one year................................................................ 230
Within the second to fifth years........................................... 183
---
413
---
---
</TABLE>
12. DEFERRED TAXATION
Deferred taxation provided in the accounts and the amounts not provided are
as follows (in thousands of British pounds):
<TABLE>
<CAPTION>
PROVIDED NOT PROVIDED
DECEMBER 31, DECEMBER 31,
1995 1995
--------------- -------------
<S> <C> <C>
Accelerated capital allowances................................... 187 --
Accrued interest................................................. -- (4,859)
Other timing differences......................................... (30) --
Losses........................................................... (45) --
--- ------
112 (4,859)
--- ------
--- ------
</TABLE>
13. SHARE CAPITAL
Share capital allotted, called up, authorised and fully paid consisted of
600,000 ordinary shares of L1 each.
14. RECONCILIATION OF SHAREHOLDERS' FUNDS AND MOVEMENTS ON RESERVES
The reconciliation is as follows (in thousands of British pounds):
<TABLE>
<CAPTION>
PROFIT AND
SHARE MERGER REVALUATION LOSS
CAPITAL RESERVE RESERVE ACCOUNT TOTAL
----------- ----------- --------------- ----------- ---------
<S> <C> <C> <C> <C> <C>
Balance at January 1, 1995................................ 568 1,133 224 (31,452) (29,527)
Loss for the year......................................... -- -- -- (2,238) (2,238)
Release of revaluation reserve............................ -- -- (39) 39 --
--- ----- --- ----------- ---------
Balance at December 31, 1995.............................. 568 1,133 185 (33,651) (31,765)
Loss for the period (unaudited)........................... -- -- -- (1,126) (1,126)
Release of revaluation reserve (unaudited)................ -- -- (19) 19 --
--- ----- --- ----------- ---------
Balance at June 30, 1996 (unaudited)...................... 568 1,133 166 (34,758) (32,891)
--- ----- --- ----------- ---------
--- ----- --- ----------- ---------
</TABLE>
F-33
<PAGE>
LEE LIGHTING LIMITED
NOTES TO THE ACCOUNTS
15. CASH FLOW STATEMENT
(a) Analysis of changes in cash and cash equivalents during the year (in
thousands of British pounds):
<TABLE>
<CAPTION>
1995
-------------
<S> <C>
Balance at 1 January............................................................ 725
Net cash (outflow).............................................................. (312)
-------------
413
-------------
-------------
</TABLE>
(b) Analysis of cash and short term deposits as shown in the balance sheet:
<TABLE>
<CAPTION>
DECEMBER 31,
1995
-------------
<S> <C>
Cash at bank and in hand (in thousands of British pounds):...................... 413
-------------
-------------
</TABLE>
(c) Analysis of changes in financing during the year - parent undertaking
loan (note 10) (in thousands of British pounds):
<TABLE>
<S> <C>
Balance as of 1 January 1995.................................... 34,199
Interest paid................................................... (1,500)
Interest charge................................................. 3,420
-----------
Balance as of 31 December 1995.................................. 36,119
-----------
-----------
</TABLE>
16. CAPITAL COMMITMENTS
Amounts contracted for but not provided in the financial statements amounted
to L69,520.
F-34
<PAGE>
LEE LIGHTING LIMITED
NOTES TO THE ACCOUNTS
17. EVENTS SINCE THE BALANCE SHEET DATE
With effect from July 1, 1996, the business and substantially all trading
assets of the Company were sold at net book value and it is planned to place the
Company into liquidation.
18. DIFFERENCES BETWEEN ACCOUNTING PRINCIPLES GENERALLY ACCEPTED IN THE UNITED
KINGDOM AND THE UNITED STATES
The financial statements are prepared under accounting principles generally
accepted in the United Kingdom (UK GAAP) which differ in certain respects from
United States generally accepted principles (US GAAP). Differences estimated to
have a significant effect on net income and shareholders' equity are set out
below.
REVALUATION OF RENTAL ASSETS
Certain rental assets were revalued in 1987 on the basis of their value to
the business and they are included in these financial statements at that value
less subsequent depreciation. Under US GAAP, such revaluations would not be
reflected in the financial statements. Rental assets would be included at
historical cost under US GAAP with depreciation computed on such cost.
DEFERRED TAXATION
Provision is made for deferred taxation using the liability method on all
material timing differences to the extent that it is probable that the
liabilities will crystallise in the foreseeable future. Under US GAAP, as set
out in Statements of Financial Accounting Standards No. 109 "Accounting for
Income Taxes", deferred taxation is generally provided on a full liability basis
on all temporary differences. However, as the unprovided UK GAAP amount
represents a deferred taxation asset which is not anticipated to be realised in
the foreseeable future, there would be no significant impact on net income or
shareholders' equity from the adoption of a US GAAP treatment.
F-35
<PAGE>
LEE LIGHTING LIMITED
NOTES TO THE ACCOUNTS
18. DIFFERENCES BETWEEN ACCOUNTING PRINCIPLES GENERALLY ACCEPTED IN THE UNITED
KINGDOM AND THE UNITED STATES (CONTINUED)
The following is a summary of the effect of the above differences on the
reported amounts (in thousands of British pounds):
<TABLE>
<CAPTION>
SIX MONTHS
YEAR ENDED ENDED
DECEMBER 31, 1995 JUNE 30, 1996
----------------- -------------
<S> <C> <C>
(UNAUDITED)
NET INCOME
Loss for the period............................................................. (2,238) (1,126)
ADJUSTMENTS
Depreciation adjustment as a result of revaluation.............................. 39 19
Adjustment on disposal of revalued asset........................................ 5 --
------- -------------
Net income as adjusted to accord with US GAAP................................... (2,194) (1,107)
------- -------------
------- -------------
SHAREHOLDERS' EQUITY
Shareholders' equity as reported................................................ (31,765) (32,891)
ADJUSTMENTS
Revaluation reserve............................................................. (185) (166)
------- -------------
Shareholders' equity as adjusted to accord with US GAAP......................... (31,950) (33,057)
------- -------------
------- -------------
</TABLE>
STATEMENTS OF CASH FLOWS
The statements of cash flows prepared in accordance with UK GAAP present
substantially the same information as that required under US GAAP. UK and US
GAAP differ, however, with regard to the classification of items within the
statements and as regards the definition of cash and cash equivalents.
Under UK GAAP, cash flows are presented separately for operating activities,
returns on investments and servicing of finance, taxation, investing activities
and financing activities. US GAAP, however, requires only three categories of
cash flow activity to be reported: operating, investing and financing. Cash
flows from taxation and returns on investments and servicing of finance shown
under UK GAAP would be included as operating activities under US GAAP.
Under US GAAP, cash and cash equivalents would not include bank overdrafts
and borrowings with initial maturities of less than three months.
F-36
<PAGE>
LEE LIGHTING LIMITED
NOTES TO THE ACCOUNTS
18. DIFFERENCES BETWEEN ACCOUNTING PRINCIPLES GENERALLY ACCEPTED IN THE UNITED
KINGDOM AND THE UNITED STATES (CONTINUED)
The categories of cash flow activity under US GAAP can be summarized as
follows (in thousands of British pounds):
<TABLE>
<CAPTION>
SIX MONTHS
YEAR ENDED ENDED
DECEMBER 31, 1995 JUNE 30, 1996
------------------- ---------------
<S> <C> <C>
(UNAUDITED)
Cash inflow from operating activities........................................... 581 984
Cash outflow on investing activities............................................ (893) (736)
Cash inflow from financing activities........................................... -- --
--- ---
(Decrease)/increase in cash and cash equivalents................................ (312) 248
Cash and cash equivalents at January 1.......................................... 725 413
--- ---
Cash and cash equivalents at December 31/June 30................................ 413 661
--- ---
--- ---
</TABLE>
F-37
<PAGE>
UNDERWRITING
Subject to the terms and conditions of the U.S. Underwriting Agreement, the
Company has agreed to sell to each of the U.S. Underwriters named below, and
each of such U.S. Underwriters, for whom Goldman, Sachs & Co., Schroder Wertheim
& Co. Incorporated and Cowen & Company are acting as representatives
(collectively, the "Representatives"), has severally agreed to purchase from the
Company, the respective number of shares of Common Stock set forth opposite its
name below:
<TABLE>
<CAPTION>
NUMBER OF
SHARES OF
UNDERWRITER COMMON STOCK
- ----------------------------------------------------------- ---------------
<S> <C>
Goldman, Sachs & Co........................................
Schroder Wertheim & Co. Incorporated.......................
Cowen & Company............................................
---------------
Total..................................................
---------------
---------------
</TABLE>
Under the terms and conditions of the U.S. Underwriting Agreement, the U.S.
Underwriters are committed to take and pay for all of the shares offered hereby,
if any are taken.
The U.S. Underwriters propose to offer the shares of Common Stock in part
directly to the public at the initial public offering price set forth on the
cover page of this Prospectus and in part to certain securities dealers at such
price less a concession of $ per share. The U.S. Underwriters may allow,
and such dealers may reallow, a concession not in excess of $ per share
to certain brokers and dealers. After the shares of Common Stock are released
for sale to the public, the offering price and other selling terms may from time
to time be varied by the Representatives.
The Company has entered into an underwriting agreement (the "International
Underwriting Agreement") with the underwriters of the International Offering
(the "International Underwriters") providing for the concurrent offer and sale
of shares of Common Stock in an international offering outside the United
States. The offering price and aggregate underwriting discounts and commissions
per share for the Offerings are identical. The closing of the U.S. Offering made
hereby is a condition to the closing of the International Offering, and vice
versa. The representatives of the International Underwriters are Goldman Sachs
International, J. Henry Schroder & Co. Limited and Cowen & Company.
Pursuant to an Agreement between the U.S. and International Underwriting
Syndicates (the "Agreement Between") relating to the Offerings, each of the U.S.
Underwriters named herein has agreed that, as a part of the distribution of the
shares offered hereby and subject to certain exceptions, it will offer, sell or
deliver the shares of Common Stock, directly or indirectly, only in the United
States of America (including the States and the District of Columbia), its
territories, its possessions and other areas subject to its jurisdiction (the
"United States") and to U.S. persons, which term shall mean, for purposes of
this paragraph: (a) any individual who is a resident of the United States or (b)
any corporation, partnership or other entity organized in or under the laws of
the United States or any political subdivision thereof and whose office most
directly involved with the purchase is located in the United States. Each of the
International Underwriters has agreed pursuant to the Agreement Between that, as
a part of the distribution of the shares offered as part of the International
Offering and subject to certain exceptions, it will (i) not, directly or
indirectly, offer, sell or deliver shares of Common Stock (a) in the United
States or to any U.S. persons or (b) to any person who it believes intends to
reoffer, resell or deliver the shares in the United States or to any U.S.
persons and (ii) cause any dealer to whom it may sell such shares at any
concession to agree to observe a similar restriction.
U-1
<PAGE>
Pursuant to the Agreement Between, sales may be made between the U.S.
Underwriters and the International Underwriters of such number of shares of
Common Stock as may be mutually agreed. The price of any shares so sold shall be
the initial public offering price, less an amount not greater than the selling
concession.
The Company has granted the U.S. Underwriters an option exercisable for 30
days after the date of this Prospectus to purchase up to an aggregate of
additional shares of Common Stock solely to cover over-allotments, if any. If
the U.S. Underwriters exercise their over-allotment option, the U.S.
Underwriters have severally agreed, subject to certain conditions, to purchase
approximately the same percentage thereof that the number of shares to be
purchased by each of them, as shown in the foregoing table, bears to the
shares of Common Stock offered hereby. The Company has granted the International
Underwriters a similar option to purchase up to an aggregate of additional
shares of Common Stock.
The Company has agreed during the period beginning from the date of this
Prospectus and continuing to and including the date 180 days after the date of
this Prospectus, not to offer, sell, contract to sell or otherwise dispose of
any securities of the Company (other than pursuant to employee stock option
plans existing, or on the conversion or exchange of convertible or exchangeable
securities outstanding, on the date of this Prospectus) which are substantially
similar to the shares of Common Stock or which are convertible or exchangeable
into securities which are substantially similar to the shares of Common Stock,
without the prior written consent of Goldman, Sachs & Co., except for the shares
of Common Stock offered in connection with the Offerings. The Company's
executive officers and directors and Warburg, Pincus, who will hold in the
aggregate shares of Common Stock following this offering, have agreed not
to offer, sell, contract to sell or otherwise dispose of any shares of Common
Stock or other securities of Panavision Inc. that are substantially similar to
the shares of Common Stock (including but not limited to any securities that are
convertible into or exchangeable for, or that represent the right to receive,
shares of Common Stock or any such substantially similar securities) for a
period of 180 days after the date of this Prospectus without the prior written
consent of Goldman, Sachs & Co. See "Shares Eligible for Future Sale."
The representatives of the U.S. Underwriters and the International
Underwriters have informed the Company that they do not expect sales to accounts
over which the U.S. Underwriters and the International Underwriters exercise
discretionary authority to exceed five percent of the total number of shares of
Common Stock offered by them.
Prior to the Offerings, there has been no public market for the Common
Stock. The initial public offering price will be negotiated among the Company
and the representatives of the U.S. Underwriters and the International
Underwriters. Among the factors to be considered in determining the initial
public offering price of the Common Stock, in addition to prevailing market
conditions, are the Company's historical performance, estimates of the business
potential and earnings prospects of the Company, an assessment of the Company's
management and the consideration of the above factors in relation to the market
valuation of companies in related businesses.
Application will be made to list the Common Stock on the NYSE under the
symbol "PVI." In order to meet one of the requirements for listing the Common
Stock on the NYSE, the U.S. Underwriters have undertaken to sell lots of 100 or
more shares to a minimum of 2,000 beneficial holders.
The Company has agreed to indemnify the several Underwriters against certain
liabilities, including liabilities under the Securities Act.
This Prospectus may be used by underwriters and dealers in connection with
offers and sales of the Common Stock, including shares initially sold in the
International Offering, to persons located in the United States.
U-2
<PAGE>
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
NO PERSON HAS BEEN AUTHORIZED TO GIVE ANY INFORMATION OR TO MAKE ANY
REPRESENTATIONS OTHER THAN THOSE CONTAINED IN THIS PROSPECTUS, AND, IF GIVEN OR
MADE, SUCH INFORMATION OR REPRESENTATIONS MUST NOT BE RELIED UPON AS HAVING BEEN
AUTHORIZED. THIS PROSPECTUS DOES NOT CONSTITUTE AN OFFER TO SELL OR THE
SOLICITATION OF AN OFFER TO BUY ANY SECURITIES OTHER THAN THE SECURITIES TO
WHICH IT RELATES OR AN OFFER TO SELL OR THE SOLICITATION OF AN OFFER TO BUY SUCH
SECURITIES IN ANY CIRCUMSTANCES IN WHICH SUCH OFFER OR SOLICITATION IS UNLAWFUL.
NEITHER THE DELIVERY OF THIS PROSPECTUS NOR ANY SALE MADE HEREUNDER SHALL, UNDER
ANY CIRCUMSTANCES, CREATE ANY IMPLICATION THAT THERE HAS BEEN NO CHANGE IN THE
AFFAIRS OF THE COMPANY SINCE THE DATE HEREOF OR THAT THE INFORMATION CONTAINED
HEREIN IS CORRECT AS OF ANY TIME SUBSEQUENT TO ITS DATE.
------------------------
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
<S> <C>
Prospectus Summary........................... 3
Risk Factors................................. 7
Use of Proceeds.............................. 10
Dividend Policy.............................. 10
Capitalization............................... 11
Dilution..................................... 12
Selected Consolidated Financial Data......... 13
Management's Discussion and Analysis of
Financial Condition and Results of
Operations................................. 15
Business..................................... 26
Management................................... 39
Certain Transactions......................... 45
Principal Stockholders....................... 46
Description of Capital Stock................. 47
Shares Eligible for Future Sale.............. 49
Legal Matters................................ 50
Experts...................................... 50
Additional Information....................... 51
Index to Consolidated Financial Statements... F-1
Underwriting................................. U-1
</TABLE>
THROUGH AND INCLUDING , 1996 (THE 25TH DAY AFTER THE DATE OF THIS
PROSPECTUS), ALL DEALERS EFFECTING TRANSACTIONS IN THE COMMON STOCK, WHETHER OR
NOT PARTICIPATING IN THIS DISTRIBUTION, MAY BE REQUIRED TO DELIVER A PROSPECTUS.
THIS IS IN ADDITION TO THE OBLIGATION OF DEALERS TO DELIVER A PROSPECTUS WHEN
ACTING AS UNDERWRITERS AND WITH RESPECT TO THEIR UNSOLD ALLOTMENTS OR
SUBSCRIPTIONS.
SHARES
PANAVISION INC.
COMMON STOCK
(PAR VALUE $0.01 PER SHARE)
---------------------
PROSPECTUS
---------------------
GOLDMAN, SACHS & CO.
SCHRODER WERTHEIM & CO.
COWEN & COMPANY
REPRESENTATIVES OF THE UNDERWRITERS
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<PAGE>
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 13. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION
The following table sets forth the various expenses in connection with the
sale and distribution of the securities being registered which will be paid
solely by the Company. All amounts shown are estimates, except the SEC
registration fee, the NASD filing fee and the NYSE listing fee:
<TABLE>
<CAPTION>
AMOUNT
---------
<S> <C>
SEC registration fee............................................................... $ 27,794
NASD filing fee.................................................................... 7,400
NYSE listing fee................................................................... *
Transfer agent and registrar fees and expenses..................................... *
Printing and engraving expenses.................................................... *
Legal fees and expenses............................................................ *
Accounting fees and expenses....................................................... *
Blue Sky fees and expenses......................................................... 20,000
Miscellaneous expenses............................................................. *
---------
Total...................................................................... $ *
---------
---------
</TABLE>
- ------------------------
* To be completed by amendment.
ITEM 14. INDEMNIFICATION OF DIRECTORS AND OFFICERS
The Company's Restated Certificate of Incorporation (the "Restated
Certificate") provides that the Company shall indemnify each person who is or
was a director, officer or employee of the Company to the fullest extent
permitted under Section 145 of the Delaware General Corporation Law. Section 145
of the Delaware General Corporation Law empowers a Delaware corporation to
indemnify any person who was or is a party or is threatened to be made a party
to any threatened, pending or completed action, suit or proceeding, whether
civil, criminal, administrative or investigative (other than an action by or in
the right of such corporation) by reason of the fact that such person is or was
a director, officer, employee or agent of such corporation, or is or was serving
at the request of such corporation as a director, officer, employee or agent of
another corporation or enterprise. A corporation may indemnify such person
against expenses (including attorneys' fees), judgments, fines and amounts paid
in settlement actually and reasonably incurred by such person in connection with
such action, suit or proceeding if he acted in good faith and in a manner he
reasonably believed to be in or not opposed to the best interests of the
corporation, and, with respect to any criminal action or proceeding, had no
reasonable cause to believe his conduct was unlawful. A corporation may, in
advance of the final disposition of any civil, criminal, administrative or
investigative action, suit or proceeding, pay the expenses (including attorneys'
fees) incurred by any officer or director in defending such action, provided
that the director or officer undertakes to repay such amount if it shall
ultimately be determined that he is not entitled to be indemnified by the
corporation.
A Delaware corporation may indemnify officers and directors in an action by
or in the right of the corporation to procure a judgment in its favor under the
same conditions, except that no indemnification is permitted without judicial
approval if the officer or director is adjudged to be liable to the corporation.
Where an officer or director is successful on the merits or otherwise in the
defense of any action referred to above, the corporation must indemnify him
against the expenses (including attorneys' fees) which he actually and
reasonably incurred in connection therewith. The indemnification provided is not
deemed to
II-1
<PAGE>
be exclusive of any other rights to which an officer or director may be entitled
under any corporation's bylaw, agreement, vote or otherwise.
The Restated Certificate provides that a director of the Company will not be
personally liable to the Company or its stockholders for monetary damages for
breach of fiduciary duty as a director, except for liability (i) for any breach
of the director's duty of loyalty to the Company or its stockholders, (ii) for
acts or omissions not in good faith or which involve intentional misconduct or a
knowing violation of law, (iii) under Section 174 of the Delaware General
Corporation Law, which concerns unlawful payments of dividends, stock purchases
or redemption, or (iv) for any transaction from which the director derived an
improper personal benefit.
While the Restated Certificate provides directors with protection from
awards for monetary damages for breaches of their duty of care, it does not
eliminate such duty. Accordingly, the Restated Certificate will have no effect
on the availability of equitable remedies such as an injunction or rescission
based on a director's breach of his or her duty of care. The provisions of the
Restated Certificate described above apply to an officer of the Company only if
he or she is a director of the Company and is acting in his or her capacity as
director, and do not apply to officers of the Company who are not directors.
Reference is made to the Employment Agreement of William C. Scott (Exhibit
10.4) which provides for indemnification of Mr. Scott in his capacity as Chief
Executive Officer of the Company.
Reference is made to the U.S. Underwriting Agreement (Exhibit 1) which
provides for indemnification of the Company, its directors, officers and
controlling persons.
ITEM 15. RECENT SALES OF UNREGISTERED SECURITIES
The following information is furnished with regard to all securities sold by
the Company within the past three years which were not registered under the
Securities Act.
Messrs. Farrand and Marcketta received and shares, respectively,
of the Company's common stock after giving effect to a :1 stock split of the
Company's Common Stock for its par value to be effected prior to the closing of
the Offerings.
The sales described in this Item 15 were made in reliance upon the exemption
from registration set forth in Section 4(2) of the Securities Act relating to
sales by an issuer not involving any public offering. The foregoing transactions
did not involve a distribution or public offering. No underwriters were engaged
in connection with the foregoing issuances of securities and no commissions or
discounts were paid.
II-2
<PAGE>
ITEM 16. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES
(a) EXHIBITS
<TABLE>
<CAPTION>
EXHIBIT NO. DESCRIPTION
- ------------- -----------------------------------------------------------------------------------------------------
<C> <S>
1 Form of U.S. Underwriting Agreement*
3.1 Restated Certificate of Incorporation*
3.2 Restated By-Laws*
4 Specimen of the Company's Common Stock certificate*
5.1 Opinion of Willkie Farr & Gallagher as to the legality of the Common Stock*
10.1 Stockholders Agreement, dated as of June 12, 1996.
10.2 Restated and Amended Credit Agreement, dated September 10, 1996, among Panavision International,
L.P., the subsidiary guarantors and the lenders listed therein, and the Chase Manhattan Bank, as
Administrative Agent.
10.3 1996 Stock Option Plan*
10.4 Employment Agreement, dated as of June 12, 1996, between the Company and
William C. Scott
10.5 Lease, dated June 13, 1995, between the Company and Trizec Warner Inc.*
11 Computations of Per Share Earnings*
21 Subsidiaries
23.1 Consent of Willkie Farr & Gallagher (included in their opinion filed as Exhibit 5.1)*
23.2 Consent of Ernst & Young LLP
23.3 Consent of Ernst & Young
24 Power of Attorney (included on the signature page of this Registration Statement)
27 Financial Data Schedule*
</TABLE>
- ------------------------
* To be filed by amendment.
(b) FINANCIAL STATEMENT SCHEDULES
Schedule II--Valuation and Qualifying Accounts.
ITEM 17. UNDERTAKINGS
(1) The undersigned Registrant hereby undertakes to provide to the
Underwriters at the closing specified in the underwriting agreements
certificates in such denominations and registered in such names as required by
the Underwriters to permit prompt delivery to each purchaser.
(2) Insofar as indemnification for liabilities arising under the Securities
Act may be permitted to directors, officers and controlling persons of the
Registrant pursuant to its Restated Certificate of Incorporation, By-laws, the
United States Underwriting Agreement, International Underwriting Agreement or
otherwise, the Registrant has been advised that, in the opinion of the
Securities and Exchange Commission, such indemnification is against public
policy as expressed in the Securities Act and is, therefore, unenforceable. In
the event that a claim for indemnification against such liabilities (other than
II-3
<PAGE>
the payment by the Registrant of expenses incurred or paid by a director,
officer or controlling person of the Registrant in the successful defense of any
action, suit or proceeding) is asserted by such director, officer or controlling
person in connection with the securities being registered, the Registrant will,
unless in the opinion of its counsel the matter has been settled by controlling
precedent, submit to a court of appropriate jurisdiction the question whether
such indemnification by it is against public policy as expressed in the
Securities Act and will be governed by the final adjudication of such issue.
(3) The Registrant hereby undertakes that:
(a) For purposes of determining any liability under the Securities Act, the
information omitted from the form of prospectus filed as part of this
Registration Statement in reliance upon Rule 430A and contained in a form of
prospectus filed by the Registrant pursuant to Rule 424(b)(1) or (4) or 497(h)
under the Securities Act shall be deemed to be part of the Registration
Statement as of the time it was declared effective.
(b) For the purpose of determining any liability under the Securities Act,
each post-effective amendment that contains a form of prospectus shall be deemed
to be a new Registration Statement relating to the securities offered therein,
and the offering of such securities at that time shall be deemed to be the
initial bona fide offering thereof.
II-4
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the Registrant
has duly caused this Registration Statement to be signed on its behalf by the
undersigned, thereunto duly authorized in New York, New York on September 18,
1996.
PANAVISION INC.
By: /s/ WILLIAM C. SCOTT
------------------------------------------
Name: William C. Scott
Title: CHIEF EXECUTIVE OFFICER AND
CHAIRMAN OF THE BOARD OF DIRECTORS
POWER OF ATTORNEY
Each of the undersigned officers and directors of Panavision Inc. hereby
severally constitutes and appoints William C. Scott and Jeffrey J. Marcketta and
each of them as the attorneys-in-fact for the undersigned, in any and all
capacities, with full power of substitution, to sign any and all pre- or post-
effective amendments to this Registration Statement, any subsequent Registration
Statement for the same offering which may be filed under Rule 462(b) under the
Securities Act of 1933 and any and all pre-or post-effective amendments thereto,
and to file the same with exhibits thereto and other documents in connection
therewith, with the Securities and Exchange Commission, granting unto said
attorney-in-fact, and each of them, full power and authority to do and perform
each and every act and thing requisite and necessary to be done in and about the
premises, as fully to all intents and purposes as he might or could do in
person, hereby ratifying and confirming all that each said attorney-in-fact, or
either of them, may lawfully do or cause to be done by virtue hereof.
Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement has been signed by the following persons in the
capacities and on the dates indicated.
SIGNATURE TITLE DATE
- ------------------------------ --------------------------- -------------------
Chief Executive Officer and
/s/ WILLIAM C. SCOTT Chairman of the Board of
- ------------------------------ Directors (Principal September 18, 1996
William C. Scott Executive Officer)
/s/ JEFFREY J. MARCKETTA Chief Financial Officer
- ------------------------------ (Principal Financial September 18, 1996
Jeffrey J. Marcketta Officer)
/s/ CHRISTOPHER M.R. Controller
PHILLIPS
- ------------------------------ September 18, 1996
Christopher M.R. Phillips
/s/ SIDNEY LAPIDUS Director
- ------------------------------ September 18, 1996
Sidney Lapidus
/s/ JOANNE R. WENIG Director
- ------------------------------ September 18, 1996
Joanne R. Wenig
II-5
<PAGE>
REPORT OF INDEPENDENT AUDITORS
We have audited the consolidated financial statements of Panavision Inc. as
of December 31, 1994 and 1995, and for each of the three years in the period
ended December 31, 1995, and have issued our report thereon dated March 4, 1996,
except Note 7, as to which the date is October , 1996, included elsewhere in
this Registration Statement. Our audits also included the financial statement
schedule listed in Item 16(b) of this Registration Statement. This schedule is
the responsibility of the Company's management. Our responsibility is to express
an opinion on this schedule based on our audits.
In our opinion, the financial statement schedule referred to above, when
considered in relation to the basic financial statements taken as a whole,
presents fairly, in all material respects, the information set forth therein.
ERNST & YOUNG LLP
Los Angeles, California
October , 1996
The foregoing report is in the format that will be signed upon the
effectiveness of the :1 stock split as described in Note 7 of the notes to
the consolidated financial statements.
ERNST & YOUNG LLP
Los Angeles, California
September 18, 1996
II-6
<PAGE>
SCHEDULE II--VALUATION AND QUALIFYING ACCOUNTS
<TABLE>
<CAPTION>
BEGINNING BALANCE AMOUNTS RESERVED BALANCES WRITTEN OFF ENDING BALANCE
------------------- --------------------- ----------------------- ----------------
<S> <C> <C> <C> <C>
Allowance for Doubtful Accounts
December 31, 1993............... $ 1,567 $ 326 $ 296 $ 1,597
December 31, 1994............... $ 1,597 $ 663 $ 488 $ 1,772
December 31, 1995............... $ 1,772 $ 829 $ 558 $ 2,043
</TABLE>
II-7
<PAGE>
STOCKHOLDERS AGREEMENT
Stockholders Agreement (the "Agreement"), dated as of June 12,
1996, by and among Panavision Holdings, L.L.C. ("Warburg"), William C. Scott III
and certain other management investors whose names appear on Schedule I hereto
(Mr. Scott and such other management investors are hereinafter referred to
collectively as the "Management Investors," and Warburg and the Management
Investors are hereinafter referred to individually as an "Investor" and
collectively as the "Investors"), and WP/GP, Inc., a Delaware corporation (the
"Company").
R E C I T A L S
WHEREAS, the Investors own shares (the "Shares") of Common Stock,
par value $.01 per share, of the Company (the "Common Stock"); and
WHEREAS, Management Investors have been and may in the future be
granted options to purchase shares of Common Stock pursuant to the terms of the
Stock Option Plan (as defined in Section l(d) hereof) and related Stock Option
Agreements between each Management Investor and the Company (each, a "Stock
Option Agreement"); and
WHEREAS, the Investors and the Company desire to promote their
mutual interests by agreeing to certain matters relating to the operations of
the Company and the disposition and voting of Shares.
NOW, THEREFORE, in consideration of the mutual covenants and
agreements herein contained, the parties hereto hereby agree as follows:
1. COVENANTS OF THE PARTIES.
(a) LEGENDS. The certificates evidencing the shares of
Common Stock owned as of the date hereof or hereafter acquired by the Investors
or to be issued upon exercise of options to purchase shares of Common Stock
pursuant to the Stock Option Plan or otherwise will bear the following legend
reflecting the restrictions on the transfer of such securities contained in this
Agreement:
<PAGE>
"The securities evidenced hereby are subject to the terms of
that certain Stockholders Agreement, dated as of June 12,
1996, by and among the Company and certain investors
identified therein, including certain restrictions on
transfer. A copy of the Stockholders Agreement has been
filed with the Secretary of the Company and is available
upon written request."
(b) ELECTION OF DIRECTORS. At all times throughout the term
of this Agreement, the Investors and the Company agree that the Company's Board
of Directors (the "Board") shall consist of at least three (3) members which
shall include (A) two (2) designees nominated by Warburg and (B) Mr. Scott or,
if he is not an employee of Panavision International, L.P., or is otherwise
unavailable, one (1) designee nominated by the holders of a majority of the
shares of Common Stock held by the Management Investors who are then employed by
the Company or any of its subsidiaries. For purposes of this Section 1(b) and
Section 1(c), Management Investors shall include additional holders of Common
Stock who become parties to this Agreement and who are then employed by the
Company or any of its subsidiaries.
(c) REPLACEMENT DIRECTORS. In the event that any director
(a "Withdrawing Director") designated in the manner set forth in Section l(b)
hereof is unable to serve, or once having commenced to serve, is removed or
withdraws from the Board, such Withdrawing Director's replacement (the
"Substitute Director") will be designated by the Investor or parties that
designated the Withdrawing Director. Any director nominated by Warburg or the
Management Investors pursuant to Section l(b), may be removed, with or without
cause, only by the consent of the Investor or Investors originally nominating
such director, as the case may be, and such party or parties shall thereafter
nominate a replacement for such director. The Company and each of the Investors
agree to take all action within their respective power, including but not
limited to the voting of capital stock of the Company, to cause the election of
such Substitute Director promptly following his or her nomination pursuant to
this Section l(c).
(d) RIGHTS NON-TRANSFERABLE. Except as otherwise expressly
contemplated by this Agreement, the rights of any Investor to designate
directors pursuant to this Section 1 are
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not transferable, whether by sale of capital stock or otherwise, to any Person
or entity other than an Affiliate of such Investor.
2. TRANSFER OF STOCK.
(a) TRANSFER OF SECURITIES. Until the second anniversary of the
closing of an Initial Public Offering, no Management Investor shall Transfer any
Shares other than in accordance with the provisions of this Section 2 and
Section 3 hereof; provided, that prior to such second anniversary, each
Management Investor may Transfer (subject to any lock-up agreements entered into
in connection with any public offering), in the aggregate, up to a number of
Shares equal to the remainder of (x) 20% of the total number ("Total Holdings")
of Shares owned by him since the date of this Agreement, including the Shares
(i) owned by him on the date hereof, (ii) acquired by him pursuant to the Stock
Option Plan and (iii) acquired by him pursuant to any restructuring or similar
transaction, minus (y) the number of Shares, if any, sold or Transferred by such
Management Investor pursuant to Section 2(b), 2(e) or 3 hereof. In addition,
Warburg shall not Transfer any shares of capital stock of the Company other than
in accordance with the provisions of this Section 2 and Section 3(a). Any
Transfer or purported Transfer made in violation of this Section 2 shall be null
and void and of no effect.
(b) TAG-ALONG RIGHT. In the event Warburg intends to Transfer
any of its shares of Common Stock prior to the closing of an Initial Public
Offering other than to an Affiliate of Warburg or pursuant to a distribution of
such shares to its or any of its Affiliates' partners, Warburg shall notify each
other Investor, in writing, of such transfer and its terms and conditions.
Within 5 days of the date of such notice, each Investor shall notify Warburg if
it elects to participate in such Transfer. Each Investor that so notifies
Warburg shall have the right to sell, at the same price and on the same terms as
Warburg, an amount of shares equal to the shares of Common Stock the third party
actually proposes to purchase multiplied by a fraction, the numerator of which
shall be the number of shares of Common Stock owned by such Investor and the
denominator of which shall be the aggregate number of shares of Common Stock
owned by Warburg and each Investor exercising its rights under this Section
2(b). Notwithstanding anything contained in this Section 2(b) or elsewhere in
this Agreement, no Management Investor may Transfer any of its shares of Common
Stock pursuant to this
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<PAGE>
Section 2(b) if and to the extent that such Transfer would result in a
Percentage Imbalance.
(c) DRAG-ALONG RIGHT.
(i) If, prior to the closing of an Initial Public Offering,
Warburg is advised by the prospective managing underwriter of the Initial Public
Offering of the Company that a restructuring of the capitalization of the
Company is advisable in connection with such offering, and if Warburg is willing
to effect such a restructuring, Warburg shall so notify each other Investor, in
writing, specifying the terms and conditions of such restructuring. Each other
Investor, within 5 days of the receipt of such notice (or such longer period of
time as Warburg shall designate) shall take all such actions as shall be
required in connection with such restructuring (without any additional
investment by the Management Investors), upon the same terms and conditions as
Warburg, including, without limitation, the voting of such Investor's shares of
Common Stock, the conversion of one or more classes of Company securities, or
the contribution to the capital of the Company of one or more classes of the
Company's equity securities.
(ii) If at any time and from time to time after the date of
this Agreement and prior to the closing of an Initial Public Offering,
Warburg wishes to Transfer in a bona fide arms' length sale all of the shares
of capital stock of the Company then owned by it to any Person or Persons who
are not Affiliates of Warburg (the "Proposed Transferee"), Warburg shall have
the right (the "Drag-Along Right") to require each other Investor to sell to
the Proposed Transferee all of the shares of capital stock of the Company
then owned by such other Investor on terms no less favorable than the terms
on which the shares of capital stock then owned by Warburg are being sold.
Each Investor agrees to take all steps necessary to enable it to comply with
the provisions of this Section 2(c).
(iii) To exercise a Drag-Along Right, Warburg shall give each
Investor a written notice (a "Drag-Along Notice") containing (A) the name and
address of the Proposed Transferee and (B) the proposed purchase price, terms of
payment and other material terms and conditions of the Proposed Transferee's
offer. Each such Investor shall thereafter be obligated to deliver for sale at
the closing specified in such Drag-Along Notice, the
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shares of capital stock subject to such Drag-Along Notice free and clear of all
liens, encumbrances and security interests.
(d) PARTICIPATION IN CERTAIN SECURITIES ISSUANCES AND
REPURCHASES.
(i) If at any time prior to the closing of an Initial
Public Offering the Company proposes to issue to Warburg or any of its
Affiliates equity securities of any kind (the term "equity securities" shall
include for purposes of this Section 2(d) any warrants, options or other rights
to acquire equity securities and debt securities convertible into equity
securities), then, as to each Investor, the Company shall:
(a) give written notice setting forth in reasonable
detail (1) the designation and all of the terms and provisions of
the securities proposed to be issued (the "Proposed Securities"),
including, where applicable, the voting powers, preferences and
relative participating, optional or other special rights, and the
qualification, limitations or restrictions thereof and interest
rate and maturity; (2) the price and other terms of the proposed
sale of such securities; (3) the amount of such securities
proposed to be issued; and (4) such other information as the
Investors may reasonably request in order to evaluate the
proposed issuance; and
(b) offer to issue to each such Investor a portion of
the Proposed Securities equal to a percentage determined by
dividing (x) the number of shares of Common Stock held by such
Investor and issuable to such Investor, assuming conversion in
full of any convertible securities or vested Option Shares, by
(y) the total number of shares of Common Stock then outstanding
assuming conversion in full of any convertible securities and
outstanding options, rights or similar securities to the extent
then vested.
Each such Investor must exercise its purchase rights hereunder
within ten (10) days after receipt of such notice from the Company. If all of
the Proposed Securities offered to such Investors are not fully subscribed by
such Investors, the remaining Proposed Securities will be re-offered to the
Investors purchasing their full allotment upon the terms set forth in this
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<PAGE>
Section 2(d)(i), until all such Proposed Securities are fully subscribed for or
until all such Investors have subscribed for all such Proposed Securities which
they desire to purchase, except that such Investors must exercise their purchase
rights within five (5) days after receipt of all such re-offers. To the extent
that the Company offers two or more securities in units, Investors must purchase
such units as a whole and will not be given the opportunity to purchase only one
of the securities making up such unit.
Upon the expiration of the offering periods described above, the
Company will be free to sell such Proposed Securities that the Investors have
not elected to purchase during the ninety (90) days following such expiration on
terms and conditions no more favorable to the purchasers thereof than those
offered to the Investors. Any Proposed Securities offered or sold by the
Company after such ninety (90) day period must be re-offered to the Investors
pursuant to this Section 2(d).
The election by an Investor not to exercise its subscription rights
under this Section 2(d)(i) in any one instance shall not affect its rights
(other than in respect of a reduction of its percentage holdings) as to any
subsequent proposed issuance.
(ii) If at any time prior to the closing of an Initial
Public Offering the Company proposes a repurchase or redemption of the Company's
equity securities, then each Investor shall have the right to have its equity
securities of the same class repurchased or redeemed, as the case may be, in an
amount equal to a percentage determined by dividing (x) the number of shares of
such equity securities held by such Investor and issuable to such Investor,
assuming conversion in full of any convertible securities or options, by (y) the
total number of shares of such equity securities then outstanding assuming
conversion in full of any convertible securities and outstanding options, rights
or similar securities to the extent then vested.
(e) PERMITTED TRANSFERS. Any Investor may Transfer,
without compliance with the requirements of this Section 2, Shares (i) in the
case of the Management Investors, to immediate family members or the estate of
any such Management Investor (including, without limitation, any Transfer by
such
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<PAGE>
Management Investor to or among any trust, custodial or other similar accounts
or funds in which such Management Investor serves as trustee or custodian or in
a similar fiduciary capacity), as well as any corporation, partnership or other
entity controlled by such Management Investor and/or immediate family members of
such Management Investor, in each case pursuant to a bona fide gift, and (ii) in
the case of Warburg, to any Affiliate; provided in each instance that such
transferee agrees to be bound by the provisions (including the provisions in
this Section 2) of this Agreement as if such transferee were an original
signatory hereto and such transferee shall be deemed an Investor, as applicable,
for purposes of this Agreement. Notwithstanding anything contained in this
Section 2(e) or elsewhere in this Agreement, no Management Investor may Transfer
any of its shares of Common Stock pursuant to this Section 2(e) if and to the
extent that the number of Shares Transferred by such Management Investor
pursuant to this Section 2(e), when added to the Shares Transferred by such
Management Investor pursuant to Sections 2(a), 2(b) and 3 hereof, would exceed
20% of such Management Investor's Total Holdings..
(f) TERMINATION OF CERTAIN PROVISIONS. The provisions of
Section 2(b), (c) and (d) shall terminate upon the closing of an Initial Public
Offering .
(g) INJUNCTIVE RELIEF. The Company and the Investors
hereby declare that it is impossible to measure in money the damages which will
accrue to the parties hereto by reason of the failure of any party to perform
any of its obligations set forth in this Section 2. Therefore, the Company and
the Investors shall have the right to specific performance of such obligations,
and if any party hereto shall institute any action or proceeding to enforce the
provisions hereof, each of the Company and the Investors hereby waives the claim
or defense that the party instituting such action or proceeding has an adequate
remedy at law.
3. REGISTRATION RIGHTS.
(a) REQUESTED REGISTRATION
(i) At any time after an Initial Public Offering, if
the Company shall at any time receive from Warburg a written request that the
Company effect any registration with
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<PAGE>
respect to all or a part of the Registrable Shares owned by Warburg, the Company
shall:
(A) within five (5) days of receipt of the
written request from Warburg, give written notice of the proposed
registration to all Management Investors holding Registrable Shares
(the "Holders"); and
(B) as soon as practicable, use its diligent best
efforts to effect such registration (including, without limitation,
the execution of an undertaking to file post-effective amendments,
appropriate qualification under applicable blue sky or other state
securities laws and appropriate compliance with applicable regulations
issued under the Act) as may be so requested and as would permit or
facilitate the sale and distribution of all or such portion of such
Registrable Shares as are specified in such request, together with all
or such portion of the Registrable Shares of any Holder or Holders
joining in such request as are specified in a written request received
by the Company within ten (10) business days after written notice from
the Company is given pursuant to Section 3(a)(i)(A) above; provided,
that the Company shall not be obligated to effect, or take any action
to effect, any such registration pursuant to this Section 3(a):
(x) in any particular jurisdiction in which
the Company would be required to execute a general consent to
service of process in effecting such registration, qualification
or compliance, unless the Company is already subject to service
in such jurisdiction and except as may be required by the Act or
applicable rules or regulations thereunder; or
(y) after the Company has effected two (2)
such registrations pursuant to this Section 3(a) and such
registrations have been declared or ordered effective and the
sales of such Registrable Shares shall have closed.
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<PAGE>
Notwithstanding anything contained in this Section 3(a)(i) or
elsewhere in this Agreement, no Management Investor may Transfer any of its
shares of Common Stock pursuant to this Section 3(a)(i) if and to the extent
that such Transfer would result in a Percentage Imbalance. The registration
rights set forth in this Section 3(a) shall be assignable, in whole or in part,
to any transferee of Common Stock under Section 2(e) only (who shall be bound by
all obligations of this Section 3).
(ii) If Warburg intends to distribute the Registrable
Shares covered by its request by means of a registered underwriting, it shall so
advise the Company as a part of its request made pursuant to Section 3(a).
In such case, any Holder may request inclusion in such registration
conditioned on such Holder's acceptance of the further applicable provisions of
this Section 3. Each Holder that so requests shall have the right to include in
such registration a number of shares equal to the Registrable Shares owned by
such Holder multiplied by a fraction, the numerator of which shall be the number
of shares of Common Stock to be included in such registration by Warburg and the
denominator of which shall be the aggregate number of shares of Common Stock
owned by Warburg; provided, however, that if pursuant to the remaining
provisions of this paragraph any Holder's participation in a registration is
reduced without a pro rata reduction in Warburg's participation, such Holder's
permitted pro rata participation in a subsequent registration governed by this
Section 3(a) shall be correspondingly increased (subject to the same volume
restrictions contained in such remaining provisions). The Holders whose shares
are to be included in such registration, Warburg and the Company shall enter
into an underwriting agreement in customary form with the representative of the
underwriter or underwriters selected for such underwriting by Warburg and
reasonably acceptable to the Company. Notwithstanding any other provision of
this Section 3(a), if the representative advises the Holders in writing that
marketing factors require a limitation on the number of shares to be
underwritten, the number of shares included in the registration by Warburg and
each Holder shall be reduced on a pro rata basis (based on the number of shares
held by Warburg and each such Holder), by such minimum number of shares as is
necessary to comply with such request; provided, that if such marketing factors
relate primarily to the representative's good faith belief that the number of
shares sold by Holders in their
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capacity as Management Investors should be limited, then the number of shares
included in the registration by each such Holder (but not by Warburg) shall be
reduced on a pro rata basis (based on the number of shares held by each such
Holder) by such minimum number of shares as is necessary to comply with such
request. No Registrable Shares excluded from the underwriting by reason of the
underwriter's marketing limitation shall be included in such registration. If
any Holder who has requested inclusion in such registration as provided above
disapproves of the terms of the underwriting, such person may elect to withdraw
therefrom by written notice to the Company, the underwriter and Warburg. The
securities so withdrawn shall also be withdrawn from registration. If the
underwriter has not limited the number of Registrable Shares or other securities
to be underwritten, the Company may include its securities for its own account
in such registration if the representative so agrees and if the number of
Registrable Shares and other securities which would otherwise have been included
in such registration and underwriting will not thereby be limited.
Notwithstanding anything contained in this Section 3(a)(ii) or
elsewhere in this Agreement, no Management Investor may Transfer any of its
shares of Common Stock pursuant to this Section 3(a)(ii) if and to the extent
that such Transfer would result in a Percentage Imbalance.
(iii) Notwithstanding the foregoing, if the Company
shall furnish to Warburg a certificate signed by the Chief Executive Officer of
the Company stating that in the good faith judgment of the Board of Directors of
the Company, it would be seriously detrimental to the Company and its
stockholders for such registration statement to be filed and it is therefore
essential to defer the filing of such registration statement, then the Company
shall have the right to defer such filing for a period of not more than 120 days
after receipt of the request of Warburg; PROVIDED, HOWEVER, that the Company may
not utilize this right more than once in any 12-month period.
(b) PIGGYBACK REGISTRATION.
(i) Commencing two years after the closing of an
Initial Public Offering, and at any time thereafter and from time to time,
whenever the Company proposes to file a Registration Statement it will, prior to
such filing, give written notice to each Investor of its intention to do so and,
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upon the written request of any Investor given within five (5) days after the
Company provides such notice (which request shall state the intended method of
disposition of the Registrable Shares), the Company shall use its good faith
efforts to cause all Registrable Shares which the Company has been requested by
an Investor to register to be registered under the Act to the extent necessary
to permit their sale or other disposition in accordance with the intended
methods of distribution specified in the request of such Investor; provided that
the Company shall have the right to postpone or withdraw any registration
effected pursuant to this Section 3(b) without obligation to any Investor.
(ii) In connection with any offering under this Section
3(b) involving an underwriting, the Company shall not be required to include any
Registrable Shares in such underwriting unless the Investor accepts the terms of
the underwriting as agreed upon between the Company and the underwriters
selected by it, and then only in such quantity as will not, in the sole
discretion of the underwriters, jeopardize the success of the offering by the
Company. If in the sole discretion of the managing underwriter or underwriters
the registration of all, or part of, the Registrable Shares which the Investor
has requested to be included would adversely affect such public offering, then
the Company shall be required to include in the underwriting only that number of
Registrable Shares, if any, which the managing underwriter believes may be sold
without causing such adverse effect. If the number of Registrable Shares to be
included in the underwriting in accordance with the foregoing is less than the
total number of shares which any Investor has requested to be included, then,
except as described below, such Investor shall participate in the underwriting
pro rata based upon its total ownership of Registrable Shares compared to the
total number of shares held by others for which registration has been requested
pursuant to this Agreement (or in any other proportion as agreed upon by all
holders of the Common Stock entitled to and requesting registration) and if any
Investor would thus be entitled to include more shares than such Investor
requested to be registered, the excess shall be allocated among other requesting
holders pro rata based upon their total ownership of Registrable Shares.
(c) REGISTRATION PROCEDURES. If and when the Company is
required by the provisions of this Agreement to use its good faith efforts to
effect the registration of any of the Registrable Shares under the Act, the
Company shall:
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(i) file with the Commission a Registration Statement
with respect to such Registrable Shares and use its good faith efforts to cause
that Registration Statement to become and remain effective;
(ii) prepare and file with the Commission any
amendments and supplements to the Registration Statement and the prospectus
included in the Registration Statement as may be necessary to keep the
Registration Statement effective for a period of up to 120 days from the
effective date;
(iii) furnish to the Investor such reasonable number of
copies of the prospectus, including a preliminary prospectus, in conformity with
the requirements of the Act, and such other documents as the Investor may
reasonably request in order to facilitate the public sale or other disposition
of the Registrable Shares owned by the Investor; and
(iv) use its good faith efforts to register or qualify
the Registrable Shares covered by the Registration Statement under the
securities or blue sky laws of such states as the Investors shall reasonably
request, and do any and all other acts and things that may be necessary or
desirable to enable the holders to consummate the public sale or other
disposition in such jurisdictions of the Registrable Shares owned by the
Investors; provided, however, that the Company shall not be required in
connection with this Section 3(c) to qualify as a foreign corporation in any
jurisdiction nor register or qualify the securities in any state which as a
condition to such registration or qualification would impose restrictions or
other conditions on the Company or any of its officers, directors or
shareholders (including with respect to any shares held by such persons or
entities) unless such restrictions or other conditions are approved by the party
adversely affected.
If the Company has delivered preliminary or final prospectuses to the
Investors and after having done so the prospectus is amended to comply with the
requirements of the Act, the Company shall promptly notify the Investors and, if
requested, the Investors shall immediately cease making offers of Registrable
Shares and return all undistributed prospectuses to the Company. The Company
shall promptly provide the Investors with revised prospectuses to permit the
Investors to resume making offers of the Registrable Shares.
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(d) ALLOCATION OF EXPENSES. The Company will pay all
Registration Expenses of all registrations under this Agreement. For purposes
of this Section 3, the term "Registration Expenses" shall mean all expenses
incurred by the Company in complying with this Section 3, including, without
limitation, all registration and filing fees, exchange listing fees, printing
expenses, fees and disbursements of counsel for the Company, state blue sky fees
and expenses, and the expense of any special audits incident to or required by
any such registration, but excluding underwriting discounts and selling
commissions attributable to the Registrable Shares and the fees and expenses of
any Investor's own counsel and accountants, which shall be borne by such
Investor.
(e) INDEMNIFICATION. In the event of any registration of
any of the Registrable Shares under the Act pursuant to this Agreement, the
Company will indemnify and hold harmless the Investors against any losses,
claims, damages or liabilities, joint or several, to which the Investors may
become subject under the Act, the Exchange Act, state securities laws or
otherwise, insofar as such losses, claims, damages or liabilities (or actions in
respect thereof) arise out of or are based upon any untrue statement of any
material fact contained in any Registration Statement under which such
Registrable Shares were registered under the Act, any preliminary prospectus or
final prospectus contained in such Registration Statement, or any amendment or
supplement to such Registration Statement, or arise out of or are based upon the
omission to state a material fact required to be stated therein or necessary to
make the statements therein not misleading; and the Company will reimburse the
Investors for any legal or any other expenses reasonably incurred by the
Investors in connection with investigating and defending any such loss, claim,
damage, liability or action; provided, however, that the Company will not be
liable to any Investor in any such case to the extent that any such loss, claim,
damage, liability or expense arises out of or is based upon any untrue statement
or omission made in such Registration Statement, preliminary prospectus or
prospectus, or any such amendment or supplement, in reliance upon and in
conformity with information furnished to the Company by or on behalf of such
Investor specifically for use in the preparation thereof, or as a result of the
failure of any Investor, or any agent of any Investor, to deliver any amendments
and supplements to any Registration Statement and the prospectus included in any
such Registration Statement.
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In the event of any registration of any of its Registrable Shares
under the Act pursuant to this Agreement, each Investor will indemnify and hold
harmless the Company, each of its directors and officers and each person, if
any, who controls the Company within the meaning of the Act or the Exchange Act,
against any losses, claims, damages or liabilities, joint or several, to which
the Company, such directors and officers, or controlling person may become
subject under the Act, Exchange Act, state securities laws or otherwise, insofar
as such losses, claims, damages or liabilities (or actions in respect thereof)
arise out of or are based upon any untrue statement of a material fact contained
in any Registration Statement under which such Registrable Shares were
registered under the Act, any preliminary prospectus or final prospectus
contained in the Registration Statement, or any amendment or supplement to the
Registration Statement, or arise out of or are based upon any omission to state
a material fact required to be stated therein or necessary to make the
statements therein not misleading, if the statement or omission was made in
reliance upon and in conformity with written information furnished to the
Company by such Investor, or any agent thereof, specifically for use in
connection with the preparation of such Registration Statement, prospectus,
amendment or supplement, and such Investor will reimburse the Company, each of
its directors and officers, and each controlling person, severally and not
jointly, for any legal or other expenses reasonably incurred by the Company,
each director and officer, and each controlling person in connection with
investigating and defending any such loss, claim, damage, liability or action.
Each party entitled to indemnification under this Section 3(e) (the
"Indemnified Party") shall give notice to the party required to provide
indemnification (the "Indemnifying Party") promptly after such Indemnified Party
has actual knowledge of any claim as to which indemnity may be sought, and shall
permit the Indemnifying Party to assume the defense of any such claim or any
litigation resulting therefrom; provided, that counsel for the Indemnifying
Party, who shall conduct the defense of such claim or litigation, shall be
approved by the Indemnified Party (whose approval shall not be unreasonably
withheld or delayed); and, provided, further, that the failure of any
Indemnified Party to give notice as provided herein shall not relieve the
Indemnifying Party of its obligations under this Section 3, except when material
prejudice to the Indemnifying Part shall have resulted from the failure to give
such notice. The Indemnified Party may participate in such defense at such
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party's expense. No Indemnifying Party, in the defense of any such claim or
litigation, shall, except with the consent of each Indemnified Party, consent to
entry of any judgment or enter into any settlement which does not include as an
unconditional term thereof, the giving by the claimant or plaintiff to such
Indemnified Party of a release from all liability in respect of such claim or
litigation.
(f) INFORMATION BY INVESTORS. Each Investor shall promptly
furnish to the Company such information regarding such Investor and the
distribution proposed by such Investor as the Company may request in writing and
as shall be required in connection with any registration, qualification or
compliance referred to in this Section 3.
(g) "STAND-OFF" AGREEMENT. Each Investor, if requested by
the Company and/or an underwriter of Common Stock or other securities of the
Company, shall agree not to sell or otherwise transfer or dispose of any
Registrable Shares or other securities of the Company held by such Investor for
the period of time specified by the Company and/or such underwriter, before or
after the effective date of a Registration Statement. Such agreement shall be
in writing in a form satisfactory to the Company and such underwriter. The
Company may impose stop transfer instructions with respect to the Registrable
Shares or other securities subject to the foregoing restriction until the end of
the stand-off period.
4. INFORMATION AS TO COMPANY AND RELATED COVENANTS.
(a) INVESTOR FINANCIAL INFORMATION. From and after the
date hereof, the Company shall deliver to each Investor so long as such Investor
continues to hold at least five percent (5%) of the outstanding shares of Common
Stock (except for the annual reports referred to in (a)(iii) below, which shall
be delivered to each Investor as long as such Investor owns any shares of Common
Stock):
(i) MONTHLY FINANCIAL STATEMENTS. As soon as
practicable, and in any event within 30 days after the close of each month of
each fiscal year of the Company, a consolidated balance sheet, statement of
income and statement of changes in cash flow of the Company and its Subsidiaries
as of the close of such month and the portion of the Company's fiscal year
ending on the last day of such month, all in reasonable detail and prepared
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in accordance with U.S. generally accepted accounting principles, consistently
applied, subject to audit and year end adjustments, setting forth in each case
in comparative form the figures for the comparable period of the previous year;
(ii) QUARTERLY STATEMENTS. As soon as practicable, and
in any event within 45 days after the close of each of the first three fiscal
quarters of each fiscal year of the Company, a consolidated balance sheet,
statement of income and statement of changes in cash flow of the Company and its
Subsidiaries as of the close of such quarter and the portion of the Company's
fiscal year ending on the last day of such quarter, all in reasonable detail and
prepared in accordance with U.S. generally accepted accounting principles,
consistently applied, subject to audit and year end adjustments, setting forth
in each case in comparative form the figures for the comparable period of the
previous year;
(iii) ANNUAL STATEMENTS. As soon as practicable after
the end of each fiscal year of the Company, and in any event within 120 days
thereafter, a copy of the consolidated balance sheet, and consolidated
statements of income, stockholders' equity and changes in cash flow of the
Company and its Subsidiaries for each year, setting forth in each case in
comparative form the figures for the previous fiscal year, all in reasonable
detail and accompanied by an opinion thereon of independent certified public
accountants of recognized national standing selected by the Company, which
opinion shall state that such financial statements fairly present the financial
position and results of operations of the Company and its Subsidiaries on a
consolidated basis and have been prepared in accordance with U.S. generally
accepted accounting principles consistently applied (except for changes in
application in which such accountants concur) and that the examination of such
accountants has been made in accordance with generally accepted auditing
standards, and accordingly included such tests of the accounting records and
such other auditing procedures as were considered necessary in the
circumstances; and
(iv) OTHER REPORTS. Promptly upon their becoming
available, one copy of each financial statement, report, notice or proxy
statement sent by the Company to its stockholders generally, of each financial
statement, report, notice or proxy statement sent by the Company or any of its
Subsidiaries to the Commission or any successor agency, if applicable, of each
-16-
<PAGE>
regular or periodic report and any registration statement, prospectus or written
communication (other than transmittal letters) in respect thereof filed by the
Company or any of its Subsidiaries with any securities exchange or the
Commission or any successor agency, and of any press release issued by the
Company or any of its Subsidiaries.
(b) INSPECTION. From and after the date hereof, the
Company will permit each Investor, its nominee, assignee or its representative,
so long as such Investor continues to hold at least five percent (5%) of the
outstanding shares of Common Stock, to visit and inspect any of the properties
of the Company, to examine all its books of account, records, reports and other
papers not contractually required of the Company to be confidential or secret,
to make copies and extracts therefrom, and to discuss its affairs, finances and
accounts with its officers, directors, key employees and independent public
accountants or any of them (and by this provision the Company authorizes said
accountants to discuss with each said Investor, its nominee, assignee and
representatives the finances and affairs of the Company and its Subsidiaries),
all at such reasonable times and as often as may be reasonably requested,
provided that the business of the Company is not unreasonably interfered with.
(c) CONFIDENTIALITY. As to so much of the information and
other material furnished under or in connection with this Agreement (whether
furnished before or after the date hereof) as constitutes or contains
confidential business, financial or other information of the Company or its
Subsidiaries, each Investor covenants for itself and its directors, officers,
partners and stockholders that it will use due care to prevent its respective
officers, directors, employees, counsel, accountants and other authorized
representatives from using or disclosing such information in any manner
materially detrimental to the Company; PROVIDED, HOWEVER, that the Investor may
disclose or deliver any information or other material disclosed to or received
by the Investor should such disclosure or delivery be required by law or legal
process; and provided further, that each Investor understands and acknowledges
that Warburg and/or its Affiliates may invest or otherwise have an interest in
entities that may be, or may be perceived to be, competitive with the business
engaged in by the Company from time to time and that this clause (c) shall not
in any way be construed to restrict any such investment activities
-17-
<PAGE>
or any management or other similar activities engaged in by Warburg or any of
its Affiliates, partners, employees or other-representatives on behalf of any
such entities, and that the persons engaged in such management or similar
activities may possess such confidential information concerning the Company and
its Subsidiaries.
5. TERMINATION. This Agreement shall terminate on the date on
which Warburg and its Affiliates beneficially own (within the meaning of Rule
13d-3 of the Exchange Act) less than 5% of the outstanding shares of capital
stock of the Company.
6. INTERPRETATION OF THIS AGREEMENT.
(a) TERMS DEFINED. As used in this Agreement, the
following terms have the respective meanings set forth below:
"ACT:" means the Securities Act of 1933,
as amended.
"AFFILIATE:" in respect of any Person, means any other
Person, directly or indirectly, controlling, controlled by or under common
control with such Person.
"COMMISSION:" means the Securities and Exchange Commission,
or any other federal agency at the time administering the Act;
"EXCHANGE ACT:" means the Securities Exchange Act of 1934,
as amended.
"INITIAL PUBLIC OFFERING:" means the initial public offering
of the Common Stock registered under the Act, as a result of which a public
market for the Common Stock is established.
"PERCENTAGE IMBALANCE:" means, in respect of the relevant
Management Investor, that condition where, at the time in question, Warburg and
its permitted transferees under Section 2(e) own, in the aggregate, a number of
shares of Common Stock, expressed as a percentage of the total number of shares
of Common Stock owned by Warburg or such transferees since the date of this
Agreement, such that such percentage exceeds the percentage that the shares of
Common Stock (including shares issuable upon the exercise of vested Options
without duplication) owned by such
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<PAGE>
Management Investor represents in respect of all such shares so owned (or so
deemed owned) by such Management Investor since the date of this Agreement.
"PERSON:" an individual, partnership, limited liability
company, joint-stock company, corporation, trust or unincorporated organization,
and a government or agency or political subdivision thereof.
"REGISTRATION EXPENSES:" means the expenses described in
Section 3(d).
"REGISTRABLE SHARES:" means (A) shares of Common Stock
issued to the Investors, (B) any additional shares of Common Stock acquired by
the Investors, (C) any shares of Common Stock acquired upon the exercise of
vested Options held by the Investors or to be acquired, pursuant to an exercise
notice (which may be conditioned on the closing of a public offering), at or
prior to the occurrence of the relevant event and (D) any capital stock of the
Company issued as a dividend or other distribution with respect to, or in
exchange for or in replacement of, the shares of Common Stock referred to in
clause (A), (B) or (C) above.
"REGISTRATION STATEMENT:" means a registration statement
filed by the Company with the Commission for a public offering and sale of
securities of the Company (other than any registration statement on Form S-4 or
Form S-8, or their successors, or any other form for a limited purpose, or any
registration statement covering only securities proposed to be issued in
exchange for securities or assets of another company or entity).
"SECURITY, SECURITIES:" as defined in Section 2(1) of the
Act.
"SUBSIDIARY:" a corporation, partnership or other business
entity of which the Company owns, directly or indirectly, more than fifty
percent (50%) of the Voting Stock.
"TRANSFER:" any sale, assignment, pledge, hypothecation, or
other disposition or encumbrance.
"VOTING STOCK:" capital stock, partnership interests or
other securities of any class or classes of a
-19-
<PAGE>
corporation, partnership or other business entity the holders of which are
ordinarily, in the absence of contingencies, entitled to elect a majority of the
corporate directors (or Persons performing similar functions) or otherwise
control the operations of such entity.
(b) ACCOUNTING PRINCIPLES. Where the character or amount
of any asset, liability or item of income or expense is required to be
determined or any consolidation or other accounting computation is required to
be made for the purposes of this Agreement, this shall be done in accordance
with U.S. generally accepted accounting principles at the time in effect, to the
extent applicable, except where such principles are inconsistent with the
explicit requirements of this Agreement.
(c) DIRECTLY OR INDIRECTLY. Where any provision in this
Agreement refers to action to be taken by any Person, or which such Person is
prohibited from taking, such provision shall be applicable whether such action
is taken directly or indirectly by such Person.
(d) GOVERNING LAW. This Agreement shall be governed by and
construed in accordance with the laws of the State of New York without regard to
its conflict of laws rules.
(e) JURISDICTION AND VENUE. Any suit, action or proceeding
against any party to this Agreement arising out of or relating to this Agreement
or any transaction contemplated hereby may only be brought in any Federal or
State court located in the Borough of Manhattan, The City of New York, and each
party hereto hereby submits to the exclusive jurisdiction of such courts for the
purpose of any such suit, action or proceeding. To the extent that service of
process by mail is permitted by applicable law, each party irrevocably consents
to the service of process in any such suit, action or proceeding in such courts
by the mailing of such process by registered or certified mail, postage prepaid,
at its address for notices provided for below. Each party irrevocably agrees
not to assert any objection which it may ever have to the laying of venue of any
such suit, action or proceeding in any Federal or State court located in the
Borough of Manhattan, the City of New York, and any claim that any such suit,
action or proceeding brought in any such court has been brought in an
inconvenient forum. Each party to this Agreement agrees not to bring any
action, suit or proceeding against any other party arising out of or relating to
this Agreement or any
-20-
<PAGE>
transaction contemplated hereby except in a Federal or State court in the
Borough of Manhattan, The City of New York.
(f) SECTION HEADINGS. The headings of the sections and
subsections of this Agreement are inserted for convenience only and shall not be
deemed to constitute a part thereof.
(g) PRONOUNS. Any pronoun used in this Agreement shall be
construed to refer to the appropriate gender, masculine, feminine or neuter.
7. MISCELLANEOUS.
(a) NOTICES.
(i) All communications under this Agreement shall be in
writing and shall be delivered by hand, by fax or mailed by overnight
courier or by registered or certified mail, postage prepaid:
(A) if to any of the Management Investors, at the
address of such Management Investor as set forth on Schedule I
hereto, or at such other address as the Management Investor may
have furnished the Company in writing;
(B) if to Warburg, at 466 Lexington Avenue, New York,
New York 10017, Attention: Joanne R. Wenig, Fax: (212) 878-6167
or at such other address or fax as Warburg may have furnished
the Company in writing; and
(C) if to the Company, at 140 East 45th Street, New
York, New York, marked for the attention of the Chief Executive
Officer of the Company, or at such other address as it may have
furnished in writing to each of the Investors.
(ii) Any notice so addressed shall be deemed to be given; if
delivered by hand, on the date of such delivery by independent courier; if
sent by fax, on the date of receipt; and if mailed by registered or
certified mail, on the third business day after the date of such mailing.
-21-
<PAGE>
(b) EXPENSES AND TAXES. The Company will pay, and save each
Investor harmless from any and all liabilities (including interest and
penalties) with respect to, or resulting from any delay or failure in paying,
stamp and other taxes (other than income taxes), if any, which may be payable or
determined to be payable on the execution and delivery of this Agreement or
acquisition of its capital stock pursuant to this Agreement.
(c) REPRODUCTION OF DOCUMENTS. This Agreement and all
documents relating thereto, including, without limitation, (i) consents, waivers
and modifications which may hereafter be executed, (ii) documents received by
each Investor pursuant hereto and (iii) financial statements, certificates and
other information previously or hereafter furnished to each Investor, may be
reproduced by each Investor by any photographic, photostatic, microfilm,
microcard, miniature photographic or other similar process and each Investor may
destroy any original document so reproduced. All parties hereto agree and
stipulate that any such reproduction shall be admissible in evidence as the
original itself in any judicial or administrative proceeding (whether or not the
original is in existence and whether or not such reproduction was made by each
Investor in the regular course of business) and that any enlargement, facsimile
or further reproduction of such reproduction shall likewise be admissible in
evidence.
(d) SUCCESSORS AND ASSIGNS. This Agreement shall inure to
the benefit of and be binding upon the successors and assigns of each of the
parties. Warburg may assign all or any portion of its rights herein to any
purchaser of some or all of the capital stock of the Company purchased by it;
provided, however, that (i) such assignees agree to be bound by the provisions
of Sections 1 and 2 (if and to the extent then in effect) hereof and (ii) the
Company is furnished within a reasonable time of its request, such information
as it shall reasonably request relating to such assignees. Warburg may assign
any of its rights hereunder to any of its Affiliates or to any partner thereof,
and, following any such assignment, any rights exercisable by "Warburg"
hereunder may be exercisable by any Affiliate or such other person, subject to
the provisions hereof and subject further to the understanding that no such
assignment shall in any way diminish the rights of any Management Investor
hereunder.
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<PAGE>
(e) COUNTERPARTS. This Agreement may be executed in one or
more counterparts, each of which shall be deemed an original and all of which
together shall be considered one and the same agreement.
(f) ENTIRE AGREEMENT; AMENDMENT AND WAIVER. This Agreement
and the Stock Option Plan constitute the entire understanding of the parties
hereto and supersede all prior understandings among such parties. This
Agreement may be amended, and the observance of any term of this Agreement may
be waived, with (and only with) the written consent of the Company and Warburg
and holders of a majority of the shares held by those Management Investors whose
rights would be affected by the proposed amendment or waiver.
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<PAGE>
IN WITNESS WHEREOF, the parties hereto have executed this
Stockholders Agreement as of the date first above written.
PANAVISION HOLDINGS, L.L.C.
By: /s/ Joanne R. Wenig
-------------------
Name: Joanne R. Wenig
Title: Authorized Signatory
WP/GP, INC.
By: /s/ Joanne R. Wenig
---------------------
Name: Joanne R. Wenig
Title: Vice President
MANAGEMENT INVESTORS:
/s/ William C. Scott III
------------------------
William C. Scott III
/s/ John S. Farrand
------------------------
John S. Farrand
/s/ Jeffery J. Marcketta
------------------------
Jeffery J. Marcketta
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<PAGE>
SCHEDULE I
Management Investors
Name Address
---- -------
William C. Scott III Lee Panavision, Inc.
140 East 45th Street
35th Floor
New York, New York 10017
John S. Farrand Lee Panavision, Inc.
18618 Oxnard Street
Tarzana, California 91356
Jeffery J. Marcketta Lee Panavision, Inc.
18618 Oxnard Street
Tarzana, California 91356
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<PAGE>
************************************************************
PANAVISION INTERNATIONAL, L.P.
and
SUBSIDIARY GUARANTORS
_____________________________
AMENDED AND RESTATED
CREDIT AGREEMENT
Dated as of September 10, 1996
______________________________
THE CHASE MANHATTAN BANK,
as Administrative Agent
************************************************************
<PAGE>
TABLE OF CONTENTS
This Table of Contents is not part of the Agreement to which it is
attached but is inserted for convenience of reference only.
Page
Section 1. Definitions and Accounting Matters............................ 2
1.01 Certain Defined Terms........................................... 2
1.02 Accounting Terms and Determinations............................. 27
1.03 Classes and Types of Loans...................................... 29
Section 2. Commitments, Loans, Notes and Prepayments..................... 29
2.01 Loans........................................................... 29
2.02 Borrowings...................................................... 31
2.03 Letters of Credit............................................... 31
2.04 Changes of Commitments.......................................... 37
2.05 Commitment Fee ................................................. 38
2.06 Lending Offices................................................. 38
2.07 Several Obligations; Remedies Independent....................... 38
2.08 Notes........................................................... 39
2.09 Optional Prepayments and Conversions or
Continuations of Loans......................................... 40
2.10 Mandatory Prepayments and Reductions of Commitments............. 41
Section 3. Payments of Principal and Interest ........................... 44
3.01 Repayment of Loans.............................................. 44
3.02 Interest........................................................ 46
Section 4. Payments; Pro Rata Treatment; Computations; Etc............... 47
4.01 Payments........................................................ 47
4.02 Pro Rata Treatment.............................................. 48
4.03 Computations.................................................... 49
4.04 Minimum Amounts................................................. 49
4.05 Certain Notices ................................................ 49
4.06 Non-Receipt of Funds by the
Administrative Agent........................................... 50
4.07 Sharing of Payments, Etc. ...................................... 52
(i)
<PAGE>
Page
Section 5. Yield Protection, Etc......................................... 53
5.01 Additional Costs ............................................... 53
5.02 Limitation on Types of Loans.................................... 55
5.03 Illegality...................................................... 56
5.04 Treatment of Affected Loans..................................... 56
5.05 Compensation.................................................... 57
5.06 Additional Costs in Respect of Letters of Credit ............... 58
5.07 U.S. Taxes ..................................................... 59
5.08 Replacement Lenders............................................. 60
Section 6. Guarantee .................................................... 61
6.01 The Guarantee................................................... 61
6.02 Obligations Unconditional ...................................... 61
6.03 Reinstatement................................................... 63
6.04 Subrogation..................................................... 63
6.05 Remedies........................................................ 63
6.06 Instrument for the Payment of Money............................. 64
6.07 Continuing Guarantee............................................ 64
6.08 Rights of Contribution.......................................... 64
6.09 General Limitation on Guarantee Obligations..................... 65
Section 7. Conditions Precedent.......................................... 65
7.01 Effectiveness................................................... 65
7.02 Initial and Subsequent Extensions of Credit..................... 66
Section 8. Representations and Warranties ............................... 67
8.01 Existence....................................................... 67
8.02 Financial Condition............................................. 67
8.03 Litigation ..................................................... 68
8.04 No Breach....................................................... 68
8.05 Action ......................................................... 68
8.06 Approvals....................................................... 69
8.07 Use of Credit................................................... 69
8.08 ERISA........................................................... 69
8.09 Taxes .......................................................... 69
8.10 Investment Company Act.......................................... 69
8.11 Public Utility Holding Company Act.............................. 70
8.12 Material Agreements and Liens................................... 70
8.13 Environmental Matters........................................... 70
8.14 Capitalization.................................................. 71
8.15 Subsidiaries, Etc............................................... 72
8.16 Title to Assets................................................. 72
(ii)
<PAGE>
Page
8.17 True and Complete Disclosure.................................... 73
8.18 Real Property................................................... 73
Section 9. Covenants of the Borrower..................................... 73
9.01 Financial Statements Etc........................................ 74
9.02 Litigation...................................................... 78
9.03 Existence, Etc.................................................. 78
9.04 Insurance....................................................... 79
9.05 Prohibition of Fundamental Changes ............................. 80
9.06 Limitation on Liens............................................. 82
9.07 Indebtedness.................................................... 83
9.08 Investments..................................................... 83
9.09 Restricted Payments............................................. 85
9.10 Certain Financial Covenants..................................... 86
9.11 Interest Rate Protection Agreements............................. 87
9.12 Subordinated Indebtedness....................................... 88
9.13 Lines of Business............................................... 88
9.14 Transactions with Affiliates.................................... 89
9.15 Use of Proceeds................................................. 89
9.16 Certain Obligations Respecting Subsidiaries..................... 90
9.17 Modifications of Certain Documents.............................. 92
9.18 Obligations relating to Collateral Security..................... 92
Section 10. Events of Default............................................ 92
Section 11. The Administrative Agent..................................... 97
11.01 Appointment, Powers and Immunities............................. 97
11.02 Reliance by Administrative Agent............................... 98
11.03 Defaults....................................................... 99
11.04 Rights as a Lender............................................. 99
11.05 Indemnification................................................ 100
11.06 Non-Reliance on Administrative Agent and Other Lenders......... 100
11.07 Failure to Act................................................. 101
11.08 Resignation or Removal of Administrative Agent................. 101
11.09 Consents under Other Loan Documents............................ 101
Section 12. Miscellaneous................................................ 102
12.01 Waiver......................................................... 102
12.02 Notices........................................................ 102
12.03 Expenses, Etc.................................................. 103
12.04 Amendments, Etc................................................ 104
(iii)
<PAGE>
Page
12.05 Successors and Assigns........................................ 105
12.06 Assignments and Participations................................ 105
12.07 Survival...................................................... 109
12.08 Captions...................................................... 109
12.09 Counterparts.................................................. 109
12.10 Governing Law; Submission to Jurisdiction..................... 109
12.11 Waiver of Jury Trial.......................................... 110
12.12 Treatment of Certain Information; Confidentiality............. 110
12.13 Limitation of Liability of Partners........................... 111
12.14 ERISA Matters..................................................... 111
12.15 Security Documents............................................ 112
SCHEDULE I - Material Agreements and Liens
SCHEDULE II - Subsidiaries and Investments
SCHEDULE III - Real Property
SCHEDULE IV - Partnership and Other Equity Interests of the
Borrower
SCHEDULE V - Litigation
SCHEDULE VI - Taxes
SCHEDULE VII - Environmental Matters
EXHIBIT A-1 - Form of Revolving Credit Note
EXHIBIT A-2 - Form of Facility A Term Loan Note
EXHIBIT A-3 - Form of Facility B Term Loan Note
EXHIBIT B - Form of Guarantee Assumption Agreement
EXHIBIT C - Form of Confidentiality Agreement
EXHIBIT D - Form of Assignment and Acceptance
(iv)
<PAGE>
AMENDED AND RESTATED CREDIT AGREEMENT dated as of September 10, 1996
between: PANAVISION INTERNATIONAL, L.P., a Delaware limited partnership (the
"BORROWER"); each of the Subsidiaries of the Borrower identified under the
caption "SUBSIDIARY GUARANTORS" on the signature pages hereof and each
Subsidiary of the Borrower that becomes a "Subsidiary Guarantor" after the
Closing Date pursuant to Section 9.16(a) hereof (individually, a "SUBSIDIARY
GUARANTOR" and, collectively, the "SUBSIDIARY GUARANTORS" and, together with the
Borrower, the "OBLIGORS"); each of the lenders that is a signatory hereto
identified under the caption "LENDERS" on the signature pages hereto and each
lender that becomes a "Lender" after the Closing Date pursuant to Section
12.06(b) hereof (individually, a "LENDER" and, collectively, the "LENDERS"); and
THE CHASE MANHATTAN BANK (as successor by merger to The Chase Manhattan Bank,
N.A.), as agent for the Lenders (in such capacity, together with its successors
in such capacity, the "ADMINISTRATIVE AGENT").
The Borrower, the Subsidiary Guarantors, the Lenders, and the
Administrative Agent are parties to a Credit Agreement dated as of May 8, 1996
(as heretofore modified and supplemented and in effect on the date of this
Agreement, the "PRIOR CREDIT AGREEMENT") providing, subject to the terms and
conditions thereof, for the making of revolving credit and term loans to the
Borrower. The Borrower has requested that the Prior Credit Agreement be amended
and restated to reflect certain changes to the Prior Credit Agreement. The
parties hereto wish to replace the Prior Credit Agreement with this Agreement,
it being the intention of the parties hereto that the loans outstanding under
the Prior Credit Agreement on the Effective Date (as hereinafter defined) shall
be extended and continue and remain outstanding hereunder.
CREDIT AGREEMENT
<PAGE>
- 2 -
The Borrower has requested that the Lenders extend credit to the
Borrower, under the guarantee of the Subsidiary Guarantors, in an aggregate
principal or face amount not to exceed $120,000,000 at any one time outstanding
to finance the Recapitalization (as defined below) and the payment of fees,
commissions and expenses payable in connection therewith and to provide funds
for the general corporate purposes of the Borrower and its Subsidiaries. The
Lenders have extended such credit upon the terms and conditions of the Prior
Credit Agreement and/or are prepared to extend such credit upon the terms and
conditions hereof, and agree to amend and restate the Prior Credit Agreement in
its entirety to read as follows:
Section 1. DEFINITIONS AND ACCOUNTING MATTERS.
1.01 CERTAIN DEFINED TERMS. As used herein, the following terms
shall have the following meanings (all terms defined in this Section 1.01 or in
other provisions of this Agreement in the singular to have the same meanings
when used in the plural and VICE VERSA):
"AFFILIATE" shall mean any Person that directly or indirectly
controls, or is under common control with, or is controlled by, the Borrower
and, if such Person is an individual, any member of the immediate family
(including parents, spouse, children and siblings) of such individual and any
trust whose principal beneficiary is such individual or one or more members of
such immediate family and any Person who is controlled by any such member or
trust. As used in this definition, "CONTROL" (including, with its correlative
meanings, "CONTROLLED BY" and "UNDER COMMON CONTROL WITH") shall mean
possession, directly or indirectly, of power to direct or cause the direction of
management or policies (whether through ownership of securities or partnership
or other ownership interests, by contract or otherwise), PROVIDED that, in any
event, any Person that owns directly or indirectly securities having 5% or more
of the voting power for the election of directors or other governing body of a
corporation or 5% or more of the partnership or other ownership interests of any
other Person (other than as a limited partner of such other Person) will be
deemed to control such corporation or
CREDIT AGREEMENT
<PAGE>
- 3 -
other Person. Notwithstanding the foregoing, (a) no individual shall be an
Affiliate solely by reason of his or her being a director, officer or employee
of the Borrower or any of its Subsidiaries and (b) none of the Wholly Owned
Subsidiaries of the Borrower shall be Affiliates.
"APPLICABLE LENDING OFFICE" shall mean, for each Lender and for each
Type of Loan, the "Lending Office" of such Lender (or of an affiliate of such
Lender) designated for such Type of Loan on the signature pages hereof or such
other office of such Lender (or of an affiliate of such Lender) as such Lender
may from time to time specify to the Administrative Agent and the Borrower as
the office by which its Loans of such Type are to be made and maintained.
"APPLICABLE MARGIN" shall mean:
(i) with respect to Revolving Credit Loans and Facility A Term Loans
of any Type during any Interest Accrual Period (as defined below), the
respective rates indicated below for such Loans of such Type opposite the
applicable Total Debt Ratio indicated below for such Interest Accrual Period:
Range Applicable Interest Margin (% p.a.)
of -----------------------------------
Total Debt Ratio Base Rate Loans Eurodollar Loans
- ---------------- --------------- ----------------
Greater than
3.75 to 1 1.25% 2.50%
Greater than 3.00
to 1 but less than
or equal to 3.75 to 1 1.00% 2.25%
Greater than 2.50
to 1 but less than
or equal to 3.00 to 1 0.75% 2.00%
Greater than or equal to
2.00 to 1 but less than
CREDIT AGREEMENT
<PAGE>
- 4 -
or equal to 2.50 to 1 0.50% 1.75%
Less than 2.00 to 1 0% 1.25%; and
(ii) with respect to Facility B Term Loans of any Type during any
Interest Accrual Period (as defined below), the respective rates indicated below
for such Loans of such Type opposite the applicable Total Debt Ratio indicated
below for such Interest Accrual Period:
Range Applicable Interest Margin (% p.a.)
of -----------------------------------
Total Debt Ratio Base Rate Loans Eurodollar Loans
- ---------------- --------------- ----------------
Greater than or equal
to 2.00 to 1 1.75% 3.00%
Less than 2.00 to 1 1.50% 2.75%
For purposes hereof, an "INTEREST ACCRUAL PERIOD" shall mean the period
commencing during any fiscal quarter on the date (the "CHANGE DATE") that is the
third Business Day following the receipt by the Administrative Agent of the
certificate referred to in the next following paragraph to but not including the
Change Date in the immediately following fiscal quarter, PROVIDED that the
initial Interest Accrual Period shall commence on the Closing Date and continue
until the Change Date during the fiscal quarter commencing July 1, 1996.
The Total Debt Ratio for the initial Interest Accrual Period shall be
determined on the basis of the certificate of a Senior Officer delivered
pursuant to Section 7.01(m) of the Prior Credit Agreement. The Total Debt Ratio
for any Interest Accrual Period after the initial Interest Accrual Period shall
be determined on the basis of a certificate of a Senior Officer setting forth a
calculation of the Total Debt Ratio as at the last day of the fiscal quarter
ending immediately prior to the first day of such Interest Accrual Period, each
of which certificates shall be delivered together with the financial statements
for the fiscal quarter on which such calculation is based, PROVIDED that, with
respect to the last fiscal quarter of
CREDIT AGREEMENT
<PAGE>
- 5 -
a fiscal year of the Borrower, the Borrower may (but shall not be required to)
provide such certificate and accompanying unaudited financial statements for
such fiscal quarter (of the type contemplated by Section 9.01(b) hereof) to the
Administrative Agent prior to the delivery of the audited financial statements
of the Borrower required to be delivered pursuant to Section 9.01(c) hereof and
such certificate shall be the basis for determining the Total Debt Ratio for
purposes of this definition.
Anything in this Agreement to the contrary notwithstanding, the
Applicable Interest Margin for Revolving Credit Loans, Facility A Term Loans and
Facility B Term Loans shall be the highest rates provided for above (i.e. 1.25%
with respect to Base Rate Loans and 2.50% with respect to Eurodollar Loans for
Revolving Credit Loans and Facility A Term Loans, and 1.75% with respect to Base
Rate Loans and 3.00% with respect to Eurodollar Loans for Facility B Term Loans)
(i) during any period when an Event of Default shall have occurred and be
continuing, or (ii) so long as the Borrower shall be in default of its
obligation to deliver any financial statements pursuant to Section 9.01(b) or
9.01(c) hereof.
"BANKRUPTCY CODE" shall mean the Federal Bankruptcy Code of 1978, as
amended from time to time.
"BASE RATE" shall mean, for any day, a rate per annum equal to the
higher of (a) the Federal Funds Rate for such day plus 1/2 of 1% and (b) the
Prime Rate for such day. Each change in any interest rate provided for herein
based upon the Base Rate resulting from a change in the Base Rate shall take
effect at the time of such change in the Base Rate.
"BASE RATE LOANS" shall mean Loans that bear interest at rates based
upon the Base Rate.
"BASLE ACCORD" shall mean the proposals for risk-based capital
framework described by the Basle Committee on Banking Regulations and
Supervisory Practices in its paper entitled "International Convergence of
Capital Measurement and Capital
CREDIT AGREEMENT
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Standards" dated July 1988, as amended, modified and supplemented and in effect
from time to time or any replacement thereof.
"BUSINESS DAY" shall mean any day (a) on which commercial banks are
not authorized or required to close in New York City and (b) if such day relates
to a borrowing of, a payment or prepayment of principal of or interest on, a
Conversion of or into, or a Continuation of an Interest Period for, a Eurodollar
Loan or a notice by the Borrower with respect to any such borrowing, payment,
prepayment, Conversion or a Continuation of an Interest Period, that is also a
day on which dealings in Dollar deposits are carried out in the London interbank
market.
"CAPITAL EXPENDITURES" shall mean, for any period, expenditures
(including, without limitation, the aggregate amount of Capital Lease
Obligations incurred during such period) made by the Borrower or any of its
Subsidiaries to acquire or construct fixed assets, plant and equipment
(including renewals, improvements and replacements, but excluding repairs)
during such period computed in accordance with GAAP; PROVIDED that in
calculating Capital Expenditures (i) for any period during the fiscal year
ending December 31, 1995, there shall be excluded an amount up to but not
exceeding $3,400,000 for any leasehold improvements in respect of the premises
subject to the Woodland Hills Lease made during such period, (ii) for any period
during the fiscal year ending December 31, 1996, there shall be excluded an
amount up to but not exceeding $1,000,000 for any additional leasehold
improvements in respect of the premises subject to the Woodland Hills Lease made
during such period and (iii) there shall be excluded any expenditure to the
extent made with the proceeds of any Casualty Event or any Excluded Disposition.
"CAPITAL LEASE OBLIGATIONS" shall mean, for any Person, all
obligations of such Person to pay rent or other amounts under a lease of (or
other agreement conveying the right to use) Property to the extent such
obligations are required to be classified and accounted for as a capital lease
on a balance sheet of such Person under GAAP, and, for purposes of this
CREDIT AGREEMENT
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Agreement, the amount of such obligations shall be the capitalized amount
thereof, determined in accordance with GAAP.
"CASUALTY EVENT" shall mean, with respect to any Property of any
Person, any loss of or damage to, or any condemnation or other taking of, such
Property for which such Person or any of its Subsidiaries receives insurance
proceeds, or proceeds of a condemnation award or other compensation.
"CHASE" shall mean The Chase Manhattan Bank.
"CLASS" shall have the meaning assigned to such term in Section 1.03
hereof.
"CLOSING DATE" shall mean the date (May 8, 1996) upon which the
initial extension of credit under the Prior Credit Agreement was made.
"CODE" shall mean the Internal Revenue Code of 1986, as amended from
time to time.
"COLLATERAL ACCOUNT" shall have the meaning assigned to such term in
Section 4.01 of the Security Agreement.
"COMMITMENTS" shall mean, collectively, the Revolving Credit
Commitments, the Facility A Term Loan Commitments, and the Facility B Term Loan
Commitments.
"CONTINUE", "CONTINUATION" and "CONTINUED" shall refer to the
continuation pursuant to Section 2.09 hereof of a Eurodollar Loan from one
Interest Period to the next Interest Period for such Loan.
"CONVERT", "CONVERSION" and "CONVERTED" shall refer to a conversion
pursuant to Section 2.09 hereof of one Type of Loans into another Type of Loans,
which may be accompanied by the transfer by a Lender (at its sole discretion) of
a Loan from one Applicable Lending Office to another.
CREDIT AGREEMENT
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"DEBT SERVICE" shall mean, for any period, the sum, for the Borrower
and its Subsidiaries (determined on a consolidated basis without duplication in
accordance with GAAP), of the following: (a) all regularly scheduled payments
of principal of Indebtedness (including, without limitation, the principal
component of any payments in respect of Capital Lease Obligations) made during
such period PLUS (b) all Interest Expense for such period.
"DEFAULT" shall mean an Event of Default or an event that with notice
or lapse of time or both would become an Event of Default.
"DISPOSITION" shall mean any sale, assignment, transfer or other
disposition of any Property (whether now owned or hereafter acquired) by the
Borrower or any of its Subsidiaries to any other Person.
"DOLLARS" and "$" shall mean lawful money of the United States of
America.
"EBITDA" shall mean, for any period, the sum, for the Borrower and its
Subsidiaries (determined on a consolidated basis without duplication in
accordance with GAAP), of the following: (a) net income for such period
(calculated after eliminating extraordinary gains and losses and unusual items)
PLUS (b) income and other taxes (to the extent deducted in determining net
income) for such period PLUS (c) depreciation and amortization and other non-
cash charges (to the extent deducted in determining net income) for such period,
PLUS (d) the aggregate amount of Interest Expense for such period MINUS (e) the
aggregate amount of interest income for such period PLUS (f) the aggregate
amount of upfront or one-time fees or expenses payable in respect of Interest
Rate Protection Agreements during such period (to the extent deducted in
determining net income for such period) PLUS (g) the amount of unrealized
foreign exchange losses (net of any gains) (or MINUS the amount of unrealized
foreign exchange gains (net of any losses)); PROVIDED that there shall be added
back to the calculation of EBITDA (i) for any period during the fiscal year
ending December 31, 1995, an amount up to but not exceeding
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$1,800,000 for any income statement provision created for the termination of the
Tarzana, California lease and an amount up to but not exceeding $1,700,000 for
any non-cash income statement provision created in respect of the revaluation of
premises located at Wycombe Road, Wembley, Middlesex, England, in each case
during such period and (ii) for any period during the fiscal year ending
December 31, 1995 and on an ongoing basis, non-cash minority interests related
to Panavision Canada Holdings Inc., all (but only) to the extent deducted in
calculating EBITDA for such period.
"EFFECTIVE DATE" shall mean the date hereof, subject to the
satisfaction of the conditions to effectiveness set forth in Section 7.01
hereof.
"ENVIRONMENTAL LAWS" shall mean any and all present and future
Federal, state, local and foreign laws, rules or regulations, and any orders or
decrees, in each case as now or hereafter in effect, relating to the regulation
or protection of human health, safety or the environment or to emissions,
discharges, Releases or threatened Releases of pollutants, contaminants,
chemicals or toxic or hazardous substances or wastes into the indoor or outdoor
environment, including, without limitation, ambient air, soil, surface water,
ground water, wetlands, land or subsurface strata, or otherwise relating to the
manufacture, processing, distribution, generation, recycling, use, treatment,
storage, disposal, transport or handling of pollutants, contaminants, chemicals
or toxic or hazardous substances or wastes (or the effect of the same on human
health or safety).
"EQUITY ISSUANCE" shall mean (a) any issuance or sale by the Borrower
or any of its Subsidiaries after the Closing Date of (i) any of its capital
stock, (ii) any warrants or options exercisable in respect of its capital stock
(other than any warrants or options issued to directors, officers or employees
of the Borrower or any of its Subsidiaries pursuant to employee benefit plans
established in the ordinary course of business and any capital stock of the
Borrower issued upon the exercise of such warrants or options) or (iii) any
other security or
CREDIT AGREEMENT
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instrument representing an equity interest (or the right to obtain any equity
interest) in the Borrower or any of its Subsidiaries or (b) the receipt by the
Borrower or any of its Subsidiaries after the Closing Date of any capital
contribution (whether or not evidenced by any equity security issued by the
recipient of such contribution) or (c) any Public Equity Offering; PROVIDED that
Equity Issuance shall not include (w) any such issuance or sale by any
Subsidiary of the Borrower to the Borrower or any Subsidiary of the Borrower,
(x) any capital contribution by the Borrower or any Subsidiary of the Borrower
to any Subsidiary of the Borrower, (y) any issuance of convertible subordinated
debt that constitutes Subordinated Indebtedness issued in accordance with
Section 9.12(a) hereof or (z) any issuance of equity securities upon the
exercise of any conversion right with respect to such convertible subordinated
debt.
"EQUITY RIGHTS" shall mean, with respect to any Person, any
subscriptions, options, warrants, commitments, preemptive rights or agreements
of any kind (including, without limitation, any stockholders' or voting trust
agreements) for the issuance, sale, registration or voting of, or securities
convertible into, any additional shares of capital stock of any class, or
partnership or other ownership interests of any type in, such Person.
"ERISA" shall mean the Employee Retirement Income Security Act of
1974, as amended from time to time.
"ERISA AFFILIATE" shall mean any corporation or trade or business that
is a member of any group of organizations (i) described in Section 414(b) or (c)
of the Code of which the Borrower is a member and (ii) solely for purposes of
potential liability under Section 302(c)(11) of ERISA and Section 412(c)(11) of
the Code and the lien created under Section 302(f) of ERISA and Section 412(n)
of the Code, described in Section 414(m) or (o) of the Code of which the
Borrower is a member.
"EURODOLLAR BASE RATE" shall mean, for any Interest Period for any
Eurodollar Loan, the arithmetic mean (rounded
CREDIT AGREEMENT
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upwards, if necessary, to the nearest 1/16 of 1%), as determined by the
Administrative Agent, of the rates per annum quoted by the respective Reference
Lenders at approximately 11:00 a.m. London time (or as soon thereafter as
practicable) on the date two Business Days prior to the first day of such
Interest Period for the offering by the respective Reference Lenders to leading
banks in the London interbank market of Dollar deposits having a term comparable
to such Interest Period and in an amount comparable to the respective principal
amount of such Loan to be made by the respective Reference Lenders for such
Interest Period. If any Reference Lender is not participating in any Eurodollar
Loan during any Interest Period therefor, the Eurodollar Base Rate for such
Interest Period shall be determined by reference to the amount of the Loan that
such Reference Lender would have made or had outstanding during such Interest
Period had it been participating in such Loan during such Interest Period. If
any Reference Lender does not timely furnish the information required for
determination of any Eurodollar Base Rate, the Administrative Agent shall
determine such Eurodollar Base Rate on the basis of the information timely
furnished by the remaining Reference Lenders.
"EURODOLLAR LOANS" shall mean Loans that bear interest at rates based
on rates referred to in the definition of "Eurodollar Base Rate" in this
Section 1.01.
"EURODOLLAR RATE" shall mean, for any Interest Period for any
Eurodollar Loan, a rate per annum (rounded upwards, if necessary, to the nearest
1/100 of 1%) determined by the Administrative Agent to be equal to the
Eurodollar Base Rate for such Interest Period divided by 1 minus the Reserve
Requirement (if any) for such Interest Period.
"EVENT OF DEFAULT" shall have the meaning assigned to such term in
Section 10 hereof.
"EXCESS CASH FLOW" shall mean, for any period, (a) EBITDA for such
period MINUS (b) the sum of (i) the aggregate amount of Debt Service for such
period PLUS (ii) taxes payable in cash in respect of such period (or, so long as
the Borrower is
CREDIT AGREEMENT
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organized as a partnership, the Tax Payment Amount payable in respect of such
period) PLUS (iii) Capital Expenditures made during such period (except for any
such Capital Expenditures to the extent financed with the proceeds of
Indebtedness, or Capital Lease Obligations, incurred pursuant to Section 9.07(e)
hereof during such period) PLUS (iv) any increase (or MINUS any decrease) in
Working Capital from the beginning of such period to the end of such period PLUS
(v) cash receipts during such period in respect of any gains to the extent not
required pursuant to Section 2.10(a) or 2.10(d) hereof to be applied to the
prepayment of Loans and/or the reduction of Commitments (or MINUS cash receipts
during such period in respect of losses relating thereto) PLUS (vi) the
aggregate amount of prepayments made under Section 2.09 hereof during such
period PLUS (vii) the amount of any Restricted Payment (other than any taxes
payable in cash pursuant to clause (i) of this definition) paid during such
period as permitted pursuant to Section 9.09 hereof.
"EXCLUDED DISPOSITION" shall mean any Disposition of any Property
(a) sold or disposed of in the ordinary course of business and on ordinary
business terms (including sales of inventory and obsolete, worn-out or surplus
Property) and (b) any other dispositions of Property, to the extent that the
proceeds of such disposition are used to acquire other Property used or useful
in the business of the Borrower or any of its Subsidiaries within a period of 60
days after the end of the fiscal quarter in which such disposition was made.
"FACILITY A LENDERS" shall mean (a) on the date hereof, the Lenders
having Facility A Term Loan Commitments on the signature pages hereof and
(b) thereafter, the Lenders from time to time holding Facility A Term Loans and
Facility A Term Loan Commitments after giving effect to any assignments thereof
permitted by Section 12.06(b) hereof.
"FACILITY A TERM LOAN COMMITMENT" shall mean, for each Facility A
Lender, the obligation of such Lender to make Facility A Term Loans in an amount
up to but not exceeding the amount set opposite the name of such Lender on the
signature pages hereof under the caption "Facility A Term Loan Commitment" or,
in the
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case of any Person that becomes a Facility A Lender pursuant to an assignment
permitted under Section 12.06(b) hereof, as specified in the respective
instrument of assignment pursuant to which such assignment is effected (as the
same may be reduced or increased pursuant to an assignment permitted under
Section 12.06(b) hereof). The original aggregate principal amount of the
Facility A Term Loan Commitments is $50,000,000.
"FACILITY A TERM LOAN NOTES" shall mean the promissory notes provided
for by Section 2.08(b) hereof and all promissory notes delivered in substitution
or exchange therefor, in each case as the same shall be modified and
supplemented and in effect from time to time. The term "Facility A Term Loan
Notes" shall include any Registered Notes evidencing Facility A Term Loans
executed and delivered pursuant to Section 2.08(f) hereof.
"FACILITY A TERM LOANS" shall mean the loans provided for by
Section 2.01(b) hereof, which may be Base Rate Loans and/or Eurodollar Loans.
"FACILITY B LENDERS" shall mean (a) on the date hereof, the Lenders
having Facility B Term Loan Commitments on the signature pages hereof and
(b) thereafter, the Lenders from time to time holding Facility B Term Loans and
Facility B Term Loan Commitments after giving effect to any assignments thereof
permitted by Section 12.06(b) hereof.
"FACILITY B TERM LOAN COMMITMENT" shall mean, for each Facility B
Lender, the obligation of such Lender to make Facility B Term Loans in an amount
up to but not exceeding the amount set opposite the name of such Lender on the
signature pages hereof under the caption "Facility B Term Loan Commitment" or,
in the case of any Person that becomes a Facility B Lender pursuant to an
assignment permitted under Section 12.06(b) hereof, as specified in the
respective instrument of assignment pursuant to which such assignment is
effected (as the same may be reduced or increased pursuant to an assignment
permitted under Section 12.06(b) hereof). The original aggregate principal
amount of the Facility B Term Loan Commitments is $50,000,000.
CREDIT AGREEMENT
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"FACILITY B TERM LOAN NOTES" shall mean the promissory notes provided
for by Section 2.08(c) hereof and all promissory notes delivered in substitution
or exchange therefor, in each case as the same shall be modified and
supplemented and in effect from time to time. The term "Facility B Term Loan
Notes" shall include any Registered Notes evidencing Facility B Term Loans
executed and delivered pursuant to Section 2.08(f) hereof.
"FACILITY B TERM LOANS" shall mean the loans provided for by
Section 2.01(c) hereof, which may be Base Rate Loans and/or Eurodollar Loans.
"FEDERAL FUNDS RATE" shall mean, for any day, the rate per annum
(rounded upwards, if necessary, to the nearest 1/100 of 1%) equal to the
weighted average of the rates on overnight Federal funds transactions with
members of the Federal Reserve System arranged by Federal funds brokers on such
day, as published by the Federal Reserve Bank of New York on the Business Day
next succeeding such day, PROVIDED that (a) if the day for which such rate is to
be determined is not a Business Day, the Federal Funds Rate for such day shall
be such rate on such transactions on the next preceding Business Day as so
published on the next succeeding Business Day and (b) if such rate is not so
published for any Business Day, the Federal Funds Rate for such Business Day
shall be the average rate charged to Chase on such Business Day on such
transactions as determined by the Administrative Agent.
"FIXED CHARGES" shall mean, for any period, the sum of (i) Debt
Service for such period PLUS (ii) taxes payable in cash in respect of such
period (or, so long as the Borrower is organized as a partnership, the Tax
Payment Amount payable in respect of such period).
"FIXED CHARGES RATIO" shall mean, as at any date, the ratio of
(a) EBITDA for the period of four consecutive fiscal quarters ending on or most
recently ended prior to such date MINUS Capital Expenditures for such period to
(b) Fixed Charges for such period; PROVIDED that in calculating the Fixed
Charges Ratio on any date after the Closing Date and prior to the first
CREDIT AGREEMENT
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anniversary thereof, the relevant period for measuring EBITDA, Capital
Expenditures and Fixed Charges shall be the period from and including April 29,
1996 to and including such calculation date.
"FOREIGN SUBSIDIARY" shall have the meaning assigned to such term in
Section 9.16(a) hereof.
"GAAP" shall mean generally accepted accounting principles applied on
a basis consistent with those that, in accordance with the last sentence of
Section 1.02(a) hereof, are to be used in making the calculations for purposes
of determining compliance with this Agreement.
"GENERAL PARTNER" shall mean Panavision Inc. (formerly known as WP/GP,
Inc.), a Delaware corporation, and such other Person or Persons as may become a
general partner of the Borrower from time to time.
"GUARANTEE" shall mean a guarantee, an endorsement, a contingent
agreement to purchase or to furnish funds for the payment or maintenance of, or
otherwise to be or become contingently liable under or with respect to, the
Indebtedness, other obligations, net worth, working capital or earnings of any
Person, or a guarantee of the payment of dividends or other distributions upon
the stock or equity interests of any Person, or an agreement to purchase, sell
or lease (as lessee or lessor) Property, products, materials, supplies or
services primarily for the purpose of enabling a debtor to make payment of such
debtor's obligations or an agreement to assure a creditor against loss, and
including, without limitation, causing a bank or other financial institution to
issue a letter of credit or other similar instrument for the benefit of another
Person, but excluding endorsements for collection or deposit in the ordinary
course of business. The terms "GUARANTEE" and "GUARANTEED" used as a verb shall
have a correlative meaning.
"GUARANTEE ASSUMPTION AGREEMENT" shall mean a Guarantee Assumption
Agreement substantially in the form of Exhibit B hereto by an entity that,
pursuant to Section 9.16(a) hereof is
CREDIT AGREEMENT
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required to become a "Subsidiary Guarantor" hereunder in favor of the
Administrative Agent.
"HAZARDOUS MATERIAL" shall mean, collectively, (a) any petroleum or
petroleum products, flammable materials, explosives, radioactive materials,
asbestos, urea formaldehyde foam insulation, and transformers or other equipment
that contain polychlorinated biphenyls ("PCB's"), (b) any chemicals or other
materials or substances that are now or hereafter become defined as or included
in the definition of "hazardous substances", "hazardous wastes", "hazardous
materials", "extremely hazardous wastes", "restricted hazardous wastes", "toxic
substances", "toxic pollutants", "contaminants" or "pollutants" under any
Environmental Law and (c) any other chemical or other material or substance,
exposure to which is now or hereafter prohibited, limited or regulated under any
Environmental Law.
"INDEBTEDNESS" shall mean, for any Person: (a) obligations created,
issued or incurred by such Person for borrowed money (whether by loan, the
issuance and sale of debt securities or the sale of Property to another Person
subject to an understanding or agreement, contingent or otherwise, to repurchase
such Property from such Person); (b) obligations of such Person to pay the
deferred purchase or acquisition price of Property or services (including in
respect of non-competition agreements), other than trade accounts payable (other
than for borrowed money) arising, and accrued expenses incurred, in the ordinary
course of business so long as such trade accounts payable are payable within 180
days of the date the respective goods are delivered or the respective services
are rendered; (c) Indebtedness of others secured by a Lien on the Property of
such Person, whether or not the respective indebtedness so secured has been
assumed by such Person; (d) obligations of such Person in respect of letters of
credit or similar instruments issued or accepted by banks and other financial
institutions for account of such Person; (e) Capital Lease Obligations of such
Person; and (f) Indebtedness of others Guaranteed by such Person.
"INTEREST COVERAGE RATIO" shall mean, as at any date, the ratio of (a)
EBITDA for the period of four consecutive fiscal
CREDIT AGREEMENT
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quarters ending on or most recently ended prior to such date MINUS Capital
Expenditures for such period to (b) Interest Expense for such period, PROVIDED
that, in calculating the Interest Coverage Ratio on any date after the Closing
Date and prior to the first anniversary thereof, the relevant period for
measuring EBITDA, Capital Expenditures and Interest Expense shall be the period
from and including April 29, 1996 to and including such calculation date.
"INTEREST EXPENSE" shall mean, for any period, the sum, for the
Borrower and its Subsidiaries (determined on a consolidated basis without
duplication in accordance with GAAP), of the following: (a) all interest in
respect of Indebtedness (including, without limitation, the interest component
of any payments in respect of Capital Lease Obligations but excluding any
capitalized financing costs) accrued or capitalized during such period (whether
or not actually paid during such period), but excluding any non-cash interest
PLUS (b) the net amount payable (or MINUS the net amount receivable) under
Interest Rate Protection Agreements during such period (whether or not actually
paid or received during such period). For purposes hereof, the aggregate amount
of upfront or one-time fees or expenses payable in respect of Interest Rate
Protection Agreements shall be amortized over the life of the respective
Interest Rate Protection Agreements in equal installments, and only the portion
thereof so amortized during any period shall be treated as "Interest Expense"
for such period.
CREDIT AGREEMENT
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"INTEREST PERIOD" shall mean, for any Eurodollar Loan, each period
commencing on the date such Eurodollar Loan is made or Converted from a Base
Rate Loan or (in the event of a Continuation) the last day of the next preceding
Interest Period for such Loan and (subject to the provisions of Section 2.01(d)
hereof) ending on the numerically corresponding day in the first, second, third
or sixth calendar month thereafter, as the Borrower may select as provided in
Section 4.05 hereof, except that each Interest Period that commences on the last
Business Day of a calendar month (or on any day for which there is no
numerically corresponding day in the appropriate subsequent calendar month)
shall end on the last Business Day of the appropriate subsequent calendar month.
Notwithstanding the foregoing:
(i) no Interest Period for any Revolving Credit Loan may commence
before and end after any Revolving Credit Commitment Reduction Date unless,
after giving effect thereto, the aggregate principal amount of the
Revolving Credit Loans having Interest Periods that end after such
Revolving Credit Commitment Reduction Date shall be equal to or less than
the aggregate amount of the Revolving Credit Commitments on such Commitment
Reduction Date;
(ii) no Interest Period for any Facility A Term Loan may commence
before and end after any Principal Payment Date unless, after giving effect
thereto, the aggregate principal amount of the Facility A Term Loans having
Interest Periods that end after such Principal Payment Date shall be equal
to or less than the aggregate principal amount of the Facility A Term Loans
scheduled to be outstanding after giving effect to the payments of
principal required to be made on such Principal Payment Date;
(iii) no Interest Period for any Facility B Term Loan may commence
before and end after any Principal Payment Date unless, after giving effect
thereto, the aggregate principal amount of the Facility B Term Loans having
Interest Periods that end after such Principal Payment Date shall be equal
to or less than the aggregate principal amount of the Facility
CREDIT AGREEMENT
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B Term Loans scheduled to be outstanding after giving effect to the
payments of principal required to be made on such Principal Payment Date;
(iv) each Interest Period that would otherwise end on a day that is
not a Business Day shall end on the next succeeding Business Day (or, in
the case of an Interest Period for a Eurodollar Loan, if such next
succeeding Business Day falls in the next succeeding calendar month, on the
next preceding Business Day); and
(v) notwithstanding clauses (i), (ii) and (iii) above, no Interest
Period shall have a duration of less than one month and, if the Interest
Period for any Eurodollar Loan would otherwise be a shorter period, such
Loan shall not be available hereunder for such period.
"INTEREST RATE PROTECTION AGREEMENT" shall mean, for any Person, an
interest rate swap, cap or collar agreement or similar arrangement between such
Person and one or more financial institutions providing for the transfer or
mitigation of interest risks either generally or under specific contingencies.
"INVESTMENT" shall mean, for any Person: (a) the acquisition (whether
for cash, Property, services or securities or otherwise) of capital stock,
bonds, notes, debentures, partnership or other ownership interests or other
securities of any other Person or any agreement to make any such acquisition
(including, without limitation, any "short sale" or any sale of any securities
at a time when such securities are not owned by the Person entering into such
sale); (b) the making of any deposit with, or advance, loan or other extension
of credit to, any other Person (including the purchase of Property from another
Person subject to an understanding or agreement, contingent or otherwise, to
resell such Property to such Person); (c) the entering into of any Guarantee of,
or other contingent obligation with respect to, Indebtedness or other liability
of any other Person and (without duplication) any amount committed to be
advanced, lent or extended to such Person; or (d) the entering into of any
Interest Rate Protection Agreement or any "swap
CREDIT AGREEMENT
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agreement" (as defined in Section 101(53)(b) of the Bankruptcy Code).
"ISSUING LENDER" shall mean Chase, as the issuer of Letters of Credit
under Section 2.03 hereof, together with its successors and assigns in such
capacity.
"LETTER OF CREDIT" shall have the meaning assigned to such term in
Section 2.03 hereof.
"LETTER OF CREDIT DOCUMENTS" shall mean, with respect to any Letter of
Credit, collectively, any application therefor and any other agreements,
instruments, guarantees or other documents (whether general in application or
applicable only to such Letter of Credit) governing or providing for (a) the
rights and obligations of the parties concerned or at risk with respect to such
Letter of Credit or (b) any collateral security for any of such obligations,
each as the same may be modified and supplemented and in effect from time to
time.
"LETTER OF CREDIT INTEREST" shall mean, for each Revolving Credit
Lender, such Lender's participation interest (or, in the case of the Issuing
Lender, the Issuing Lender's retained interest) in the Issuing Lender's
liability under Letters of Credit and such Lender's rights and interests in
Reimbursement Obligations and fees, interest and other amounts payable in
connection with Letters of Credit and Reimbursement Obligations.
"LETTER OF CREDIT LIABILITY" shall mean, without duplication, at any
time and in respect of any Letter of Credit, the sum of (a) the undrawn face
amount of such Letter of Credit PLUS (b) the aggregate unpaid principal amount
of all Reimbursement Obligations of the Borrower at such time due and payable in
respect of all drawings made under such Letter of Credit. For purposes of this
Agreement, a Revolving Credit Lender (other than the Issuing Lender) shall be
deemed to hold a Letter of Credit Liability in an amount equal to its
participation interest in the related Letter of Credit under Section 2.03
hereof, and the Issuing Lender shall be deemed to
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hold a Letter of Credit Liability in an amount equal to its retained interest in
the related Letter of Credit after giving effect to the acquisition by the
Revolving Credit Lenders other than the Issuing Lender of their participation
interests under said Section 2.03.
"LIEN" shall mean, with respect to any Property, any mortgage, lien,
pledge, charge, security interest or encumbrance of any kind in respect of such
Property. For purposes of this Agreement and the other Loan Documents, a Person
shall be deemed to own subject to a Lien any Property that it has acquired or
holds subject to the interest of a vendor or lessor under any conditional sale
agreement, capital lease or other title retention agreement (other than an
operating lease) relating to such Property.
"LOAN DOCUMENTS" shall mean, collectively, this Agreement, the Notes,
the Letter of Credit Documents and the Security Documents.
"LOANS" shall mean, collectively, the Revolving Credit Loans, the
Facility A Term Loans, and the Facility B Term Loans.
"MAJORITY FACILITY A LENDERS" shall mean
Facility A Lenders holding at least 51% of the aggregate outstanding principal
amount of the Facility A Term Loans or, if the Facility A Term Loans shall not
have been made, at least 51% of the Facility A Term Loan Commitments.
"MAJORITY FACILITY B LENDERS" shall mean Facility B Lenders holding at
least 51% of the aggregate outstanding principal amount of the Facility B Term
Loans, or, if the Facility B Term Loans shall not have been made, at least 51%
of the Facility B Term Loan Commitments.
"MAJORITY LENDERS" shall mean Lenders holding in the aggregate 51% of
the Commitments and Loans.
"MAJORITY REVOLVING CREDIT LENDERS" shall mean Revolving Credit
Lenders having at least 51% of the aggregate
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amount of the Revolving Credit Commitments or, if the Revolving Credit
Commitments shall have terminated, Lenders holding at least 51% of the sum of
(a) the aggregate unpaid principal amount of the Revolving Credit Loans plus (b)
the aggregate amount of all Letter of Credit Liabilities.
"MANAGEMENT GROUP" shall mean, collectively, William C. Scott, John S.
Farrand and Jeffrey J. Marcketta.
"MARGIN STOCK" shall mean "margin stock" within the meaning of
Regulations G, T, U and X.
"MATERIAL ADVERSE EFFECT" shall mean a material adverse effect on
(a) the Property, business, operations, financial condition, prospects or
liabilities of the Borrower and its Subsidiaries taken as a whole, (b) the
ability of any Obligor to perform its obligations under any of the Loan
Documents to which it is a party, (c) the validity or enforceability of any of
the Loan Documents, (d) the rights and remedies of the Lenders and the
Administrative Agent under any of the Loan Documents or (e) the timely payment
of the principal of or interest on the Loans or the Reimbursement Obligations or
other amounts payable in connection therewith.
"MORTGAGES" shall mean, collectively, (a) the Leasehold Deed of Trust
with respect to the Woodland Hills Lease dated as of May 8, 1996, executed by
the Borrower in favor of the trustee for the benefit of the Administrative Agent
and the Lenders and (b) one or more other mortgages or deeds of trust executed
by the Borrower in favor of the Administrative Agent (or, in the case of a deed
of trust, in favor of a trustee, for the benefit of the Administrative Agent and
the Lenders), covering the real property and/or leasehold interests of the
Borrower, in each case, as such mortgages and deeds of trust shall be modified
and supplemented and in effect from time to time.
"MULTIEMPLOYER PLAN" shall mean a multiemployer plan defined as such
in Section 3(37) of ERISA to which contributions have been made by the Borrower
or any ERISA Affiliate and that is covered by Title IV of ERISA.
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"NET AVAILABLE PROCEEDS" shall mean:
(i) in the case of any Disposition, the amount of Net Cash Payments
received in connection with such Disposition;
(ii) in the case of any Casualty Event, the aggregate amount of
proceeds of insurance, condemnation awards and other compensation
received by the Borrower and its Subsidiaries in respect of such
Casualty Event net of (A) reasonable expenses incurred by the Borrower
and its Subsidiaries in connection therewith, (B) contractually required
repayments of Indebtedness to the extent secured by a Lien on such
Property or contractually required payments to a lessor in respect of
such Property and (C) any income and transfer taxes payable by the
Borrower or any of its Subsidiaries in respect of such Casualty Event;
(iii) in the case of any Equity Issuance, the aggregate amount of
all cash received by WP/GP Inc., the Borrower and/or its Subsidiaries in
respect of such Equity Issuance net of expenses incurred by WP/GP Inc.,
the Borrower and/or its Subsidiaries in connection therewith; and
(iv) in the case of any issuance or incurrence of Indebtedness,
the aggregate amount of all cash received by the Borrower and its
Subsidiaries in respect of such Indebtedness net of expenses incurred by
the Borrower and its Subsidiaries in connection therewith.
"NET CASH PAYMENTS" shall mean, with respect to any Disposition, the
aggregate amount of all cash payments received by the Borrower and/or its
Subsidiaries directly or indirectly in connection with such Disposition;
PROVIDED that: (a) Net Cash Payments shall be net of (i) the amount of any
legal, title and recording tax expenses, commissions and other fees and
expenses paid by the Borrower and/or its Subsidiaries in connection with such
Disposition and (ii) any foreign, U.S. Federal, state and local income or
other taxes (including sales and value added
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taxes and including taxes payable in connection with the transfer of funds to
the Borrower or any of its Subsidiaries in connection with a prepayment
pursuant to Section 2.10(d) hereof) estimated to be payable by the Borrower
and its Subsidiaries as a result of such Disposition; (b) Net Cash Payments
shall be net of any repayments by the Borrower and/or any of its Subsidiaries
of Indebtedness to the extent that (i) such Indebtedness is secured by a Lien
on the Property that is the subject of such Disposition and (ii) the
transferee of (or holder of a Lien on) such Property requires that such
Indebtedness be repaid as a condition to the purchase of such Property; and
(c) Net Cash Payments shall be net of appropriate amounts to be provided by
the Borrower and/or any of its Subsidiaries as a reserve (whether or not
contained in an escrow or similar arrangement) against any liabilities
associated with such Disposition and retained by the Borrower and/or any such
Subsidiary after such Disposition, including pension and other
post-retirement liabilities, liabilities relating to environmental matters
and liabilities under indemnification obligations associated with such
Disposition.
"NOTES" shall mean, collectively, the Revolving Credit Notes, the
Facility A Term Loan Notes and the Facility B Term Loan Notes.
"PARTNERS" shall mean, collectively, the General Partner and the
limited partners of the Borrower from time to time.
"PARTNERSHIP AGREEMENT" shall mean the Amended and Restated
Agreement of Limited Partnership of Panavision International, L.P. dated as
of May 8, 1996 between the General Partner and the limited partners party
thereto, as the same shall be modified and supplemented and in effect on the
Closing Date and may, subject to Section 9.17 hereof, thereafter be modified
and supplemented and in effect from time to time.
"PBGC" shall mean the Pension Benefit Guaranty Corporation or any
entity succeeding to any or all of its functions under ERISA.
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"PERMITTED INVESTMENTS" shall mean, with respect to any Person: (a)
direct obligations of the United States of America, or of any agency thereof,
or obligations guaranteed as to principal and interest by the United States
of America, or of any agency thereof, in either case maturing not more than
360 days from the date of acquisition thereof; (b) U.S. dollar denominated
(or, with respect to Foreign Subsidiaries, U.S. dollar denominated and
non-U.S. dollar denominated) time deposits and certificates of deposit of (i)
any Lender or (ii) any domestic (or, with respect to Foreign Subsidiaries,
any domestic or nondomestic) bank or trust company having capital, surplus
and undivided profits of at least $500,000,000, maturing not more than 360
days from the date of acquisition thereof; (c) repurchase obligations with
respect to obligations of the type (but not necessarily the maturity)
described in clause (a) above issued by any bank or trust company described
in clause (b) above and maturing not more than 270 days from the date of
acquisition thereof by such Person; (d) commercial paper rated A-1 or better
or P-1 by Standard & Poor's Ratings Group, a Division of McGraw Hill, Inc.,
or Moody's Investors Services, Inc., respectively, maturing not more than 90
days from the date of acquisition thereof; (e) interests in any money market
mutual fund registered under the Investment Company Act of 1940, as amended,
the portfolio of which is limited to obligations described in the foregoing
clauses (a), (b), (c) and (d), so long as such fund has total assets of at
least $1,000,000,000 and is rated AAAm-G or better or AAA or better by
Standard & Poor's Ratings Group or Moody's Investors Services, Inc.,
respectively; and (f) the Warburg Pincus Cash Reserve Fund, so long as
substantially all of the investments in the portfolio of such Fund consist of
obligations (i) which are of the type referred to in the foregoing clauses
(a), (b), (c) and (d), and (ii) which mature within one year of the date upon
which they are acquired; in each case so long as the same (x) provide for the
payment of principal and interest (and not principal alone or interest alone)
and (y) are not subject to any contingency regarding the payment of principal
or interest.
"PERSON" shall mean any individual, corporation, company, voluntary
association, partnership, limited liability
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company, joint venture, trust, unincorporated organization or government (or
any agency, instrumentality or political subdivision thereof).
"PLAN" shall mean an employee benefit or other plan established or
maintained by the Borrower or any ERISA Affiliate and that is covered by
Title IV of ERISA, other than a Multiemployer Plan.
"POST-DEFAULT RATE" shall mean a rate per annum equal to 2% PLUS the
Base Rate as in effect from time to time PLUS the Applicable Margin for Base
Rate Loans, PROVIDED that, with respect to principal of a Eurodollar Loan
that shall become due (whether at stated maturity, by acceleration, by
optional or mandatory prepayment or otherwise) on a day other than the last
day of the Interest Period therefor, the "Post-Default Rate" shall be, for
the period from and including such due date to but excluding the last day of
such Interest Period, 2% PLUS the interest rate for such Loan as provided in
Section 3.02(b) hereof and, thereafter, the rate provided for above in this
definition.
"PRIME RATE" shall mean the rate of interest from time to time
announced by Chase at the principal office of Chase in New York, New York as
its prime commercial lending rate.
"PRINCIPAL PAYMENT DATES" shall mean the Quarterly Dates falling on or
nearest to March 31, June 30, September 30 and December 31 of each year,
commencing with March 31, 1997 through and including March 31, 2004.
"PROPERTY" shall mean any right or interest in or to property of any
kind whatsoever, whether real, personal or mixed and whether tangible or
intangible.
"PUBLIC EQUITY OFFERING" means an underwritten primary public
offering of the common stock of either the Borrower (upon its conversion to a
corporation permitted under Section 9.05(d) (iii) hereof) or WP/GP, Inc.
(after giving effect to such public offering such company being referred to
herein as the "PUBLIC COMPANY"), pursuant to an effective registration
statement filed
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with the Securities and Exchange Commission in accordance with the Securities
Act of 1933, as amended, and the rules and regulations promulgated thereunder.
"PUBLIC COMPANY" shall have the meaning assigned to such term in the
definition of "Public Equity Offering" in this Section 1.01.
"QUARTERLY DATES" shall mean the last Business Day of March, June,
September and December in each year, the first of which shall be the first
such day after the Closing Date.
"RECAPITALIZATION" shall mean the recapitalization of the Borrower
contemplated to occur as of the Closing Date, following which the Management
Group and Warburg Pincus will own, collectively, 100% of the aggregate
partnership interests of the Borrower, which will include (a) the repurchase
by the Borrower of all of its outstanding Indebtedness owing to banks and
financial institutions (other than that held by the Management Group and
Warburg Pincus), (ii) the repurchase of the Indebtedness of Panavision Canada
Corporation, (iii) the repurchase of all of the Class A and Class B limited
partnership interests of the Borrower (other than those interests held by the
Management Group and Warburg Pincus) and (iv) certain other transactions
contemplated by the Recapitalization Documents.
"RECAPITALIZATION DOCUMENTS" shall mean (a) the Agreement dated as
of March 29, 1996 (the "Restructuring Agreement") among the Borrowers, the
General Partner, WP/LP, Inc., WCS Panavision Corporation and each of the
lenders party thereto, (b) the Keepco Purchase Agreement (as defined in the
Restructuring Agreement) and (c) all documents related to the foregoing.
"REFERENCE LENDERS" shall mean Chase and each other Lender (if any)
designated as such by the Administrative Agent after the Closing Date (or
their respective Applicable Lending Offices, as the case may be).
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"REGISTERED HOLDER" shall have the meaning assigned to such term in
Section 5.07(a)(ii) hereof.
"REGISTERED LOAN" shall have the meaning assigned to such term in
Section 2.08(f) hereof.
"REGISTERED NOTE" shall have the meaning assigned to such term in
Section 2.08(f) hereof.
"REGULATIONS A, D, G, T, U AND X" shall mean, respectively,
Regulations A, D, G, T, U and X of the Board of Governors of the Federal
Reserve System (or any successor), as the same may be modified and
supplemented and in effect from time to time.
"REGULATORY CHANGE" shall mean, with respect to any Lender, any
change after the Closing Date in Federal, state or foreign law or regulations
(including, without limitation, Regulation D) or the adoption or making after
such date of any interpretation, directive or request applying to a class of
banks or other financial institutions including such Lender of or under any
Federal, state or foreign law or regulations (whether or not having the force
of law and whether or not failure to comply therewith would be unlawful) by
any court or governmental or monetary authority charged with the
interpretation or administration thereof.
"REIMBURSEMENT OBLIGATIONS" shall mean, at any time, the obligations
of the Borrower then outstanding, or that may thereafter arise in respect of
all Letters of Credit then outstanding, to reimburse amounts paid by the
Issuing Lender in respect of any drawings under a Letter of Credit.
"RELEASE" shall mean any release, spill, emission, leaking, pumping,
injection, deposit, disposal, discharge, dispersal, leaching or migration
into or through ambient air, soil, surface water, ground water, wetlands,
land or subsurface strata.
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"RESERVE REQUIREMENT" shall mean, for any Interest Period for any
Eurodollar Loan, the average maximum rate at which reserves (including,
without limitation, any marginal, supplemental or emergency reserves) are
required to be maintained during such Interest Period under Regulation D by
member banks of the Federal Reserve System in New York City with deposits
exceeding one billion Dollars against "Eurocurrency liabilities" (as such
term is used in Regulation D). Without limiting the effect of the foregoing,
the Reserve Requirement shall include any other reserves required to be
maintained by such member banks by reason of any Regulatory Change with
respect to (i) any category of liabilities that includes deposits by
reference to which the Eurodollar Base Rate for any Interest Period for any
Eurodollar Loans is to be determined as provided in the definition of
"Eurodollar Base Rate" in this Section 1.01 or (ii) any category of
extensions of credit or other assets that includes Eurodollar Loans.
"RESTRICTED PAYMENT" shall mean distributions or dividends (in cash,
Property or obligations) on, or other payments on account of, or the setting
apart of money for a sinking or other analogous fund for, or the purchase,
redemption, retirement or other acquisition of, partnership or other
ownership interests in, or any shares of any class of stock of, the Borrower
or of any warrants, options or other rights to acquire the same (or to make
any payments to any Person, such as "phantom stock" payments, where the
amount thereof is calculated with reference to the fair market or equity
value of the Borrower or any of its Subsidiaries), but excluding
distributions or dividends (or options therein) payable solely in partnership
interests or shares of capital stock of the Borrower.
"REVOLVING CREDIT LENDERS" shall mean (a) on the date hereof, the
Lenders having Revolving Credit Commitments on the signature pages hereof and
(b) thereafter, the Lenders from time to time holding Revolving Credit Loans
and Revolving Credit Commitments after giving effect to any assignments
thereof permitted by Section 12.06(b) hereof.
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"REVOLVING CREDIT COMMITMENT" shall mean, as to each Revolving
Credit Lender, the obligation of such Lender to make Revolving Credit Loans,
and to issue or participate in Letters of Credit pursuant to Section 2.03
hereof, in an aggregate principal or face amount at any one time outstanding
up to but not exceeding the amount set opposite the name of such Lender on
the signature pages hereof under the caption "Revolving Credit Commitment"
or, in the case of a Person that becomes a Revolving Credit Lender pursuant
to an assignment permitted under Section 12.06(b) hereof, as specified in the
respective instrument of assignment pursuant to which such assignment is
effected (as the same may be reduced at any time or from time to time
pursuant to Section 2.04 or 2.10 hereof). The original aggregate principal
amount of the Revolving Credit Commitments is $20,000,000.
"REVOLVING CREDIT COMMITMENT PERCENTAGE" shall mean, with respect to
any Revolving Credit Lender, the ratio of (a) the amount of the Revolving
Credit Commitment of such Lender to (b) the aggregate amount of the Revolving
Credit Commitments of all of the Lenders.
"REVOLVING CREDIT COMMITMENT TERMINATION DATE" shall mean the
Quarterly Date falling on or nearest to March 31, 2002.
"REVOLVING CREDIT LOANS" shall mean the loans provided for in
Section 2.01(a) hereof, which may be Base Rate Loans and/or Eurodollar Loans.
"REVOLVING CREDIT NOTES" shall mean the promissory notes provided
for in Section 2.08(a) hereof and all promissory notes delivered in
substitution or exchange therefor, in each case as the same shall be modified
and supplemented and in effect from time to time. The term "Revolving Credit
Notes" shall include any Registered Notes evidencing Revolving Credit Loans
executed and delivered pursuant to Section 2.08(f) hereof.
"SECURITY AGREEMENT" shall mean the Security Agreement dated as of
May 8, 1996 between the Borrower, certain of the
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other Obligors and the Administrative Agent, as the same shall be modified
and supplemented and in effect from time to time.
"SECURITY DOCUMENTS" shall mean, collectively, the Security
Agreement, the Mortgages, the U.K. Pledge Agreement, all Uniform Commercial
Code financing statements required by the Security Agreement or the Mortgages
to be filed with respect to the security interests in personal Property and
fixtures created pursuant to the Security Agreement or the Mortgages and all
filings, recordings, registrations and/or other similar steps required by the
U.K. Pledge Agreement with respect to the charges created pursuant thereto.
"SENIOR OFFICER" shall mean (a) for the period during which the
Borrower is organized as a partnership, the Person or Persons exercising the
functions of the chief executive officer or chief financial officer of the
Borrower or the Persons exercising the functions of the chief financial
officer, chief executive officer or vice president of the General Partner of
the Borrower and (b) for the period during which the Borrower is organized as
a corporation, the chief executive officer or chief financial officer of the
Borrower (it being understood that any individual acting in the capacity of a
Senior Officer shall act on behalf of the Borrower and not in his or her
individual capacity).
"SIGNIFICANT SUBSIDIARY" shall mean, as at any time, any Subsidiary
of the Borrower that has assets in excess of $2,000,000 at such time (or, if
such Subsidiary's assets are denominated in a currency other than Dollars,
the U.S. dollar equivalent thereof).
"SUBORDINATED INDEBTEDNESS" shall mean Indebtedness of the Borrower
or any of its Subsidiaries incurred in accordance with Section 9.12(a)
hereof.
"SUBSIDIARY" shall mean, with respect to any Person, any
corporation, partnership or other entity of which at least a majority of the
securities or other ownership interests having by the terms thereof ordinary
voting power to elect a majority of
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the board of directors or other persons performing similar functions of such
corporation, partnership or other entity (irrespective of whether or not at
the time securities or other ownership interests of any other class or
classes of such corporation, partnership or other entity shall have or might
have voting power by reason of the happening of any contingency) is at the
time directly or indirectly owned or controlled by such Person or one or more
Subsidiaries of such Person or by such Person and one or more Subsidiaries of
such Person.
"TAX PAYMENT AMOUNT" shall mean, for any period, the distributions
in respect of taxes required or permitted to be made pursuant to Section
5.2(c) of the Partnership Agreement.
"TERM LOAN COMMITMENT TERMINATION DATE" shall mean June 14, 1996.
"TERM LOANS" shall mean, collectively, the Facility A Term Loans and
the Facility B Term Loans.
"TOTAL DEBT RATIO" shall mean, as at any date, the ratio of (a) the
sum, for the Borrower and its Subsidiaries (determined on a consolidated
basis without duplication in accordance with GAAP), of the aggregate amount
of all Indebtedness (including, without limitation, all Subordinated
Indebtedness, except as expressly provided below) as at such date to (b)
EBITDA for the period of four consecutive fiscal quarters ending on, or most
recently ended prior to, such date MINUS Capital Expenditures for such
period; PROVIDED that in calculating Total Debt Ratio for purposes of
determining the "Applicable Margin" (and for no other purpose), Indebtedness
shall not include any Subordinated Indebtedness of the Borrower or its
Subsidiaries.
"TYPE" shall have the meaning assigned to such term in Section 1.03
hereof.
"U.K. PLEDGE AGREEMENT" shall mean the Share Charge Agreement dated as
of May 8, 1996 between the Borrower and the
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Administrative Agent, as the same shall be modified and supplemented and in
effect from time to time.
"U.S. PERSON" shall mean a citizen or resident of the United States
of America, a corporation, partnership or other entity created or organized
in or under any laws of the United States of America or any State thereof, or
any estate or trust that is subject to Federal income taxation regardless of
the source of its income.
"U.S. TAXES" shall mean any present or future tax, assessment or
other charge or levy imposed by or on behalf of the United States of America
or any taxing authority thereof.
"WARBURG AFFILIATE" shall mean any Subsidiary of any of the entities
listed in clauses (i) through (v), inclusive, of the definition of "Warburg
Pincus" in this Section 1.01.
"WARBURG PINCUS" shall mean, collectively: (i) Warburg, Pincus
Capital Company, L.P., a Delaware limited partnership, (ii) Warburg, Pincus
Capital Partners, L.P., a Delaware limited partnership, (iii) Warburg, Pincus
Investors, L.P., a Delaware limited partnership, (iv) Warburg, Pincus & Co.,
a New York general partnership, and (v) any other venture banking fund in
which Warburg, Pincus & Co. is the general partner.
"WHOLLY OWNED SUBSIDIARY" shall mean, with respect to any Person,
any corporation, partnership or other entity of which all of the equity
securities or other ownership interests (other than, in the case of a
corporation, directors' qualifying shares and, in the case of Panavision
Canada Holdings Inc., shares and/or options for shares issued (or to be
issued) to its management) are directly or indirectly owned or controlled by
such Person or one or more Wholly Owned Subsidiaries of such Person or by
such Person and one or more Wholly Owned Subsidiaries of such Person (it
being understood that, in the case of Panavision Canada Holdings Inc., the
issue of such shares and/or options contemplated above shall not preclude it
from being treated as a Wholly-Owned Subsidiary of the Borrower for purposes
of this Agreement).
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"WORKING CAPITAL" shall mean, as at such date, for the Borrower and
its Subsidiaries (determined on a consolidated basis without duplication in
accordance with GAAP), of the following: (a) the sum of inventory PLUS
accounts receivable MINUS (b) the sum of accounts payable PLUS accrued
expenses at such date (but exclusive of any accruals relating to leasehold
improvements in respect of the premises subject to the Woodland Hills Lease).
"WOODLAND HILLS LEASE" shall mean the Lease dated June 13, 1995
between Trizec Warner, Inc., as landlord, and the Borrower, as tenant, as the
same shall be modified and supplemented and in effect on the Closing Date and
may, subject to Section 9.17 hereof, thereafter be modified and supplemented
and in effect from time to time.
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1.02 ACCOUNTING TERMS AND DETERMINATIONS.
(a) Except as otherwise expressly provided herein, all accounting
terms used herein shall be interpreted, and all financial statements and
certificates and reports as to financial matters required to be delivered to
the Lenders hereunder shall (unless otherwise disclosed to the Lenders in
writing at the time of delivery thereof in the manner described in Section
1.02(b) hereof) be prepared, in accordance with generally accepted accounting
principles in the United States applied on a basis consistent with those used
in the preparation of the latest financial statements furnished to the
Lenders hereunder (which, prior to the delivery of the first financial
statements under Section 9.01 hereof, shall mean the audited financial
statements as at December 31, 1995 referred to in Section 8.02 hereof). All
calculations made for the purposes of determining compliance with this
Agreement shall (except as otherwise expressly provided herein) be made by
application of U.S. generally accepted accounting principles applied on a
basis consistent with those used in the preparation of the latest annual or
quarterly financial statements furnished to the Lenders pursuant to Section
9.01 hereof (or, prior to the delivery of the first financial statements
under Section 9.01 hereof, used in the preparation of the audited financial
statements as at December 31, 1995 referred to in Section 8.02 hereof) unless
(i) the Borrower shall have objected to determining such compliance
on such basis at the time of delivery of such financial statements or
(ii) the Majority Lenders shall so object in writing within 30 days
after delivery of such financial statements,
in either of which events such calculations shall be made on a basis
consistent with those used in the preparation of the latest financial
statements as to which such objection shall not have been made (which, if
objection is made in respect of the first financial statements delivered
under Section 9.01 hereof, shall
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mean the audited financial statements referred to in Section 8.02 hereof).
(b) The Borrower shall deliver to the Lenders at the same time as
the delivery of any annual or quarterly financial statement under Section
9.01 hereof (i) a description in reasonable detail of any material variation
between the application of accounting principles employed in the preparation
of such statement and the application of accounting principles employed in
the preparation of the next preceding annual or quarterly financial
statements as to which no objection has been made in accordance with the last
sentence of Section 1.02(a) hereof and (ii) reasonable estimates of the
difference between such statements arising as a consequence thereof.
(c) To enable the ready and consistent determination of compliance
with the covenants set forth in Section 9 hereof, the Borrower will not
change (i) the last day of its fiscal year from December 31 of each year, or
(ii) the last days of the first three fiscal quarters in each of its fiscal
years from March 31, June 30 and September 30 of each year, respectively.
1.03 CLASSES AND TYPES OF LOANS. Loans hereunder are distinguished
by "Class" and by "Type". The "Class" of a Loan (or of a Commitment to make
a Loan) refers to whether such Loan is a Revolving Credit Loan, a Facility A
Term Loan or a Facility B Term Loan, each of which constitutes a Class. The
"Type" of a Loan refers to whether such Loan is a Base Rate Loan or a
Eurodollar Loan, each of which constitutes a Type. Loans may be identified
by both Class and Type.
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Section 2. COMMITMENTS, LOANS, NOTES AND PREPAYMENTS.
2.01 LOANS.
(a) REVOLVING CREDIT LOANS. (a) On the Effective Date, the
"Revolving Credit Loans" (as defined in the Prior Credit Agreement) held by
the Revolving Credit Lenders under the Prior Credit Agreement shall
automatically, and without any action on the part of any Person, be
designated as Revolving Credit Loans hereunder. As of the Effective Date,
all Interest Periods under the Prior Credit Agreement in respect of the
"Revolving Credit Loans" under and as defined in the Prior Credit Agreement
shall continue hereunder until the end of such Interest Periods and not be
terminated, and, subject to the provisions of paragraph (d) below, the
Borrower shall be permitted to Continue such "Revolving Credit Loans" as
Eurodollar Loans hereunder, or to Convert such "Revolving Credit Loans" into
Base Rate Loans hereunder. Notwithstanding the amendment and restatement of
the Prior Credit Agreement and the surrender of the promissory notes issued
thereunder as contemplated by Section 7.01(b) hereof, all accrued and unpaid
interest on the "Revolving Credit Loans" held by the Revolving Credit Lenders
under the Prior Credit Agreement as of the Effective Date shall remain
payable and be paid by the Borrower to the respective Revolving Credit
Lenders in accordance with Section 3.02 hereof as if such Revolving Credit
Loans were made hereunder.
From and after the Effective Date, each Revolving Credit Lender
severally agrees, on the terms and conditions of this Agreement, to make loans
to the Borrower in Dollars during the period from and including the Closing Date
to but not including the Revolving Credit Commitment Termination Date in an
aggregate principal amount at any one time outstanding up to but not exceeding
the amount of the Revolving Credit Commitment of such Lender as in effect from
time to time (such Loans being herein called "REVOLVING CREDIT LOANS"), PROVIDED
that in no event shall the aggregate principal amount of all Revolving Credit
Loans, together with the aggregate amount of all Letter of Credit Liabilities,
exceed the aggregate amount of the Revolving
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Credit Commitments as in effect from time to time. Subject to the terms and
conditions of this Agreement, during such period the Borrower may borrow,
repay and reborrow the amount of the Revolving Credit Commitments by means of
Base Rate Loans and Eurodollar Loans and may Convert Revolving Credit Loans
of one Type into Revolving Credit Loans of another Type (as provided in
Section 2.09 hereof) or Continue Revolving Credit Loans of one Type as
Revolving Credit Loans of the same Type (as provided in Section 2.09 hereof).
Anything herein to the contrary notwithstanding, Revolving Credit Loans
shall not be available hereunder until such time as the Facility A Term Loan
Commitments and the Facility B Term Loan Commitments have been fully utilized.
(b) FACILITY A TERM LOANS. On the Effective Date, the "Facility A
Term Loans" (as defined in the Prior Credit Agreement) held by the Facility A
Lenders under the Prior Credit Agreement shall automatically, and without any
action on the part of any Person, be designated as Facility A Term Loans
hereunder. As of the Effective Date, all Interest Periods under the Prior
Credit Agreement in respect of the "Facility A Term Loans" under and as
defined in the Prior Credit Agreement shall continue hereunder until the end
of such Interest Periods and not be terminated, and, subject to the
provisions of paragraph (d) below, the Borrower shall be permitted to
Continue such "Facility A Term Loans" as Eurodollar Loans hereunder, or to
Convert such "Facility A Term Loans" into Base Rate Loans hereunder.
Notwithstanding the termination of the Prior Credit Agreement and the
surrender of the promissory notes issued thereunder as contemplated by
Section 7.01(b) hereof, all accrued and unpaid interest on the "Facility A
Term Loans" held by the Facility A Lenders under the Prior Credit Agreement
as of the Effective Date shall remain payable and be paid by the Borrower to
the respective Facility A Lenders in accordance with Section 3.02 hereof as
if such Facility A Term Loans were made hereunder.
From and after the Effective Date, the Borrower may Convert Facility
A Term Loans of one Type into Facility A Term Loans of another Type (as
provided in Section 2.09 hereof) or
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Continue Facility A Term Loans of one Type as Facility A Term Loans of the
same Type (as provided in Section 2.09 hereof).
(c) FACILITY B TERM LOANS. On the Effective Date, the "Facility B
Term Loans" (as defined in the Prior Credit Agreement) held by the Facility B
Lenders under the Prior Credit Agreement shall automatically, and without any
action on the part of any Person, be designated as Facility B Term Loans
hereunder. As of the Effective Date, all Interest Periods under the Prior
Credit Agreement in respect of the "Facility B Term Loans" under and as
defined in the Prior Credit Agreement shall continue hereunder until the end
of such Interest Periods and not be terminated, and, subject to the
provisions of paragraph (d) below, the Borrower shall be permitted to
Continue such "Facility B Term Loans" as Eurodollar Loans hereunder, or to
Convert such "Facility A Term Loans" into Base Rate Loans hereunder.
Notwithstanding the termination of the Prior Credit Agreement and the
surrender of the promissory notes issued thereunder as contemplated by
Section 7.01(b) hereof, all accrued and unpaid interest on the "Facility B
Term Loans" held by the Facility B Lenders under the Prior Credit Agreement
as of the Effective Date shall remain payable and be paid by the Borrower to
the respective Facility B Lenders in accordance with Section 3.02 hereof as
if such Facility B Term Loans were made hereunder.
From and after the Effective Date, the Borrower may Convert Facility
B Term Loans of one Type into Facility B Term Loans of another Type (as
provided in Section 2.09 hereof) or Continue Facility B Term Loans of one
Type as Facility B Term Loans of the same Type (as provided in Section 2.09
hereof).
(d) LIMIT ON EURODOLLAR LOANS. Notwithstanding the foregoing, (i)
no more than ten separate Interest Periods in respect of Eurodollar Loans of
all Classes from each Lender may be outstanding at any one time and (ii)
prior to June 30, 1996, all Eurodollar Loans of any Class must have an
Interest Period of one month's duration and be coterminous with the Interest
Periods of all other Eurodollar Loans of each other Class, and, to the extent
that prior to such date a Eurodollar Loan would not
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satisfy such conditions, such Loan shall be made, or Continued as or
Converted into, a Base Rate Loan.
2.02 BORROWINGS. The Borrower shall give the Administrative Agent
notice of each borrowing hereunder as provided in Section 4.05 hereof. Not
later than 1:00 p.m. New York time on the date specified for each borrowing
hereunder, each Lender shall make available the amount of the Loan or Loans
to be made by it on such date to the Administrative Agent, at an account in
New York, New York specified by the Administrative Agent, in immediately
available funds, for account of the Borrower. The amount so received by the
Administrative Agent shall, subject to the terms and conditions of this
Agreement, be made available to the Borrower by depositing the same, in
immediately available funds, in an account of the Borrower designated by the
Borrower and maintained with Chase at its principal office in New York, New
York.
2.03 LETTERS OF CREDIT. Subject to the terms and conditions of
this Agreement, the Revolving Credit Commitments may be utilized, upon the
request of the Borrower, in addition to the Revolving Credit Loans provided
for by Section 2.01(a) hereof, by the issuance by the Issuing Lender of
letters of credit (collectively, "LETTERS OF CREDIT") for account of the
Borrower or any of its Subsidiaries (as specified by the Borrower), PROVIDED
that in no event shall (i) the aggregate amount of all Letter of Credit
Liabilities, together with the aggregate principal amount of the Revolving
Credit Loans, exceed the aggregate amount of the Revolving Credit Commitments
as in effect from time to time, (ii) the outstanding aggregate amount of all
Letter of Credit Liabilities exceed $5,000,000 and (iii) the expiration date
(without giving effect to any extension thereof by reason of an interruption
of business) of any Letter of Credit extend beyond the earlier of the
Revolving Credit Commitment Termination Date and the date eighteen months
following the issuance of such Letter of Credit (PROVIDED that any such
Letter of Credit may provide for automatic extensions thereof to a date not
later than twelve months beyond the current expiration date, so long as such
extended expiration date is not later than eighteen months after the date
upon which such
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automatic extension may no longer be canceled). The following additional
provisions shall apply to Letters of Credit:
(a) The Borrower shall give the Administrative Agent at least three
Business Days' irrevocable prior notice (effective upon receipt) specifying
the Business Day (which shall be no later than 30 days preceding the
Revolving Credit Commitment Termination Date) each Letter of Credit is to
be issued and the account party or parties therefor and describing in
reasonable detail the proposed terms of such Letter of Credit (including
the beneficiary thereof) and the nature of the transactions or obligations
proposed to be supported thereby (including whether such Letter of Credit
is to be a commercial letter of credit or a standby letter of credit).
Upon receipt of any such notice, the Administrative Agent shall advise each
Lender of the contents thereof.
(b) On each day during the period commencing with the issuance by the
Issuing Lender of any Letter of Credit and until such Letter of Credit
shall have expired or been terminated, the Revolving Credit Commitment of
each Revolving Credit Lender shall be deemed to be utilized for all
purposes of this Agreement in an amount equal to such Lender's Revolving
Credit Commitment Percentage of the then undrawn face amount of such Letter
of Credit. Each Revolving Credit Lender (other than the Issuing Lender)
agrees that, upon the issuance of any Letter of Credit hereunder, it shall
automatically acquire a participation in the Issuing Lender's liability
under such Letter of Credit in an amount equal to such Lender's Revolving
Credit Commitment Percentage of such liability, and each Revolving Credit
Lender (other than the Issuing Lender) thereby shall absolutely,
unconditionally and irrevocably assume, as primary obligor and not as
surety, and shall be unconditionally obligated to the Issuing Lender to pay
and discharge when due, its Revolving Credit Commitment Percentage of the
Issuing Lender's liability under such Letter of Credit.
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(c) Upon receipt from the beneficiary of any Letter of Credit of any
demand for payment under such Letter of Credit, the Issuing Lender shall
promptly notify the Borrower (through the Administrative Agent) of the
amount to be paid by the Issuing Lender as a result of such demand and the
date on which payment is to be made by the Issuing Lender to such
beneficiary in respect of such demand. Notwithstanding the identity of the
account party of any Letter of Credit, the Borrower hereby unconditionally
agrees to pay and reimburse the Administrative Agent for account of the
Issuing Lender for the amount of each demand for payment under such Letter
of Credit that is in substantial compliance with the provisions of such
Letter of Credit at or prior to the date on which payment is to be made by
the Issuing Lender to the beneficiary thereunder, without presentment,
demand, protest or other formalities of any kind.
(d) Forthwith upon its receipt of a notice referred to in
paragraph (c) of this Section 2.03, the Borrower shall advise the
Administrative Agent whether or not the Borrower intends to borrow
hereunder to finance its obligation to reimburse the Issuing Lender for the
amount of the related demand for payment, PROVIDED that, unless the
Borrower shall otherwise notify the Administrative Agent within one
Business Day of its receipt of such notice, the Borrower shall be deemed to
have requested a borrowing hereunder in the lowest amount permitted under
Section 4.04 which would enable the Borrower to fulfill its payment
obligation in respect of such demand for payment. The proceeds of such
borrowing will be applied automatically to the payment of the Reimbursement
Obligation arising in respect of such demand for payment, with any
remaining portion of such borrowing in excess of the amount of such
Reimbursement Obligation being made available to the Borrower as provided
in Section 2.02 hereof.
(e) Each Revolving Credit Lender (other than the Issuing Lender)
shall pay to the Administrative Agent for account of the Issuing Lender at
its principal office in New
CREDIT AGREEMENT
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York, New York in Dollars and in immediately available funds, the amount of
such Lender's Revolving Credit Commitment Percentage of any payment under
a Letter of Credit upon notice by the Issuing Lender (through the
Administrative Agent) to such Revolving Credit Lender requesting such
payment and specifying such amount. Each such Revolving Credit Lender's
obligation to make such payment to the Administrative Agent for account of
the Issuing Lender under this paragraph (e), and the Issuing Lender's right
to receive the same, shall be absolute and unconditional and shall not be
affected by any circumstance whatsoever, including, without limitation,
the failure of any other Revolving Credit Lender to make its payment under
this paragraph (e), the financial condition of the Borrower (or any other
account party), the existence of any Default or the termination of the
Commitments. Each such payment to the Issuing Lender shall be made without
any offset, abatement, withholding or reduction whatsoever. If any
Revolving Credit Lender shall default in its obligation to make any such
payment to the Administrative Agent for account of the Issuing Lender, for
so long as such default shall continue the Administrative Agent may at the
request of the Issuing Lender withhold from any payments received by the
Administrative Agent under this Agreement or any Note for account of such
Revolving Credit Lender the amount so in default and, to the extent so
withheld, pay the same to the Issuing Lender in satisfaction of such
defaulted obligation.
(f) Upon the making of each payment by a Revolving Credit Lender to
the Issuing Lender pursuant to paragraph (e) above in respect of any Letter
of Credit, such Lender shall, automatically and without any further action
on the part of the Administrative Agent, the Issuing Lender or such Lender,
acquire (i) a participation in an amount equal to such payment in the
Reimbursement Obligation owing to the Issuing Lender by the Borrower
hereunder and under the Letter of Credit Documents relating to such Letter
of Credit and (ii) a participation in a percentage equal to such Lender's
Revolving Credit Commitment Percentage in any interest or other amounts
payable by the Borrower hereunder
CREDIT AGREEMENT
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and under such Letter of Credit Documents in respect of such Reimbursement
Obligation (other than the commissions, charges, costs and expenses
payable to the Issuing Lender pursuant to paragraph (g) of this
Section 2.03). Upon receipt by the Issuing Lender from or for account of
the Borrower of any payment in respect of any Reimbursement Obligation or
any such interest or other amount (including by way of setoff or
application of proceeds of any collateral security) the Issuing Lender
shall promptly pay to the Administrative Agent for account of each
Revolving Credit Lender entitled thereto, such Revolving Credit Lender's
Revolving Credit Commitment Percentage of such payment, each such payment
by the Issuing Lender to be made in the same money and funds in which
received by the Issuing Lender. In the event any payment received by the
Issuing Lender and so paid to the Revolving Credit Lenders hereunder is
rescinded or must otherwise be returned by the Issuing Lender, each
Revolving Credit Lender shall, upon the request of the Issuing Lender
(through the Administrative Agent), repay to the Issuing Lender (through
the Administrative Agent) the amount of such payment paid to such Lender,
with interest at the rate specified in paragraph (j) of this Section 2.03.
(g) The Borrower shall pay to the Administrative Agent for account of
each Revolving Credit Lender (ratably in accordance with their respective
Commitment Percentages) a letter of credit fee in respect of each Letter of
Credit at a rate per annum equal to the Applicable Margin for Revolving
Credit Loans that are Eurodollar Loans MINUS 1/4 of 1%, in respect of the
daily average undrawn face amount of such Letter of Credit for the period
from and including the date of issuance of such Letter of Credit (i) in the
case of a Letter of Credit that expires in accordance with its terms, to
and including such expiration date and (ii) in the case of a Letter of
Credit that is drawn in full or is otherwise terminated other than on the
stated expiration date of such Letter of Credit, to but excluding the date
such Letter of Credit is drawn in full or is terminated (such fee to be
non-refundable, to be paid in arrears on
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each Quarterly Date and on the Revolving Credit Commitment Termination
Date and to be calculated for any day after giving effect to any
payments made under such Letter of Credit on such day). In addition, the
Borrower shall pay to the Administrative Agent for account of the Issuing
Lender a fronting fee in respect of each Letter of Credit in an amount
equal to 1/4 of 1% per annum of the daily average undrawn face amount of
such Letter of Credit for the period from and including the date of
issuance of such Letter of Credit (i) in the case of a Letter of Credit
that expires in accordance with its terms, to and including such
expiration date and (ii) in the case of a Letter of Credit that is drawn
in full or is otherwise terminated other than on the stated expiration
date of such Letter of Credit, to but excluding the date such Letter of
Credit is drawn in full or is terminated (such fee to be non-refundable,
to be paid in arrears on each Quarterly Date and on the Revolving Credit
Commitment Termination Date and to be calculated for any day after giving
effect to any payments made under such Letter of Credit on such day) plus
all commissions, charges, costs and expenses in the amounts customarily
charged by the Issuing Lender from time to time in like circumstances
with respect to the issuance of, or amendments to, each Letter of Credit
and drawings and other transactions relating thereto.
(h) Upon the request of any Revolving Credit Lender from time to
time, the Issuing Lender shall deliver any other information reasonably
requested by such Lender with respect to each Letter of Credit then
outstanding.
(i) The issuance by the Issuing Lender of each Letter of Credit
shall, in addition to the conditions precedent set forth in Section 7
hereof, be subject to the conditions precedent that (i) such Letter of
Credit shall be in such form, contain such terms and support such
transactions as shall be satisfactory to the Issuing Lender consistent with
its then current practices and procedures with respect to letters of credit
of the same type and (ii) the Borrower shall have executed and delivered
such applications, agreements and other instruments relating to such Letter
of
CREDIT AGREEMENT
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Credit as the Issuing Lender shall have reasonably requested consistent
with its then current practices and procedures with respect to letters of
credit of the same type, PROVIDED that such application, agreement or other
instrument shall not impose any financial obligation on the Borrower or any
of its Subsidiaries inconsistent with this Agreement and in the event of
any conflict between any such application, agreement or other instrument
and the provisions of this Agreement or any Security Document, the
provisions of this Agreement and the Security Documents shall control.
(j) To the extent that any Lender shall fail to pay any amount
required to be paid pursuant to paragraph (e) or (f) of this Section 2.03
on the due date therefor, such Lender shall pay interest to the Issuing
Lender (through the Administrative Agent) on such amount from and including
such due date to but excluding the date such payment is made at a rate per
annum equal to the Federal Funds Rate, PROVIDED that if such Lender shall
fail to make such payment to the Issuing Lender within three Business Days
of such due date, then, retroactively to the due date, such Lender shall be
obligated to pay interest on such amount at the Post-Default Rate.
(k) The issuance by the Issuing Lender of any modification or
supplement to any Letter of Credit hereunder shall be subject to the same
conditions applicable under this Section 2.03 to the issuance of new
Letters of Credit, and no such modification or supplement shall be issued
hereunder unless either (i) the respective Letter of Credit affected
thereby would have complied with such conditions had it originally been
issued hereunder in such modified or supplemented form or (ii) each
Revolving Credit Lender shall have consented thereto.
The Borrower hereby indemnifies and holds harmless each Revolving Credit
Lender and the Administrative Agent from and against any and all claims and
damages, losses, liabilities, costs or expenses that such Lender or the
Administrative Agent may incur (or that may be claimed against such Lender or
the Administrative
CREDIT AGREEMENT
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Agent by any Person whatsoever) by reason of or in connection
with the execution and delivery or transfer of or payment or refusal to pay
by the Issuing Lender under any Letter of Credit; PROVIDED that the Borrower
shall not be required to indemnify any Lender or the Administrative Agent for
any claims, damages, losses, liabilities, costs or expenses to the extent,
but only to the extent, caused by (x) the willful misconduct or gross
negligence of the Issuing Lender in determining whether a request presented
under any Letter of Credit complied with the terms of such Letter of Credit
or (y) in the case of the Issuing Lender, such Lender's failure to pay under
any Letter of Credit after the presentation to it of a request strictly
complying with the terms and conditions of such Letter of Credit. Nothing in
this Section 2.03 is intended to limit the other obligations of the Borrower,
any Lender or the Administrative Agent under this Agreement.
2.04 CHANGES OF COMMITMENTS.
(a) The aggregate amount of the Revolving Credit Commitments shall be
automatically reduced to zero on the Revolving Credit Commitment Termination
Date.
(b) Any portion of the Facility A Term Loan Commitments and/or the
Facility B Term Loan Commitments not used on the Closing Date shall be
automatically terminated.
(c) The Borrower shall have the right at any time or from time
to time (i) so long as no Revolving Credit Loans or Letter of Credit
Liabilities are outstanding, to terminate the Revolving Credit Commitments,
(ii) to reduce the aggregate unutilized amount of the Revolving Credit
Commitments (for which purpose use of the Revolving Credit Commitments shall
be deemed to include the aggregate amount of Letter of Credit Liabilities),
and (iii) to terminate both (and not just one) of the Facility A Term Loan
Commitments and the Facility B Term Loan Commitments; PROVIDED that (x) the
Borrower shall give notice of each such termination or reduction as provided
in Section 4.05 hereof and (y) each partial reduction of either the Revolving
Credit Commitments, the Facility A Term Loan Commitments or the Facility
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B Term Loan Commitments shall be in an aggregate amount at least equal to
$5,000,000 (or a larger multiple of $1,000,000).
(d) The Commitments once terminated or reduced may not be
reinstated.
2.05 COMMITMENT FEE. The Borrower shall pay to the
Administrative Agent for account of each Lender a commitment fee on the daily
average unutilized amount of such Lender's Revolving Credit Commitment (for
which purpose the aggregate amount of any Letter of Credit Liabilities shall
be deemed to be a pro rata (based on the Revolving Credit Commitments) use of
each Lender's Revolving Credit Commitment), for the period from and including
the Closing Date to but not including the earlier of the date such Revolving
Credit Commitment is terminated and the Revolving Credit Commitment
Termination Date, at a rate per annum equal to 3/8 of 1%. The Borrower shall
pay to the Administrative Agent for account of each Lender a commitment fee
on the daily average unutilized amount of such Lender's Facility A Term Loan
Commitments and Facility B Term Loan Commitments, for the period from and
including the Closing Date to but not including the earlier of the date such
Term Loan Commitments are terminated and the Term Loan Commitment Termination
Date, at a rate per annum equal to 3/8 of 1%. Accrued commitment fees shall
be payable on the Closing Date, on each Quarterly Date and on the earlier of
the date the relevant Commitments are terminated and the Revolving Credit
Commitment Termination Date or the Term Loan Commitment Date, as the case may
be.
2.06 LENDING OFFICES. The Loans of each Type made by each
Lender shall be made and maintained at such Lender's Applicable Lending Office
for Loans of such Type.
2.07 SEVERAL OBLIGATIONS; REMEDIES INDEPENDENT. The failure
of any Lender to make any Loan to be made by it on the date specified
therefor shall not relieve any other Lender of its obligation to make its
Loan on such date, but neither any Lender nor the Administrative Agent shall
be responsible for the failure of any other Lender to make a Loan to be made
by such other Lender, and (except as otherwise provided in Section 4.06
hereof)
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no Lender shall have any obligation to the Administrative Agent or any other
Lender for the failure by such Lender to make any Loan required to be made by
such Lender.
Anything in this Agreement to the contrary notwithstanding,
each Lender hereby agrees with each other Lender that no Lender shall take
any action to protect or enforce its rights arising out of this Agreement or
the Notes (including, without limitation, exercising any rights of off-set)
without first obtaining the prior written consent of the Administrative Agent
or the Majority Lenders, it being the intent of the Lenders that any such
action to protect or enforce rights under this Agreement and the Notes shall
be taken in concert and at the direction or with the consent of the
Administrative Agent or the Majority Lenders and not individually by a single
Lender.
2.08 NOTES.
(a) The Revolving Credit Loans (other than Registered Loans)
made by each Lender shall be evidenced by a single promissory note of the
Borrower substantially in the form of Exhibit A-1 hereto, dated the Closing
Date, payable to such Lender in a principal amount equal to the amount of its
Revolving Credit Commitment as originally in effect and otherwise duly
completed.
(b) The Facility A Term Loans (other than Registered Loans)
made by each Lender shall be evidenced by a single promissory note of the
Borrower substantially in the form of Exhibit A-2 hereto, dated the Closing
Date, payable to such Lender in a principal amount equal to the amount of its
Facility A Term Loan Commitment as originally in effect and otherwise duly
completed.
(c) The Facility B Term Loans (other than Registered Loans)
made by each Lender shall be evidenced by a single promissory note of the
Borrower substantially in the form of Exhibit A-3 hereto, dated the Closing
Date, payable to such Lender in a principal amount equal to the amount of its
Facility
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B Term Loan Commitment as originally in effect and otherwise duly completed.
(d) The date, amount, Type, interest rate and duration of
Interest Period (if applicable) of each Loan of each Class made by each
Lender to the Borrower, and each payment made on account of the principal
thereof, shall be recorded by such Lender on its books and, prior to any
transfer of any Note evidencing the Loans of such Class held by it, endorsed
by such Lender on the schedule attached to such Note or any continuation
thereof; PROVIDED that the failure of such Lender to make any such
recordation or endorsement shall not affect the obligations of the Borrower
to make a payment when due of any amount owing hereunder or under such Note
in respect of such Loans.
(e) No Lender shall be entitled to have its Notes substituted
or exchanged for any reason, or subdivided for promissory notes of lesser
denominations, except in connection with a permitted assignment of all or any
portion of such Lender's relevant Commitment, Loans and Notes pursuant to
Section 12.06 hereof and except as provided in Section 2.07(f) hereof (and,
if requested by any Lender, the Borrower agrees to so exchange any Note).
(f) Notwithstanding the foregoing, any Lender that is not a
U.S. Person and is not a "bank" within the meaning of Section 881(c)(3)(A) of
the Code may request the Borrower (through the Administrative Agent), and the
Borrower agrees thereupon, to record on the Register referred to in Section
12.06(g) hereof any Loans of any Class held by such Lender under this
Agreement. Loans recorded on the Register ("REGISTERED LOANS") may not be
evidenced by promissory notes other than Registered Notes as defined below
and, upon the registration of any Loan, any promissory note (other than a
Registered Note) evidencing the same shall be null and void and shall be
returned to the Borrower. The Borrower agrees, at the request of any Lender
that is the holder of Registered Loans, to execute and deliver to such Lender
a promissory note in registered form to evidence such Registered Loans (i.e.,
containing the optional registered note language as indicated in
CREDIT AGREEMENT
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Exhibit A-1, A-2 or A-3 hereto, as the case may be) and registered as
provided in Section 12.06(g) hereof (herein, a "REGISTERED NOTE"), dated the
date hereof, payable to such Lender and otherwise duly completed. A Loan
once recorded on the Register may not be removed from the Register so long as
it remains outstanding and a Registered Note may not be exchanged for a
promissory note that is not a Registered Note.
2.09 OPTIONAL PREPAYMENTS AND CONVERSIONS OR CONTINUATIONS OF
LOANS. Subject to Section 4.04 hereof, the Borrower shall have the right to
prepay Loans, to Convert Loans of one Type into Loans of another Type or to
Continue Eurodollar Loans from one Interest Period to another Interest
Period, at any time or from time to time, PROVIDED that: (a) the Borrower
shall give the Administrative Agent notice of each such prepayment,
Conversion or Continuation as provided in Section 4.05 hereof (and, upon the
date specified in any such notice of prepayment, the amount to be prepaid
shall become due and payable hereunder); (b) upon any prepayment or
Conversion of Eurodollar Loans other than on the last day of an Interest
Period for such Loans, the Borrower shall pay any amounts owing under
Section 5.05 hereof as a result of such prepayment or Conversion; (c) any
Conversion into or Continuation of Eurodollar Loans shall be subject to the
provisions of Section 2.01(d) hereof; and (d) prepayments of the Term Loans
shall be allocated between the Facility A Term Loans and Facility B Term Loans
ratably and, then as to each such Class of Term Loans, pro rata to the then
remaining principal installments thereof. Notwithstanding the foregoing, and
without limiting the rights and remedies of the Lenders under Section 10
hereof, in the event that any Event of Default shall have occurred and be
continuing, the Administrative Agent may (and at the request of the Majority
Lenders shall) suspend the right of the Borrower to Convert any Loan into a
Eurodollar Loan, or to Continue any Loan as a Eurodollar Loan, in which event
all Loans shall be Converted (on the last day(s) of the respective Interest
Periods therefor) into, or Continued as, as the case may be, Base Rate Loans.
CREDIT AGREEMENT
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2.10 MANDATORY PREPAYMENTS AND REDUCTIONS OF COMMITMENTS.
(a) CASUALTY EVENTS. Upon the date 90 days following the receipt by
the Borrower or any of its Subsidiaries of the proceeds of insurance,
condemnation award or other compensation in respect of any Casualty Event
affecting any Property of the Borrower or any of its Subsidiaries (or upon such
earlier date as the Borrower or such Subsidiary, as the case may be, shall have
determined not to repair or replace the Property affected by such Casualty
Event), the Borrower shall prepay the Loans (and/or provide cover for Letter of
Credit Liabilities as specified in paragraph (g) below), and the Commitments
shall be subject to automatic reduction, in an aggregate amount, if any, equal
to 100% of the Net Available Proceeds of such Casualty Event not theretofore
applied (or committed to be applied pursuant to executed construction contracts
or equipment orders) to the repair or replacement of such Property or to the
purchase of other Property used or useful in the business of the Borrower and
its Subsidiaries, such prepayment and reduction to be effected in each case in
the manner and to the extent specified in paragraph (f) below, PROVIDED that,
notwithstanding the foregoing, the Borrower shall not be required to make any
prepayment or reduce the Commitments under this paragraph (a) until such time as
the aggregate amount of the required prepayments and reductions of Commitments
hereunder, after deducting any such amounts previously applied to prepayments
and reductions pursuant to this paragraph (a), shall be greater than or equal to
$1,000,000. Nothing in this paragraph (a) shall be deemed to limit any
obligation of the Borrower and its Subsidiaries pursuant to the Security
Agreement to remit to the Collateral Account the proceeds of insurance,
condemnation award or other compensation received in respect of any Casualty
Event, and the Administrative Agent shall release such proceeds to the Borrower
in the manner, and to the extent, provided in Section 4.01(d) of the Security
Agreement.
(b) EQUITY ISSUANCE. Upon any Equity Issuance (other than an Equity
Issuance in connection with the exercise of stock
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options held by any of the Management Group) at a time when the Total Debt Ratio
is greater than or equal to 3.00 to 1, the Borrower shall prepay the Loans
(and/or provide cover for Letter of Credit Liabilities as specified in paragraph
(g) below), and the Commitments shall be subject to automatic reduction, in an
aggregate amount equal to the lesser of (i) 50% of the Net Available Proceeds of
such Equity Issuance or (ii) the amount of such Net Available Proceeds that,
when applied to the prepayment of Loans as contemplated by this Section 2.10,
will result in the Total Debt Ratio being less than 3.00 to 1, such prepayment
and reduction to be effected in each case in the manner and to the extent
specified in paragraph (f) below.
(c) EXCESS CASH FLOW. Not later than the date 90 days after the end
of each fiscal year of the Borrower ending after the Closing Date, the Borrower
shall prepay the Loans (and/or provide cover for Letter of Credit Liabilities as
specified in paragraph (g) below), and the Commitments shall be subject to
automatic reduction, in an aggregate amount equal to the 60% of Excess Cash Flow
for such fiscal year, such prepayment and reduction to be effected in each case
in the manner and to the extent specified in paragraph (f) below, PROVIDED that
Excess Cash Flow for the fiscal year ending December 31, 1996 shall be
determined for purposes of this Section 2.10(c) only for the period from and
after the Closing Date to and including December 31, 1996.
(d) SALE OF ASSETS. Without limiting the obligation of the Borrower
to obtain the consent of the Majority Lenders pursuant to Section 9.05 hereof to
any Disposition not otherwise permitted hereunder, the Borrower agrees, on or
prior to the occurrence of any Disposition (other than an Excluded Disposition)
in which the Net Available Proceeds of such Disposition shall exceed $250,000
(herein, the "CURRENT DISPOSITION"), to deliver to the Administrative Agent
(which shall promptly forward a copy thereof to the Lenders) a statement,
certified by a Senior Officer, in form and detail reasonably satisfactory to the
Administrative Agent, of the estimated amount of the Net Available Proceeds of
the Current Disposition that will (on the date of the Current Disposition) be
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received in cash, in which event the Borrower will prepay the Loans (and/or
provide cover for Letter of Credit Liabilities as specified in paragraph (g)
below), and the Commitments shall be subject to automatic reduction (in each
case in the manner specified in paragraph (f) below as follows:
(i) upon the date of the Current Disposition, in an aggregate amount
equal to 100% of the Net Available Proceeds thereof to the extent received
in cash on the date of the Current Disposition; and
(ii) thereafter, from time to time as the Borrower or any of its
Subsidiaries shall receive Net Available Proceeds during such quarterly
fiscal period in cash under deferred payment or escrow arrangements or
Investments entered into or received in connection with any Disposition, in
an amount equal to (x) 100% of the aggregate amount of such Net Available
Proceeds MINUS (y) any transaction expenses associated with Dispositions
and not previously deducted in the determination of Net Available Proceeds
PLUS (or MINUS, as the case may be) (z) any other adjustment received or
paid by the Borrower or such Subsidiary pursuant to the respective
agreements giving rise to Dispositions and not previously taken into
account in the determination of the Net Available Proceeds of Dispositions,
PROVIDED that, notwithstanding the foregoing, the Borrower shall not be required
to make any prepayment or reduce Commitments under this paragraph (d) until such
time as the aggregate amount of the required prepayments and reductions of
Commitments pursuant to the foregoing clauses (i) and (ii) (with respect to the
then Current Disposition and all prior Dispositions as to which a prepayment has
not yet been made under this paragraph (d)), after deducting any such amounts
previously applied to prepayments and reductions of Commitments pursuant to this
paragraph (d), shall be greater than or equal to $1,000,000.
(e) DEBT ISSUANCE. Upon any issuance or incurrence of Indebtedness
after the Closing Date (other than Indebtedness permitted under Sections
9.07(a), (b), (d) and (e) hereof), (i)
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at any time when the Total Debt Ratio is greater than or equal to 3.00 to 1, in
respect of Subordinated Indebtedness permitted under Section 9.12(a) hereof or
(ii) in respect of any other Indebtedness (other than the Loans), the Borrower
shall prepay the Loans (and/or provide cover for Letter of Credit Liabilities as
specified in paragraph (g) below), and the Commitments shall be subject to
automatic reduction, in an aggregate amount equal to 100% of the Net Available
Proceeds thereof (or, with respect to any Subordinated Indebtedness referred to
in clause (i) above, the amount of such Net Available Proceeds that, when
applied to the prepayment of Loans as contemplated by this Section 2.10, will
result in the Total Debt Ratio being less than 3.00 to 1, whichever amount is
lesser), such prepayment to be effected in each case in the manner and to the
extent specified in paragraph (f) below;
(f) APPLICATION. Prepayments and reductions of Commitments described
in the above paragraphs of this Section 2.10 shall be applied without penalty or
premium (except for any interest rate breakage costs pursuant to Section 5.05
hereof), first, to repay Term Loans ratably as between the Facility A Term Loans
and the Facility B Term Loans, pro rata to the then remaining respective
principal installments and, thereafter, to reduce permanently the aggregate
amount of Revolving Credit Commitments (and, if after such reduction the
aggregate principal amount of Revolving Credit Loans, together with the
aggregate amount of Letter of Credit Liabilities, exceed the aggregate amount of
such Revolving Credit Commitments, to prepay Revolving Credit Loans and/or
provide cover for outstanding letters of credit as provided in paragraph (g)
below). Notwithstanding the foregoing, the amount required to be applied in
respect of the Facility A Term Loans under paragraph (c) above shall be applied
in respect of such Term Loans as follows: first, 25% of such amount shall be
applied in direct order of the then remaining principal installments of such
Term Loans scheduled to fall due during the period of 12 months immediately
succeeding the date of such application; and, then, the remainder shall be
applied as provided above in this paragraph (f).
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(g) COVER FOR LETTER OF CREDIT LIABILITIES. In the event that the
Borrower shall be required pursuant to this Section 2.10, or pursuant to Section
3.01(a) hereof, to provide cover for Letter of Credit Liabilities, the Borrower
shall effect the same by paying to the Administrative Agent immediately
available funds in an amount equal to the required amount, which funds shall be
retained by the Administrative Agent in the Collateral Account (as provided
therein as collateral security in the first instance for the Letter of Credit
Liabilities) until such time as the Letters of Credit shall have been terminated
and all of the Letter of Credit Liabilities have been paid in full.
Section 3. PAYMENTS OF PRINCIPAL AND INTEREST.
3.01 REPAYMENT OF LOANS.
(a) REVOLVING CREDIT LOANS. The Borrower hereby promises to pay to
the Administrative Agent for account of each Lender the entire outstanding
principal amount of such Lender's Revolving Credit Loans, and each Revolving
Credit Loan shall mature, on the Revolving Credit Commitment Termination Date.
In addition, if following any Commitment Reduction Date the aggregate principal
amount of the Revolving Credit Loans, together with the aggregate amount of all
Letter of Credit Liabilities, shall exceed the Revolving Credit Commitments, the
Borrower shall, first, prepay Revolving Credit Loans, and, second, provide cover
for Letter of Credit Liabilities in an aggregate amount equal to such excess
(such cover for Letter of Credit Liabilities to be effected in the manner
provided in Section 2.10(h) hereof).
(b) FACILITY A TERM LOANS. The Borrower hereby promises to pay to
the Administrative Agent for account of the Facility A Lenders the principal of
the Facility A Term Loans in twenty-one installments payable on the Principal
Payment Dates as follows:
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Principal Payment Date
Falling on or Nearest to: Amount of Installment ($)
------------------------- -------------------------
March 31, 1997 $5,000,000
June 30, 1997 1,750,000
September 30, 1997 1,750,000
December 31, 1997 1,750,000
March 31, 1998 1,750,000
June 30, 1998 2,000,000
September 30, 1998 2,000,000
December 31, 1998 2,000,000
March 31, 1999 2,000,000
June 30, 1999 2,250,000
September 30, 1999 2,250,000
December 31, 1999 2,250,000
March 31, 2000 2,250,000
June 30, 2000 2,500,000
September 30, 2000 2,500,000
December 31, 2000 2,500,000
March 31, 2001 2,500,000
June 30, 2001 2,750,000
September 30, 2001 2,750,000
December 31, 2001 2,750,000
March 31, 2002 2,750,000
If the Borrower does not borrow the full amount of the aggregate Facility A Term
Loan Commitments on the Closing Date, the shortfall shall be applied to reduce
the foregoing installments ratably.
(c) FACILITY B TERM LOANS. The Borrower hereby promises to pay to
the Administrative Agent for account of the Facility B Lenders the principal of
the Facility B Term Loans in
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fourteen installments payable on the Principal Payment Dates as follows:
Principal Payment Date
Falling on or Nearest to: Amount of Installment ($)
------------------------- -------------------------
March 31, 1997 $ 500,000
March 31, 1998 500,000
March 31, 1999 500,000
March 31, 2000 500,000
March 31, 2001 500,000
March 31, 2002 500,000
June 30, 2002 5,875,000
September 30, 2002 5,875,000
December 31, 2002 5,875,000
March 31, 2003 5,875,000
June 30, 2003 5,875,000
September 30, 2003 5,875,000
December 31, 2003 5,875,000
March 31, 2004 5,875,000
If the Borrower does not borrow the full amount of the aggregate Facility B Term
Loan Commitments on the Closing Date, the shortfall shall be applied to reduce
the foregoing installments ratably.
3.02 INTEREST. The Borrower hereby promises to pay to the
Administrative Agent for account of each Lender interest on the unpaid principal
amount of each Loan made by such Lender for the period from and including the
date of such Loan to but excluding the date such Loan shall be paid in full, at
the following rates per annum:
(a) during such periods as such Loan is a Base Rate Loan, the Base
Rate (as in effect from time to time) PLUS the Applicable Margin; and
(b) during each Interest Period for such Loan during which such Loan
is a Eurodollar Loan, the Eurodollar Rate for such Interest Period PLUS the
Applicable Margin.
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Notwithstanding the foregoing, the Borrower hereby promises to pay to the
Administrative Agent for account of each Lender interest on all of the Loans or
Reimbursement Obligations hereunder at the applicable Post-Default Rate on any
principal of any Loan made by such Lender and on any other amount payable by the
Borrower hereunder to or for account of such Lender, that shall not be paid in
full when due (whether at stated maturity, by acceleration, by mandatory
prepayment or otherwise), for the period from and including the due date thereof
to but excluding the date the same is paid in full. Accrued interest on each
Loan shall be payable (i) in the case of a Base Rate Loan, quarterly on the
Quarterly Dates, (ii) in the case of a Eurodollar Loan, on the last day of each
Interest Period therefor and, if such Interest Period is longer than three
months, at three-month intervals following the first day of such Interest
Period, and (iii) in the case of any Loan, upon the payment or prepayment
thereof or the Conversion of such Loan to a Loan of another Type (but only on
the principal amount so paid, prepaid or Converted), except that interest
payable at the Post-Default Rate shall be payable from time to time on demand.
Promptly after the determination of any interest rate provided for herein or any
change therein, the Administrative Agent shall give notice thereof to the
Lenders to which such interest is payable and to the Borrower.
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Section 4. PAYMENTS; PRO RATA TREATMENT; COMPUTATIONS; ETC.
4.01 PAYMENTS.
(a) Except to the extent otherwise provided herein, all payments of
principal, interest, Reimbursement Obligations and other amounts to be made by
the Borrower under this Agreement and the Notes, and, except to the extent
otherwise provided therein, all payments to be made by the Obligors under any
other Loan Document, shall be made in Dollars, in immediately available funds,
without deduction, set-off or counterclaim, to the Administrative Agent at an
account in New York, New York specified by the Administrative Agent, not later
than 1:00 p.m. New York time on the date on which such payment shall become due
(each such payment made after such time on such due date to be deemed to have
been made on the next succeeding Business Day).
(b) Any Lender for whose account any such payment is to be made may
(but shall not be obligated to) debit the amount of any such payment that is not
made to the Administrative Agent when due pursuant to Section 4.01(a) hereof to
any ordinary deposit account of the Borrower with such Lender (with notice to
the Borrower and the Administrative Agent), PROVIDED that such Lender's failure
to give such notice shall not affect the validity thereof.
(c) The Borrower shall, at the time of making each payment under this
Agreement or any Note for account of any Lender, specify to the Administrative
Agent (which shall so notify the intended recipient(s) thereof) the Loans,
Reimbursement Obligations or other amounts payable by the Borrower hereunder to
which such payment is to be applied (and in the event that the Borrower fails to
so specify, or if an Event of Default has occurred and is continuing, the
Administrative Agent may distribute such payment to the Lenders for application
in such manner as it or the Majority Lenders, subject to Section 4.02 hereof,
may determine to be appropriate).
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(d) Except to the extent otherwise provided in the last sentence of
Section 2.03(e) hereof, each payment received by the Administrative Agent under
this Agreement or any Note for account of any Lender shall be paid by the
Administrative Agent promptly to such Lender, in immediately available funds,
for account of such Lender's Applicable Lending Office for the Loan or other
obligation in respect of which such payment is made.
(e) If the due date of any payment under this Agreement or any Note
would otherwise fall on a day that is not a Business Day, such date shall be
extended to the next succeeding Business Day, and interest shall be payable for
any principal so extended for the period of such extension.
4.02 PRO RATA TREATMENT. Except to the extent otherwise provided
herein: (a) each borrowing of Loans of a particular Class from the Lenders
under Section 2.01 hereof shall be made from the relevant Lenders, each payment
of commitment fee under Section 2.05 hereof in respect of Commitments of a
particular Class shall be made for account of the relevant Lenders, and each
termination or reduction of the amount of the Commitments of a particular Class
under Section 2.03 hereof shall be applied to the respective Commitments of such
Class of the relevant Lenders, pro rata according to the amounts of their
respective Commitments of such Class; (b) except as otherwise provided in
Section 5.04 hereof, Eurodollar Loans of any Class having the same Interest
Period shall be allocated pro rata among the relevant Lenders according to the
amounts of their respective Revolving Credit Commitments, Facility A Term Loan
Commitments and Facility B Term Loan Commitments (in the case of the making of
Loans) or their respective Revolving Credit Loans, Facility A Term Loans and
Facility B Term Loans (in the case of Conversions and Continuations of Loans);
(c) each payment or prepayment of principal of Revolving Credit Loans, Facility
A Term Loans or Facility B Term Loans by the Borrower shall be made for account
of the relevant Lenders pro rata in accordance with the respective unpaid
principal amounts of the Loans of such Class held by them; and (d) each payment
of interest on Revolving Credit Loans, Facility A Term Loans and Facility B Term
Loans by the Borrower shall be made for account of the relevant Lenders
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pro rata in accordance with the amounts of interest on such Loans then due and
payable to the respective Lenders.
4.03 COMPUTATIONS. Interest on Eurodollar Loans and commitment fee
and letter of credit fees shall be computed on the basis of a year of 360 days
and actual days elapsed (including the first day but, except as otherwise
provided in Section 2.03(g) hereof, excluding the last day) occurring in the
period for which payable and interest on Base Rate Loans and Reimbursement
Obligations shall be computed on the basis of a year of 365 or 366 days, as the
case may be, and actual days elapsed (including the first day but excluding the
last day) occurring in the period for which payable. Notwithstanding the
foregoing, for each day that the Base Rate is calculated by reference to the
Federal Funds Rate, interest on Base Rate Loans and Reimbursement Obligations
shall be computed on the basis of a year of 360 days and actual days elapsed.
4.04 MINIMUM AMOUNTS. Except for mandatory prepayments made pursuant
to Section 2.10 hereof and Conversions or prepayments made pursuant to
Section 5.04 hereof, (a) each borrowing, Conversion and partial prepayment of
principal of Base Rate Loans shall be in an aggregate amount at least equal to
$1,000,000 or a larger multiple of $100,000 and (b) each borrowing,
Continuation, Conversion or partial prepayment of principal of Eurodollar Loans
shall be in an aggregate amount at least equal to $1,000,000 or a larger
multiple of $1,000,000 (borrowings, Conversions or prepayments of or into Loans
of different Types or, in the case of Eurodollar Loans, having different
Interest Periods at the same time hereunder to be deemed separate borrowings,
Conversions and prepayments for purposes of the foregoing, one for each Type or
Interest Period), and if any Eurodollar Loans would otherwise be in a lesser
principal amount for any period, such Loans shall be Base Rate Loans during such
period.
4.05 CERTAIN NOTICES. Notices by the Borrower to the Administrative
Agent of terminations or reductions of the Commitments, of borrowings,
Conversions, Continuations and optional prepayments of Loans, of Classes of
Loans, of Types of
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Loans and of the duration of Interest Periods shall be irrevocable and shall be
effective only if received by the Administrative Agent not later than 12:00 noon
New York time on the number of Business Days prior to the date of the relevant
termination, reduction, borrowing, Conversion, Continuation or prepayment or the
first day of such Interest Period specified below:
Number of
Business
Notice Days Prior
------ ----------
Termination or reduction
of Commitments 5
Borrowing or prepayment of,
or Conversions into,
Base Rate Loans 1
Borrowing or prepayment of,
Conversions into, Continuations
as, or duration of Interest
Period for, Eurodollar Loans 3
Each such notice of termination or reduction shall specify the amount and the
Class of the Commitments to be terminated or reduced. Each such notice of
borrowing, Conversion, Continuation or optional prepayment shall specify the
Class of Loans to be borrowed, Converted, Continued or prepaid and the amount
(subject to Section 4.04 hereof) and Type of each Loan to be borrowed,
Converted, Continued or prepaid and the date of borrowing, Conversion,
Continuation or optional prepayment (which shall be a Business Day). Each such
notice of the duration of an Interest Period shall specify the Loans to which
such Interest Period is to relate. The Administrative Agent shall promptly
notify the Lenders of the contents of each such notice. In the event that the
Borrower fails to select the Type of Loan, or the duration of any Interest
Period for any Eurodollar Loan, within the time period and otherwise as provided
in this Section 4.05, such Loan
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(if outstanding as a Eurodollar Loan) will be automatically Converted into a
Base Rate Loan on the last day of the then current Interest Period for such Loan
or (if outstanding as a Base Rate Loan) will remain as, or (if not then
outstanding) will be made as, a Base Rate Loan.
4.06 NON-RECEIPT OF FUNDS BY THE ADMINISTRATIVE AGENT. Unless the
Administrative Agent shall have been notified by a Lender or the Borrower (the
"PAYOR") prior to the date on which the Payor is to make payment to the
Administrative Agent of (in the case of a Lender) the proceeds of a Loan to be
made by such Lender hereunder or (in the case of the Borrower) a payment to the
Administrative Agent for account of one or more of the Lenders hereunder (such
payment being herein called the "REQUIRED PAYMENT"), which notice shall be
effective upon receipt, that the Payor does not intend to make the Required
Payment to the Administrative Agent, the Administrative Agent may assume that
the Required Payment has been made and may, in reliance upon such assumption
(but shall not be required to), make the amount thereof available to the
intended recipient(s) on such date; and, if the Payor has not in fact made the
Required Payment to the Administrative Agent, the recipient(s) of such payment
shall, on demand, repay to the Administrative Agent the amount so made available
together with interest thereon in respect of each day during the period
commencing on the date (the "ADVANCE DATE") such amount was so made available by
the Administrative Agent until the date the Administrative Agent recovers such
amount at a rate per annum equal to the Federal Funds Rate for such day and, if
such recipient(s) shall fail promptly to make such payment, the Administrative
Agent shall be entitled to recover such amount, on demand, from the Payor,
together with interest as aforesaid, PROVIDED that if neither the recipient(s)
nor the Payor shall return the Required Payment to the Administrative Agent
within three Business Days of the Advance Date, then, retroactively to the
Advance Date, the Payor and the recipient(s) shall each be obligated to pay
interest on the Required Payment as follows:
(i) if the Required Payment shall represent a payment to be made by
the Borrower to the Lenders, the Borrower and
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the recipient(s) shall each be obligated retroactively to the Advance Date
to pay interest in respect of the Required Payment at the Post-Default Rate
(without duplication of the obligation of the Borrower under Section 3.02
hereof to pay interest on the Required Payment at the Post-Default Rate),
it being understood that the return by the recipient(s) of the Required
Payment to the Administrative Agent shall not limit such obligation of the
Borrower under said Section 3.02 to pay interest at the Post-Default Rate
in respect of the Required Payment, and
(ii) if the Required Payment shall represent proceeds of a Loan to be
made by the Lenders to the Borrower, the Payor and the Borrower shall each
be obligated retroactively to the Advance Date to pay interest in respect
of the Required Payment pursuant to whichever of the rates specified in
Section 3.02 hereof is applicable to the Type of such Loan, it being
understood that the return by the Borrower of the Required Payment to the
Administrative Agent shall not limit any claim the Borrower may have
against the Payor in respect of such Required Payment.
4.07 SHARING OF PAYMENTS, ETC.
(a) Each Obligor agrees that, in addition to (and without limitation
of) any right of set-off, banker's lien or counterclaim a Lender may otherwise
have, each Lender shall be entitled, at its option (to the fullest extent
permitted by law), to set off and apply any deposit (general or special, time or
demand, provisional or final), or other indebtedness, held by it for the credit
or account of such Obligor at any of its offices, in Dollars or in any other
currency, against any principal of or interest on any of such Lender's Loans,
Reimbursement Obligations or any other amount payable to such Lender hereunder,
that is not paid when due (regardless of whether such deposit or other
indebtedness is then due to such Obligor), in which case it shall promptly
notify such Obligor and the Administrative Agent thereof, PROVIDED that such
Lender's failure to give such notice shall not affect the validity thereof.
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(b) If any Lender shall obtain from any Obligor payment of any
principal of or interest on any Loan of any Class or Letter of Credit Liability
owing to it or payment of any other amount under this Agreement or any other
Loan Document through the exercise of any right of set-off, banker's lien or
counterclaim or similar right or otherwise (other than from the Administrative
Agent as provided herein), and, as a result of such payment, such Lender shall
have received a greater percentage of the principal of or interest on the Loans
of such Class or Letter of Credit Liabilities or such other amounts then due
hereunder or thereunder by such Obligor to such Lender than the percentage
received by any other Lender, it shall promptly purchase from such other Lenders
participations in (or, if and to the extent specified by such Lender, direct
interests in) the Loans of such Class or Letter of Credit Liabilities or such
other amounts, respectively, owing to such other Lenders (or in interest due
thereon, as the case may be) in such amounts, and make such other adjustments
from time to time as shall be equitable, to the end that all the Lenders shall
share the benefit of such excess payment (net of any expenses that may be
incurred by such Lender in obtaining or preserving such excess payment) pro rata
in accordance with the unpaid principal of and/or interest on the Loans of such
Class or Letter of Credit Liabilities or such other amounts, respectively, owing
to each of the Lenders. To such end all the Lenders shall make appropriate
adjustments among themselves (by the resale of participations sold or otherwise)
if such payment is rescinded or must otherwise be restored.
(c) The Borrower agrees that any Lender so purchasing such a
participation (or direct interest) may exercise all rights of set-off, banker's
lien, counterclaim or similar rights with respect to such participation as fully
as if such Lender were a direct holder of Loans or other amounts (as the case
may be) owing to such Lender in the amount of such participation.
(d) Nothing contained herein shall require any Lender to exercise any
such right or shall affect the right of any Lender to exercise, and retain the
benefits of exercising, any such right with respect to any other indebtedness or
obligation
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of any Obligor. If, under any applicable bankruptcy, insolvency or other
similar law, any Lender receives a secured claim in lieu of a set-off to which
this Section 4.07 applies, such Lender shall, to the extent practicable,
exercise its rights in respect of such secured claim in a manner consistent with
the rights of the Lenders entitled under this Section 4.07 to share in the
benefits of any recovery on such secured claim.
Section 5. YIELD PROTECTION, ETC.
5.01 ADDITIONAL COSTS.
(a) The Borrower shall pay directly to each Lender from time to time
such amounts as such Lender may determine to be necessary to compensate such
Lender for any costs that such Lender determines are attributable to its making
or maintaining of any Eurodollar Loans or its obligation to make any Eurodollar
Loans hereunder, or any reduction in any amount receivable by such Lender
hereunder in respect of any of such Loans or such obligation (such increases in
costs and reductions in amounts receivable being herein called "ADDITIONAL
COSTS"), resulting from any Regulatory Change that:
(i) shall subject any Lender (or its Applicable Lending Office for
any of such Loans) to any tax, duty or other charge in respect of such
Loans or its Notes or changes the basis of taxation of any amounts payable
to such Lender under this Agreement or its Notes in respect of any of such
Loans (excluding changes in the rate of tax on the overall net income of
such Lender or of such Applicable Lending Office by the jurisdiction in
which such Lender has its principal office or such Applicable Lending
Office and excluding any U.S. Taxes that would not be payable under the
proviso in the first paragraph of Section 5.07(a) hereof); or
(ii) imposes or modifies any reserve, special deposit or similar
requirements (other than the Reserve Requirement used in the determination
of the Eurodollar Rate for any
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Interest Period for such Loan) relating to any extensions of credit or
other assets of, or any deposits with or other liabilities of, such Lender
(including, without limitation, any of such Loans or any deposits referred
to in the definition of "Eurodollar Base Rate" in Section 1.01 hereof), or
any commitment of such Lender (including, without limitation, the
Commitments of such Lender hereunder); or
(iii) imposes any other condition affecting this Agreement or its
Notes (or any of such extensions of credit or liabilities) or its
Commitments.
If any Lender requests compensation from the Borrower under this
Section 5.01(a), the Borrower may, by notice to such Lender (with a copy to the
Administrative Agent), suspend the obligation of such Lender thereafter to make
or Continue Eurodollar Loans, or to Convert Loans of any other Type into
Eurodollar Loans, until the Regulatory Change giving rise to such request ceases
to be in effect (in which case the provisions of Section 5.04 hereof shall be
applicable), PROVIDED that such suspension shall not affect the right of such
Lender to receive the compensation so requested.
(b) Without limiting the effect of the foregoing provisions of this
Section 5.01 (but without duplication), the Borrower shall pay directly to each
Lender from time to time on request such amounts as such Lender may determine to
be necessary to compensate such Lender (or, without duplication, the holding
company of which such Lender is a subsidiary) for any costs that it determines
are attributable to the maintenance by such Lender (or any Applicable Lending
Office or such holding company), pursuant to any law or regulation or any
interpretation, directive or request (whether or not having the force of law and
whether or not failure to comply therewith would be unlawful) of any court or
governmental or monetary authority (i) following any Regulatory Change or
(ii) implementing any risk-based capital guideline or other requirement (whether
or not having the force of law and whether or not the failure to comply
therewith would be unlawful) hereafter issued by any government or governmental
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or supervisory authority implementing at the national level the Basle Accord, of
capital in respect of its Commitments or Loans (such compensation to include,
without limitation, an amount equal to any reduction of the rate of return on
assets or equity of such Lender (or any Applicable Lending Office or such
holding company) to a level below that which such Lender (or any Applicable
Lending Office or such holding company) could have achieved but for such law,
regulation, interpretation, directive or request).
(c) Each Lender shall notify the Borrower of any event occurring
after the Closing Date entitling such Lender to compensation under
Section 5.01(a) or 5.01(b) hereof as promptly as practicable, but in any event
within 45 days, after such Lender obtains actual knowledge thereof; PROVIDED
that (i) if any Lender fails to give such notice within 45 days after it obtains
actual knowledge of such an event, such Lender shall, with respect to
compensation payable pursuant to this Section 5.01 in respect of any costs
resulting from such event, only be entitled to payment under this Section 5.01
for costs incurred from and after the date 45 days prior to the date that such
Lender does give such notice and (ii) each Lender will designate a different
Applicable Lending Office for the Loans of such Lender affected by such event if
such designation will avoid the need for, or reduce the amount of, such
compensation and will not, in the sole opinion of such Lender, be
disadvantageous to such Lender, except that such Lender shall have no obligation
to designate an Applicable Lending Office located in the United States of
America. Each Lender will furnish to the Borrower a certificate setting forth
the basis and amount of each request by such Lender for compensation under
Section 5.01(a) or 5.01(b) hereof. Determinations and allocations by any Lender
for purposes of this Section 5.01 of the effect of any Regulatory Change
pursuant to Section 5.01(a) hereof, or of the effect of capital maintained
pursuant to Section 5.01(b) hereof, on its costs or rate of return of
maintaining Loans or its obligation to make Loans, or on amounts receivable by
it in respect of Loans, and of the amounts required to compensate such Lender
under this Section 5.01, shall be conclusive, PROVIDED that such determinations
and allocations are made on a reasonable basis.
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5.02 LIMITATION ON TYPES OF LOANS. Anything herein to the contrary
notwithstanding, if, on or prior to the determination of the Eurodollar Base
Rate for any Interest Period for any Eurodollar Loan;
(a) the Administrative Agent determines, which determination shall be
conclusive, that quotations of interest rates for the relevant deposits
referred to in the definition of "Eurodollar Base Rate" in Section 1.01
hereof are not being provided in the relevant amounts or for the relevant
maturities for purposes of determining rates of interest for Eurodollar
Loans as provided herein; or
(b) if the related Loans are Revolving Credit Loans, the Majority
Revolving Credit Lenders or, if the related Loans are Facility A Term Loans
or Facility B Term Loans, the Majority Facility A Lenders or Majority
Facility B Lenders, respectively, determine, which determination shall be
conclusive, and notify the Administrative Agent that the relevant rates of
interest referred to in the definition of "Eurodollar Base Rate" in
Section 1.01 hereof upon the basis of which the rate of interest for
Eurodollar Loans for such Interest Period is to be determined are not
likely adequately to cover the cost to such Lenders of making or
maintaining Eurodollar Loans for such Interest Period;
then the Administrative Agent shall give the Borrower and each Lender prompt
notice thereof and, so long as such condition remains in effect, the Lenders
shall be under no obligation to make additional Eurodollar Loans, to Continue
Eurodollar Loans or to Convert Loans of any other Type into Eurodollar Loans,
and the Borrower shall, on the last day(s) of the then current Interest
Period(s) for the outstanding Eurodollar Loans, either prepay such Loans or
Convert such Loans into another Type of Loan in accordance with Section 2.09
hereof.
5.03 ILLEGALITY. Notwithstanding any other provision of this
Agreement, in the event that it becomes unlawful, or any central bank or other
governmental authority asserts that it is
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unlawful, for any Lender or its Applicable Lending Office to honor its
obligation to make or maintain Eurodollar Loans hereunder (and, in the sole
opinion of such Lender, the designation of a different Applicable Lending Office
would either not avoid such unlawfulness or would be disadvantageous to such
Lender), then such Lender shall promptly notify the Borrower thereof (with a
copy to the Administrative Agent) and such Lender's obligation to make or
Continue, or to Convert Loans of any other Type into, Eurodollar Loans shall be
suspended until such time as such Lender may again make and maintain Eurodollar
Loans (in which case the provisions of Section 5.04 hereof shall be applicable).
5.04 TREATMENT OF AFFECTED LOANS. If the obligation of any Lender to
make Eurodollar Loans or to Continue, or to Convert Base Rate Loans into,
Eurodollar Loans shall be suspended pursuant to Section 5.01 or 5.03 hereof,
such Lender's Eurodollar Loans shall be automatically Converted into Base Rate
Loans on the last day(s) of the then current Interest Period(s) for Eurodollar
Loans (or, in the case of a Conversion resulting from a circumstance described
in Section 5.03 hereof, on such earlier date as such Lender may specify to the
Borrower with a copy to the Administrative Agent) and, unless and until such
Lender gives notice as provided below that the circumstances specified in
Section 5.01 or 5.03 hereof that gave rise to such Conversion no longer exist:
(a) to the extent that such Lender's Eurodollar Loans have been so
Converted, all payments and prepayments of principal that would otherwise
be applied to such Lender's Eurodollar Loans shall be applied instead to
its Base Rate Loans; and
(b) all Loans that would otherwise be made or Continued by such
Lender as Eurodollar Loans shall be made or Converted into Base Rate Loans,
and all Base Rate Loans of such Lender that would otherwise be Converted
into Eurodollar Loans shall remain as Base Rate Loans.
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If such Lender gives notice to the Borrower with a copy to the Administrative
Agent that the circumstances specified in Section 5.01 or 5.03 hereof that gave
rise to the Conversion of such Lender's Eurodollar Loans pursuant to this
Section 5.04 no longer exist (which such Lender agrees to do promptly upon such
circumstances ceasing to exist) at a time when Eurodollar Loans of the same
Class made by other Lenders are outstanding, such Lender's Base Rate Loans of
such Class shall be automatically Converted, on the first day(s) of the next
succeeding Interest Period(s) for such outstanding Eurodollar Loans, to the
extent necessary so that, after giving effect thereto, all Base Rate Loans and
Eurodollar Loans of such Class are allocated among the Lenders ratably (as to
principal amounts, Types and Interest Periods) in accordance with their
respective Commitments of such Class.
5.05 COMPENSATION. The Borrower shall pay to the Administrative
Agent for account of each Lender, upon the request of such Lender through the
Administrative Agent, such amount or amounts as shall be sufficient (in the
reasonable opinion of such Lender) to compensate it for any loss, cost or
expense (including, without limitation, any loss, cost or expense incurred by
reason of the liquidation or reemployment of deposits or other funds required by
such Lender to fund its Eurodollar Loans) which such Lender may sustain:
(a) if any payment, mandatory or optional prepayment or Conversion of
a Eurodollar Loan made by such Lender for any reason (including, without
limitation, the acceleration of the Loans pursuant to Section 10 hereof)
occurs on a date other than the last day of the Interest Period for such
Loan; or
(b) if the Borrower fails for any reason (including, without
limitation, the failure of any of the conditions precedent specified in
Section 7 hereof to be satisfied) to borrow a Eurodollar Loan from such
Lender on the date for such borrowing specified in the relevant notice of
borrowing given pursuant to Section 2.02 hereof.
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Calculation of all amounts payable to a Lender under this Section 5.05 shall be
made as though such Lender had actually funded its relevant Eurodollar Loan
through the purchase of a Eurodollar deposit bearing interest at the Eurodollar
Rate in an amount equal to the amount of such Loan, having a maturity comparable
to the relevant Interest Period and through the transfer of such Eurodollar
deposit from an offshore office of such Lender to a domestic office of such
Lender in the United States of America; PROVIDED, HOWEVER, that each Lender may
fund each of its Eurodollar Loans in any manner it sees fit and the foregoing
assumption shall be utilized only for the calculation of amounts payable under
this Section 5.05.
5.06 ADDITIONAL COSTS IN RESPECT OF LETTERS OF CREDIT. Without
limiting the obligations of the Borrower under Section 5.01 hereof (but without
duplication), if as a result of any Regulatory Change or any risk-based capital
guideline or other requirement heretofore or hereafter issued by any government
or governmental or supervisory authority implementing at the national level the
Basle Accord there shall be imposed, modified or deemed applicable any tax,
reserve, special deposit, capital adequacy or similar requirement against or
with respect to or measured by reference to Letters of Credit issued or to be
issued hereunder and the result shall be to increase the cost to any Lender or
Lenders of issuing (or purchasing participations in) or maintaining its
obligation hereunder to issue (or purchase participations in) any Letter of
Credit hereunder or reduce any amount receivable by any Lender hereunder in
respect of any Letter of Credit (which increases in cost, or reductions in
amount receivable, shall be the result of such Lender's or Lenders' reasonable
allocation of the aggregate of such increases or reductions resulting from such
event), then, upon demand by such Lender or Lenders (through the Administrative
Agent), the Borrower shall pay immediately to the Administrative Agent for
account of such Lender or Lenders, from time to time as specified by such Lender
or Lenders (through the Administrative Agent), such additional amounts as shall
be sufficient to compensate such Lender or Lenders (through the Administrative
Agent) for such increased costs or reductions in amount. A statement as to such
increased costs or reductions in amount incurred by any such
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Lender or Lenders, submitted by such Lender or Lenders to the Borrower shall be
conclusive in the absence of manifest error as to the amount thereof.
5.07 U.S. TAXES.
(a) The Borrower agrees to pay to each Lender that is not a
U.S. Person such additional amounts as are necessary in order that the net
payment of any amount due to such non-U.S. Person hereunder after deduction for
or withholding in respect of any U.S. Taxes imposed with respect to such payment
(or in lieu thereof, payment of such U.S. Taxes by such non-U.S. Person), will
not be less than the amount stated herein to be then due and payable, PROVIDED
that the foregoing obligation to pay such additional amounts shall not apply:
(i) to any payment to any Lender hereunder (other than in respect of
any Registered Loan) unless such Lender is, on the Closing Date (or on the
date it becomes a Lender hereunder as provided in Section 12.06(b) hereof)
and on the date of any change in the Applicable Lending Office of such
Lender, either entitled to submit a Form 1001 (relating to such Lender and
entitling it to a complete exemption from withholding on all interest to be
received by it hereunder in respect of the Loans) or Form 4224 (relating to
all interest to be received by such Lender hereunder in respect of the
Loans),
(ii) to any payment to any Lender hereunder in respect of a
Registered Loan (a "REGISTERED HOLDER"), unless such Registered Holder (or,
if such Registered Holder is not the beneficial owner of such Registered
Loan, the beneficial owner thereof) is, on the Closing Date (or on the date
such Registered Holder becomes a Lender as provided in Section 12.06(b)
hereof) and on the date of any change in the Applicable Lending Office of
such Lender, entitled to submit a Form W-8, together with an annual
certificate stating that such Registered Holder (or beneficial owner, as
the case may be) (w) is not a "bank" within the meaning of
Section 881(c)(3)(A) of the Code, (x) is not a 10-percent
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shareholder (within the meaning of Section 871(h)(3)(B) of the Code) of the
Borrower, (y) is not a controlled foreign corporation related to the
Borrower (within the meaning of Section 871(h)(4)(B) of the Code) and (z)
is not acting as a conduit entity (within the meaning of U.S. Treasury
Regulation Section 1.881-3), or
(iii) to any U.S. Taxes imposed solely by reason of the failure by
such non-U.S. Person (or, if such non-U.S. Person is not the beneficial
owner of the relevant Loan, such beneficial owner) to comply with
applicable certification, information, documentation or other reporting
requirements (including, without limitation, the failure to timely submit a
Form 1001, 4224 or W-8 (together with the annual certificate required under
clause (ii) above), as applicable) concerning the nationality, residence,
identity or connections with the United States of America of such
non-U.S. Person (or beneficial owner, as the case may be) if such
compliance is required by statute or regulation of the United States of
America as a precondition to relief or exemption from such U.S. Taxes.
For the purposes of this Section 5.07(a), (A) "FORM 1001" shall mean Form 1001
(Ownership, Exemption, or Reduced Rate Certificate) of the Department of the
Treasury of the United States of America, (B) "FORM 4224" shall mean Form 4224
(Exemption from Withholding of Tax on Income Effectively Connected with the
Conduct of a Trade or Business in the United States) of the Department of the
Treasury of the United States of America and (C) "FORM W-8" shall mean Form W-8
(Certificate of Foreign Status) of the Department of Treasury of the United
States of America. Each of the Forms referred to in the foregoing clauses (A),
(B) and (C) shall include such successor and related forms as may from time to
time be adopted by the relevant taxing authorities of the United States of
America to document a claim to which such Form relates.
(b) Within 30 days after paying any amount to the Administrative
Agent or any Lender from which it is required by law to make any deduction or
withholding, and within 30 days
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after it is required by law to remit such deduction or withholding to any
relevant taxing or other authority, the Borrower shall deliver to the
Administrative Agent for delivery to such non-U.S. Person evidence satisfactory
to such Person of such deduction, withholding or payment (as the case may be).
5.08 REPLACEMENT LENDERS. At any time within 30 days after the
payment by the Borrower to any Lender of any amount pursuant to Section 5.01 or
5.07 hereof that the Borrower deems material, the Borrower may, by notice to the
Administrative Agent and each Lender that requested the payment of such amount,
nominate or propose a bank or other financial institution that is willing to
become the assignee of the Loans and (if any) Commitments of such Lender (a
"REPLACEMENT LENDER") pursuant to Section 12.06(b) hereof, and within 15
Business Days after receipt of such proposal from the Borrower, such Lender
shall execute and deliver to the Administrative Agent an Assignment and
Acceptance substantially in the form of Exhibit D hereto whereby such Lender
shall assign its entire Loans and (if any) Commitments to the proposed
Replacement Lender in accordance with Section 12.06(b) hereof unless, prior to
the expiration of such period, the Administrative Agent shall have notified the
Borrower and such Lender that the proposed Replacement Lender is not reasonably
acceptable to the Administrative Agent; PROVIDED that in no event will (i) any
Lender be required to enter into such Assignment and Acceptance under this
Section 5.08 at a price less than par plus accrued interest and prorated fees
and other costs due hereunder (including, without limitation, break funding
costs incurred by such Lender as a result of such assignment being effected on a
day other than the last day of an Interest Period, which amount (if any) shall
be payable by the Borrower to such Lender) to the effective date thereof, (ii)
the Administrative Agent or any Lender be obligated to assist the Borrower in
identifying any Person that is willing to become such a Replacement Lender and
(iii) any such assignment be required if the consummation thereof conflicts with
any law, regulation or rule.
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Section 6. GUARANTEE.
6.01 THE GUARANTEE. The Subsidiary Guarantors hereby jointly and
severally guarantee to each Lender and the Administrative Agent and their
respective successors and assigns the prompt payment in full when due (whether
at stated maturity, by acceleration or otherwise) of the principal of and
interest on the Loans made by the Lenders to, and the Notes held by each Lender
of, the Borrower and all other amounts from time to time owing to the Lenders or
the Administrative Agent by the Borrower under this Agreement and under the
Notes and by any Obligor under any of the other Loan Documents (including,
without limitation, all Reimbursement Obligations), and all obligations of the
Borrower or any of its Subsidiaries to any Lender or any affiliate of a Lender
in respect of any Interest Rate Protection Agreement, in each case strictly in
accordance with the terms thereof (such obligations being herein collectively
called the "GUARANTEED OBLIGATIONS"). The Subsidiary Guarantors hereby further
jointly and severally agree that if the Borrower shall fail to pay in full when
due (whether at stated maturity, by acceleration or otherwise) any of the
Guaranteed Obligations, the Subsidiary Guarantors will promptly pay the same,
without any demand or notice whatsoever, and that in the case of any extension
of time of payment or renewal of any of the Guaranteed Obligations, the same
will be promptly paid in full when due (whether at extended maturity, by
acceleration or otherwise) in accordance with the terms of such extension or
renewal.
6.02 OBLIGATIONS UNCONDITIONAL. The obligations of the Subsidiary
Guarantors under Section 6.01 hereof are absolute and unconditional, joint and
several, irrespective of the value, genuineness, validity, regularity or
enforceability of the obligations of the Borrower under this Agreement, the
Notes or any other agreement or instrument referred to herein or therein, or any
substitution, release or exchange of any other guarantee of or security for any
of the Guaranteed Obligations, and, to the fullest extent permitted by
applicable law, irrespective of any other circumstance whatsoever that might
otherwise constitute a legal or equitable discharge or defense of a surety or
guarantor,
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it being the intent of this Section 6.02 that the obligations of the Subsidiary
Guarantors hereunder shall be absolute and unconditional, joint and several,
under any and all circumstances. Without limiting the generality of the
foregoing, it is agreed that the occurrence of any one or more of the following
shall not alter or impair the liability of the Subsidiary Guarantors hereunder,
which shall remain absolute and unconditional as described above:
(i) at any time or from time to time, without notice to the
Subsidiary Guarantors, the time for any performance of or compliance with
any of the Guaranteed Obligations shall be extended, or such performance or
compliance shall be waived;
(ii) any of the acts mentioned in any of the provisions of this
Agreement or the Notes or any other agreement or instrument referred to
herein or therein shall be done or omitted;
(iii) the maturity of any of the Guaranteed Obligations shall be
accelerated, or any of the Guaranteed Obligations shall be modified,
supplemented or amended in any respect, or any right under this Agreement
or the Notes or any other agreement or instrument referred to herein or
therein shall be waived or any other guarantee of any of the Guaranteed
Obligations or any security therefor shall be released or exchanged in
whole or in part or otherwise dealt with; or
(iv) any lien or security interest granted to, or in favor of, the
Administrative Agent or any Lender or Lenders as security for any of the
Guaranteed Obligations shall fail to be perfected.
The Subsidiary Guarantors hereby expressly waive diligence, presentment, demand
of payment, protest and all notices whatsoever, and any requirement that the
Administrative Agent or any Lender exhaust any right, power or remedy or proceed
against the Borrower under this Agreement or the Notes or any other
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agreement or instrument referred to herein or therein, or against any other
Person under any other guarantee of, or security for, any of the Guaranteed
Obligations.
6.03 REINSTATEMENT. The obligations of the Subsidiary Guarantors
under this Section 6 shall be automatically reinstated if and to the extent that
for any reason any payment by or on behalf of the Borrower in respect of the
Guaranteed Obligations is rescinded or must be otherwise restored by any holder
of any of the Guaranteed Obligations, whether as a result of any proceedings in
bankruptcy or reorganization or otherwise, and the Subsidiary Guarantors jointly
and severally agree that they will indemnify the Administrative Agent and each
Lender on demand for all reasonable costs and expenses (including, without
limitation, fees of counsel) incurred by the Administrative Agent or such Lender
in connection with such rescission or restoration, including any such costs and
expenses incurred in defending against any claim alleging that such payment
constituted a preference, fraudulent transfer or similar payment under any
bankruptcy, insolvency or similar law.
6.04 SUBROGATION. The Subsidiary Guarantors hereby jointly and
severally agree that until the payment and satisfaction in full of all
Guaranteed Obligations and the expiration and termination of the Commitments of
the Lenders under this Agreement they shall not exercise any right or remedy
arising by reason of any performance by them of their guarantee in Section 6.01
hereof, whether by subrogation or otherwise, against the Borrower or any other
Subsidiary Guarantor of any of the Guaranteed Obligations or any security for
any of the Guaranteed Obligations.
6.05 REMEDIES. The Subsidiary Guarantors jointly and severally agree
that, as between the Subsidiary Guarantors and the Lenders, the obligations of
the Borrower under this Agreement and the Notes may be declared to be forthwith
due and payable as provided in Section 10 hereof (and shall be deemed to have
become automatically due and payable in the circumstances provided in said
Section 10) for purposes of Section 6.01 hereof notwithstanding any stay,
injunction or other prohibition
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preventing such declaration (or such obligations from becoming automatically due
and payable) as against the Borrower and that, in the event of such declaration
(or such obligations being deemed to have become automatically due and payable),
such obligations (whether or not due and payable by the Borrower) shall
forthwith become due and payable by the Subsidiary Guarantors for purposes of
said Section 6.01.
6.06 INSTRUMENT FOR THE PAYMENT OF MONEY. Each Subsidiary Guarantor
hereby acknowledges that the guarantee in this Section 6 constitutes an
instrument for the payment of money, and consents and agrees that any Lender or
the Administrative Agent, at its sole option, in the event of a dispute by such
Subsidiary Guarantor in the payment of any moneys due hereunder, shall have the
right to bring motion-action under New York CPLR Section 3213.
6.07 CONTINUING GUARANTEE. The guarantee in this Section 6 is a
continuing guarantee, and shall apply to all Guaranteed Obligations whenever
arising.
6.08 RIGHTS OF CONTRIBUTION. The Subsidiary Guarantors hereby agree,
as between themselves, that if any Subsidiary Guarantor shall become an Excess
Funding Guarantor (as defined below) by reason of the payment by such Subsidiary
Guarantor of any Guaranteed Obligations, each other Subsidiary Guarantor shall,
on demand of such Excess Funding Guarantor (but subject to the next sentence),
pay to such Excess Funding Guarantor an amount equal to such Subsidiary
Guarantor's Pro Rata Share (as defined below and determined, for this purpose,
without reference to the Properties, debts and liabilities of such Excess
Funding Guarantor) of the Excess Payment (as defined below) in respect of such
Guaranteed Obligations. The payment obligation of a Subsidiary Guarantor to any
Excess Funding Guarantor under this Section 6.08 shall be subordinate and
subject in right of payment to the prior payment in full of the obligations of
such Subsidiary Guarantor under the other provisions of this Section 6 and such
Excess Funding Guarantor shall not exercise any right or remedy with respect to
such excess until payment and satisfaction in full of all of such obligations.
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For purposes of this Section 6.08, (i) "EXCESS FUNDING GUARANTOR"
shall mean, in respect of any Guaranteed Obligations, a Subsidiary Guarantor
that has paid an amount in excess of its Pro Rata Share of such Guaranteed
Obligations, (ii) "EXCESS PAYMENT" shall mean, in respect of any Guaranteed
Obligations, the amount paid by an Excess Funding Guarantor in excess of its Pro
Rata Share of such Guaranteed Obligations and (iii) "PRO RATA SHARE" shall mean,
for any Subsidiary Guarantor, the ratio (expressed as a percentage) of (x) the
amount by which the aggregate present fair saleable value of all Properties of
such Subsidiary Guarantor (excluding any shares of stock of any other Subsidiary
Guarantor) exceeds the amount of all the debts and liabilities of such
Subsidiary Guarantor (including contingent, subordinated, unmatured and
unliquidated liabilities, but excluding the obligations of such Subsidiary
Guarantor hereunder and any obligations of any other Subsidiary Guarantor that
have been Guaranteed by such Subsidiary Guarantor) to (y) the amount by which
the aggregate fair saleable value of all Properties of all of the Borrower and
the Subsidiary Guarantors exceeds the amount of all the debts and liabilities
(including contingent, subordinated, unmatured and unliquidated liabilities, but
excluding the obligations of the Borrower and the Subsidiary Guarantors
hereunder and under the other Loan Documents) of the Borrower and the Subsidiary
Guarantors, determined (A) with respect to any Subsidiary Guarantor that is a
party hereto on the Closing Date, as of the Closing Date, and (B) with respect
to any other Subsidiary Guarantor, as of the date such Subsidiary Guarantor
becomes a Subsidiary Guarantor hereunder.
6.09 GENERAL LIMITATION ON GUARANTEE OBLIGATIONS. In any action or
proceeding involving any state corporate law, or any state or Federal
bankruptcy, insolvency, reorganization or other law affecting the rights of
creditors generally, if the obligations of any Subsidiary Guarantor under
Section 6.01 hereof would otherwise, taking into account the provisions of
Section 6.08 hereof, be held or determined to be void, invalid or unenforceable,
or subordinated to the claims of any other creditors, on account of the amount
of its liability under said Section 6.01, then, notwithstanding any other
provision hereof to
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the contrary, the amount of such liability shall, without any further action by
such Subsidiary Guarantor, any Lender, the Administrative Agent or any other
Person, be automatically limited and reduced to the highest amount that is valid
and enforceable and not subordinated to the claims of other creditors as
determined in such action or proceeding.
Section 7. CONDITIONS PRECEDENT.
7.01 EFFECTIVENESS. The effectiveness of this Agreement is subject
to the conditions precedent that the Administrative Agent shall have received
the following documents (with sufficient copies for each Lender), each of which
shall be reasonably satisfactory to the Administrative Agent (and to the extent
specified below, to each Lender) in form and substance:
(a) SENIOR OFFICER'S CERTIFICATE. A certificate of a Senior Officer,
dated the Effective Date, to the effect set forth in the first sentence of
Section 7.02 hereof.
(b) NOTES. The Notes, duly completed and executed for each Lender
(except that, in the case of a Registered Holder, Notes shall be required
only to the extent that such Registered Holder shall have requested the
execution and delivery of a Note pursuant to Section 2.08(f) hereof).
Promptly upon receipt of the Notes, the Lenders shall return the promissory
notes (if any) issued to and held by them under the Prior Credit Agreement.
(c) MODIFICATION TO MORTGAGE. A modification agreement with respect
to the the Mortgage of the Woodland Hills Lease, duly executed and
delivered by the Borrower and the Administrative Agent in recordable form
(in such number of copies as the Administrative Agent shall have
requested).
(d) OTHER DOCUMENTS. Such other documents as the Administrative
Agent or any Lender or special New York counsel to Chase may reasonably
request.
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7.02 INITIAL AND SUBSEQUENT EXTENSIONS OF CREDIT. The obligation
of the Lenders to make any Loan or otherwise extend credit to the Borrower
upon the occasion of each borrowing or other extension of credit hereunder
(including the initial borrowing) is subject to the further conditions
precedent that, both immediately prior to the making of such Loan or other
extension of credit and also after giving effect thereto and to the intended
use thereof:
(a) no Default shall have occurred and be continuing; and
(b) the representations and warranties made by the Borrower in
Section 8 hereof, and by each Obligor in each of the other Loan Documents
to which it is a party, shall be true and complete on and as of the date of
the making of such Loan or other extension of credit with the same force
and effect as if made on and as of such date (or, if any such
representation or warranty is expressly stated to have been made as of a
specific date (it being understood that references to "the date hereof" are
references to a specific date), as of such specific date).
Each notice of borrowing or request for the issuance of a Letter of Credit by
the Borrower hereunder shall constitute a certification by the Borrower to the
effect set forth in the preceding sentence (both as of the date of such notice
or request and, unless the Borrower otherwise notifies the Administrative Agent
prior to the date of such borrowing or issuance, as of the date of such
borrowing or issuance).
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Section 8. REPRESENTATIONS AND WARRANTIES. The Borrower represents
and warrants to the Administrative Agent and the Lenders that:
8.01 EXISTENCE. Each of the Borrower and its Subsidiaries: (a) is
a corporation, partnership or other entity duly organized, validly existing
and in good standing under the laws of the jurisdiction of its organization;
(b) has all requisite corporate or other power, and has all material
governmental licenses, authorizations, consents and approvals necessary to
own its assets and carry on its business as now being or as proposed to be
conducted; and (c) is qualified to do business and is in good standing in all
jurisdictions in which the nature of the business conducted by it makes such
qualification necessary and where failure so to qualify could reasonably be
expected (either individually or in the aggregate) to have a Material Adverse
Effect.
8.02 FINANCIAL CONDITION. The Borrower has heretofore furnished to
each of the Lenders the following financial statements:
(i) consolidated balance sheets of the Borrower and its Subsidiaries
as at December 31, 1995 and the related consolidated statements of income,
retained earnings and cash flows of the Borrower and its Subsidiaries for
the fiscal year ended on said date, with the opinion thereon of Ernst &
Young LLP, and
(ii) the unaudited consolidated balance sheets of the Borrower and its
Subsidiaries as at March 31, 1996 and the related consolidated statements
of income, retained earnings and cash flows of the Borrower and its
Subsidiaries for the three-month period ended on such date.
All such financial statements are complete and correct in all material respects
and fairly present the consolidated financial condition of the Borrower and its
Subsidiaries and the consolidated results of their operations for the fiscal
year and
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three-month period ended on said dates (subject, in the case of such
financial statements as at March 31, 1996 to normal year-end audit
adjustments), all in accordance with generally accepted accounting principles
and practices applied on a consistent basis. None of the Borrower and its
Subsidiaries has on the Closing Date any material contingent liabilities,
liabilities for taxes, unusual forward or long-term commitments or unrealized
or anticipated losses from any unfavorable commitments, except as referred to
or reflected or provided for in said balance sheets as at said dates. Since
December 31, 1995, there has been no material adverse change in the
consolidated financial condition, operations, business, assets, liabilities
or prospects taken as a whole of the Borrower and its Subsidiaries from that
set forth in said financial statements as at said date.
8.03 LITIGATION. Except as set forth in Schedule V hereto, there
are no legal or arbitral proceedings, or any proceedings by or before any
governmental or regulatory authority or agency, now pending or (to the
knowledge of the Borrower) threatened against the Borrower or any of its
Subsidiaries or that could reasonably be expected (either individually or in
the aggregate) to have a Material Adverse Effect, or that seek to enjoin or
otherwise challenge any of the transactions (including, without limitation,
the Recapitalization) contemplated by this Agreement.
8.04 NO BREACH. None of the execution and delivery of this
Agreement and the Notes and the other Loan Documents, the consummation of the
transactions herein and therein contemplated or compliance with the terms and
provisions hereof and thereof will conflict with or result in a breach of, or
require any consent under, the Partnership Agreement, charter or by-laws of
any Obligor, or any applicable law or regulation, or any order, writ,
injunction or decree of any court or governmental authority or agency, or any
material agreement or instrument to which the Borrower or any of its
Subsidiaries is a party or by which any of them or any of their Property is
bound or to which any of them is subject, or constitute a default under any
such agreement or instrument, or (except for the Liens created pursuant to
the Security Documents) result in the creation or imposition of any
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Lien upon any Property of the Borrower or any of its Subsidiaries pursuant to
the terms of any such agreement or instrument.
8.05 ACTION. Each Obligor has all necessary partnership or
corporate power, authority and legal right to execute, deliver and perform
its obligations under each of the Loan Documents to which it is a party; the
execution, delivery and performance by each Obligor of each of the Loan
Documents to which it is a party have been duly authorized by all necessary
partnership or corporate action on its part (including, without limitation,
any required partner or shareholder approvals); and this Agreement has been
duly and validly executed and delivered by each Obligor and constitutes, and
each of the Notes and the other Loan Documents to which it is a party when
executed and delivered by such Obligor (in the case of the Notes, for value)
will constitute, its legal, valid and binding obligation, enforceable against
each Obligor in accordance with its terms, except as such enforceability may
be limited by (a) bankruptcy, insolvency, reorganization, moratorium or
similar laws of general applicability affecting the enforcement of creditors'
rights and (b) the application of general principles of equity (regardless of
whether such enforceability is considered in a proceeding in equity or at
law).
8.06 APPROVALS. No authorizations, approvals or consents of, and
no filings or registrations with, any governmental or regulatory authority or
agency, or any securities exchange, are necessary for the execution, delivery
or performance by any Obligor of this Agreement or any of the other Loan
Documents to which it is a party or for the legality, validity or
enforceability hereof or thereof, except for filings, recordings and
registrations in respect of the Liens created pursuant to the Security
Documents.
8.07 USE OF CREDIT. Neither the Borrower nor any of its
Subsidiaries is engaged principally, or as one of its important activities,
in the business of extending credit for the purpose, whether immediate,
incidental or ultimate, of buying or carrying Margin Stock, and no part of
the proceeds of any Loan hereunder will be used to buy or carry any Margin
Stock.
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8.08 ERISA. Each Plan, and, to the knowledge of the Borrower, each
Multiemployer Plan, is in compliance with, and has been administered in
compliance with, the applicable provisions of ERISA, the Code and any other
Federal or State law except where failure to so comply could not reasonably
be expected to have a Material Adverse Effect, and no event or condition has
occurred and is continuing as to which the Borrower would be under an
obligation to furnish a report to the Lenders under Section 9.01(f) hereof
which could reasonably be likely to lead to liabilities in excess of $500,000.
8.09 TAXES. Except as set forth in Schedule VI hereto, the
Borrower and its Subsidiaries have filed all Federal income tax returns and
all other material tax returns that are required to be filed by them and have
paid all taxes due pursuant to such returns or pursuant to any assessment
received by the Borrower or any of its Subsidiaries. The charges, accruals
and reserves on the books of the Borrower and its Subsidiaries in respect of
taxes and other governmental charges are, in the opinion of the Borrower,
adequate.
8.10 INVESTMENT COMPANY ACT. Neither the Borrower nor any of its
Subsidiaries is an "investment company", or a company "controlled" by an
"investment company", within the meaning of the Investment Company Act of
1940, as amended.
8.11 PUBLIC UTILITY HOLDING COMPANY ACT. Neither the Borrower nor
any of its Subsidiaries is a "holding company", or an "affiliate" of a
"holding company" or a "subsidiary company" of a "holding company", within
the meaning of the Public Utility Holding Company Act of 1935, as amended.
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8.12 MATERIAL AGREEMENTS AND LIENS.
(a) Part A of Schedule I hereto is a complete and correct list of
each credit agreement, loan agreement, indenture, agreement for purchase of
Property or services, guarantee, letter of credit or other arrangement
providing for or otherwise relating to any Indebtedness or any extension of
credit (or commitment for any extension of credit) to, or guarantee by, the
Borrower or any of its Subsidiaries outstanding on the Closing Date (other
than any Indebtedness which will be repaid upon the consummation of the
Recapitalization) as to which (in the case of any such arrangement) the
aggregate principal or face amount equals or exceeds (or may equal or exceed)
$500,000, and the aggregate principal or face amount outstanding or that may
become outstanding under each such arrangement is correctly described in Part
A of said Schedule I.
(b) Part B of Schedule I hereto is a complete and correct list of
each Lien (other than any Lien which shall be released upon the consummation
of the Recapitalization, including any thereof as to which arrangements for
such release satisfactory to the Administrative Agent shall have been made as
of the Closing Date) securing Indebtedness of any Person outstanding on the
Closing Date the aggregate principal or face amount of which equals or
exceeds (or may equal or exceed) $500,000 and covering any Property of the
Borrower or any of its Subsidiaries, and the aggregate Indebtedness secured
(or that may be secured) by each such Lien and the Property covered by each
such Lien is correctly described in Part B of said Schedule I.
8.13 ENVIRONMENTAL MATTERS. Each of the Borrower and its
Subsidiaries has obtained all environmental, health and safety permits,
licenses and other authorizations required under all Environmental Laws to
carry on its business as now being or as proposed to be conducted, except to
the extent failure to have any such permit, license or authorization could
not reasonably be expected (either individually or in the aggregate) to have
a Material Adverse Effect. Each of such permits, licenses and authorizations
is in full force and effect and each of the
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Borrower and its Subsidiaries is in compliance with the terms and conditions
thereof, and is also in compliance with all other limitations, restrictions,
conditions, standards, prohibitions, requirements, obligations, schedules and
timetables contained in any applicable Environmental Law or in any
regulation, code, plan, order, decree, judgment, injunction, notice or demand
letter issued, entered, promulgated or approved thereunder, except to the
extent failure to comply therewith could not reasonably be expected (either
individually or in the aggregate) to have a Material Adverse Effect. Except
as set forth on Schedule VII hereto, no notice, notification, demand, request
for information, citation, summons or order has been issued, no complaint has
been filed, no penalty has been assessed and no investigation or review is
pending or (to the knowledge of the Borrower) threatened by any governmental
or other entity with respect to any alleged failure by the Borrower or any of
its Subsidiaries to have any environmental, health or safety permit, license
or other authorization required under any Environmental Law in connection
with the conduct of the business of the Borrower or any of its Subsidiaries
or with respect to any generation, treatment, storage, recycling,
transportation, discharge or disposal, or any Release of any Hazardous
Materials generated by the Borrower or any of its Subsidiaries, in each case
which could reasonably be expected to lead to fines, penalties or liabilities
in excess of $500,000. All environmental investigations, studies, audits,
tests, reviews or other analyses conducted by or that are in the possession
of the Borrower or any of its Subsidiaries in relation to facts,
circumstances or conditions at or affecting any site or facility now or
previously owned, operated or leased by the Borrower or any of its
Subsidiaries and that could reasonably be expected to have a Material Adverse
Effect have been made available to the Administrative Agent.
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8.14 CAPITALIZATION.
(a) The Borrower has heretofore delivered to the Lenders a true and
complete copy of its Partnership Agreement to be in effect on the date of the
Recapitalization. The General Partners and each of the limited partners of
the Borrower, on the date of the Recapitalization, and their respective
general and limited partnership interests of the Borrower (after giving
effect to the Recapitalization) are specified on Part A of Schedule IV
hereto.
(b) As of the date of the Recapitalization, (i) there are no
outstanding Equity Rights with respect to the Borrower except as set forth on
Part B of Schedule IV hereto and (ii) there are no outstanding obligations of
the Borrower or any of its Subsidiaries to repurchase, redeem, or otherwise
acquire any partnership interest, shares of capital stock or other ownership
interests of the Borrower nor are there any outstanding obligations of the
Borrower or any of its Subsidiaries to make payments to any Person, such as
"phantom stock" payments, where the amount thereof is calculated with
reference to the fair market value or equity value of the Borrower or any of
its Subsidiaries.
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8.15 SUBSIDIARIES, ETC.
(a) Set forth in Part A of Schedule II hereto is a complete and
correct list of all of the Subsidiaries of the Borrower as of the date of the
Recapitalization, together with, for each such Subsidiary, (i) the
jurisdiction of organization of such Subsidiary, (ii) each Person holding
ownership interests in such Subsidiary and (iii) the nature of the ownership
interests held by each such Person and the percentage of ownership of such
Subsidiary represented by such ownership interests. Except as disclosed in
Part A of Schedule II hereto, (x) each of the Borrower and its Subsidiaries
owns, free and clear of Liens (other than Liens created pursuant to the
Security Documents), and has the unencumbered right to vote, all outstanding
ownership interests in each Person shown to be held by it in Part A of
Schedule II hereto, (y) all of the issued and outstanding capital stock of
each such Person organized as a corporation is validly issued, fully paid and
nonassessable and (z) there are no outstanding Equity Rights with respect to
such Person.
(b) Set forth in Part B of Schedule II hereto is a complete and
correct list of all Investments (other than Investments disclosed in Part A
of said Schedule II hereto and other than Investments of the type referred to
in clauses (b), (c), (d) or (e) of Section 9.08 hereof) held by the Borrower
or any of its Subsidiaries in any Person on the date of the Recapitalization
and, for each such Investment, (x) the identity of the Person or Persons
holding such Investment and (y) the nature of such Investment. Except as
disclosed in Part B of Schedule II hereto, each of the Borrower and its
Subsidiaries owns, free and clear of all Liens (other than Liens created
pursuant to the Security Documents), all such Investments. The Borrower is
not a party to any Interest Rate Protection Agreement on the date of the
Recapitalization.
(c) None of the Subsidiaries of the Borrower is, on the date of the
Recapitalization, subject to any indenture, agreement, instrument or other
arrangement of the type described in Section 9.16(c) hereof.
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8.16 TITLE TO ASSETS. The Borrower owns and has on the date of the
Recapitalization good and marketable title (subject only to Liens permitted
by Section 9.06 hereof) to the material Properties shown to be owned in the
most recent financial statements referred to in Section 8.02 hereof (other
than Properties disposed of in the ordinary course of business or otherwise
permitted to be disposed of pursuant to Section 9.05 hereof). The Borrower
owns and has on the Closing Date good and marketable title to, and enjoys on
the Closing Date peaceful and undisturbed possession of, all material
Properties (subject only to Liens permitted by Section 9.06 hereof) that are
necessary for the operation and conduct of its businesses.
8.17 TRUE AND COMPLETE DISCLOSURE. The information, reports,
financial statements, exhibits and schedules furnished in writing by or on
behalf of the Obligors to the Administrative Agent or any Lender in
connection with the negotiation, preparation or delivery of this Agreement
and the other Loan Documents or included herein or therein or delivered
pursuant hereto or thereto, when taken as a whole do not contain any untrue
statement of material fact or omit to state any material fact necessary to
make the statements herein or therein, in light of the circumstances under
which they were made, not misleading. All written information furnished
after the Closing Date by the Borrower and its Subsidiaries to the
Administrative Agent and the Lenders in connection with this Agreement and
the other Loan Documents and the transactions contemplated hereby and thereby
(including, without limitation, any information memorandum prepared in
connection with the primary syndication of this Agreement to the Lenders
other than Chase) will be true, complete and accurate in every material
respect, or (in the case of projections) based on reasonable estimates, on
the date as of which such information is stated or certified. There is no
fact known to the Borrower that could have a Material Adverse Effect that has
not been disclosed herein, in the other Loan Documents or in a report,
financial statement, exhibit, schedule, disclosure letter or other writing
furnished to the Lenders for use in connection with the transactions
contemplated hereby or thereby.
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8.18 REAL PROPERTY. Set forth on Schedule III attached hereto is a
list, as of the date of the Recapitalization, of all of the real property
interests held by the Borrower and its Subsidiaries, indicating in each case
whether the respective Property is owned or leased, the identity of the owner or
lessee and the location of the respective Property.
Section 9. COVENANTS OF THE BORROWER. The Borrower covenants and
agrees with the Lenders and the Administrative Agent that, so long as any
Commitment, Loan or Letter of Credit Liability is outstanding and until
payment in full of all amounts payable by the Borrower hereunder:
9.01 FINANCIAL STATEMENTS ETC. The Borrower shall deliver to the
Administrative Agent, together with copies for each of the Lenders (which
copies the Administrative Agent shall promptly forward to the Lenders):
(a) as soon as available and in any event within 45 days after the
end of each calendar monthly period (other than the month of December),
consolidated statements of income, partners' capital (or, at any time
following the conversion of the Borrower from a partnership to a
corporation, retained earnings) and cash flows of the Borrower and its
Subsidiaries for such period and for the period from the beginning of the
respective fiscal year to the end of such period, and the related
consolidated balance sheet of the Borrower and its Subsidiaries as at the
end of such period, setting forth in each case in comparative form the
corresponding consolidated figures for the corresponding periods in the
preceding fiscal year;
(b) as soon as available and in any event within 45 days after the
end of each of the first three quarterly fiscal periods of each fiscal year
of the Borrower, consolidated statements of income, partners' capital (or,
at any time following the conversion of the Borrower from a
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partnership to a corporation, retained earnings) and cash flows of the
Borrower and its Subsidiaries for such period and for the period from
the beginning of the respective fiscal year to the end of such period,
and the related consolidated balance sheets of the Borrower and its
Subsidiaries as at the end of such period, setting forth in each case in
comparative form the corresponding consolidated figures for the
corresponding periods in the preceding fiscal year (except that, in the
case of balance sheets, such comparison shall be to the last day of the
prior fiscal year), accompanied by a certificate of a Senior Officer,
which certificate shall state (i) that said consolidated financial
statements fairly present the consolidated financial condition and
results of operations of the Borrower and its Subsidiaries in accordance
with generally accepted accounting principles, consistently applied, as
at the end of, and for, such period (subject to normal year-end audit
adjustments) and (ii) the amount of any Restricted Payment paid during
such period as permitted pursuant to Section 9.09 hereof;
(c) as soon as available and in any event within 90 days after the
end of each fiscal year of the Borrower, consolidated statements of income,
partners' capital (or, at any time following the conversion of the Borrower
from a partnership to a corporation, retained earnings) and cash flows of
the Borrower and its Subsidiaries for such fiscal year and the related
consolidated balance sheets of the Borrower and its Subsidiaries as at the
end of such fiscal year, setting forth in each case in comparative form the
corresponding consolidated figures for the preceding fiscal year, and
accompanied by an opinion thereon of independent certified public
accountants of recognized national standing, which opinion shall state that
said consolidated financial statements fairly present the consolidated
financial condition and results of operations of the Borrower and its
Subsidiaries as at the end of, and for, such fiscal year in accordance with
generally accepted accounting principles, and a statement of such
accountants to the effect that, in making the examination necessary for
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their opinion, nothing came to their attention that caused them to believe
that the Borrower was not in compliance with Section 9.10 hereof, insofar
as such Section relates to accounting matters;
(d) promptly upon their becoming available, copies of all
registration statements and regular periodic reports, if any, that the
Borrower shall have filed with the Securities and Exchange Commission (or
any governmental agency substituted therefor) or any national securities
exchange;
(e) promptly upon the mailing thereof to the Partners of the Borrower
generally or to holders of Subordinated Indebtedness generally, copies of
all financial statements, reports and proxy statements so mailed, and
promptly following the receipt thereof by the Borrower, copies of any
notices or demands made by any holder (or a trustee for any holder) of any
Subordinated Indebtedness to or upon the Borrower;
(f) as soon as possible, and in any event within 20 Business Days
after the Borrower knows that any of the events or conditions specified
below with respect to any Plan or Multiemployer Plan has occurred or
exists, a statement signed by a Senior Officer setting forth details
respecting such event or condition and the action, if any, that the
Borrower or its ERISA Affiliate proposes to take with respect thereto (and
a copy of any report or notice required to be filed with or given to the
PBGC by the Borrower or an ERISA Affiliate with respect to such event or
condition):
(i) any reportable event, as defined in Section 4043(c) of
ERISA and the regulations issued thereunder, with respect to a
Plan, as to which the PBGC has not by regulation waived the notice
requirement of Section 4043(a) of ERISA (PROVIDED that a failure to
meet the minimum funding standard of Section 412 of the Code or
Section 302 of ERISA, including, without limitation, the failure to
make on
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or before its due date a required installment under Section 412(m)
of the Code or Section 302(e) of ERISA, shall be a reportable event
regardless of the issuance of any waivers in accordance with
Section 412(d) of the Code); and any request for a waiver under
Section 412(d) of the Code for any Plan;
(ii) the distribution under Section 4041 of ERISA of a notice
of intent to terminate any Plan or any action taken by the Borrower
or an ERISA Affiliate to terminate any Plan, in each case other
than in a standard termination;
(iii) the institution by the PBGC of proceedings under
Section 4042 of ERISA for the termination of, or the appointment of
a trustee to administer, any Plan, or the receipt by the Borrower
or any ERISA Affiliate of a notice from a Multiemployer Plan that
such action has been taken by the PBGC with respect to such
Multiemployer Plan;
(iv) the complete or partial withdrawal from a Multiemployer
Plan by the Borrower or any ERISA Affiliate that results in
liability under Section 4201 or 4204 of ERISA (including the
obligation to satisfy secondary liability as a result of a
purchaser default) or the receipt by the Borrower or any ERISA
Affiliate of notice from a Multiemployer Plan that it is in
reorganization or insolvency pursuant to Section 4241 or 4245 of
ERISA or that it intends to terminate or has terminated under
Section 4041A of ERISA;
(v) the institution of a proceeding by a fiduciary of any
Multiemployer Plan against the Borrower or any ERISA Affiliate to
enforce Section 515 of ERISA, which proceeding is not dismissed
within 30 days; and
(vi) the adoption of an amendment to any Plan that, pursuant
to Section 401(a)(29) of the Code or
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Section 307 of ERISA, would result in the loss of tax-exempt status
of the trust of which such Plan is a part if the Borrower or an
ERISA Affiliate fails to timely provide security to the Plan in
accordance with the provisions of said Sections;
(g) promptly after the Borrower knows or has reason to believe that
any Default has occurred, a notice of such Default describing the same in
reasonable detail and, together with such notice or as soon thereafter as
possible, a description of the action that the Borrower has taken or
proposes to take with respect thereto;
(h) promptly upon becoming available for each fiscal year (but not
later than 15 days after the beginning of each fiscal year), an annual
budget of the Borrower and its Subsidiaries for such fiscal year,
containing (i) a forecast balance sheet, and statements of income and cash
flows, (ii) an explanation of assumptions used to arrive at such forecasts
and (iii) an estimate of the calculation of compliance with the covenants
set forth in Section 9.10 for the relevant forecast period;
(i) from time to time such other information regarding the financial
condition, operations, business or prospects of the Borrower or any of its
Subsidiaries (including, without limitation, any Plan or Multiemployer Plan
and any reports or other information required to be filed under ERISA) or
Affiliates as any Lender or the Administrative Agent may reasonably
request.
The Borrower will furnish to the Administrative Agent, together with copies for
each of the Lenders (which copies the Administrative Agent shall promptly
forward to the Lenders), at the time it furnishes each set of financial
statements pursuant to Section 9.01(b) or 9.01(c) hereof, a certificate of a
Senior Officer (i) to the effect that no Default has occurred and is continuing
(or, if any Default has occurred and is continuing, describing the same in
reasonable detail and describing the action that the Borrower has taken or
proposes to take with
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respect thereto) and (ii) setting forth in reasonable detail the computations
necessary to determine whether the Borrower is in compliance with Sections
9.07(e), 9.08(f), 9.09(a), 9.09(b), 9.09(c) and 9.10 hereof as of the end of
the respective monthly accounting period, quarterly fiscal period or fiscal
year.
9.02 LITIGATION.
(a) The Borrower will promptly give to the Administrative Agent,
together with copies for each of the Lenders (which copies the Administrative
Agent shall promptly forward to the Lenders), notice of all legal or arbitral
proceedings, and of all proceedings by or before any governmental or
regulatory authority or agency, and any material development in respect of
such legal or other proceedings, affecting the Borrower or any of its
Subsidiaries, but only if such proceedings, if adversely determined, could
reasonably be expected (either individually or in the aggregate) to have a
Material Adverse Effect.
(b) Without limiting the generality of the obligations under
Section 9.02(a) hereof, the Borrower will give to the Administrative Agent,
together with copies for each Lender (which copies the Administrative Agent
shall promptly forward to the Lenders), notice of the assertion of any
environmental matter by any Person against, or with respect to the activities
of, the Borrower or any of its Subsidiaries and notice of any alleged
violation of or non-compliance with any Environmental Laws or any permits,
licenses or authorizations, but only if such environmental matter or alleged
violation, if adversely determined, could reasonably be expected (either
individually or in the aggregate) to have a Material Adverse Effect. In
addition, the Borrower shall promptly furnish to the Administrative Agent
true and complete copies of each environmental audit, assessment or study
with respect to the premises subject to the Woodland Hills Lease delivered
pursuant to Section 15.3 of such Lease, and the Borrower shall cause the
lessor to implement the recommendations (if any) set forth in such report and
shall cause the lessor to remediate any identified instances of
non-compliance with Environmental Laws
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which could reasonably be expected to lead to material fines, penalties or
liabilities. The Borrower agrees to pursue diligently any claims or remedies
under Section 15.4 of the Woodland Hills Lease and the Agreement of Guaranty
dated June 13, 1995 from Trizec Properties, Inc. in favor of the Borrower, in
each case with respect to the matters covered thereby.
9.03 EXISTENCE, ETC. The Borrower will, and will cause each of its
Subsidiaries to:
(a) preserve and maintain its legal existence and all of its material
rights, privileges, licenses and franchises (PROVIDED that nothing in this
Section 9.03 shall prohibit any transaction expressly permitted under
Section 9.05 hereof);
(b) comply with the requirements of all applicable laws, rules,
regulations and orders of governmental or regulatory authorities if failure
to comply with such requirements could reasonably be expected (either
individually or in the aggregate) to have a Material Adverse Effect;
(c) pay and discharge all taxes, assessments and governmental charges
or levies imposed on it or on its income or profits or on any of its
Property prior to the date on which penalties attach thereto, except for
any such tax, assessment, charge or levy the payment of which is being
contested in good faith and by proper proceedings and against which
adequate reserves are being maintained;
(d) maintain all of its Properties used or useful in its business in
good working order and condition, ordinary wear and tear excepted;
(e) keep adequate records and books of account, in which complete
entries will be made in accordance with generally accepted accounting
principles consistently applied; and
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(f) permit representatives of any Lender or the Administrative Agent,
during normal business hours and upon reasonable notice to the Borrower, to
examine, copy and make extracts from its books and records, to inspect any
of its Properties, and to discuss its business and affairs with its
officers, all to the extent reasonably requested by such Lender or the
Administrative Agent (as the case may be).
9.04 INSURANCE. The Borrower will, and will cause each of its
Subsidiaries to, maintain insurance with financially sound and reputable
insurance companies, and with respect to Property and risks of a character
usually maintained by corporations engaged in the same or similar business
similarly situated, against loss, damage and liability of the kinds and in the
amounts customarily maintained by such corporations, PROVIDED that in any event
the Borrower will maintain property damage insurance with respect to the
tangible personal and real property subject to the Liens of the Security
Documents in such amounts, and subject to such deductibles, as shall be
reasonably satisfactory to the Administrative Agent, and shall name the
Administrative Agent as loss payee under each policy of such insurance.
9.05 PROHIBITION OF FUNDAMENTAL CHANGES.
(a) MERGERS AND CONSOLIDATIONS. The Borrower will not, nor will it
permit any of its Subsidiaries to, enter into any transaction of merger or
consolidation or amalgamation, or liquidate, wind up or dissolve itself (or
suffer any liquidation or dissolution).
(b) ACQUISITIONS. The Borrower will not, nor will it permit any of
its Subsidiaries to, acquire any business or Property from, or capital stock of,
or be a party to any acquisition of, any Person except for:
(i) purchases of inventory and other Property to be sold or used in
the ordinary course of business;
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(ii) Investments permitted under Section 9.08(f) hereof; and
(iii) Capital Expenditures.
(c) DISPOSITIONS. The Borrower will not, nor will it permit any of
its Subsidiaries to, convey, sell, lease, transfer or otherwise dispose of, in
one transaction or a series of transactions, any part of its business or
Property, whether now owned or hereafter acquired (including, without
limitation, receivables and leasehold interests, but excluding:
(i) Excluded Dispositions;
(ii) any disposition of Property in connection with the termination
or nonrenewal of the lease existing on the Closing Date in respect of the
premises located in Tarzana, California (or any other lease, PROVIDED that
the aggregate amount of Property disposed of under all such other leases
shall not exceed $250,000); and
(iii) additional Dispositions having a market value not exceeding
$3,000,000 during any fiscal year (in the case of the fiscal year ending
December 31, 1996, from and after the Closing Date) or $6,000,000 in the
aggregate for all such Dispositions.
(d) CERTAIN EXCLUSIONS. Notwithstanding the foregoing provisions of
this Section 9.05:
(i) any Wholly Owned Subsidiary of the Borrower may be merged or
consolidated with or into: (x) the Borrower if the Borrower shall be the
continuing or surviving corporation or (y) any other Wholly Owned Subsidiary
of the Borrower;
(ii) any Wholly Owned Subsidiary of the Borrower may sell, lease,
transfer or otherwise dispose of any or all of its Property (upon voluntary
liquidation or otherwise) to
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the Borrower or another Wholly Owned Subsidiary of the Borrower;
(iii) the Borrower may at any time convert from a partnership to a
corporation, PROVIDED that (x) the Borrower will provide prior written
notice of such proposed conversion to the Administrative Agent as early as
practicable following its decision to undertake such conversion (but in no
event less than 45 days prior to the date of such proposed conversion) (and
the Administrative Agent shall promptly notify each of the Lenders
thereof), specifying the proposed date of such conversion and providing
reasonable details as to the steps proposed to be taken in order to effect
such conversion, (y) at the time of such notice, the Borrower shall propose
to the Administrative Agent all necessary modifications to this Agreement
and the other Loan Documents as shall be necessary to give effect to such
conversion (and the Administrative Agent and the Lenders shall review such
proposed modifications and shall provide to the Borrower (through the
Administrative Agent) any changes thereto (or otherwise on their own
propose any modifications to this Agreement or any other Loan Documents) as
the Administrative Agent or any Lender shall deem reasonably necessary to
give effect to such conversion, not later than the date 10 days prior to
the proposed effective date of such conversion) and (z) at the time of such
notice and on the effective date of such conversion, no Default shall have
occurred or be continuing; PROVIDED, FURTHER, that, if the Majority
Lenders, in their sole determination, advise the Borrower not later than
the date 10 days prior to the proposed effective date of such conversion)
that such proposed conversion could reasonably be expected to impair the
rights, benefits, privileges or remedies of the Lenders hereunder or under
the other Loan Documents or the collateral for the Loans under any of the
Loan Documents, such conversion shall not thereafter be effected without
the prior written consent of the Majority Lenders; and
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(iv) the Borrower may cause Panavision Italia S.rl. to be liquidated.
9.06 LIMITATION ON LIENS. The Borrower will not, nor will it permit
any of its Subsidiaries to, create, incur, assume or suffer to exist any Lien
upon any of its Property, whether now owned or hereafter acquired, except:
(a) Liens created pursuant to the Security Documents;
(b) Liens in existence on the Closing Date and listed in Part B of
Schedule I hereto (excluding, however, following the making of the initial
Loans hereunder, Liens securing Indebtedness to be repaid with the proceeds
of such Loans, as indicated on said Schedule I);
(c) Liens imposed by any governmental authority for taxes,
assessments or charges not yet due or that are being contested in good
faith and by appropriate proceedings if adequate reserves with respect
thereto are maintained on the books of the Borrower or the affected
Subsidiaries, as the case may be, in accordance with GAAP;
(d) carriers', warehousemen's, mechanics', materialmen's, repairmen's
or other like Liens arising in the ordinary course of business that are not
overdue for a period of more than 30 days (but excluding any thereto in
relation to the work required to be undertaken by the Borrower and/or the
landlord with respect to the premises subject to the Woodland Hills Lease
as contemplated by the definitions of "Tenant's Work" and "Landlord's Work"
as set forth in Exhibit B thereto) or that are being contested in good
faith and by appropriate proceedings and Liens securing judgments but only
to the extent for an amount and for a period not resulting in an Event of
Default under Section 10(h) hereof;
(e) pledges or deposits under worker's compensation, unemployment
insurance and other social security legislation;
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(f) deposits to secure the performance of bids, trade contracts
(other than for Indebtedness), leases, statutory obligations, surety and
appeal bonds, performance bonds and other obligations of a like nature
incurred in the ordinary course of business;
(g) easements, rights-of-way, restrictions and other similar
encumbrances incurred in the ordinary course of business and encumbrances
consisting of zoning restrictions, easements, licenses, restrictions on the
use of Property or minor imperfections in title thereto that, in the
aggregate, are not material in amount, and that do not in any case
materially detract from the value of the Property subject thereto or
interfere with the ordinary conduct of the business of the Borrower or any
of its Subsidiaries; and
(h) Liens upon real and/or tangible personal Property acquired after
the Closing Date (by purchase, construction or otherwise) by the Borrower
or any of its Subsidiaries, each of which Liens secures Indebtedness under
Section 9.07(e) hereof and which Liens either (A) existed on such Property
before the time of its acquisition and was not created in anticipation
thereof or (B) was created solely for the purpose of securing Indebtedness
representing, or incurred to finance, refinance or refund, the cost
(including the cost of construction) of such Property; PROVIDED that no
such Lien shall extend to or cover any Property of the Borrower or such
Subsidiary other than the Property so acquired and improvements thereon.
9.07 INDEBTEDNESS. The Borrower will not, nor will it permit any of
its Subsidiaries to, create, incur or suffer to exist any Indebtedness except:
(a) Indebtedness to the Lenders hereunder;
(b) Indebtedness outstanding on the Closing Date and listed in Part A
of Schedule I hereto (other than Indebtedness which will be repaid upon the
consummation of
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the Recapitalization with the proceeds of the initial Loans);
(c) Subordinated Indebtedness incurred after the Closing Date in
accordance with Section 9.12(a) hereof;
(d) Indebtedness of Subsidiaries of the Borrower to the Borrower or
to other Subsidiaries of the Borrower, and Indebtedness of the Borrower to
any Subsidiary of the Borrower; and
(e) additional Indebtedness of the Borrower and its Subsidiaries
(including, without limitation, Capital Lease Obligations and other
Indebtedness secured by Liens permitted under Sections 9.06(h) hereof) up
to but not exceeding $6,000,000 at any one time outstanding.
9.08 INVESTMENTS. The Borrower will not, nor will it permit any of
its Subsidiaries to, make or permit to remain outstanding any Investments
except:
(a) (i) Investments outstanding on the Closing Date and (ii) the
Investments by the Borrower in the promissory note(s) of WP/GP, Inc. (in
the case of both (i) and (ii), as identified in Part B of Schedule II
hereto);
(b) operating deposit accounts with banks;
(c) Permitted Investments;
(d) Investments by the Borrower and its Subsidiaries in the Borrower
and its Subsidiaries;
(e) Interest Rate Protection Agreement not entered into for
speculative purposes;
(f) advances, loans or extensions of credit arising in connection
with the sale of inventory or supplies, or the provision of services, by
the Borrower or any of its Subsidiaries in the ordinary course of business
having a
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term not exceeding 180 days for the Borrower or any of its Subsidiaries
(other than Foreign Subsidiaries) or 360 days for any Foreign Subsidiary;
(g) loans to directors, officers, employees or agents up to but not
exceeding $1,000,000 in the aggregate at any one time outstanding;
(h) Investments made as a result of the receipt of non-cash
consideration from a Disposition permitted under Section 9.05(c) hereof, up
to but not exceeding $1,000,000 (with respect to the fair market value of
such non-cash consideration) in the aggregate at any one time outstanding;
(i) Investments in dealers and customers received in connection with
any bankruptcy or reorganization of such Person as a result of an
Investment otherwise permitted hereunder;
(j) Investments comprised of progress payments to suppliers up to but
not exceeding $1,000,000 in the aggregate at any one time outstanding;
(k) additional Investments (other than any Investments permitted
under any of the foregoing clauses) of up to but not exceeding $4,000,000
in the aggregate during any fiscal year, PROVIDED that in no event shall
the aggregate amount of all such Investments exceed $6,000,000.
9.09 RESTRICTED PAYMENTS. The Borrower will not, nor will it permit
any of its Subsidiaries to, declare or make any Restricted Payment at any time;
PROVIDED that, so long as at the time thereof and after giving effect thereto no
Default shall have occurred and be continuing, the Borrower may:
(a) if, as of the last day of any fiscal year of the Borrower ending
on or after December 31, 1996 (the "PRECEDING FISCAL YEAR"), the Total Debt
Ratio is less than 2.50 to 1, make Restricted Payments during the
succeeding fiscal year in an aggregate amount not exceeding the net
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income of the Borrower and its Subsidiaries for such preceding fiscal year
PLUS an amount equal to any amount which could previously have been paid
under this clause (a) but which was not theretofore paid, PROVIDED that the
Borrower shall have delivered to the Administrative Agent, at least 10
Business Days (but not more than 20 Business Days) prior to the date of
declaration of any such Restricted Payment, a certificate of a Senior
Officer setting forth computations in reasonable detail demonstrating
compliance with the requirements of this clause (a);
(b) at any time on or after the initial Public Equity Offering make
Restricted Payments to (i) its shareholders, in the case where the Public
Company is the Borrower and (ii) its partners, in the case where the Public
Company is WP/GP, Inc., from that portion of the Net Available Proceeds of
such Public Equity Offering not required to be applied as a mandatory
prepayment pursuant to Section 2.10(b) hereof in an aggregate amount not
exceeding the aggregate amount of capital contributions to the Borrower
made from and after the Closing Date by the partners and/or shareholders of
the Borrower (including, without limitation, the capital contributions made
as of the Closing Date and referred to in Section 7.01(j) of the Prior
Credit Agreement), PROVIDED that the Borrower shall have delivered to the
Administrative Agent, at least 10 Business Days (but not more than 20
Business Days) prior to the date of declaration of the Restricted Payment,
a certificate of a Senior Officer setting forth computations in reasonable
detail demonstrating compliance with the requirement of this clause (b);
and
(c) Panavision Canada Holdings Inc. may repurchase its shares held by
management from time to time, up to but not exceeding $3,000,000 in the
aggregate.
Nothing herein shall be deemed to prohibit the payment of dividends by
any Subsidiary of the Borrower to the Borrower or to any other Subsidiary of the
Borrower. In addition,
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notwithstanding anything contained herein to the contrary, the Borrower may
(so long as the Borrower is organized as a partnership) make Restricted
Payments to its partners or on behalf of its partners in such amounts and at
such times as provided in the Partnership Agreement in respect of the Tax
Payment Amount.
9.10 CERTAIN FINANCIAL COVENANTS.
(a) TOTAL DEBT RATIO. The Borrower will not permit the Total Debt
Ratio to exceed the following respective ratios at any time during the following
respective periods:
PERIOD RATIO
From and including the
Closing Date to and
including March 30, 1997 4.75 to 1
From and including
March 31, 1997
to and including
September 29, 1997 4.50 to 1
From and including
September 30, 1997
to and including
March 30, 1998 4.25 to 1
From and including
March 31, 1998
to and including
September 29, 1998 4.00 to 1
From and including
September 30, 1998
to and including
March 30, 1999 3.75 to 1
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From and including
March 31, 1999
to and including
September 29, 1999 3.50 to 1
From and including
September 30, 1999
to and including
March 30, 2000 3.25 to 1
From and including
March 31, 2000
and at all times
thereafter 3.00 to 1
(b) INTEREST COVERAGE RATIO. The Borrower will cause the Interest
Coverage Ratio to exceed the following respective ratios at the end of each
fiscal quarter during the following respective periods:
PERIOD RATIO
From and including the
Closing Date
through and including
March 31, 1997 2.00 to 1
From and including
April 1, 1997
through and including
March 31, 1998 2.25 to 1
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From and including
April 1, 1998
and at all times
thereafter 2.50 to 1
(c) FIXED CHARGES RATIO. The Borrower will not permit the Fixed
Charges Ratio to be less than 1.05 to 1 at the end of any fiscal quarter.
9.11 INTEREST RATE PROTECTION AGREEMENTS. The Borrower will within
60 days after the Closing Date enter into, and thereafter maintain in full force
and effect, one or more Interest Rate Protection Agreements in form and
substance satisfactory to the Administrative Agent in an aggregate notional
principal amount at least equal to 50% of the aggregate principal amount of the
Term Loans made on the Closing Date, for a period of at least two years measured
from the Closing Date.
9.12 SUBORDINATED INDEBTEDNESS.
(a) INCURRENCE. The Borrower may, at any time after the Closing
Date, incur additional Indebtedness so long as each of the following conditions
shall be satisfied:
(i) such additional Indebtedness is subordinated to the obligations of
the Borrower to pay principal of and interest on the Loans, the Notes and
the other obligations hereunder and under the Loan Documents on terms of
subordination, and pursuant to documentation containing other terms
(including, without limitation, interest, amortization, covenants and
events of default), in each case in form and substance reasonably
satisfactory to the Majority Lenders;
(ii) the Net Available Proceeds of such Indebtedness are applied to
the prepayment of the Loans to the extent required by Section 2.10(e)
hereof; and
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(iii) after giving effect to the incurrence of such Indebtedness and
the application of proceeds thereof, no Default shall have occurred and be
continuing.
Any Subsidiary Guarantor may Guarantee such Indebtedness so long as such
Guarantee is similarly subordinated to the Guarantee of such Subsidiary
Guarantor hereunder upon terms (including, without limitation, terms of
subordination) in form and substance reasonably satisfactory to the Majority
Lenders.
(b) PAYMENTS AND PREPAYMENTS. The Borrower will not, nor will it
permit any of its Subsidiaries to, purchase, redeem, retire or otherwise acquire
for value, or set apart any money for a sinking, defeasance or other analogous
fund for the purchase, redemption, retirement or other acquisition of, or make
any voluntary payment or prepayment of the principal of or interest on, or any
other amount owing in respect of, any Subordinated Indebtedness, except for
regularly scheduled payments or prepayments of principal and interest in respect
thereof required pursuant to the instruments evidencing such Subordinated
Indebtedness.
9.13 LINES OF BUSINESS. The Borrower will not, nor will it permit
any of its Subsidiaries to, engage in any line or lines of business activity
other than that related to the manufacturing, sale, distribution or rental of
media and/or film equipment or lines of business substantially similar to that
conducted by the Borrower and its Subsidiaries on the Closing Date.
9.14 TRANSACTIONS WITH AFFILIATES. Except as expressly permitted by
this Agreement, the Borrower will not, nor will it permit any of its
Subsidiaries to, directly or indirectly: (a) make any Investment in an
Affiliate; (b) transfer, sell, lease, assign or otherwise dispose of any
Property to an Affiliate; (c) merge into or consolidate with or purchase or
acquire Property from an Affiliate; or (d) enter into any other transaction
directly or indirectly with or for the benefit of an Affiliate (including,
without limitation,
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Guarantees and assumptions of obligations of an Affiliate);
PROVIDED that, notwithstanding the foregoing:
(i) any Affiliate who is an individual may serve as a director,
officer or employee of the Borrower or any of its Subsidiaries and receive
indemnification and reasonable compensation for his or her services in such
capacity;
(ii) the Borrower and its Subsidiaries may enter into transactions
(other than extensions of credit by the Borrower or any of its Subsidiaries
to an Affiliate) providing for the leasing of Property, the rendering or
receipt of services or the purchase or sale of inventory and other Property
in the ordinary course of business if the monetary or business
consideration arising therefrom would be substantially as advantageous to
the Borrower and its Subsidiaries as the monetary or business consideration
that would obtain in a comparable transaction with a Person not an
Affiliate; and
(iii) the Borrower and its Subsidiaries may make Permitted
Investments in the Warburg Pincus Cash Reserve Fund meeting the
requirements of the definition of "Permitted Investments" in Section 1.01
hereof.
9.15 USE OF PROCEEDS. The Borrower will use the proceeds of the
Loans made hereunder on the Closing Date to finance the Recapitalization and to
make the Investments referred to in Section 9.08(a)(ii) hereof and to finance
fees and expenses incurred in connection therewith, and will use the proceeds of
the Revolving Credit Loans made hereunder after the Closing Date to finance the
ongoing working capital and capital expenditure requirements of the Borrower and
its Subsidiaries and to provide funds for general corporate purposes of the
Borrower and its Subsidiaries, in each case in compliance with all applicable
legal and regulatory requirements, including, without limitation, Regulations G,
T, U and X and the Securities Act of 1933 and the Securities Exchange Act of
1934 and the regulations thereunder; PROVIDED that neither the Administrative
Agent nor any Lender
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shall have any responsibility as to the use of any of such proceeds.
9.16 CERTAIN OBLIGATIONS RESPECTING SUBSIDIARIES.
(a) SUBSIDIARY GUARANTORS. The Borrower will take such action, and
will cause each of its Subsidiaries to take such action, from time to time as
shall be necessary to ensure that all Subsidiaries of the Borrower are
"Subsidiary Guarantors" hereunder. Without limiting the generality of the
foregoing, in the event that the Borrower or any of its Subsidiaries shall form
or acquire any new entity that shall constitute a Subsidiary hereunder, the
Borrower and its Subsidiaries will cause such new Subsidiary to:
(i) become a "Subsidiary Guarantor" hereunder, and a "Securing Party"
under the Security Agreement, pursuant to a Guarantee Assumption Agreement;
(ii) cause such Subsidiary to take such action (including, without
limitation, delivering such shares of stock, executing and delivering such
Uniform Commercial Code financing statements and executing and delivering
mortgages or deeds of trust covering the real Property and fixtures owned or
leased by such Subsidiary) as shall be necessary to create and perfect valid
and enforceable first priority Liens on substantially all of the Property of
such new Subsidiary as collateral security for the obligations of such new
Subsidiary hereunder (PROVIDED that any such security interests shall be
subject to the provisions of Section 5.04(c) of the Security Agreement and
to any Liens permitted under Section 9.06 hereof and existing at the time
such entity becomes a Subsidiary); and
(iii) deliver such proof of partnership or corporate action,
incumbency of officers, opinions of counsel (subject to usual and customary
exceptions and assumptions) and other documents as is consistent with those
delivered by each Obligor pursuant to Section 7.01 of the Prior Credit
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Agreement on the Closing Date or as the Administrative Agent shall have
requested;
PROVIDED that, if any such Subsidiary is organized as a corporation under the
laws of a jurisdiction other than the United States of America or a State
thereof (each a "FOREIGN SUBSIDIARY"), such Subsidiary shall not be required to
become a Subsidiary Guarantor hereunder or a Securing Party under the Security
Agreement, and the Borrower shall forthwith pledge, or cause to be pledged, to
the Administrative Agent (for the benefit of the Lenders) under the Security
Agreement (or, at the request of the Majority Lenders, under a pledge or other
agreement governed by the law of such Subsidiary's jurisdiction of organization)
(x) 66% of the voting capital stock of such Foreign Subsidiary having ordinary
voting power for the election of the board of directors of such Foreign
Subsidiary and (y) 100% of all other stock of such Foreign Subsidiary.
(b) OWNERSHIP OF SUBSIDIARIES. The Borrower will, and will cause
each of its Subsidiaries to, take such action from time to time as shall be
necessary to ensure that each of its Subsidiaries formed or acquired after the
Closing Date is a Wholly Owned Subsidiary, except that with respect to
Subsidiaries formed or acquired pursuant to Section 9.08(k) hereof, such
Subsidiaries shall not be required to be Wholly Owned Subsidiaries. In the
event that any additional shares of stock shall be issued by any Subsidiary, the
respective Obligor agrees forthwith to deliver to the Administrative Agent
pursuant to the Security Agreement the certificates evidencing such shares of
stock, accompanied by undated stock powers executed in blank and to take such
other action as the Administrative Agent shall request to perfect the security
interest created therein pursuant to the Security Agreement.
(c) CERTAIN RESTRICTIONS. The Borrower will not permit any of its
Subsidiaries to enter into, after the Closing Date, any indenture, agreement,
instrument or other arrangement that, directly or indirectly, prohibits or
restrains, or has the effect of prohibiting or restraining, or imposes
materially adverse conditions upon, the incurrence or payment
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of Indebtedness, the granting of Liens, the declaration or payment of
dividends, the making of loans, advances or Investments or the sale,
assignment, transfer or other disposition of Property; PROVIDED that the
foregoing shall not prohibit (i) any customary nonassignment provisions
entered into in the ordinary course of business in leases and other
agreements, (ii) any restriction with respect to a Subsidiary imposed
pursuant to an agreement which has been entered into for the sale or
disposition of all or substantially all of the capital stock or assets of
such Subsidiary, PROVIDED that the consummation of such transaction is
otherwise permitted under this Agreement, (iii) any restriction pursuant to
applicable law or regulations, (iv) any restriction on the sale or other
disposition of Property securing Indebtedness as a result of a Lien on such
Property, and (v) any restriction contained in any instrument constituting
Indebtedness permitted under Section 9.07(e) hereof, PROVIDED that such
restrictions are consistent with, and not materially more restrictive (as
conclusively determined in good faith by a Senior Officer) than comparable
provisions included in this Agreement.
9.17 MODIFICATIONS OF CERTAIN DOCUMENTS. The Borrower will not, nor
will it permit any of its Subsidiaries to, consent to any modification,
supplement, or waiver of any of the provisions of (a) Sections 3.1 and 5.2(c) of
the Partnership Agreement or (b) of any other provision of the Partnership
Agreement or (in the case of any such Subsidiary or, following the conversion to
a corporation, the Borrower) any provision of its respective charter or by-laws
(or equivalent documents) or any provision of the Woodland Hills Lease or the
Recapitalization Documents, if, in each case such modification, supplement or
waiver could reasonably be expected to be adverse to the interests of the
Lenders under the Loan Documents, in each case without the prior consent of the
Majority Lenders; PROVIDED that, the Borrower shall, in any event, notify the
Administrative Agent in writing of any proposed modification, supplement or
waiver of any provision of any of the foregoing agreements or documents at least
ten Business Days prior to proposed effective date of such modification,
supplement or waiver.
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9.18 OBLIGATIONS RELATING TO COLLATERAL SECURITY. The Borrower
agrees that in the event it or any of its Subsidiaries (other than any Foreign
Subsidiary) shall, after the Closing Date, acquire any real Property, including,
without limitation, the entering into of a new lease, in each case involving
Property having a fair market value at the time of such acquisition or lease of
more than $3,000,000, whether of a new or an existing facility, the Borrower or
such Subsidiary, as the case may be, will promptly, upon the request of the
Majority Lenders, (a) execute and deliver to the Administrative Agent an
appropriate Mortgage covering such real Property, PROVIDED that, in the case of
any such leasehold interest, the Borrower or such Subsidiary shall use its best
efforts to obtain from the respective landlord a consent for the execution and
delivery by the Borrower or any such Subsidiary, as the case may be, of a
Mortgage covering such leasehold interest and, only upon obtaining such consent,
it will immediately execute and deliver to the Administrative Agent an
appropriate Mortgage covering such leasehold interest) and (b) satisfy all other
requirements with respect thereto as set forth in Section 7.01(h) of the Prior
Credit Agreement; PROVIDED that the lease to be entered into by the Borrower
with respect to the premises at 6735 Selma Avenue, Hollywood, California shall
not be subject to the provisions of this Section 9.18.
Section 10. EVENTS OF DEFAULT. If one or more of the following
events (herein called "EVENTS OF DEFAULT") shall occur and be continuing:
(a) The Borrower shall default in the payment when due (whether at
stated maturity or at mandatory or optional prepayment) of (i) any
principal of any Loan or Reimbursement Obligation, (ii) any interest on any
Loan or Reimbursement Obligation or (iii) any fee or any other amount
payable by it hereunder or under any other Loan Document and, in the case
of any such default in the payment of any fee or other amount, such default
shall continue for two or more Business Days; or
(b) The Borrower or any of its Subsidiaries shall default in the
payment when due of any principal of or
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interest on any of its other Indebtedness aggregating $2,000,000 or
more; or any event specified in any note, agreement, indenture or other
document evidencing or relating to any such Indebtedness shall occur if
the effect of such event is to cause, or (with the giving of any notice
or the lapse of time or both) to permit the holder or holders of such
Indebtedness (or a trustee or agent on behalf of such holder or holders)
to cause, such Indebtedness to become due, or to be prepaid in full
(whether by redemption, purchase, offer to purchase or otherwise), prior
to its stated maturity; or any event specified in any Interest Rate
Protection Agreement to which any Obligor is a party shall occur if the
effect of such event is to cause, or (with the giving of any notice or
the lapse of time or both) to permit, termination or liquidation payment
or payments aggregating $2,000,000 or more to become due; or
(c) Any representation, warranty or certification made or deemed made
herein or in any other Loan Document (or in any modification or supplement
hereto or thereto) by any Obligor, or any certificate furnished to any
Lender or the Administrative Agent pursuant to the provisions hereof or
thereof, shall prove to have been false or misleading as of the time made
or furnished in any material respect; or
(d) Any of the following shall occur and be continuing: (i) the
Borrower shall default in the performance of any of its obligations under
any of Sections 9.05, 9.06, 9.07, 9.08, 9.09, 9.10, 9.12 or 9.17 hereof;
(ii) any Obligor shall default in the performance of any of its obligations
under Section 5.02 of the Security Agreement; or (iii) any Obligor shall
default in the performance of any of its other obligations in this
Agreement or any other Loan Document and such default shall continue
unremedied for a period of 30 or more days after notice thereof to the
Borrower by the Administrative Agent or any Lender (through the
Administrative Agent); or
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(e) The Borrower or any of its Significant Subsidiaries shall admit
in writing its inability to, or be generally unable to, pay its debts as
such debts become due; or
(f) The Borrower or any of its Significant Subsidiaries shall
(i) apply for or consent to the appointment of, or the taking of possession
by, a receiver, custodian, trustee, examiner or liquidator of itself or of
all or a substantial part of its Property, (ii) make a general assignment
for the benefit of its creditors, (iii) commence a voluntary case under the
Bankruptcy Code, (iv) file a petition seeking to take advantage of any
other law relating to bankruptcy, insolvency, reorganization, liquidation,
dissolution, arrangement or winding-up, or composition or readjustment of
debts, (v) fail to controvert in a timely and appropriate manner, or
acquiesce in writing to, any petition filed against it in an involuntary
case under the Bankruptcy Code or (vi) take any corporate action for the
purpose of effecting any of the foregoing; or
(g) A proceeding or case shall be commenced, without the application
or consent of the Borrower or any of its Significant Subsidiaries, in any
court of competent jurisdiction, seeking (i) its reorganization,
liquidation, dissolution, arrangement or winding-up, or the composition or
readjustment of its debts, (ii) the appointment of a receiver, custodian,
trustee, examiner, liquidator or the like of the Borrower or such
Significant Subsidiary or of all or any substantial part of its Property,
or (iii) similar relief in respect of the Borrower or such Significant
Subsidiary under any law relating to bankruptcy, insolvency,
reorganization, winding-up, or composition or adjustment of debts, and such
proceeding or case shall continue undismissed, or an order, judgment or
decree approving or ordering any of the foregoing shall be entered and
continue unstayed and in effect, for a period of 60 or more days; or an
order for relief against the Borrower or any of its Significant
Subsidiaries shall be entered in an involuntary case under the Bankruptcy
Code; or
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(h) A final judgment or judgments for the payment of money of
$2,000,000 or more in the aggregate (net of judgment amounts to the extent
covered by insurance or indemnity where the insurer or indemnitor, as the
case may be, has admitted liability in respect of such judgment) shall be
rendered by one or more courts, administrative tribunals or other bodies
having jurisdiction against the Borrower or any of its Significant
Subsidiaries and the same shall not be discharged (or provision shall not
be made for such discharge), or a stay of execution thereof shall not be
procured, within 45 days from the date of entry thereof and the Borrower or
the relevant Subsidiary shall not, within said period of 45 days, or such
longer period during which execution of the same shall have been stayed,
appeal therefrom and cause the execution thereof to be stayed during such
appeal; or
(i) An event or condition specified in Section 9.01(f) hereof shall
occur or exist with respect to any Plan or Multiemployer Plan and, as a
result of such event or condition, together with all other such events or
conditions, the Borrower or any ERISA Affiliate shall incur or, in the
opinion of the Majority Lenders, shall be reasonably likely to incur a
liability to a Plan, a Multiemployer Plan or the PBGC (or any combination
of the foregoing) that, in the determination of the Majority Lenders, would
(either individually or in the aggregate) have a Material Adverse Effect;
or
(j) There shall have been asserted against the Borrower or any of its
Subsidiaries, or any predecessor in interest of the Borrower or any of its
Subsidiaries or Affiliates, of (or there shall have been asserted against
the Borrower or any of its Subsidiaries) any claims or liabilities, whether
accrued, absolute or contingent, based on or arising from the generation,
storage, transport, handling or disposal of Hazardous Materials by the
Borrower or any of its Subsidiaries, Affiliates or predecessors that, in
the reasonable judgment of the Majority Lenders, are
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reasonably likely to be determined adversely to the Borrower or any of
its Subsidiaries, and the amount thereof (either individually or in the
aggregate) is reasonably likely to have a Material Adverse Effect
(insofar as such amount is payable by the Borrower or any of its
Subsidiaries but after deducting any portion thereof that is reasonably
expected to be paid by other creditworthy Persons jointly and severally
liable therefor); or
(k) Any of the following events shall occur and be continuing:
(i) at any time prior to the initial Public Equity Offering and
during which time the Borrower shall be organized as a partnership,
Warburg Pincus or a Warburg Affiliate shall cease to be the General
Partner; or
(ii) at any time prior to the initial Public Equity Offering and
during which time the Borrower shall be organized as a partnership,
Warburg Pincus and/or the Warburg Affiliates shall cease to own,
collectively, at least 60% of the aggregate partnership interests of
the Borrower; or
(iii) at any time subsequent to the initial Public Equity
Offering, Warburg Pincus and/or the Warburg Affiliates shall cease to
be, collectively, the largest single shareholder of the voting common
stock of the Public Company, provided that if the Public Company is
WP/GP, Inc. and the Borrower remains organized as a partnership, then
at such time thereafter that WP/GP, Inc. shall cease to be the General
Partner thereof; or
(l) The Liens created by the Security Documents shall at any time not
(other than by reason of the action of the Administrative Agent or any of
the Lenders) constitute a valid and perfected Lien on the collateral
intended to be covered thereby (to the extent perfection by filing,
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registration, recordation or possession is required herein or therein) in
favor of the Administrative Agent, free and clear of all other Liens (other
than Liens permitted under Section 9.06 hereof or under the respective
Security Documents), or, except for expiration in accordance with its
terms, any of the Security Documents shall for whatever reason be
terminated or cease to be in full force and effect, or the enforceability
thereof shall be contested by any Obligor;
THEREUPON:
(1) in the case of an Event of Default other than one referred to in
clause (f) or (g) of this Section 10 with respect to any Obligor, the
Administrative Agent may, (and, upon the direction of the Majority Lenders,
shall) by notice to the Borrower, terminate the Commitments and/or declare
the principal amount then outstanding of, and the accrued interest on, the
Loans, the Reimbursement Obligations and all other amounts payable by the
Obligors hereunder and under the Notes (including, without limitation, any
amounts payable under Section 5.05 or 5.06 hereof) to be forthwith due and
payable, whereupon such amounts shall be immediately due and payable
without presentment, demand, protest or other formalities of any kind, all
of which are hereby expressly waived by each Obligor; and
(2) in the case of the occurrence of an Event of Default referred to
in clause (f) or (g) of this Section 10 with respect to any Obligor, the
Commitments shall automatically be terminated and the principal amount then
outstanding of, and the accrued interest on, the Loans, the Reimbursement
Obligations and all other amounts payable by the Obligors hereunder and
under the Notes (including, without limitation, any amounts payable under
Section 5.05 or 5.06 hereof) shall automatically become immediately due and
payable without presentment, demand, protest or other formalities of any
kind, all of which are hereby expressly waived by each Obligor.
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In addition, upon the occurrence and during the continuance of any
Event of Default (if the Administrative Agent has declared the principal amount
then outstanding of, and accrued interest on, the Revolving Credit Loans and all
other amounts payable by the Borrower hereunder and under the Notes to be due
and payable), the Borrower agrees that it shall, if requested by the
Administrative Agent or the Majority Revolving Credit Lenders through the
Administrative Agent (and, in the case of any Event of Default referred to in
clause (f) or (g) of this Section 10 with respect to the Borrower, forthwith,
without any demand or the taking of any other action by the Administrative Agent
or such Lenders) provide cover for the Letter of Credit Liabilities by paying to
the Administrative Agent immediately available funds in an amount equal to the
then aggregate undrawn face amount of all Letters of Credit, which funds shall
be held by the Administrative Agent in the Collateral Account as collateral
security in the first instance for the Letter of Credit Liabilities and be
subject to withdrawal only as therein provided.
Section 11. THE ADMINISTRATIVE AGENT.
11.01 APPOINTMENT, POWERS AND IMMUNITIES. Each Lender hereby
appoints and authorizes the Administrative Agent to act as its agent hereunder
and under the other Loan Documents (and specifically as agent under the U.K.
Pledge Agreement) with such powers as are specifically delegated to the
Administrative Agent by the terms of this Agreement and of the other Loan
Documents, together with such other powers as are reasonably incidental thereto.
The Administrative Agent (which term as used in this sentence and in
Section 11.05 hereof and the first sentence of Section 11.06 hereof shall
include reference to its affiliates and its own and its affiliates' officers,
directors, employees and agents):
(a) shall have no duties or responsibilities except those expressly
set forth in this Agreement and in the other Loan Documents, and shall not
by reason of this Agreement or any other Loan Document be a trustee for any
Lender;
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(b) shall not be responsible to the Lenders for any recitals,
statements, representations or warranties contained in this Agreement or in
any other Loan Document, or in any certificate or other document referred
to or provided for in, or received by any of them under, this Agreement or
any other Loan Document, or for the value, validity, effectiveness,
genuineness, enforceability or sufficiency of this Agreement, any Note or
any other Loan Document or any other document referred to or provided for
herein or therein or for any failure by the Borrower or any other Person to
perform any of its obligations hereunder or thereunder;
(c) shall not, except to the extent expressly instructed by the
Majority Lenders with respect to collateral security under the Security
Documents, be required to initiate or conduct any litigation or collection
proceedings hereunder or under any other Loan Document; and
(d) shall not be responsible for any action taken or omitted to be
taken by it hereunder or under any other Loan Document or under any other
document or instrument referred to or provided for herein or therein or in
connection herewith or therewith, except for its own gross negligence or
willful misconduct.
The Administrative Agent may employ agents and attorneys-in-fact and shall not
be responsible for the negligence or misconduct of any such agents or
attorneys-in-fact selected by it in good faith. The Administrative Agent may
deem and treat the payee (or Registered Holder, as the case may be) of a Note as
the holder thereof for all purposes hereof unless and until a notice of the
assignment or transfer thereof shall have been filed with the Administrative
Agent, together with the consent of the Borrower to such assignment or transfer
(to the extent required by Section 12.06(b) hereof).
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11.02 RELIANCE BY ADMINISTRATIVE AGENT. The Administrative Agent
shall be entitled to rely upon any certification, notice or other communication
(including, without limitation, any thereof by telephone, telecopy, telegram or
cable) reasonably believed by it to be genuine and correct and to have been
signed or sent by or on behalf of the proper Person or Persons, and upon advice
and statements of legal counsel, independent accountants and other experts
selected by the Administrative Agent. As to any matters not expressly provided
for by this Agreement or any other Loan Document, the Administrative Agent shall
in all cases be fully protected in acting, or in refraining from acting,
hereunder or thereunder in accordance with instructions given by the Majority
Lenders or, if provided herein, in accordance with the instructions given by the
Majority Revolving Credit Lenders, the Majority Facility A Lenders, the Majority
Facility B Lenders or all of the Lenders as is required in such circumstance,
and such instructions of such Lenders and any action taken or failure to act
pursuant thereto shall be binding on all of the Lenders.
11.03 DEFAULTS. The Administrative Agent shall not be deemed to have
knowledge or notice of the occurrence of a Default unless the Administrative
Agent has received notice from a Lender or the Borrower specifying such Default
and stating that such notice is a "Notice of Default". In the event that the
Administrative Agent receives such a notice of the occurrence of a Default, the
Administrative Agent shall give prompt notice thereof to the Lenders. The
Administrative Agent shall (subject to Section 11.07 hereof) take such action
with respect to such Default as shall be directed by the Majority Lenders or, if
provided herein, the Majority Revolving Credit Lenders, the Majority Facility A
Term Loan Lenders or the Majority Facility B Term Loan Lenders, PROVIDED that,
unless and until the Administrative Agent shall have received such directions,
the Administrative Agent may (but shall not be obligated to) take such action,
or refrain from taking such action, with respect to such Default as it shall
deem advisable in the best interest of the Lenders except to the extent that
this Agreement expressly requires that such action be taken, or not be taken,
only with the consent or upon the authorization of the Majority Lenders,
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the Majority Revolving Credit Lenders, the Majority Facility A Lenders, the
Majority Facility B Lenders or all of the Lenders.
11.04 RIGHTS AS A LENDER. With respect to its Commitments and the
Loans made by it, Chase (and any successor acting as Administrative Agent) in
its capacity as a Lender hereunder shall have the same rights and powers
hereunder as any other Lender and may exercise the same as though it were not
acting as the Administrative Agent, and the term "Lender" or "Lenders" shall,
unless the context otherwise indicates, include the Administrative Agent in its
individual capacity. Chase (and any successor acting as Administrative Agent)
and its affiliates may (without having to account therefor to any Lender) accept
deposits from, lend money to, make investments in and generally engage in any
kind of banking, trust or other business with the Obligors (and any of their
Subsidiaries or Affiliates) as if it were not acting as the Administrative
Agent, and Chase and its affiliates (and any such successor) and its affiliates
may accept fees and other consideration from the Obligors for services in
connection with this Agreement or otherwise without having to account for the
same to the Lenders.
11.05 INDEMNIFICATION. The Lenders agree to indemnify the
Administrative Agent (to the extent not reimbursed under Section 12.03 hereof,
but without limiting the obligations of the Borrower under said Section 12.03)
ratably in accordance with the aggregate principal amount of the Loans and
Reimbursement Obligations held by the Lenders (or, if no Loans or Reimbursement
Obligations are at the time outstanding, ratably in accordance with their
respective Commitments), for any and all liabilities, obligations, losses,
damages, penalties, actions, judgments, suits, costs, expenses or disbursements
of any kind and nature whatsoever that may be imposed on, incurred by or
asserted against the Administrative Agent (including by any Lender) arising out
of or by reason of any investigation in or in any way relating to or arising out
of this Agreement or any other Loan Document or any other documents contemplated
by or referred to herein or therein or the transactions contemplated hereby or
thereby (including, without limitation, the costs and expenses that the Borrower
is obligated to pay under Section 12.03 hereof)
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or the enforcement of any of the terms hereof or thereof or of any such other
documents, PROVIDED that no Lender shall be liable for any of the foregoing
to the extent they arise from the gross negligence or willful misconduct of
the party to be indemnified.
11.06 NON-RELIANCE ON ADMINISTRATIVE AGENT AND OTHER LENDERS. Each
Lender agrees that it has, independently and without reliance on the
Administrative Agent or any other Lender, and based on such documents and
information as it has deemed appropriate, made its own credit analysis of the
Borrower and its Subsidiaries and decision to enter into this Agreement and that
it will, independently and without reliance upon the Administrative Agent or any
other Lender, and based on such documents and information as it shall deem
appropriate at the time, continue to make its own analysis and decisions in
taking or not taking action under this Agreement or under any other Loan
Document. The Administrative Agent shall not be required to keep itself
informed as to the performance or observance by any Obligor of this Agreement or
any of the other Loan Documents or any other document referred to or provided
for herein or therein or to inspect the Properties or books of the Borrower or
any of its Subsidiaries. Except for notices, reports and other documents and
information expressly required to be furnished to the Lenders by the
Administrative Agent hereunder or under the Security Documents, the
Administrative Agent shall not have any duty or responsibility to provide any
Lender with any credit or other information concerning the affairs, financial
condition or business of the Borrower or any of its Subsidiaries (or any of
their affiliates) that may come into the possession of the Administrative Agent
or any of its affiliates.
11.07 FAILURE TO ACT. Except for action expressly required of the
Administrative Agent hereunder and under the other Loan Documents, the
Administrative Agent shall in all cases be fully justified in failing or
refusing to act hereunder and thereunder unless it shall receive further
assurances to its satisfaction from the Lenders of their indemnification
obligations under Section 11.05 hereof against any and all liability and expense
that may be incurred by it by reason of taking or continuing to take any such
action.
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11.08 RESIGNATION OR REMOVAL OF ADMINISTRATIVE AGENT. Subject to the
appointment and acceptance of a successor Administrative Agent as provided
below, the Administrative Agent may resign at any time by giving notice thereof
to the Lenders and the Borrower, and the Administrative Agent may be removed at
any time with or without cause by the Majority Lenders. Upon any such
resignation or removal, the Majority Lenders shall have the right (with the
consent of the Borrower, such consent not to be unreasonably withheld) to
appoint a successor Administrative Agent. If no successor Administrative Agent
shall have been so appointed by the Majority Lenders and shall have accepted
such appointment within 30 days after the retiring Administrative Agent's giving
of notice of resignation or the Majority Lenders' removal of the retiring
Administrative Agent, then the retiring Administrative Agent may, on behalf of
the Lenders, appoint a successor Administrative Agent, that shall be a bank that
has an office in New York, New York with a combined capital and surplus of at
least $500,000,000. Upon the acceptance of any appointment as Administrative
Agent hereunder by a successor Administrative Agent, such successor
Administrative Agent shall thereupon succeed to and become vested with all the
rights, powers, privileges and duties of the retiring Administrative Agent, and
the retiring Administrative Agent shall be discharged from its duties and
obligations hereunder. After any retiring Administrative Agent's resignation or
removal hereunder as Administrative Agent, the provisions of this Section 11
shall continue in effect for its benefit in respect of any actions taken or
omitted to be taken by it while it was acting as the Administrative Agent.
11.09 CONSENTS UNDER OTHER LOAN DOCUMENTS. Except as otherwise
provided in Section 12.04 hereof with respect to this Agreement, the
Administrative Agent may, with the prior consent of the Majority Lenders (but
not otherwise), consent to any modification, supplement or waiver under any of
the Loan Documents, PROVIDED that, without the prior consent of each Lender, the
Administrative Agent shall not (except as provided herein or in the Security
Documents) release any collateral or otherwise terminate any Lien under any
Security Document
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providing for collateral security, agree to additional obligations being
secured by such collateral security (unless the Lien for such additional
obligations shall be junior to the Lien in favor of the other obligations
secured by such Security Document, in which event the Administrative Agent
may consent to such junior Lien provided that it obtains the consent of the
Majority Lenders thereto), alter the relative priorities of the obligations
entitled to the benefits of the Liens created under the Security Documents,
except that no such consent shall be required, and the Administrative Agent
is hereby authorized, to release any Lien covering Property that is the
subject of either a disposition of Property permitted hereunder or a
disposition to which the Majority Lenders have consented.
Section 12. MISCELLANEOUS.
12.01 WAIVER. No failure on the part of the Administrative Agent or
any Lender to exercise and no delay in exercising, and no course of dealing with
respect to, any right, power or privilege under this Agreement or any Note shall
operate as a waiver thereof, nor shall any single or partial exercise of any
right, power or privilege under this Agreement or any Note preclude any other or
further exercise thereof or the exercise of any other right, power or privilege.
The remedies provided herein are cumulative and not exclusive of any remedies
provided by law.
12.02 NOTICES. All notices, requests and other communications
provided for herein and in the Security Documents (including, without
limitation, any modifications of, or waivers or consents under, this Agreement)
shall be given or made in writing (including, without limitation, by telecopy),
delivered to the intended recipient at the "Address for Notices" specified below
its name on the signature pages hereof (below the name of the Borrower, in the
case of any Subsidiary Guarantor); or, as to any party, at such other address as
shall be designated by such party in a notice to each other party. Except as
otherwise provided in this Agreement, all such communications shall be deemed to
have been duly given when transmitted by telecopier or
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personally delivered or, in the case of a mailed notice, upon receipt, in
each case given or addressed as aforesaid.
12.03 EXPENSES, ETC. The Borrower agrees to pay or reimburse each of
the Lenders and the Administrative Agent for: (a) all reasonable out-of-pocket
costs and expenses of the Administrative Agent (including, without limitation,
the reasonable fees and expenses of Milbank, Tweed, Hadley & McCloy, special New
York counsel to Chase) in connection with (i) the negotiation, preparation,
execution and delivery of this Agreement and the other Loan Documents and the
making of the extensions of credit hereunder and (ii) the negotiation or
preparation of any modification, supplement or waiver of any of the terms of
this Agreement or any of the other Loan Documents (whether or not consummated);
(b) all reasonable out-of-pocket costs and expenses of the Lenders and the
Administrative Agent (including, without limitation, the reasonable fees and
expenses of legal counsel) in connection with (i) any Default and any
enforcement or collection proceedings resulting therefrom, including, without
limitation, all manner of participation in or other involvement with (x)
bankruptcy, insolvency, receivership, foreclosure, winding up or liquidation
proceedings, (y) judicial or regulatory proceedings and (z) workout,
restructuring or other negotiations or proceedings (whether or not the workout,
restructuring or transaction contemplated thereby is consummated) and (ii) the
enforcement of this Section 12.03; (c) all transfer, stamp, documentary or other
similar taxes, assessments or charges levied by any governmental or revenue
authority in respect of this Agreement or any of the other Loan Documents or any
other document referred to herein or therein and all costs, expenses, taxes,
assessments and other charges incurred in connection with any filing,
registration, recording or perfection of any security interest contemplated by
any Security Document or any other document referred to therein; and (d) all
costs, expenses and other charges in respect of title insurance procured with
respect to the Liens created pursuant to the Mortgages.
The Borrower hereby agrees to indemnify the Administrative Agent and
each Lender and their respective directors, officers, trustees, employees,
attorneys and agents
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from, and hold each of them harmless against, any and all losses,
liabilities, claims, damages or expenses incurred by any of them (including,
without limitation, any and all losses, liabilities, claims, damages or
expenses incurred by the Administrative Agent to any Lender, whether or not
the Administrative Agent or any Lender is a party thereto) arising out of or
by reason of any investigation or litigation or other proceedings (including
any threatened investigation or litigation or other proceedings) relating to
the extensions of credit hereunder or any actual or proposed use by the
Borrower or any of its Subsidiaries of the proceeds of any of the extensions
of credit hereunder, including, without limitation, the reasonable fees and
disbursements of counsel incurred in connection with any such investigation
or litigation or other proceedings (but excluding any such losses,
liabilities, claims, damages or expenses incurred by reason of the gross
negligence or willful misconduct of the Person to be indemnified). Without
limiting the generality of the foregoing, the Borrower will indemnify the
Administrative Agent and each Lender from, and hold the Administrative Agent
and each Lender harmless against, any losses, liabilities, claims, damages or
expenses described in the preceding sentence (including any Lien filed
against any Property covered by the Mortgages or any part of the collateral
thereunder in favor of any governmental entity, but excluding, as provided in
the preceding sentence, any loss, liability, claim, damage or expense
incurred by reason of the gross negligence or willful misconduct of the
Person to be indemnified) arising under any Environmental Law as a result of
the past, present or future operations of the Borrower or any of its
Subsidiaries (or any predecessor in interest to the Borrower or any of its
Subsidiaries), or the past, present or future condition of any site or
facility owned, operated or leased at any time by the Borrower or any of its
Subsidiaries (or any such predecessor in interest), or any Release or
threatened Release of any Hazardous Materials at or from any such site or
facility, excluding any such Release or threatened Release that shall occur
during any period when the Administrative Agent or any Lender shall be in
possession of any such site or facility following the exercise by the
Administrative Agent or any Lender of any of its rights and remedies
hereunder or under any of the Security Documents, but including any such
Release or threatened Release
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occurring during such period that is a continuation of conditions previously
in existence, or of practices employed by the Borrower and its Subsidiaries,
at such site or facility.
12.04 AMENDMENTS, ETC. Except as otherwise expressly provided in
this Agreement, any provision of this Agreement may be modified or supplemented
only by an instrument in writing signed by the Borrower and the Majority
Lenders, or by the Borrower and the Administrative Agent acting with the consent
of the Majority Lenders, and any provision of this Agreement may be waived by
the Majority Lenders or by the Administrative Agent acting with the consent of
the Majority Lenders; PROVIDED that: (a) no modification, supplement or waiver
shall, unless by an instrument signed by all of the Lenders or by the
Administrative Agent acting with the consent of all of the Lenders (i) increase,
or extend the term of any of the Commitments, or extend the time or waive any
requirement for the reduction or termination of any of the Commitments,
(ii) extend the date fixed for any payment of principal of or interest on any
Loan, the Reimbursement Obligations or any fee hereunder, (iii) reduce the
amount of any such payment of principal, (iv) reduce the rate at which interest
is payable thereon or any fee is payable hereunder, (v) alter the rights or
obligations of the Borrower to prepay Loans, (vi) alter the manner in which
payments or prepayments of principal, interest or other amounts hereunder shall
be applied as between the Lenders or Types or Classes of Loans, (vii) alter the
terms of this Section 12.04, (viii) modify the definition of the term "Majority
Lenders", "Majority Revolving Credit Lenders", "Majority Facility A Lenders" or
"Majority Facility B Lenders", or modify in any other manner the number or
percentage of the Lenders required to make any determinations or waive any
rights hereunder or to modify any provision hereof, (ix) release any Subsidiary
Guarantor from any of its guarantee obligations under Section 6 hereof (except
in connection with the disposition of such Subsidiary in a transaction permitted
hereunder or to which the Majority Lenders shall have consented), or (x) waive
any of the conditions precedent set forth in Section 7.01 hereof; (b) any
modification or supplement of Section 11 hereof, or of any of the rights or
duties of the Administrative Agent hereunder, shall require the consent of the
Administrative Agent;
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and (c) any modification or supplement of Section 6 hereof shall require the
consent of each Subsidiary Guarantor.
12.05 SUCCESSORS AND ASSIGNS. This Agreement shall be binding upon
and inure to the benefit of the parties hereto and their respective successors
and permitted assigns.
12.06 ASSIGNMENTS AND PARTICIPATIONS.
(a) No Obligor may assign any of its rights or obligations hereunder
or under the Notes without the prior consent of all of the Lenders and the
Administrative Agent.
(b) Each Lender may assign any of its Loans, its Notes, its
Commitments, and, if such Lender is a Revolving Credit Lender, its Letter of
Credit Interest (but only with the consent of, (x) in the case of its
outstanding Commitments, the Borrower and the Administrative Agent, which
consent in either case shall not be unreasonably withheld and, (y) in the case
of the Revolving Credit Commitment or a Letter of Credit Interest, the Issuing
Lender), PROVIDED that:
(i) no such consent by the Borrower, the Administrative Agent or
the Issuing Lender shall be required in the case of any assignment to
another Lender (or any of its Affiliates);
(ii) except to the extent the Borrower and the Administrative Agent
shall otherwise consent, any such partial assignment (other than to another
Lender) shall be in an amount at least equal to $5,000,000, and after
giving effect thereto, the assigning Lender shall have Commitments and
Loans in an aggregate amount of at least $5,000,000;
(iii) each such assignment by a Lender of its Revolving Credit Loans,
Revolving Credit Note, Revolving Credit Commitment or Letter of Credit
Interest shall be made in such manner so that the same portion of its
Revolving Credit Loans, Revolving Credit Note, Revolving Credit
CREDIT AGREEMENT
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Commitment and Letter of Credit Interest is assigned to the respective
assignee;
(iv) each such assignment by a Lender of its Facility A Term Loans or
Facility A Term Loan Commitment shall be made in such manner so that
the same portion of its Facility A Term Loans and Facility A Term Loan
Commitment is assigned to the respective assignee;
(v) each such assignment by a Lender of its Facility B Term Loans or
Facility B Term Loan Commitment shall be made in such manner so that the
same portion of its Facility B Term Loans and Facility B Term Loan
Commitment is assigned to the respective assignee; and
(vi) each such assignment shall be effected pursuant to an Assignment
and Acceptance substantially in the form of Exhibit D hereto, executed by
the assigning Lender and the assignee and delivered to the Administrative
Agent for its acceptance and recording in the register referred to below.
Upon execution and delivery of such Assignment and Acceptance, and subject to
the consent thereto by the Borrower, the Administrative Agent and the Issuing
Lender to the extent required above, the assignee shall have, to the extent
of such assignment (unless otherwise consented to by the Borrower, the
Administrative Agent and the Issuing Lender), the obligations, rights and
benefits of a Lender hereunder holding the Commitment(s), Loans and, if
applicable, Letter of Credit Interest (or portions thereof) assigned to it
and specified in such Assignment and Acceptance (in addition to the
Commitment(s), Loans and Letter of Credit Interest, if any, theretofore held
by such assignee) and the assigning Lender shall, to the extent of such
assignment, be released from the Commitment(s) (or portion(s) thereof) so
assigned. Upon each such assignment the assigning Lender shall pay the
Administrative Agent an assignment fee of $3,000. The Administrative Agent
shall maintain a register for the recordation of the names and addresses of
the Lenders and the principal amount of the Loans owing by the Borrower to
each Lender from time to time. The entries in such
CREDIT AGREEMENT
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register shall be conclusive, in the absence of clearly demonstrable error,
and the Borrower, the Administrative Agent and the Lenders may treat each
Person whose name is recorded therein as the owner of the Loan or Loans
recorded therein for all purposes of this Agreement. Such register shall be
available for inspection by the Borrower and any Lender at any reasonable
time upon reasonable prior notice.
(c) A Lender may sell or agree to sell to one or more other Persons
(each a "PARTICIPANT") a participation in all or any part of any Loans or Letter
of Credit Interest held by it, or in its Commitments, PROVIDED that such
Participant shall not have any rights or obligations under this Agreement or any
Note or any other Loan Document (the Participant's rights against such Lender in
respect of such participation to be those set forth in the agreements executed
by such Lender in favor of the Participant). All amounts payable by the
Borrower to any Lender under Section 5 hereof in respect of Loans, Letter of
Credit Interest held by it, and its Commitments, shall be determined as if such
Lender had not sold or agreed to sell any participations in such Loans, Letter
of Credit Interest and Commitments, and as if such Lender were funding each of
such Loans, Letter of Credit Interest and Commitments in the same way that it is
funding the portion of such Loans, Letter of Credit Interest and Commitments in
which no participations have been sold. In no event shall a Lender that sells a
participation agree with the Participant to take or refrain from taking any
action hereunder or under any other Loan Document except that such Lender may
agree with the Participant that it will not, without the consent of the
Participant, agree to (i) extend the term of such Lender's related Commitment or
extend the amount or date of any scheduled reduction of such Commitment pursuant
to Section 2.04 hereof, (ii) extend the date fixed for the payment of principal
of or interest on the related Loan or Loans, Reimbursement Obligations or any
portion of any fee hereunder payable to the Participant, (iii) reduce the amount
of any such payment of principal, (iv) reduce the rate at which interest is
payable thereon, or any fee hereunder payable to the Participant, to a level
below the rate at which the Participant is entitled to receive such interest or
fee or (v) consent to any modification, supplement or waiver hereof or of any of
the other
CREDIT AGREEMENT
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Loan Documents to the extent that the same, under Section 11.09 or 12.04
hereof, requires the consent of each Lender.
(d) In addition to the assignments and participations permitted under
the foregoing provisions of this Section 12.06, any Lender may (without notice
to the Borrower, the Administrative Agent or any other Lender and without
payment of any fee) (i) assign and pledge all or any portion of its Loans and
its Notes to any Federal Reserve Bank as collateral security pursuant to
Regulation A and any Operating Circular issued by such Federal Reserve Bank and
(ii) assign all or any portion of its rights under this Agreement and its Loans
and its Notes to an affiliate. No such assignment shall release the assigning
Lender from its obligations hereunder (except that such assignment shall release
the assigning Lender to the extent the same is effected in accordance with the
provisions of paragraph (b) above).
(e) A Lender may furnish any information concerning the Borrower or
any of its Subsidiaries in the possession of such Lender from time to time to
assignees and participants (including prospective assignees and participants),
subject, however, to the provisions of Section 12.12(b) hereof.
(f) Anything in this Section 12.06 to the contrary notwithstanding,
no Lender may assign or participate any interest in any Loan or Reimbursement
Obligation held by it hereunder to the Borrower or any of its Affiliates or
Subsidiaries without the prior consent of each Lender, except that this
paragraph (f) shall not prohibit any such assignment or participation to any
Affiliate of the Borrower that is a bank or trust company organized under the
laws of the United States of America or a State thereof and that is supervised
by the Office of the Comptroller of the Currency or the Board of Governors of
the Federal Reserve.
(g) At the request of any Lender that is not a U.S. Person and is not
a "bank" within the meaning of Section 881(c)(3)(A) of the Code, the Borrower
shall maintain, or cause to be maintained, a register (which will be separate
from the register referred to in the last sentence of Section 12.06(b)
CREDIT AGREEMENT
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hereof) that, at the request of the Borrower, shall be kept by the
Administrative Agent on behalf of the Borrower at no charge to the Borrower
at the address to which notices to the Administrative Agent are to be sent
hereunder, on which it enters the name of such Lender as the registered owner
of each Registered Loan held by such Lender. A Registered Loan (and the
Registered Note, if any, evidencing the same) may be assigned or otherwise
transferred in whole or in part by registration of such assignment or
transfer on such register (and each Registered Note shall expressly so
provide). Any assignment or transfer of all or part of such Loan (and the
Registered Note, if any, evidencing the same) may be effected by registration
of such assignment or transfer on such register, together with the surrender
of the Registered Note, if any, evidencing the same duly endorsed by (or
accompanied by a written instrument of assignment or transfer duly executed
by) the holder of such Registered Note, whereupon, at the request of the
designated assignee(s) or transferee(s), one or more new Registered Notes in
the same aggregate principal amount shall be issued to the designated
assignee(s) or transferee(s). Prior to the registration of assignment or
transfer of any Registered Loan (and the Registered Note, if any, evidencing
the same), the Borrower shall treat the Person in whose name such Loan (and
the Registered Note, if any, evidencing the same) is registered as the owner
thereof for the purpose of receiving all payments thereon and for all other
purposes, notwithstanding notice to the contrary. The register referred to
above in this Section 12.06(g) shall be available for inspection by the
Borrower and any Lender that is a Registered Holder at any reasonable time
upon reasonable prior notice.
12.07 SURVIVAL. The obligations of the Borrower under Sections 5.01,
5.05, 5.06, 5.07 and 12.03 hereof, the obligations of each Subsidiary Guarantor
under Section 6.03 hereof, and the obligations of the Lenders under
Section 11.05 hereof, shall survive the repayment of the Loans and Reimbursement
Obligations and the termination of the Commitments and, in the case of any
Lender that may assign any interest in its Commitments, Loans or Letter of
Credit Interest hereunder, shall survive the making of such assignment,
notwithstanding that such assigning Lender may cease to be a "Lender" hereunder.
In addition, each
CREDIT AGREEMENT
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representation and warranty made, or deemed to be made by a notice of any
extension of credit (whether by means of a Loan or a Letter of Credit),
herein or pursuant hereto shall survive the making of such representation and
warranty, and no Lender shall be deemed to have waived, by reason of making
any extension of credit hereunder (whether by means of a Loan or Letter of
Credit), any Default that may arise by reason of such representation or
warranty proving to have been false or misleading, notwithstanding that such
Lender or the Administrative Agent may have had notice or knowledge or reason
to believe that such representation or warranty was false or misleading at
the time such extension of credit was made.
12.08 CAPTIONS. The table of contents and captions and section
headings appearing herein are included solely for convenience of reference and
are not intended to affect the interpretation of any provision of this
Agreement.
12.09 COUNTERPARTS. This Agreement may be executed in any number of
counterparts, all of which taken together shall constitute one and the same
instrument and any of the parties hereto may execute this Agreement by signing
any such counterpart.
12.10 GOVERNING LAW; SUBMISSION TO JURISDICTION. This Agreement and
the Notes shall be governed by, and construed in accordance with, the law of the
State of New York. Each Obligor hereby submits to the nonexclusive jurisdiction
of the United States District Court for the Southern District of New York and of
the Supreme Court of the State of New York sitting in New York County
(including, without limitation, its Appellate Division), and of any other
appellate court in the State of New York, for the purposes of all legal
proceedings arising out of or relating to this Agreement or the transactions
contemplated hereby. Each Obligor hereby irrevocably waives, to the fullest
extent permitted by applicable law, any objection that it may now or hereafter
have to the laying of the venue of any such proceeding brought in such a court
and any claim that any such proceeding brought in such a court has been brought
in an inconvenient forum.
CREDIT AGREEMENT
<PAGE>
-138-
12.11 Waiver of Jury Trial. EACH OF THE OBLIGORS, THE
ADMINISTRATIVE AGENT AND EACH LENDER HEREBY IRREVOCABLY WAIVES,
TO THE FULLEST EXTENT PERMITTED BY APPLICABLE LAW, ANY AND ALL
RIGHT TO TRIAL BY JURY IN ANY LEGAL PROCEEDING ARISING OUT OF OR
RELATING TO THIS AGREEMENT, THE NOTES OR THE TRANSACTIONS
CONTEMPLATED HEREBY.
12.12 TREATMENT OF CERTAIN INFORMATION;
CONFIDENTIALITY.
(a) The Borrower acknowledges that from time to time
financial advisory, investment banking and other services may be
offered or provided to the Borrower or one or more of its
Subsidiaries (in connection with this Agreement or otherwise) by
any Lender or by one or more subsidiaries or affiliates of such
Lender and the Borrower hereby authorizes each Lender to share
any information delivered to such Lender by the Borrower and its
Subsidiaries pursuant to this Agreement, or in connection with
the decision of such Lender to enter into this Agreement, to any
such subsidiary or affiliate, it being understood that any such
subsidiary or affiliate receiving such information shall be bound
by the provisions of Section 12.12(b) hereof as if it were a
Lender hereunder. Such authorization shall survive the repayment
of the Loans and Reimbursement Obligations and the termination of
the Commitments.
(b) Each Lender and the Administrative Agent agrees
(on behalf of itself and each of its affiliates, directors,
officers, employees and representatives) to keep confidential, in
accordance with their customary procedures for handling
confidential information of the same nature, any non-public
information supplied to it by the Borrower pursuant to this
Agreement that is identified by the Borrower as being
confidential at the time the same is delivered to the Lenders or
the Administrative Agent, PROVIDED that nothing herein shall
limit the disclosure of any such information (i) after such
information shall have become public (other than through a
violation of this Section 12.12), (ii) to the extent required by
statute, rule, regulation or judicial process, (iii) to counsel
CREDIT AGREEMENT
<PAGE>
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for any of the Lenders or the Administrative Agent, (iv) to bank
examiners (or any other regulatory authority having jurisdiction
over any Lender or the Administrative Agent), or to auditors or
accountants, (v) to the Administrative Agent or any other Lender
(or to Chase Securities, Inc.), (vi) in connection with any
litigation to which any one or more of the Lenders or the
Administrative Agent is a party, or in connection with the
enforcement of rights or remedies hereunder or under any other
Loan Document, (vii) to a subsidiary or affiliate of such Lender
as provided in Section 12.12(a) hereof or (viii) to any assignee
or participant (or prospective assignee or participant) so long
as such assignee or participant (or prospective assignee or
participant) first executes and delivers to the respective Lender
a Confidentiality Agreement substantially in the form of
Exhibit C hereto (or executes and delivers to such Lender an
acknowledgement to the effect that it is bound by the provisions
of this Section 12.12(b), which acknowledgement may be included
as part of the respective assignment or participation agreement
pursuant to which such assignee or participant acquires an
interest in the Loans or Letter of Credit Interest hereunder);
PROVIDED, FURTHER, that in no event shall any Lender or the
Administrative Agent be obligated or required to return any
materials furnished by the Borrower. The obligations of any
assignee that has executed a Confidentiality Agreement in the
form of Exhibit C hereto shall be superseded by this
Section 12.12 upon the date upon which such assignee becomes a
Lender hereunder pursuant to Section 12.06(b) hereof.
12.13 LIMITATION OF LIABILITY OF PARTNERS. No Partner
or any officer, employee, servant, controlling Person, executive,
director, agent, authorized representative or affiliate of any
such Partner (herein referred to as "OPERATIVES") shall be liable
for payments due hereunder or under the Notes or other Loan
Documents or for the performance of any obligation by the
Obligors hereunder or thereunder. The sole recourse of the
Lenders and the Administrative Agent for satisfaction of the
obligations of the Obligors under or in respect of this
Agreement, the Notes and the other Loan Documents shall be
against the Obligors party thereto and the Collateral (as such
term is defined in the respective Security Documents) and not
CREDIT AGREEMENT
<PAGE>
-140-
against any assets or Property of any such Partner or its
operatives.
12.14 ERISA MATTERS. Each Lender as to itself only
hereby represents and warrants to the Borrower and to each Lender
that, with respect to each source of funds to be used by it in
making the Loans to the Borrower hereunder (the "Source"), the
Source does not constitute "plan assets" as defined in Department
of Labor Regulation 2510.3-101 of any "employee benefit plan"
within the meaning of Section 3(3) of ERISA or any "plan" within
the meaning of Section 4975(e)(1) of the Code.
12.15 SECURITY DOCUMENTS. By their signatures below,
each of the parties agree that references to the Prior Credit
Agreement in the Security Documents shall be deemed to be
references to this Amended and Restated Credit Agreement.
CREDIT AGREEMENT
<PAGE>
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IN WITNESS WHEREOF, the parties hereto have caused this
Agreement to be duly executed and delivered as of the day and
year first above written.
BORROWER
PANAVISION INTERNATIONAL, L.P.
By Panavision Inc. (formerly known as
WP/GP, Inc.), its General Partner
By /s/ Jeffrey J. Marcketta
------------------------
Title: E.V.P.
Address for Notices:
Panavision International, L.P.
6219 De Soto Avenue
Woodland Hills, CA 91367-2602
Attention: Jeffrey J. Marcketta
Telecopier No.: (818) 316-1110
Telephone No.: (818) 316-1000
CREDIT AGREEMENT
<PAGE>
-142-
SUBSIDIARY GUARANTORS
[NONE AS OF DATE HEREOF]
CREDIT AGREEMENT
<PAGE>
-143-
LENDERS
Revolving Credit Commitment THE CHASE MANHATTAN BANK
$5,714,285.71
Facility A Term Loan Commitment By /s/ Dahlia C. Munroe
$14,285,714.29 ---------------------
Title: Second Vice President
Facility B Term Loan Commitment Lending Office for all Loans:
$0
The Chase Manhattan Bank
270 Park Avenue
New York, New York 10017
Address for Notices:
The Chase Manhattan Bank
1 Chase Manhattan Plaza
New York, New York 10081
Attention: Jeff Howe
CREDIT AGREEMENT
<PAGE>
-144-
REVOLVING CREDIT COMMITMENT CIBC INC.
$4,285,714.29
Facility A Term Loan Commitment By /s/ Deborah Strek
$10,714,285.71 -----------------
Title: Director
FACILITY B TERM LOAN COMMITMENT Lending Office for all Loans:
$0
425 Lexington Avenue
8th Floor
New York, NY 10017
Address for Notices:
425 Lexington Avenue
8th Floor
New York, NY 10017
Attention: Deborah Strek
Telecopier No.: 212-856-3558
Telephone No.: 212-856-3732
CREDIT AGREEMENT
<PAGE>
-145-
REVOLVING CREDIT COMMITMENT MERRILL LYNCH SENIOR FLOATING RATE
$0 FUND, INC.
FACILITY A TERM LOAN COMMITMENT
$0 By /s/ Anthony R. Clemente
-----------------------
Title: Authorized Signatory
FACILITY B TERM LOAN COMMITMENT
$6,500,000 Lending Office for all Loans:
Merrill Lynch Asset Management
800 Scudders Mill Road
Plainsboro, NJ 08536
Address for Notices:
Merrill Lynch Asset Management
800 Scudders Mill Road
Plainsboro, NJ 08536
Telephone No.: (609) 282-2092
Telecopier No.: (609) 282-2756
Attention: Anthony R. Clemente
CREDIT AGREEMENT
<PAGE>
-146-
REVOLVING CREDIT COMMITMENT MERRILL LYNCH PRIME RATE PORTFOLIO
$0
By: Merrill Lynch Asset Management,
FACILITY A TERM LOAN COMMITMENT L.P., as Investment Advisor
$0
FACILITY B TERM LOAN COMMITMENT By /s/ Anthony R. Clemente
$6,500,000 ------------------------
Title: Authorized Signatory
Lending Office for all Loans:
Anbacher House
P.O. Box 500
George Town, Grand Cayman
Cayman Islands, British West
Indies
Address for Notices:
Merrill Lynch Asset Management
800 Scudders Mill Road
Plainsboro, NJ 08536
Telephone No.: (609) 282-2092
Telecopier No.: (609) 282-2756
Attention: Anthony R. Clemente
CREDIT AGREEMENT
<PAGE>
-147-
REVOLVING CREDIT COMMITMENT SENIOR DEBT PORTFOLIO
$0
By: Boston Management and
FACILITY A TERM LOAN COMMITMENT Research, as Investment
$0 Advisor
FACILITY B TERM LOAN COMMITMENT By /s/ James O'Connor
$10,000,000 ------------------
Title: Treasurer
Lending Office for all Loans:
Eaton Vance Management
24 Federal Street
Boston, MA 02110
Address for Notices:
Eaton Vance Management
24 Federal Street
Boston, MA 02110
Telephone No.: (617) 482-8260
Telecopier No.: (617) 695-9594
Attention: Scott H. Page
CREDIT AGREEMENT
<PAGE>
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REVOLVING CREDIT COMMITMENT THE FIRST NATIONAL BANK OF BOSTON
$3,571,428.57
FACILITY A TERM LOAN COMMITMENT By /s/ Kathryn S. Ticknor
$8,928,571.43 ----------------------
Title: Director
FACILITY B TERM LOAN COMMITMENT Lending Office for all Loans:
$3,000,000
The First National Bank of
Boston
100 Federal Street
Boston, MA 02110
Address for Notices:
The First National Bank of
Boston
Media and Communications,
MS: 01-08-08
100 Federal Street
Boston, MA 02110
Telephone No.: (617) 434-5747
Telecopier No.: (617) 434-3401
Attention: Jeff Wakelin
CREDIT AGREEMENT
<PAGE>
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REVOLVING CREDIT COMMITMENT PILGRIM AMERICA PRIME RATE TRUST
$0
FACILITY A TERM LOAN COMMITMENT By /s/ Michael J. Bacevich
$0 -----------------------
Title: Vice President
FACILITY B TERM LOAN COMMITMENT Lending Office for all Loans:
$8,000,000
Two Renaissance Square
40 North Central Avenue
Suite 1200
Phoenix, AZ 85004-4424
Address for Notices:
Two Renaissance Square
40 North Central Avenue,
Suite 1200
Phoenix, AZ 85004-4424
Telephone No.: (602) 417-8257
Telecopier No.: (602) 417-8327
Attention: Thomas C. Hunt
CREDIT AGREEMENT
<PAGE>
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REVOLVING CREDIT COMMITMENT PRIME INCOME TRUST
$0
FACILITY A TERM LOAN COMMITMENT By /s/ Louis Pistecchia
$0 --------------------
Title:
FACILITY B TERM LOAN COMMITMENT Lending Office for all Loans:
$8,000,000
Two World Trade Center
72nd Floor
New York, NY 10048
Address for Notices:
Two World Trade Center
72nd Floor
New York, NY 10048
Telephone No.: (212) 392-5845
Telecopier No.: (212) 392-5345
Attention: Louis Pistecchia
CREDIT AGREEMENT
<PAGE>
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REVOLVING CREDIT COMMITMENT VAN KAMPEN AMERICAN CAPITAL
$0 PRIME RATE INCOME TRUST
FACILITY A TERM LOAN COMMITMENT
$0 By /s/ Brian Good
---------------
Title: Vice President &
Asst. Portfolio Manager
FACILITY B TERM LOAN COMMITMENT
$8,000,000
Lending Office for all Loans:
Van Kampen American Capital
Prime Rate Income Trust
c/o Van Kampen American Capital
One Parkview Plaza
Oakbrook Terrace, IL 60181
Address for Notices:
Van Kampen American Capital
Prime Rate Income Trust
c/o Van Kampen American Capital
One Parkview Plaza
Oakbrook Terrace, IL 60181
Telephone No.: (708) 684-6438
Telecopier No.: (708) 684-6740
Attention: Jeff Maillet
CREDIT AGREEMENT
<PAGE>
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REVOLVING CREDIT COMMITMENT THE BANK OF NOVA SCOTIA
$3,571,428.57
FACILITY A TERM LOAN COMMITMENT By /s/ Stephen Lockhart
$8,918,571.43 --------------------
Title: Vice President
FACILITY B TERM LOAN COMMITMENT Lending Office for all Loans:
$0
The Bank of Nova Scotia
New York Agency
One Liberty Plaza
New York, NY 10006
Address for Notices:
The Bank of Nova Scotia
New York Agency
One Liberty Plaza
New York, NY 10006
Telephone No.: (212) 225-5030
Telecopier No.: (212) 225-5090
Attention: Brian S. Allen
CREDIT AGREEMENT
<PAGE>
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REVOLVING CREDIT COMMITMENT BANK OF HAWAII
$2,857,142.86
FACILITY A TERM LOAN COMMITMENT By /s/ Elizabeth O. Maclean
$7,142,857.14 ------------------------
Title: Vice President
FACILITY B TERM LOAN COMMITMENT Lending Office for all Loans:
$0
Bank of Hawaii
130 Merchant Street
20th Floor
Honolulu, Hawaii 96813
Address for Notices:
Bank of Hawaii
1839 South Alma School Road
Suite 150
Mesa, AZ 85210
Telephone No.: (602) 752-8019
Telecopier No.: (602) 752-8007
Attention: Beth Maclean
CREDIT AGREEMENT
<PAGE>
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ADMINISTRATIVE AGENT
THE CHASE MANHATTAN BANK,
as Administrative Agent
By /s/ Dahlia C. Munroe
---------------------------
Title: Second Vice President
Address for Notices to
the Administrative Agent:
The Chase Manhattan Bank
140 East 48th St., 29th Floor
New York, New York 10017
Attention: Agent Bank Services
Telecopier No.: (212) 622-0122
Telephone No.: (212) 622-0004
CREDIT AGREEMENT
<PAGE>
Schedule I
MATERIAL AGREEMENTS AND LIENS
[Section 8.12(a), b; 9.07(b)]
A. MATERIAL AGREEMENTS:
Purchase order #228514 to Hughes E. L. Can in the aggregate principal
amount of $756,740 due 1996.
B. LIENS:
None.
SCHEDULE I
<PAGE>
Schedule II
SUBSIDIARIES AND INVESTMENTS
[Section 8.15(a), (b)]
A. Subsidiaries.
WHOLLY-OWNED SUBSIDIARIES OF PANAVISION EUROPE LIMITED
THE BORROWER Place of Incorporation: United
Kingdom
Authorized 9,000,000 shares Issued and
fully paid 8,800,002 ordinary shares of
L1.00 par value
Percentage Owned: 100% of
Issued Shares
PANAVISION CANADA HOLDINGS, INC.
Place of Incorporation:
Ontario
Authorized capital: an unlimited number
of common shares
Issued: 2,500 common shares
Percentage Owned: 100% of
Issued Shares
WHOLLY-OWNED SUBSIDIARIES OF LEE FILTERS LIMITED
PANAVISION EUROPE LIMITED Place of Incorporation: United
Kingdom
Authorized 1,000 shares Issued and
fully paid 2 ordinary shares of
L1.00 par value
Percentage Owned: 100% of
Issued Shares
CAMERA BELLOWS LIMITED
Place of Incorporation:
United Kingdom
Authorized 1,000 shares
Issued and fully paid 2 ordinary shares
of L1.00 par
SCHEDULE II
<PAGE>
value
Percentage Owned: 100% of
Issued Shares
SCHEDULE II
<PAGE>
COLORTRAN LIMITED
Place of Incorporation: United
Kingdom
Authorized 100 shares Issued and fully
paid 2 shares of L1.00 par value
Percentage Owned: 100% of
Issued Shares
JOE DUNTON CAMERAS LIMITED
Place of Incorporation: United
Kingdom
Authorized 100 shares of L1.00
par value
Percentage Owned: 100% of
Issued Shares
WHOLLY-OWNED SUBSIDIARY OF PANAVISION (CANADA)
PANAVISION CANADA CORPORATION
HOLDINGS, INC. Place of Incorporation:
Ontario
Authorized share capital: an unlimited
number of class A, B, C, D and E common
shares Issued 100,000 common shares
Percentage Owned: 100%
Management Options: Pursuant to an
Employee Share Purchase and Shareholders
Agreement, dated as of January 20, 1995,
among the Borrower, Panavision Canada
Holdings, Inc., Panavision (Canada)
Corporation and certain Management
Employees named therein, the Borrower
has granted the Management Employees
certain options to purchase shares of
Panavision Canada Holdings, Inc. on a
fully diluted basis. The Management
Employees may purchase up to 15%
collectively of the issued and
outstanding shares.
SCHEDULE II
<PAGE>
WHOLLY-OWNED SUBSIDIARY PANA TRUCK LEASING CORPORATION
OF PANAVISION (CANADA) Place of Incorporation:
CORPORATION Ontario
Authorized share capital: unlimited
Issued 100 shares, par value $1.00 per
share
Percentage Owned: 100% of issued
shares.
SUBSIDIARY OF PANAVISION PANAVISION ITALIA S.R.L.
EUROPE LTD. Place of Incorporation: Italy Authorized
65,000,000 Italian Lire
Panavision Europe Ltd. owns 64,946,000
Italian Lire. Percentage Owned: 100%
B. Investments:
PANY Rental, Inc. (New York) The Borrower owns $333 in common stock
which represents 33% ownership.
The Borrower has a $450,000 note
receivable due May 30, 2004 which bears
interest at 9% per year.
Aaton S.A. (Grenoble, France) The Borrower paid $924,507 for 21,594
shares of common stock which represents
45% ownership.
The Borrower holds 50% of the voting
stock.
Cosharp Printer Number One The Borrower paid $12,499 for one unit
of thirty outstanding partnership units
which represents 3.3% ownership.
WP/GP, Inc. (Delaware) The Borrower loaned $48,125,600 to
WP/GP, Inc. in exchange for a Demand
Note which bears interest at the rate of
6.83% per annum.
SCHEDULE II
<PAGE>
SCHEDULE II
<PAGE>
Schedule III
REAL PROPERTY
LEASES: [Section 8.18]
PROPERTY ADDRESS LANDLORD EXPIRATION DATE
- ---------------- -------- ---------------
Panavision Tarzana Trizec Properties Inc. May 30, 2012
6219 Desoto Ave.
Woodland Hills, CA 91367
Panavision Tarzana Pacifica Investment May 31, 1997
18750 Oxnard St. Co.
Units 401 - 412
Tarzana, CA 91356
Panavision Tarzana Pacifica Investment May 31, 1997
18740 Oxnard St. Co.
Unit 302
Tarzana, CA 91356
Panavision Tarzana Toshin Corporation Buyout has been executed
18618 Oxnard St.
Tarzana, CA 91356
Panavision Hollywood McCadden Place December 31, 1996
6779 Hawthorne Ave. Partners
Hollywood, CA 90028
Panavision Hollywood (This is Hollywood's December 31, 2006
6735 Selma Ave. new building lease
Hollywood, CA 90028 which is scheduled to
start 1/1/97)
Panavision Florida/N.C. Universal City Florida January 31, 1998
2000 Universal Studios Partners
Plaza Suite 900
Orlando, FL 32819-7606
Panavision Florida/N.C. Carolco Studios Inc. Month to month
1223 No. 23rd St.
Wilmington, NC 28405
SCHEDULE III
<PAGE>
PROPERTY ADDRESS LANDLORD EXPIRATION DATE
- ---------------- -------- ---------------
Panavision Tarzana VP Self Storage Month to month
VP Self Storage
18716 Oxnard St.
Unit 2310
Tarzana, CA 91356
Corporate New York Conde Nast Publications January 6, 1999
Two Grand Center Tower
140 East 45th Street
35th Floor
New York, NY 10017
Panavision Canada A. Farber Associates, Month to month
629 Eastern Avenue Trustee in Bankruptcy
Toronto, Ontario M4M 1E4 for Eastern Mall
Canada Limited
Panavision Canada I. Trasolini Month to month
3999 Second Ave.
Burnaby, B.C. V5C 3W9
Canada
Lee Filters U.S. Kenneth J. Maurer & May 14, 1997
2301 W. Victory Blvd. Ema W. Maurer,
Burbank, CA 91506 Trustees under the
Kenneth & Ema Maurer
family trust
Lee Filters U.S. Mejor Verde L.L.C. January 31,
375 North St. 1999
Unit F
Teterboro, NJ 07608
Panavision Europe Shepperton Studios LTD March 30, 1999
Part Building 37 & Room
310 in the Old House
Shepperton Studios
Studios Road, Shepperton
Middlesex, TW17 OQD
United Kingdom
SCHEDULE III
<PAGE>
PROPERTY ADDRESS LANDLORD EXPIRATION DATE
- ---------------- -------- ---------------
Panavision Europe Thames Water Utilities August 30,
Pipetrack Land at LTD 1999
Wycombe Road
Wembley, Middlesex TW17
0QD
United Kingdom
Panavision Europe Sunset Developments January 31,
Unit 13, Sunset Business LTD 1998
Centre
Manchester Road,
Kearsley
Bolton BL4 8SG
United Kingdom
Panavision Europe Keyfield Property March 17, 1997
Cinema House Company LTD
93 Wardour Street
London, W1V 3TE
United Kingdom
Panavision Europe Council of the Valley July 5, 2004
Unit 3, Kingsway Walworth
Industrial Estate
Andover, Hants
United Kingdom
Panavision Europe Test Valley Borough July 6, 2108
Plot 38, Walworth Council
Industrial Estate
Andover, Hampshire
United Kingdom
Panavision Europe Ardmore Studios September 12, 1996
Ardmore Studios
Herbert Road, Bray
County Wicklow, Ireland
Panavision Europe Mr. & Mrs. Kirchheim Six month
17 Avenue Victor Hugo notice as of
92220 Bagneux June 15, 1996
SCHEDULE III
<PAGE>
PROPERTY ADDRESS LANDLORD EXPIRATION DATE
- ---------------- -------- ---------------
Paris, France
OWNED:
Panavision Europe N/A
Binatone Plaza
Wycombe Road, Wembley
Middlesex, HAO 10N
United Kingdom
Panavision Europe N/A
Wycombe Road, Wembley
Middlesex, HAO 10N
United Kingdom
The following property is subleased by the Borrower:
Dataproducts, Inc. N/A January 31,
6219 Desoto Ave. 1998
Woodland Hills, CA 91367
SCHEDULE III
<PAGE>
Schedule IV
PARTNERSHIP INTERESTS OF THE BORROWER
A. [Section 8.14(a)]
Partners Nature of Interest Interest
WP/GP, Inc. General Partner 40 General Partner
Class A Units
70 General Partner
Class B Units
WP/GP, Inc. Limited Partner 170 Class A Units
560 Class B Units
Sr. Equity Units ($12.5mm)
Keepco I, Inc. Limited Partner 350 Class A Units
150 Class B Units
Sr. Equity Units ($20mm)
Keepco II, Inc. Limited Partner 350 Class A Units
150 Class B Units
Sr. Equity Units ($20mm)
WCS-Panavision Limited Partner 90 Class A Units
Corporation 70 Class B Units
B. [Section 8.14(b)]
None.
SCHEDULE IV
<PAGE>
Schedule V
LITIGATION
[Section 8.03]
None.
SCHEDULE V
<PAGE>
Schedule VI
TAXES
[Section 8.09]
None.
SCHEDULE VI
<PAGE>
Schedule VII
ENVIRONMENTAL MATTERS
[Section 8.13]
UNITED KINGDOM
As required by the Environmental Protection Act (1990 United Kingdom),
Lee Filters is required to reduce the emission of Volatile Organic
Compounds (VOC's) into the atmosphere to comply with new stringent UK
emission standards. The control technology selected has a possible cost
of L1,300,000. Orders must be placed by December 31, 1996 in order to
demonstrate full compliance by the final date.
SCHEDULE VII
<PAGE>
EXHIBIT A-1
[Form of Revolving Credit Note]
PROMISSORY NOTE
Principal Sum $_______________ __________, 1996
Lender: ______________________ New York, New York
FOR VALUE RECEIVED, PANAVISION INTERNATIONAL, L.P., a Delaware limited
partnership (the "BORROWER"), hereby promises to pay to the Lender set forth
above (the "LENDER") [or registered assigns](1), for account of its respective
Applicable Lending Offices provided for by the Credit Agreement referred to
below, at the principal office of The Chase Manhattan Bank in New York, New
York, the Principal Sum of _______________ Dollars (or such lesser amount as
shall equal the aggregate unpaid principal amount of the Revolving Credit Loans
made by the Lender to the Borrower under the Credit Agreement), in lawful money
of the United States of America and in immediately available funds, on the dates
and in the principal amounts provided in the Credit Agreement, and to pay
interest on the unpaid principal amount of each such Revolving Credit Loan, at
such office, in like money and funds, for the period commencing on the date of
such Revolving Credit Loan until such Revolving Credit Loan shall be paid in
full, at the rates per annum and on the dates provided in the Credit Agreement.
[This Note and the Loans evidenced hereby may be transferred in whole
or in part only by registration of such transfer on the register maintained for
such purpose by or on behalf of the Borrower as provided in Section 12.06(g) of
the Credit Agreement.]
The date, amount, Type, interest rate and duration of Interest Period
(if applicable) of each Revolving Credit Loan made by the Lender to the
Borrower, and each payment made on account of the principal thereof, shall be
recorded by the Lender on its books and, prior to any transfer of this Note,
endorsed by the Lender on the schedule attached hereto or any continuation
____________________
1. Bracketed language to be inserted into Registered Notes
REVOLVING CREDIT NOTE
<PAGE>
-2-
thereof, PROVIDED that the failure of the Lender to make any such recordation or
endorsement shall not affect the obligations of the Borrower to make a payment
when due of any amount owing under the Credit Agreement or hereunder in respect
of the Revolving Credit Loans made by the Lender.
This Note is one of the Revolving Credit Notes [(constituting a
Registered Note)] referred to in the Amended and Restated Credit Agreement dated
as of September 10, 1996 (as modified and supplemented and in effect from time
to time, the "CREDIT AGREEMENT") between the Borrower, the Subsidiary Guarantors
party thereto, the lenders party thereto (including the Lender) and The Chase
Manhattan Bank, as Administrative Agent, and evidences Revolving Credit Loans
made by the Lender thereunder. Terms used but not defined in this Note have the
respective meanings assigned to them in the Credit Agreement.
The Credit Agreement provides for the acceleration of the maturity of
this Note upon the occurrence of certain events and for prepayments of Loans
upon the terms and conditions specified therein.
Except as permitted by Section 12.06 of the Credit Agreement, this
Note may not be assigned by the Lender to any other Person.
This Note shall be governed by, and construed in accordance with, the
law of the State of New York.
PANAVISION INTERNATIONAL, L.P.
By Panavision Inc. (formerly known
as WP/GP, Inc.), its General
Partner
By_________________________
Title:
REVOLVING CREDIT NOTE
<PAGE>
- 3 -
SCHEDULE OF REVOLVING CREDIT LOANS
This Note evidences Revolving Credit Loans made, Continued or
Converted under the within-described Credit Agreement to the Borrower, on the
dates, in the principal amounts, of the Types, bearing interest at the rates and
having Interest Periods (if applicable) of the durations set forth below,
subject to the payments, Continuations, Conversions and prepayments of principal
set forth below:
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C> <C>
Amount
Date Prin- Paid,
Made, cipal Duration Prepaid, Unpaid
Continued Amount Type of Continued Princ-
or of of Interest Interest or cipal Notation
Converted Loan Loan Rate Period Converted Amount Made by
- --------- ------- ---- -------- -------- --------- ------ --------
</TABLE>
REVOLVING CREDIT NOTE
<PAGE>
EXHIBIT A-2
[Form of Facility A Term Loan Note]
PROMISSORY NOTE
Principal Sum $_______________ ___________, 1996
Lender: _____________________ New York, New York
FOR VALUE RECEIVED, PANAVISION INTERNATIONAL, L.P., a Delaware limited
partnership (the "BORROWER"), hereby promises to pay to the Lender set forth
above (the "LENDER") [or registered assigns](1) for account of its respective
Applicable Lending Offices provided for by the Credit Agreement referred to
below, at the principal office of The Chase Manhattan Bank in New York, New
York, the Principal Sum of _______________ Dollars (or such lesser amount as
shall equal the aggregate unpaid principal amount of the Facility A Term Loans
made by the Lender to the Borrower under the Credit Agreement), in lawful money
of the United States of America and in immediately available funds, on the dates
and in the principal amounts provided in the Credit Agreement, and to pay
interest on the unpaid principal amount of each such Facility A Term Loan, at
such office, in like money and funds, for the period commencing on the date of
such Facility A Term Loan until such Facility A Term Loan shall be paid in full,
at the rates per annum and on the dates provided in the Credit Agreement.
[This Note and the Loans evidenced hereby may be transferred in whole
or in part only by registration of such transfer on the register maintained for
such purpose by or on behalf of the Borrower as provided in Section 12.06(g) of
the Credit Agreement.]
The date, amount, Type, interest rate and duration of Interest Period
(if applicable) of each Facility A Term Loan made by the Lender to the Borrower,
and each payment made on account of the principal thereof, shall be recorded by
the Lender on its books and, prior to any transfer of this Note, endorsed by the
Lender on the schedule attached hereto or any continuation
- -----------------
1. Bracketed language to be inserted into Registered Notes
REVOLVING CREDIT NOTE
<PAGE>
- 2 -
thereof, PROVIDED that the failure of the Lender to make any such recordation or
endorsement shall not affect the obligations of the Borrower to make a payment
when due of any amount owing under the Credit Agreement or hereunder in respect
of the Facility A Term Loans made by the Lender.
This Note is one of the Facility A Term Loan Notes [(constituting a
Registered Note)] referred to in the Amended and Restated Credit Agreement dated
as of September 10, 1996 (as modified and supplemented and in effect from time
to time, the "CREDIT AGREEMENT") between the Borrower, the Subsidiary Guarantors
party thereto, the lenders party thereto (including the Lender) and The Chase
Manhattan Bank, as Administrative Agent, and evidences Facility A Term Loans
made by the Lender thereunder. Terms used but not defined in this Note have the
respective meanings assigned to them in the Credit Agreement.
The Credit Agreement provides for the acceleration of the maturity of
this Note upon the occurrence of certain events and for prepayments of Facility
A Term Loans upon the terms and conditions specified therein.
Except as permitted by Section 12.06 of the Credit Agreement, this
Note may not be assigned by the Lender to any other Person.
This Note shall be governed by, and construed in accordance with, the
law of the State of New York.
PANAVISION INTERNATIONAL, L.P.
By Panavision Inc. (formerly known
as WP/GP, Inc.), its General
Partner
By_________________________
FACILITY A TERM LOAN NOTE
<PAGE>
- 3-
Title:
FACILITY A TERM LOAN NOTE
<PAGE>
SCHEDULE OF FACILITY A TERM LOANS
This Note evidences Facility A Term Loans made, Continued or Converted
under the within-described Credit Agreement to the Borrower, on the dates, in
the principal amounts, of the Types, bearing interest at the rates and having
Interest Periods (if applicable) of the durations set forth below, subject to
the payments, Continuations, Conversions and prepayments of principal set forth
below:
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C> <C>
Amount
Date Prin- Paid,
Made, cipal Duration Prepaid, Unpaid
Continued Amount Type of Continued Princ-
or of of Interest Interest or cipal Notation
Converted Loan Loan Rate Period Converted Amount Made by
- --------- ------- ---- -------- -------- --------- ------ --------
</TABLE>
FACILITY A TERM LOAN NOTE
<PAGE>
EXHIBIT A-3
[Form of Facility B Term Loan Note]
PROMISSORY NOTE
Principal Sum $_______________ ___________, 1996
Lender: ______________________ New York, New York
FOR VALUE RECEIVED, PANAVISION INTERNATIONAL, L.P., a Delaware limited
partnership (the "BORROWER"), hereby promises to pay to the Lender set forth
above (the "LENDER") [or registered assigns](1), for account of its respective
Applicable Lending Offices provided for by the Credit Agreement referred to
below, at the principal office of The Chase Manhattan Bank in New York, New
York, the Principal Sum of _______________ Dollars (or such lesser amount as
shall equal the aggregate unpaid principal amount of the Facility B Term Loans
made by the Lender to the Borrower under the Credit Agreement), in lawful money
of the United States of America and in immediately available funds, on the dates
and in the principal amounts provided in the Credit Agreement, and to pay
interest on the unpaid principal amount of each such Facility B Term Loan, at
such office, in like money and funds, for the period commencing on the date of
such Facility B Term Loan until such Facility B Term Loan shall be paid in full,
at the rates per annum and on the dates provided in the Credit Agreement.
[This Note and the Loans evidenced hereby may be transferred in whole
or in part only by registration of such transfer on the register maintained for
such purpose by or on behalf of the Borrower as provided in Section 12.06(g) of
the Credit Agreement.]
The date, amount, Type, interest rate and duration of Interest Period
(if applicable) of each Facility B Term Loan made by the Lender to the Borrower,
and each payment made on account of the principal thereof, shall be recorded by
the Lender on its books and, prior to any transfer of this Note, endorsed by the
Lender on the schedule attached hereto or any continuation
____________________
1. Bracketed language to be inserted into Registered Notes
FACILITY A TERM LOAN NOTE
<PAGE>
- 2 -
thereof, PROVIDED that the failure of the Lender to make any such recordation or
endorsement shall not affect the obligations of the Borrower to make a payment
when due of any amount owing under the Credit Agreement or hereunder in respect
of the Facility B Term Loans made by the Lender.
This Note is one of the Facility B Term Loan Notes [(constituting a
Registered Note)] referred to in the Amended and Restated Credit Agreement dated
as of September 10, 1996 (as modified and supplemented and in effect from time
to time, the "CREDIT AGREEMENT") between the Borrower, the Subsidiary Guarantors
party thereto, the lenders party thereto (including the Lender) and The Chase
Manhattan Bank, as Administrative Agent, and evidences Facility B Term Loans
made by the Lender thereunder. Terms used but not defined in this Note have the
respective meanings assigned to them in the Credit Agreement.
The Credit Agreement provides for the acceleration of the maturity of
this Note upon the occurrence of certain events and for prepayments of Facility
B Term Loans upon the terms and conditions specified therein.
Except as permitted by Section 12.06 of the Credit Agreement, this
Note may not be assigned by the Lender to any other Person.
This Note shall be governed by, and construed in accordance with, the
law of the State of New York.
PANAVISION INTERNATIONAL, L.P.
By Panavision Inc. (formerly known
as WP/GP, Inc.), its General
Partner
By_________________________
Title:
FACILITY B TERM LOAN NOTE
<PAGE>
SCHEDULE OF FACILITY B TERM LOANS
This Note evidences Facility B Term Loans made, Continued or Converted
under the within-described Credit Agreement to the Borrower, on the dates, in
the principal amounts, of the Types, bearing interest at the rates and having
Interest Periods (if applicable) of the durations set forth below, subject to
the payments, Continuations, Conversions and prepayments of principal set forth
below:
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C> <C>
Amount
Date Prin- Paid,
Made, cipal Duration Prepaid, Unpaid
Continued Amount Type of Continued Princ-
or of of Interest Interest or cipal Notation
Converted Loan Loan Rate Period Converted Amount Made by
- --------- ------- ---- -------- -------- --------- ------ --------
</TABLE>
FACILITY B TERM LOAN NOTE
<PAGE>
EXHIBIT B
[Form of Guarantee Assumption Agreement]
GUARANTEE ASSUMPTION AGREEMENT
GUARANTEE ASSUMPTION AGREEMENT dated as of ____________ __, 199_, by
_______________________, a ______________ corporation (the "ADDITIONAL
SUBSIDIARY GUARANTOR"), in favor of THE CHASE MANHATTAN BANK, as administrative
agent for the lenders or other financial institutions or entities party,
lenders, to the Credit Agreement referred to below (in such capacity together
with its successors in such capacity, the "ADMINISTRATIVE AGENT").
Panavision International, L.P., a Delaware limited partnership, the
"Subsidiary Guarantors" referred to therein, certain lenders named therein (the
"LENDERS"), and the Administrative Agent are parties to an Amended and Restated
Credit Agreement dated as of September 10, 1996 (as modified and supplemented
and in effect from time to time, the "CREDIT AGREEMENT").
Pursuant to Section 9.16(a) of the Credit Agreement, the Additional
Subsidiary Guarantor hereby agrees to become a "Subsidiary Guarantor" for all
purposes of the Credit Agreement, and a "Securing Party" for all purposes of the
Security Agreement. Without limiting the generality of the foregoing, the
Additional Subsidiary Guarantor hereby, jointly and severally with the other
Subsidiary Guarantors, guarantees to each Lender and the Administrative Agent
and their respective successors and assigns the prompt payment in full when due
(whether at stated maturity, by acceleration or otherwise) of all Guaranteed
Obligations (as defined in Section 6.01 of the Credit Agreement) in the same
manner and to the same extent as is provided in Section 6 of the Credit
Agreement. In addition, the Additional Subsidiary Guarantor hereby makes the
representations and warranties set forth in Sections 8.01, 8.04, 8.05 and 8.06
of the Credit Agreement, and in Section 2 of the Security Agreement, with
respect to itself and its obligations under this Agreement (with any reference
in said Sections to the Loan Documents being deemed to include a reference to
this Agreement). In addition,
GUARANTEE ASSUMPTION AGREEMENT
<PAGE>
- 2 -
Annexes 1, 2, 3 and 4 to the Security Agreement shall be deemed to be
supplemented in respect of the Additional Subsidiary Guarantor as specified in
Appendix A hereto.
GUARANTEE ASSUMPTION AGREEMENT
<PAGE>
- 3 -
IN WITNESS WHEREOF, the Additional Subsidiary Guarantor has caused
this Guarantee Assumption Agreement to be duly executed and delivered as of the
day and year first above written.
[ADDITIONAL SUBSIDIARY GUARANTOR]
By_____________________________
Title:
Accepted and Agreed:
THE CHASE MANHATTAN BANK,
as Administrative Agent
By_________________________
Title:
GUARANTEE ASSUMPTION AGREEMENT
<PAGE>
APPENDIX A
Supplement to Annex 1:
[To be completed]
Supplement to Annex 2:
[To be completed]
Supplement to Annex 3:
[To be completed]
Supplement to Annex 4:
[To be completed]
GUARANTEE ASSUMPTION AGREEMENT
<PAGE>
EXHIBIT C
[Form of Confidentiality Agreement]
CONFIDENTIALITY AGREEMENT
[Date]
[Insert Name and
Address of Prospective
Participant or Assignee]
Re: Amended and Restated Credit Agreement dated as of September 10,
1996 (the "CREDIT AGREEMENT") between Panavision International,
L.P. (the "BORROWER"), the Subsidiary Guarantors party thereto,
the lenders party thereto and The Chase Manhattan Bank, as
Administrative Agent.
Dear Ladies and Gentlemen:
As a Lender party to the Credit Agreement, we have agreed with the
Borrower pursuant to Section 12.12 of the Credit Agreement to use reasonable
precautions to keep confidential, except as otherwise provided therein, all
non-public information identified by the Borrower as being confidential at the
time the same is delivered to us pursuant to the Credit Agreement.
As provided in said Section 12.12, we are permitted to provide you, as
a prospective [holder of a participation in the Loans (as defined in the Credit
Agreement)] [assignee Lender], with certain of such non-public information
subject to the execution and delivery by you, prior to receiving such non-public
information, of a Confidentiality Agreement in this form. Such information will
not be made available to you until your execution and return to us of this
Confidentiality Agreement.
Accordingly, in consideration of the foregoing, you agree (on behalf
of yourself and each of your affiliates,
CONFIDENTIALITY AGREEMENT
<PAGE>
- 2 -
directors, officers, employees and representatives and for the benefit of us and
each Obligor) that (A) such information will not be used by you except in
connection with the proposed [participation] [assignment] mentioned above and
(B) you shall use reasonable precautions, in accordance with your customary
procedures for handling confidential information and in accordance with safe and
sound banking practices, to keep such information confidential, PROVIDED that
nothing herein shall limit the disclosure of any such information (i) after such
information shall have become public (other than through a violation of
Section 12.12 of the Credit Agreement), (ii) to the extent required by statute,
rule, regulation or judicial process, (iii) to your counsel or to counsel for
any of the Lenders or the Administrative Agent, (iv) to bank examiners (or any
other regulatory authority having jurisdiction over you or any Lender or the
Administrative Agent), or to auditors or accountants, (v) to the Administrative
Agent or any other Lender (or to Chase Securities Inc.), (vi) in connection with
any litigation to which you or any one or more of the Lenders or the
Administrative Agent are a party, or in connection with the enforcement of
rights or remedies under the Credit Agreement or under any other Loan Document,
(vii) to a subsidiary or affiliate of yours as provided in Section 12.12(a) of
the Credit Agreement or (viii) to any assignee or participant (or prospective
assignee or participant) so long as such assignee or participant (or prospective
assignee or participant) first executes and delivers to you a Confidentiality
Agreement substantially in the form hereof; PROVIDED, FURTHER, that in no event
shall you be obligated to return any materials furnished to you pursuant to this
Confidentiality Agreement.
If you are a prospective assignee, your obligations under this
Confidentiality Agreement shall be superseded by Section 12.12 of the Credit
Agreement on the date upon which you become a Lender under the Credit Agreement
pursuant to Section 12.06(b) thereof.
CONFIDENTIALITY AGREEMENT
<PAGE>
- 3 -
Please indicate your agreement to the foregoing by signing as provided
below the enclosed copy of this Confidentiality Agreement and returning the same
to us.
Very truly yours,
[INSERT NAME OF LENDER]
By_________________________
The foregoing is agreed to
as of the date of this letter.
[INSERT NAME OF PROSPECTIVE
PARTICIPANT OR ASSIGNEE]
By_________________________
CONFIDENTIALITY AGREEMENT
<PAGE>
EXHIBIT D
[Form of Assignment and Acceptance]
Reference is made to the Amended and Restated Credit Agreement dated
as of September 10, 1996, as amended, supplemented or otherwise modified from
time to time (the "CREDIT AGREEMENT"), among Panavision International, L.P. (the
"BORROWER"), each of the subsidiary guarantors party thereto (each a "SUBSIDIARY
GUARANTOR", and, collectively, the "SUBSIDIARY GUARANTORS" and, together with
the Borrower, the "OBLIGORS"), each of the lenders party thereto (each a
"LENDER", and, collectively, the "LENDERS"), and The Chase Manhattan Bank, as
administrative agent for the Lenders (in such capacity, the "ADMINISTRATIVE
AGENT"). Terms defined in the Credit Agreement are used herein with the same
meanings.
[___________] (the "ASSIGNOR") and [__________] (the "ASSIGNEE") agree
as follows:
1. The Assignor hereby irrevocably sells and assigns to the Assignee
without recourse to the Assignor, and the Assignee hereby irrevocably purchases
and assumes from the Assignor without recourse to the Assignor, as of the
Effective Date set forth in Schedule 1 hereto (the "EFFECTIVE DATE"), an
interest (the "ASSIGNED INTEREST") in and to the Assignor's rights and
obligations under the Credit Agreement with respect to those credit facilities
contained in the Credit Agreement as set forth on Schedule 1 (individually, an
"ASSIGNED FACILITY"; collectively, the "ASSIGNED FACILITIES"), in a principal
amount and percentage for each Assigned Facility as set forth on Schedule 1.
2. The Assignor (i) makes no representation or warranty and assumes
no responsibility with respect to any statements, warranties or representations
made in or in connection with the Credit Agreement, the other Loan Documents or
any other instrument or document furnished pursuant thereto, or the execution,
legality, validity, enforceability, genuineness, sufficiency or value of the
Credit Agreement, the other Loan Documents or any other instrument or document
furnished pursuant thereto, other than that it has not created any adverse claim
CONFIDENTIALITY AGREEMENT
<PAGE>
- 2 -
upon the interest being assigned by it hereunder and that such interest is free
and clear of any adverse claim; (ii) makes no representation or warranty and
assumes no responsibility with respect to the financial condition of the
Borrower, any of its Subsidiaries or any other obligor or the performance or
observance by the Borrower, any of its Subsidiaries or any other obligor of any
of their respective obligations under the Credit Agreement, any other Loan
Document or any other instrument or document or any other instrument or document
furnished pursuant hereto or thereto; and (iii) attaches the Note(s) held by it
evidencing the Assigned Facilities and requests that the Administrative Agent
exchange such Note(s) for a new Note or Notes payable to the Assignor (if the
Assignor has retained any interest in the Assigned Facility) and a new Note or
Notes payable to the Assignee in the respective amounts which reflect the
assignment being made hereby (and after giving effect to any other assignments
which have become effective on the Effective Date).
3. The Assignee (i) represents and warrants that it is legally
authorized to enter into this Assignment and Acceptance; (ii) confirms that it
has received a copy of the Credit Agreement, together with copies of the
financial statements delivered pursuant to Sections [9.01(b) and (c)] thereof,
and such other documents and information as it has deemed appropriate to make
its own credit analysis and decision to enter into this Assignment and
Acceptance; (iii) agrees that it will, independently and without reliance upon
the Assignor, the Administrative Agent or any other Lender and based on such
documents and information as it shall deem appropriate at the time, continue to
make its own credit decisions in taking or not taking action under the Credit
Agreement, the other Loan Documents or any other instrument or document
furnished pursuant hereto or thereto; (iv) appoints and authorizes the
Administrative Agent to take such action as agent on its behalf and to exercise
such powers under the Credit Agreement, the other Loan Documents or any other
instrument or document furnished pursuant hereto or thereto as are delegated to
the Administrative Agent by the terms thereof, together with such powers as are
incidental thereto; and (v) agrees that it will be bound by the
FORM OF ASSIGNMENT AND ACCEPTANCE
<PAGE>
provisions of the Credit Agreement and will perform in accordance with its terms
all the obligations which by the terms of the Credit Agreement are required to
be performed by it as a Lender.
4. Following the execution of this Assignment and Acceptance, it will
be delivered to the Administrative Agent for acceptance by it and recording by
the Administrative Agent pursuant to Section 12.06(b) of the Credit Agreement,
effective as of the Effective Date which date shall not, unless otherwise agreed
to by the Administrative Agent, be earlier than five Business Days after the
date of such acceptance and recording by the Administrative Agent and shall in
no event be earlier than the date the information contained herein is recorded
in the Register pursuant to Section 12.06(b) of the Credit Agreement).
5. Upon such acceptance and recording, from and after the Effective
Date, the Administrative Agent shall make all payments in respect of the
Assigned Interest (including payments of principal, interest, fees and other
amounts) to the Assignee whether such amounts have accrued prior to the
Effective Date or accrue subsequent to the Effective Date.
6. From and after the Effective Date, (i) the Assignee shall be a
party to the Credit Agreement and, to the extent provided in this Assignment and
Acceptance, have the rights and obligations of a Lender thereunder and under the
other Loan Documents and shall be bound by the provisions thereof and (ii) the
Assignor shall, to the extent provided in this Assignment and Acceptance,
relinquish its rights and be released from its obligations under the Credit
Agreement except as provided in Section 12.07 of the Credit Agreement.
7. This Assignment and Acceptance shall be governed by and construed
in accordance with the laws of the State of New York.
IN WITNESS WHEREOF, the parties hereto have caused this Assignment and
Acceptance to be executed on Schedule 1 hereto by their respective duly
authorized officers.
FORM OF ASSIGNMENT AND ACCEPTANCE
<PAGE>
Schedule 1 to
Assignment and Acceptance
relating to the Amended and Restated Credit Agreement,
dated as of September 10, 1996
among Panavision International, L.P. as Borrower,
the Lenders named therein and The Chase Manhattan Bank,
as administrative agent for the Lenders
(in such capacity, the "Administrative Agent")
Name of Assignor: _______________
Name of Assignee: _______________
Effective Date of
Assignment: _______________
Principal Amount Percentage of
Assigned Facility Assigned Aggregate Commitment
- ----------------- ---------------- --------------------
[ASSIGNOR] [ASSIGNEE]
By_______________________ By________________________
Title: Title:
Form of Assignment and Acceptance
---------------------------------
<PAGE>
- 2 -
[Consented to and] Accepted:
THE CHASE MANHATTAN BANK,
as Administrative Agent
By_________________________
Title:
[Consented to:
PANAVISION INTERNATIONAL, L.P.(4)
By Panavision Inc.,
its General Partner
By_________________________
Title:]
[Consented to:
THE CHASE MANHATTAN BANK,(5)
as Issuing Lender
By_________________________
Title:]
4. If required by 12.06(b) of the Credit Agreement.
5. If required by 12.06(b) of the Credit Agreement.
FORM OF ASSIGNMENT AND ACCEPTANCE
<PAGE>
EMPLOYMENT AGREEMENT
THIS EMPLOYMENT AGREEMENT is made the 12th day of June 1996 (the
"Effective Date") by and between PANAVISION INTERNATIONAL, L.P., a Delaware
limited partnership, whose principal office is located at 140 East 45th Street,
New York, New York (the "Employer"), and WILLIAM C. SCOTT III, having an office
at 140 East 45th Street, 35th Floor, New York, New York (the "Executive").
RECITALS
WHEREAS, pursuant to the terms of that certain employment agreement,
dated as of June 1, 1991, by and between the Employer and the Executive, and
amended by an extension agreement, dated as of May 31, 1995 (together, the "Old
Agreement"), the Executive is currently an employee of the Employer.
WHEREAS, the Employer desires to continue to employ the Executive in
an executive capacity and to be assured of his services as such on the terms and
conditions hereinafter set forth, and the Executive is willing to accept such
employment on such terms and conditions.
WHEREAS, the Employer and the Executive intend and desire that the Old
Agreement be superseded by this Agreement.
NOW, THEREFORE, in consideration of the foregoing premises and such
other good and valuable consideration; the receipt and adequacy of which are
hereby acknowledged, the Employer and the Executive hereby agree as follows:
1. TERMINATION OF THE OLD AGREEMENT. The parties hereto agree
that effective on the date hereof the Old Agreement shall terminate and be of
no further force and effect and that no party shall have any further
rights or obligations under the Old Agreement other than such rights or
obligations which may have accrued prior to the date hereof.
<PAGE>
2. TERM. The Employer hereby agrees to employ the Executive, and
the Executive hereby agrees to serve the Employer, as Chairman and Chief
Executive Officer for a period commencing on the Effective Date, and ending on
the third anniversary of the Effective Date (such period, subject to early
termination as provided herein, being herein referred to as the "Employment
Period", and the period commencing on the Effective Date and ending on June 11,
1997 and any year commencing on any subsequent anniversary of the Effective Date
during which the Executive is employed by the Employer, being herein referred to
as an "Employment Year").
3. EXECUTIVE DUTIES. (a) The Executive shall have such
duties, responsibilities and authority as are reasonable and customary for a
chairman and chief executive officer and such other duties, responsibilities and
authority of a similar nature as the Board of Directors of the general partner
of the Employer from time to time shall designate, and in carrying out such
duties and responsibilities, and exercising such authority, the Executive shall
report to and consult with the Board of Directors of the general partner of the
Employer. The Executive shall devote his full time, energy and skill during
regular business hours to the business and affairs of the Employer and its
subsidiaries and to the promotion of their interests; provided, however, that
the Executive shall be permitted to devote a portion of his time during regular
business hours to the business and affairs of Lee International, Inc., a
Delaware corporation ("Lee International"), in his capacity as an officer of
Lee International and in connection with efforts to sell all or any part of the
operating assets and businesses of Lee International and its subsidiaries.
Without limiting the generality of the foregoing, the Executive shall, if
requested by the Employer, serve as an executive officer and director of the
general partner and/or one or more subsidiaries of the Employer. The Executive
shall faithfully and diligently discharge his duties hereunder and use his best
reasonable efforts to implement the policies established by the Employer.
(b) The principal place of performance by the Executive of his
duties hereunder shall be in New York City, and the Employer will provide the
Executive with suitable
2
<PAGE>
office space and services in New York City for this purpose, but the Executive
acknowledges that he will be required to travel frequently to and expend
substantial periods of time in the United Kingdom, Los Angeles and its suburbs,
and other locations in which the Employer and its subsidiaries and affiliates
conduct their activities.
(c) Throughout the Employment Period, the Employee shall not,
directly or indirectly, engage in activities which would interfere with the
faithful performance of his duties hereunder.
4. COMPENSATION. (a) As compensation for the Executive's
services during the Employment Period, the Employer shall pay him a base salary
at the rate of $800,000 per annum, payable in arrears in equal installments
twice monthly, or at such other times as may be mutually agreed upon between the
Employer and the Executive. The foregoing base salary may be increased but not
decreased upon annual review in the sole discretion of the Employer. Except as
set forth herein, or as otherwise approved by the Board of Directors of the
general partner of the Employer, the Employee shall not be entitled to receive
any other cash compensation, bonus or compensation from the Employer or any
subsidiary of the Employer. The Executive shall also be entitled to the medical
and other benefits made available to other high ranking executives of the
Employer.
(b) The Employer and the Executive agree that bonuses to be
granted to the Executive shall be granted pursuant to the terms of the Executive
Incentive Compensation Plan of the Employer as in effect from time to time.
(c) The Employer and the Executive agree that options to be
granted to the Executive shall be non-qualified and shall be granted pursuant to
the terms of the Stock Option Plan of the general partner of the Employer as in
effect from time to time.
5. EXPENSES. All reasonable and accountable travel and other
expenses incident to the rendering of services by the Executive hereunder shall
be paid by the Employer. If any such expenses are paid in the first instance by
the Executive, the Employer shall reimburse him
3
<PAGE>
therefor on presentation of expense accounts for any such expenses.
6. TERMINATION
(a) For the purposes of this Agreement, the following terms
shall be accorded the following meanings:
(i) "Involuntary Termination" shall mean the termination of the
Executive's employment (A) by the Employer, other than for
Cause (as defined below), or (B) by the Executive for Good
Reason (as defined below).
(ii) "Voluntary Termination" shall mean the termination by the
Executive of his employment other than as a result of
death, Disability (as defined below) or Good Reason.
4
<PAGE>
(iii) "Cause" shall mean: (A) indictment of the Executive for any
felony involving dishonesty or moral turpitude; (B)
embezzlement or misappropriation of funds or property of the
Employer or its affiliates by the Executive; (C) the
Executive's willful refusal to obey or perform lawful
written directions of the Board of Directors of the general
partner of the Employer consistent with the Executive's
position as Chairman and Chief Executive Officer, after
written notice and reasonable opportunity to cure; (D) the
Executive's chronic absenteeism after written notice and
reasonable opportunity to be heard; (E) the Executive's
chronic alcoholism or other form of substance addiction
after written notice and reasonable opportunity to be heard;
or (F) the Executive's willful and material breach of his
duties and obligations hereunder, after written notice and
reasonable opportunity to cure. In any event, upon
termination of the Executive for Cause, the Employer shall
give him written notice thereof specifying the grounds for
such termination, and the Executive shall be afforded an
opportunity to be heard, together with his counsel, at a
meeting with the Employer, to appeal such termination.
(iv) "Disability" shall mean the Executive's inability to perform
properly his duties hereunder for a period of 120
consecutive days, or for a period of 120 nonconsecutive days
during any consecutive six month period, by reason of
medical, emotional, or mental injury, illness, disease or
defect.
(v) "Good Reason" shall mean: (A) a breach by the Employer of
its obligations under Section 3(b) hereunder; (B) a material
diminution in the Executive's responsibilities with respect
to the management of the Employer or his authority within
the Employer; (C) a decrease in the Executive's salary or a
significant decrease in the Executive's benefits; or (D)
assignment to inappropriate duties with respect to
management of the Employer or his authority within the
Employer.
5
<PAGE>
(vi) "Change of Control" shall have occurred at such time as: (i)
Warburg Pincus Capital Company, L.P., either directly or
through one or more affiliated entities ("WP"), is no longer
the largest single beneficial owner (within the meaning of
Rule 13d-3 of the Securities Exchange Act of 1934, as
amended) of the outstanding common stock, par value $.01 per
share (the "Common Stock"), of the general partner of the
Employer; PROVIDED, that if WP fails to remain the largest
single beneficial owner of the Common Stock because WP
distributed the Common Stock to its limited partners, then
no Change of Control shall have occurred unless and until
(a) an unaffiliated third party becomes the beneficial owner
of more than 30% of the outstanding Common Stock or (b)
there is a successful hostile proxy contest pursuant to
which a majority of the incumbent Board of Directors of the
general partner of the Employer is replaced; (ii) a merger,
consolidation or other similar transaction of, or in respect
of, the general partner of the Employer or the Employer
occurs which results in the failure by WP to directly or
indirectly remain the largest single beneficial owner of the
common stock or other equity equivalent of the surviving
entity in such merger, consolidation or similar transaction;
or (iii) there is any liquidation or dissolution of the
general partner of the Employer or the Employer.
(b) If the Executive's employment with the Employer is
terminated (i) by Voluntary Termination (except during the period commencing six
months following a Change of Control and ending twelve months following a Change
of Control) or (ii) for Cause, the Employer shall pay the Executive only an
amount equal to his base salary and all previously unreimbursed expenses through
and including the date of termination, and the Executive shall have no further
obligations, duties or rights under this Agreement, except as set forth in
Sections 7, 8 and 9.
(c) Upon a Voluntary Termination during the period commencing
six months following a Change of Control and ending twelve months following a
Change of Control or an Involuntary Termination at any time, the Employer shall
pay
6
<PAGE>
the Executive (i) an amount equal to the greater of (x) $1,600,000 or (y) twice
the annual base salary payable to the Executive immediately prior thereto, such
amount to be payable in a lump sum, and (ii) all accrued but previously unpaid
salary, bonuses and unreimbursed expenses through the date of termination. The
Executive shall thereupon have no further obligations, duties or rights under
this Agreement, except as set forth in Sections 7, 8 and 9.
(d) Upon a termination by reason of death or Disability, the
Employer shall pay the Executive or his representative, estate, heirs or
legatees, in a lump sum payment, an amount equal to the greater of (i) $800,000
or (ii) the Executive's annual base salary then in effect, as well as all
accrued but previously unpaid salary or bonuses and unreimbursed expenses
through the date of termination, payable in a lump sum. The Executive, or his
representative, estate, heirs or legatees, shall thereupon have no further
obligations, duties or rights under this Agreement, except as set forth in
Sections 7, 8 and 9.
7. CONFIDENTIAL INFORMATION
(a) The Executive agrees not to disclose or use, at any time,
except in pursuit of the business of the Employer, any confidential information
of the Employer, whether the Executive has such information in his memory or
embodied in writing or other physical form. For purposes of this Agreement the
phrase "confidential information of the Employer" means all information which is
known only to the Employer's employees (including former Employer employees or
employees of affiliated companies) or others in a confidential relationship with
the Employer, and (i) relates to specific technical matters, such as designs,
plans, diagrams, reports, promotional, sales or operational procedures and
materials of the Employer or (ii) relates to the identity or solicitation of
suppliers, customers or accounting procedures of the Employer or other business
practices of the Employer which are unique to the Employer.
(b) The Executive agrees not to remove from the premises of the
Employer, except in pursuit of the business of the Employer, any document or
object containing or reflecting any confidential information of the Employer,
and the Executive recognizes that all such documents and
7
<PAGE>
objects, whether developed by the Executive or by someone else for the Employer,
are the exclusive property of the Employer.
(c) Upon termination of the Executive's employment by the
Employer, the Executive will not divulge the above-mentioned information to any
of the Employer's competitors or use such information in any other way that will
be in competition with the Employer.
8. NONCOMPETITION.
The Executive agrees that, for a period commencing with the Effective
Date and ending 24 months after the termination of the Employment Period, other
than by reason of an Involuntary Termination, he will not, either directly or
indirectly (whether as principal, agent, manager, director, employee, officer,
contractor, consultant, stockholder, partner or otherwise, except as a passive
investor with less than a 5% equity interest), compete with the Employer in any
business in which the Employer competes or engages during the Employment Period.
The Executive also agrees that, during the Employment Period, and during the
period ending 24 months after the termination for any reason of the Employment
Period, he will not solicit or encourage any persons who, within six (6) months
prior to the expiration of the Employment Period, were employees of the Employer
(or its affiliated companies) to (i) terminate their employment with the
Employer (or any of its affiliated companies) or (ii) become affiliated with any
company or business which is in a similar business to that of the Employer (or
any of its subsidiaries or affiliated companies) and in which the Executive,
either directly or indirectly (whether as principal, agent, manager, director,
employee, officer, contractor, consultant, stockholder, partner or otherwise)
has an interest.
The Executive agrees that the remedy at law for any breach by him of
Sections 7 or 8 will be inadequate and that the Employer shall be entitled to
temporary and permanent injunctive relief for any such breach without the
necessity of proving actual damages.
The Employer and the Executive acknowledge that the provisions of
Sections 7 and 8 are reasonable in scope,
8
<PAGE>
necessary for the Employer's business and goodwill and form an essential part of
the consideration for which the Employer is willing to enter into this
Agreement. It is the intent of the parties hereto that the provisions of
Sections 7 and 8 be enforced to the fullest extent permissible under the laws
and public policies applicable in each jurisdiction in which enforcement is
sought. Accordingly, if any provision of Sections 7 and 8 shall be adjudicated
to be invalid, ineffective or unenforceable, the remaining provisions shall not
be affected thereby. The invalid, ineffective or unenforceable provision shall,
without further action by the parties, be amended automatically to effect the
original purposes and intent of the invalid, ineffective or unenforceable
provision; provided, however, that any such amendment shall apply only with
respect to the operation of such provision in the particular jurisdiction with
respect to which such adjudication is made.
Any restriction contained in this Agreement or in any agreement
provided for herein or contemplated hereby which is subject to registration
under the Restrictive Trade Practices Act of 1976 shall come into effect on the
day following the day on which particulars of this Agreement and of any such
arrangement have been furnished to the Office of Fair Trading (or on such later
date as may be provided for in relation to any such restriction), and the
parties hereto agree to cooperate to furnish such particulars to the office of
Fair Trading within 10 business days after the date hereof.
9. INDEMNIFICATION. The Employer agrees (i) to indemnify, defend
and hold the Executive harmless against any and all expenses (including
attorney's fees and expenses), losses and judgments, fines and amounts paid in
settlement actually and reasonably incurred by the Executive arising out of any
claim, suit, action or proceeding brought against the Executive by reason of the
Executive's service as an officer, director or employee of the Employer or any
of its subsidiaries or affiliates, or Lee International or any of its
subsidiaries or affiliates, whether before or after the Effective Date,
including without limitation any such claim, suit, action or proceedings in
which it is alleged that the Executive's participation in the management or
control of the Employer, the Executive's direct or indirect ownership of limited
partnership interests in the
9
<PAGE>
Employer or any other activity or circumstance renders the Executive liable for
the debts or other obligations of the Employer as general partner or otherwise,
and (ii) to advance to the Executive all costs and expenses of defending or
investigating any such claim, suit, action or proceedings as they are incurred,
all to the full extent permitted by law; provided, however, that nothing herein
is meant, or shall be construed to require the Employer (a) to indemnify the
Executive against or pay or reimburse the Executive for any legal or other
expenses incurred in defending any bona fide attempt by the Employer to
terminate the Executive's employment for Cause, (b) to indemnify the Executive
against, or pay or reimburse the Executive for any legal or other expenses,
losses, judgments or fines incurred by the Executive in defending any criminal
action seeking the Executive's conviction for a felony or a bona fide civil
action to recover funds or property of the Employer or its affiliates embezzled
or otherwise misappropriated by the Executive, or for damages resulting from any
such act by the Executive or (c) to indemnify the Executive against, or pay or
reimburse the Executive for (i) any amounts which may have been previously
distributed to WCS Panavision Corporation, a Delaware corporation which was
formerly owned by the Executive, in its capacity as a limited partner of the
Employer as a return of capital or otherwise and must, pursuant to the
provisions of Section 17-607 of the Delaware Revised Uniform Limited Partnership
Act (the "Delaware Limited Partnership Act") or a successor provision, be
returned to the Employer for the benefit of the Employer or its creditors or
(ii) any legal or other expense incurred in defending any action, suit or
proceeding in which the Executive is held liable by a court of competent
jurisdiction, in a decision which is not subject to further appeal, to any third
party transacting business with the Employer pursuant to the provisions of the
Delaware Limited Partnership Act solely as a result of affirmative
representations by the Executive to such third party that he is a general
partner of the Employer and any losses, judgments or fines incurred by the
Executive in connection therewith.
10. GENERAL. This Agreement is further governed by the following
provisions:
10
<PAGE>
(a) NOTICES. All notices relating to this Agreement shall be in
writing and shall be either personally delivered, sent by telex or facsimile or
mailed by certified mail, return receipt requested, to be delivered at such
address as is indicated below, or at such other address or to the attention of
such other person as the recipient has specified by prior written notice to the
sending party. Notice shall be effective when so personally delivered, one
business day after being sent by telex or facsimile or three days after being
mailed.
To the Employer:
c/o Warburg, Pincus Capital Company, L.P.
466 Lexington Avenue
New York, New York 10017
Attention: Joanne R. Wenig
With a copy to:
Christopher E. Manno, Esq.
Willkie Farr & Gallagher
One Citicorp Center
153 East 53rd Street
New York, New York 10022
To the Executive:
William C. Scott III
25 East 86th Street
New York, New York 10028
With a copy to:
Stephen W. Schwarz, Esq.
Patterson, Belknap, Webb & Tyler LLP
1133 6th Avenue
New York, New York 10036
(b) PARTIES IN INTEREST. This Agreement shall be nondelegable
by the Executive, and shall be binding upon, and inure to the sole benefit of
the Executive (and, to the extent explicitly set forth, his representative,
estate, heirs and legatees) . This Agreement shall be binding upon and inure to
the benefit of the Employer and any corporation
11
<PAGE>
or other entity succeeding to all or substantially all of the business and
assets of the Employer by merger, consolidation, purchase of assets or
otherwise.
(c) ENTIRE AGREEMENT. This Agreement supersedes any and all
other agreements, either oral or in writing, between the parties hereto with
respect to the employment of the Executive by the Employer and contains all of
the covenants and agreements between the parties with respect to such employment
in any manner whatsoever. Any modification of this Agreement will be effective
only if it is in writing signed by the party to be charged.
(d) GOVERNING LAW. This Agreement shall be governed by and
construed in accordance with the laws of the State of New York (without regard
to the conflicts of law provisions thereof).
(e) SEVERABILITY. In the event that any term or condition
contained in this Agreement shall for any reason be held by a court of competent
jurisdiction to be invalid, illegal or unenforceable in any respect, such
invalidity, illegality or unenforceability shall not affect any other term or
condition of this Agreement, but this Agreement shall be construed as if such
invalid or illegal or unenforceable or condition had never been contained
herein.
IN WITNESS WHEREOF, the parties hereto have executed and
delivered this Agreement as of the date first above written.
PANAVISION INTERNATIONAL, L.P.
By: WP/GP, INC., its General
Partner
By: /s/ Joanne R. Wenig
-------------------
Name: Joanne R. Wenig
Title: Vice President
/s/ William C. Scott III
------------------------
WILLIAM C. SCOTT III
12
<PAGE>
Exhibit 21
SUBSIDIARIES OF THE COMPANY
<TABLE>
<CAPTION>
NAME JURISDICTION OF FORMATION DOING BUSINESS AS:
- ---- ------------------------- ------------------
<S> <C> <C>
Panavision International, L.P. Delaware Panavision; Panavision Florida;
Panavision Hollywood; Panavision Wilmington
Panavision Europe Limited United Kingdom Panavision U.K.; Panavision Ireland;
Panavision France
Panavision Canada Holdings, Inc. Ontario, Canada
Lee Filters Limited United Kingdom Lee Filters
Camera Bellows Limited United Kingdom
Colortran Limited United Kingdom
Joe Dunton Cameras Limited United Kingdom
Panavision (Canada) Corporation Ontario, Canada Panavision Canada
Pana Truck Leasing Corporation Ontario, Canada
Panavision Italia S.R.L. Italy
</TABLE>
<PAGE>
EXHIBIT 23.2
CONSENT OF INDEPENDENT AUDITORS
We consent to the reference to our firm under the caption "Experts" and to
the use of our report dated March 4, 1996, except Note 7, as to which the date
is October , 1996, in the Registration Statement (Form S-1 No. 333- ) and
the related Prospectus of Panavision Inc. for the registration of its shares of
its common stock.
ERNST & YOUNG LLP
Los Angeles, California
October , 1996
The foregoing consent is in the format that will be signed upon the
effectiveness of the :1 stock split as described in Note 7 of the notes to the
consolidated financial statements.
ERNST & YOUNG LLP
Los Angeles, California
September 18, 1996
<PAGE>
EXHIBIT 23.3
CONSENT OF INDEPENDENT AUDITORS
We consent to the reference to our firm under the caption "Experts" and to
the use of our report dated September 5, 1996, in the Registration Statement
(Form S-1 No. 333- ) and the related Prospectus of Panavision Inc. for the
registration of its shares of its common stock.
ERNST & YOUNG
Chartered Accountants
London, United Kingdom
September 18, 1996
