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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K
Current Report
Pursuant to Section 13 or 15(d) of
The Securities Exchange Act of 1934
Date of Report (Date of earliest event reported): December 18, 1997
Panavision Inc.
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(Exact Name of Registrant as specified in its Charter)
Delaware 001-12391 13-3593063
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(State or other jurisdiction (Commission File No.) (I.R.S. Employer
of corporation) Identification No.)
6219 De Soto Avenue
Woodlands Hills, California 91367
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(Address of Principal (Zip Code)
Executive Offices)
Registrant's telephone number, including area code: (818) 316-1000
N/A
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(Former name or former address, if changed since last report)
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Item 5. Other Events.
On December 18, 1997, Panavision Inc. (the "Company") entered
into (i) an Agreement of Recapitalization and Merger, dated as of
December 18, 1997 (the "Merger Agreement"), by and among PX Holding
Corporation, PX Merger Corporation (the "Merger Sub") and the Company,
pursuant to which the Merger Sub will be merged into the Company (the
"Merger") and (ii) a Voting and Stockholders Agreement, dated as of
December 18, 1997 (the "Stockholders Agreement"), by and among Warburg
Pincus Capital Company, L.P., a Delaware limited partnership
("Warburg"), the Company and Mafco Holdings Inc., a Delaware
corporation.
Pursuant to the terms of the above-referenced agreements,
holders of the Company's common stock, par value $.01 per share
("Common Stock"), other than Warburg, will be offered the opportunity
to exchange up to 88% of their shares of Common Stock for $27.00 per
share in cash. In addition, as part of the recapitalization of the
Company, Warburg has agreed to exchange 88% of the Common Stock it
beneficially owns for $26.50 per share in cash and has agreed to vote
all of its Common Stock in favor of the Merger.
The foregoing description is qualified in its entirety by
reference to the Merger Agreement and the Stockholders Agreement, which
appear as Exhibit 10.1 and 10.2, respectively, to this report.
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Item 7. FINANCIAL STATEMENTS AND EXHIBITS
(a) Financial Statements of Business acquired: None
(b) Pro Forma Financial Information: None
(c) Exhibits: See index immediately following the signature page.
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Exhibit Index
Exhibit No. Document
10.1 Agreement of Recapitalization and Merger, dated
as of December 18, 1997, by and among
PX Holding Corporation, PX Merger Corporation
and Panavision Inc.
10.2 Voting and Stockholders Agreement, dated as of
December 18, 1997, by and among
Warburg, Pincus Capital Company, L.P., Panavision
Inc. and Mafco Holdings Inc.
99.1 Panavision Inc. Press Release
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SIGNATURE
Pursuant to the requirements of the Securities Exchange Act, of 1934,
as amended, the registrant has duly caused this Report to be signed on its
behalf by the undersigned thereunto duly authorized.
Date: December 19, 1997 By: /s/ William J. Scott
William C. Scott
Chairman of the Board and
Chief Executive Officer
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AGREEMENT OF RECAPITALIZATION AND MERGER
By and Among
PX HOLDING CORPORATION,
PX MERGER CORPORATION
and
PANAVISION INC.
Dated as of December 18, 1997
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AGREEMENT OF RECAPITALIZATION AND MERGER
AGREEMENT OF RECAPITALIZATION AND MERGER (collectively, this "Agree-
ment"), dated as of December 18, 1997, by and among PX Holding Corporation, a
Delaware corporation ("Purchaser"), PX Merger Corporation, a Delaware corpo-
ration, a wholly owned subsidiary of Purchaser ("Merger Sub"), and Panavision
Inc., a Delaware corporation (the "Company").
WHEREAS, the Merger (as hereinafter defined) and this Agreement
require the vote of a majority of the issued and outstanding Common Shares (as
hereinafter defined) for the approval thereof (the "Company Stockholder
Approval");
WHEREAS, the respective Boards of Directors of Merger Sub and the
Company have approved the merger of Merger Sub with and into the Company, as
set forth below (the "Merger"), in accordance with the General Corporation Law
of the State of Delaware (the "DGCL") and upon the terms and subject to the
conditions set forth in this Agreement, holders of shares of common stock, par
value $.01 per share, of the Company (the "Common Shares") issued and out-
standing immediately prior to the Effective Time (as defined below) will be
entitled, subject to the terms hereof and other than as set forth herein, to
either (A) receive the Cash Consideration (as hereinafter defined) or (B)
retain the Retained Common Shares(as hereinafter defined), in each case
pursuant to the Merger;
WHEREAS, the Board of Directors of the Company (the "Company Board")
has, in light of and subject to the terms and conditions set forth herein, (i)
determined that the Merger is in the best interests of the Company and its
stockholders, and (ii) resolved to approve and adopt this Agreement and the
transactions contemplated hereby and to recommend approval and adoption of
this Agreement by the stockholders of the Company;
WHEREAS, Purchaser desires to purchase and the Company desires to
issue and sell to Purchaser a certain number of Common Shares pursuant to the
terms and conditions set forth in this Agreement (the "Stock Purchase");
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WHEREAS, Purchaser, Merger Sub and the Company desire to make cer-
tain representations, warranties, covenants and agreements in connection with
the Merger and the Stock Purchase, and also to set forth various conditions to
the Merger and the Stock Purchase; and
WHEREAS, it is intended that the Merger be recorded as a recapital-
ization for financial reporting purposes.
NOW, THEREFORE, in consideration of the foregoing and the respective
representations, warranties, covenants and agreements set forth herein,
Purchaser, Merger Sub and the Company agree as follows:
ARTICLE I
THE MERGER
SECTION 1.1 The Merger. Upon the terms and subject to the satis-
faction or waiver of the conditions hereof, and in accordance with the
applicable provisions of this Agreement and the DGCL, at the Effective Time
(as hereinafter defined) Merger Sub shall be merged with and into the Company.
Following the Merger, the separate corporate existence of Merger Sub shall
cease and the Company shall continue as the surviving corporation (the
"Surviving Corporation").
SECTION 1.2 Effective Time. As soon as practicable after the
satisfaction or waiver of the conditions set forth in Article VI, the Company
shall execute, in the manner required by the DGCL, and deliver to the Secre-
tary of State of the State of Delaware Certificate of Merger duly executed and
verified by the appropriate parties hereto, and the parties shall take such
other and further actions as may be required by law to make the Merger
effective. The time the Merger becomes effective in accordance with applica-
ble law is referred to herein as the "Effective Time."
SECTION 1.3 Effects of the Merger. The Merger shall have the
effects set forth in the applicable provisions of the DGCL and as set forth
herein. Without limiting the generality of the foregoing, and subject
thereto, at the Effective Time, all the properties,
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rights, privileges, powers and franchises of the Company and Merger Sub shall
vest in the Surviving Corporation, and all debts, liabilities and duties of
the Company and Merger Sub shall become the debts, liabilities and duties of
the Surviving Corporation.
SECTION 1.4 Certificate of Incorporation and By-Laws of the
Surviving Corporation.
(a) The Amended and Restated Certificate of Incorporation of the
Company dated as of July 12, 1996 (the "Amended and Restated Certificate of
Incorporation"), as in effect immediately prior to the Effective Time, shall
be the Certificate of Incorporation of the Surviving Corporation until
thereafter amended in accordance with the provisions thereof and hereof and
applicable law, or as otherwise contemplated hereby; and, provided that
Section 13(b) shall be restated in its entirety therein to read as follows,
"(b) Expenses incurred in defending a civil or criminal action, suit or
proceeding shall (in the case of any action, suit or proceeding against a
director or officer of the Corporation) be paid by the Corporation in advance
of the final disposition of such action, suit or proceeding as authorized by
the Board of Directors upon receipt of an undertaking by or on behalf of the
indemnified person to repay such amount if it shall ultimately be determined
that he is not entitled to be indemnified by the Corporation as authorized in
this Section 13."; and further provided, that a new Section 16 shall be added
thereto to read as follows, "The Corporation expressly elects not to be
governed by Section 203 of the General Corporation Law of the State of
Delaware."
(b) The By-Laws of Merger Sub in effect at the Effective Time shall
be the By-Laws of the Surviving Corporation until thereafter amended, in
accordance with the provisions thereof, hereof and applicable law.
SECTION 1.5 Directors and Officers. Subject to applicable law,
immediately prior to the Effective Time, the directors of Merger Sub and the
officers of the Company shall be the initial directors and the initial
officers, respectively, of the Surviving Corporation and shall hold office
until their respective successors are duly elected and qualified, or their
earlier death, resignation or removal.
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SECTION 1.6 Closing. The closing of the Merger (the "Closing")
shall take place at 10:00 a.m. on a date to be specified by the parties, which
shall be no later than the second business day after satisfaction or waiver of
all of the conditions set forth in Article VI hereof (the "Closing Date"), at
the offices of Skadden, Arps, Slate, Meagher & Flom LLP, 919 Third Avenue, New
York, New York 10022-3897, unless another date or place is agreed to in
writing by the parties hereto.
ARTICLE II
EFFECT OF THE MERGER ON THE CAPITAL STOCK
OF THE CONSTITUENT CORPORATIONS
SECTION 2.1 Effect on Capital Stock. As of the Effective Time, by
virtue of the Merger and without any action on the part of the holder of any
Common Shares or any shares of capital stock of Merger Sub:
(a) Common Stock of Merger Sub. All of the shares of common stock,
par value $1.00 per share, of Merger Sub (the "Merger Sub Common Stock"),
issued and outstanding immediately prior to the Effective Time shall be
converted into 10 (ten) Common Shares.
(b) Cancellation of Treasury Stock. Each Common Share that is
owned by the Company or by any wholly owned subsidiary of the Company shall
automatically be canceled and retired and shall cease to exist, and no cash or
other consideration shall be delivered or deliverable in exchange therefore.
(c) Retention or Exchange of Common Shares. Except as otherwise
provided herein and subject to Sections 2.2 and 2.3, each Common Share issued
and outstanding immediately prior to the Effective Time shall, by virtue of
the Merger, be treated as follows:
(i) for each Common Share with respect to which an election to
receive an amount in cash equal to $27.00 (the "Cash Consideration") has
been made and not revoked in accordance with Section 2.3 and for each
Common Share for which no election has been made (the "Cash Election
Shares"), the right to receive the Cash Consideration. All Common Shares
so exchanged for the Cash Consideration shall no
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longer be outstanding, shall automatically be canceled and retired and
shall cease to exist, and each holder of a Certificate representing any
such Common Shares shall, to the extent such Certificate represents such
shares, cease to have any rights with respect thereto, except the right to
receive the applica- ble Merger Consideration, upon surrender of such
Certificate in accordance with Section 2.5.
(ii) for each Common Share with respect to which an election to
retain Common Shares has been made and not revoked in accordance with
Section 2.3, the right to retain such fully paid and non-assessable
Common Share (the "Retained Common Shares" and, collectively with the
Cash Consideration, the "Merger Consideration").
SECTION 2.2 Proration.
(a) Notwithstanding anything in this Agreement to the contrary, the
number of Common Shares (the "Cash Election Number") to be converted into the
right to receive the Cash Consideration shall be equal to not more than 88% of
the number of Common Shares issued and outstanding immediately prior to the
Stock Purchase and held of record or beneficially by stockholders of the
Company other than Warburg, Pincus Capital Company, L.P. ("Stockholder").
(b) If the number of Cash Election Shares is greater than the Cash
Election Number, then each Cash Election Share shall (i) receive the Cash
Consideration in accordance with the terms of Section 2.1(c)(i) or (ii) be
retained as a Retained Common Share in accordance with the terms of Section
2.1(c)(ii) in the following manner:
(i) A proration factor (the "Proration Factor") shall be determined
by dividing the Cash Election Number by the total number of Cash Election
Shares.
(ii) The number of Cash Election Shares converted into cash in
accordance with the terms of Section 2.1(c)(i) shall be determined by
multiplying the Proration Factor by the total number of Cash Election
Shares covered by such election, rounded down to the nearest whole
number.
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(iii) All Cash Election Shares, other than those shares that shall
receive cash in accordance with Section 2.3(b)(ii), shall be deemed to be
Retained Common Shares (on a consistent basis among stockholders who made
the election referred to in Section 2.3(a), pro rata to the number of
shares as to which they made such election).
SECTION 2.3 Election Procedures. (a) Each person who, on or prior
to the Election Date (as defined in Section 2.3(b) below), is a record holder
of Common Shares will be entitled, subject to Section 2.2 hereof, to make an
unconditional election on or prior to such Election Date specifying the number
of Common Shares which he desires (i) to have converted into the right to
receive the Cash Consideration or (ii) to retain as a Retained Common Share.
(b) Subject to any required clearance by the Securities and
Exchange Commission (the "SEC"), the Purchaser shall prepare a form of
election (the "Form of Election"), which form shall be subject to the reason-
able approval of the Company, to be mailed by the Company with the Proxy
Statement to the record holders of Common Shares as of the record date for the
Special Meeting (as hereinafter defined), which Form of Election shall be used
by each record holder of Common Shares who elects to specify the number of
Common Shares which he desires to have converted into the right to receive the
Cash Consideration in the Merger, subject to the provisions of Section 2.2
hereof. The Company will use its reasonable best efforts to make the Form of
Election available to all persons who become holders of Common Shares during
the period between such record date and the Election Date, with a copy of the
Proxy Statement. Any such holder's election shall have been properly made
only if such bank or trust company as shall be mutually acceptable to
Purchaser and the Company, acting as exchange agent (the "Exchange Agent")
shall have received at its designated office, by 5:00 p.m., New York City time
on the business day prior to the date of the Special Meeting (the "Election
Date"), a Form of Election properly completed and signed and accompanied by
Certificates (as hereinafter defined) for the Common Shares to which such Form
of Election relates, duly endorsed in blank or otherwise in a form acceptable
for transfer on the books of the Company (or by an appropriate guarantee if
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delivery of such certificates as set forth in such Form of Election from a firm
which is a member of a registered national securities exchange or of the
National Association of Securities Dealers, Inc. or a commercial bank or trust
company having an office or correspondent in the United States, provided such
certificates are in fact delivered to the Exchange Agent within three New York
Stock Exchange ("NYSE") trading days after the date of execution of such
guarantee of delivery).
(c) Any Form of Election may be revoked by the holder submitting it
to the Exchange Agent only by written notice received by the Exchange Agent
(i) prior to 5:00 p.m., New York City time on the Election Date or (ii) after
the Election Date, if the Company and Purchaser determine, on or prior to the
Election Date, that the Closing is not likely to occur within three business
days following the Election Date, in which case any Form of Election shall
remain revocable until a subsequent date which shall be a date prior to the
Closing determined by the Company and the Purchaser. In addition, all Forms
of Election shall automatically be revoked if the Exchange Agent is notified
in writing by Merger Sub and the Company that the Merger has been abandoned.
If a Form of Election is revoked, the Certificate or Certificates (or guaran-
tees of delivery, as appropriate) for the Common Shares to which such Form of
Election relates shall be promptly returned to the stockholder submitting the
same to the Exchange Agent.
(d) The determination of the Exchange Agent shall be binding with
respect to whether or not elections have been properly made or revoked
pursuant to this Section 2.3 and when elections and revocations were received
by it. If the Exchange Agent determines that any election was not properly
made, such shares shall be treated by the Exchange Agent as Retained Common
Shares. The Exchange Agent shall also make all computations as to the
allocation and the proration contemplated by Section 2.2, and any such
computation shall be conclusive and binding on the holders of Common Shares.
The Exchange Agent may, with the mutual agreement of Merger Sub and the
Company, make such rules as are consistent with this Section 2.3 for the
implementation of the elections provided for herein as shall be necessary or
desirable fully to effect such elections.
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SECTION 2.4 Options; Stock Plans. Each option held by an employee,
consultant or director of the Company to acquire Common Shares ("Company Stock
Option") that is outstanding immediately prior to the Merger, whether or not
then vested or exercisable, shall, simultaneously with the Merger, be cancel-
led in exchange for a prompt payment of a single lump sum cash payment equal
to the product of (1) the number of Common Shares subject to such Company
Stock Option and (2) the excess, if any, of the Cash Consideration over the
exercise price per share of such Company Stock Option.
SECTION 2.5 Exchange and Retention of Common Shares.
(a) From time to time prior to the Effective Time, Purchaser shall
take all steps necessary to cause to be deposited on a timely basis with the
Exchange Agent in an account (the "Exchange Fund") the Cash Consideration to
which holders of Common Shares shall be entitled at the Effective Time
pursuant to Section 2.1(c)(i).
(b) Promptly after the Effective Time, Purchaser shall cause the
Exchange Agent to mail to each record holder of certificates (the "Certifi-
cates") that immediately prior to the Effective Time represented Common Shares
a form of letter of transmittal which shall specify that delivery shall be ef-
fected, and risk of loss and title to the Certificates shall pass, only upon
proper delivery of the Certificates to the Exchange Agent and instructions for
use in surrendering such Certificates and receiving the Merger Consideration
in respect thereof.
(c) In effecting the payment of the Cash Consideration in respect
of Common Shares represented by Certificates entitled to payment of the Cash
Consideration pursuant to Section 2.1(c)(i) and Section 2.2(b) (the "Cashed
Shares"), upon the surrender of each such Certificate, the Exchange Agent at
the time of such surrender shall pay the holder of such Certificate the Cash
Consideration multiplied by the number of Cashed Shares, in consideration
therefor. Upon such payment, such Certificate shall forthwith be cancelled.
(d) Until surrendered in accordance with paragraph (c) above, each
such Certificate (other than
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Certificates representing Common Shares held by any affiliate of Merger Sub, in
the treasury of the Company or by any wholly owned subsidiary of the Company)
shall represent solely the right to receive the aggregate Cash Consideration
relating thereto. No interest shall be paid or accrued on the Cash Consider-
ation. If the Cash Consideration (or any portion thereof) is to be delivered
to any person other than the person in whose name the Certificate formerly
representing Common Shares surrendered therefor is registered, it shall be a
condition to such right to receive such Cash Consideration that the Certif-
icate so surrendered shall be properly endorsed or otherwise be in proper form
for transfer and that the person surrendering such Common Shares shall pay to
the Exchange Agent any transfer or other taxes required by reason of the
payment of the Cash Consideration to a person other than the registered holder
of the Certificate surrendered, or shall establish to the satisfaction of the
Exchange Agent that such tax has been paid or is not applicable.
(e) Promptly following the date which is six months after the
Effective Time, the Exchange Agent shall deliver to the Surviving Corporation,
all cash and other documents in its possession relating to the transactions
described in this Agreement, and the Exchange Agent's duties shall terminate.
Thereafter, each holder of a Certificate formerly representing a Common Share
electing the Cash Consideration may surrender such Certificate to the Sur-
viving Corporation and (subject to applicable abandoned property, escheat and
similar laws) receive in consideration therefor the applicable aggregate Cash
Consideration relating thereto, without any interest thereon.
(f) After the Effective Time, there shall be no transfers on the
stock transfer books of the Surviving Corporation of any Common Shares which
were outstanding immediately prior to the Effective Time and which were
surrendered for exchange for the Cash Consideration. If, after the Effective
Time, Certificates formerly representing Common Shares are presented to the
Surviving Corporation or the Exchange Agent for exchange for the Cash Consid-
eration, they shall be surrendered and cancelled in return for the payment of
the applicable aggregate Cash Consideration relating thereto, as provided in
this Article II.
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(g) No Liability. None of Merger Sub, Purchaser, the Company or
the Exchange Agent shall be liable to any person in respect of any Cash Con-
sideration delivered to a public official pursuant to any applicable abandoned
property, escheat or similar law. If any Certificates shall not have been
surrendered prior to seven years after the Effective Time (or immediately
prior to such earlier date on which the Cash Consideration would otherwise
escheat to or become the property of any Governmental Entity) any such distri-
butions or cash in respect of such Certificate shall, to the extent permitted
by applicable law, become the property of the Surviving Corporation, free and
clear of all claims or interest of any person previously entitled thereto.
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF THE COMPANY
The Company represents and warrants to Purchaser and Merger Sub as
follows:
SECTION 3.1 Organization and Qualification; Subsidiaries. The
Company and each of its Subsidiaries, is an entity duly organized, validly
existing and in good standing under the laws of its state or jurisdiction of
organization and has all requisite power and authority to own, lease and
operate its properties and to carry on its business as now being conducted and
is in good standing as a foreign entity in each jurisdiction where the prop-
erties owned, leased or operated, or the business conducted, by it require
such qualification and where failure to be in good standing or to so qualify
would have a Material Adverse Effect on the Company. The term "Material Ad-
verse Effect on the Company," as used in this Agreement, means any change in
or effect on the business, financial condition, results of operations of the
Company or any of its Subsidiaries that would be materially adverse to the
Company and its Subsidiaries taken as a whole. Neither (i) seasonal varia-
tions in operating income, to the extent reasonably consistent with prior
periods, nor (ii) the existence of a labor strike, in and of itself (that is,
unless such labor strike has caused a Material Adverse Effect on the Company),
shall be deemed a Material Adverse Effect on the Company. The Company has
heretofore made available to Purchaser a complete and
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correct copy of its Amended and Restated Certificate of Incorporation and By-
Laws.
SECTION 3.2 Capitalization; Subsidiaries.
(a) The authorized capital stock of the Company consists of 50,000,000
Common Shares and 2,000,000 shares of preferred stock, par value $.01 per
share ("Preferred Stock"). As of the close of business on December 12, 1997,
18,155,000 Common Shares were issued and outstanding, all of which are
entitled to vote, and no Common Shares were held in the Company's treasury.
The Company has no shares of Preferred Stock issued or outstanding. The
Company intends to authorize the issuance, prior to the Effective Time, of up
to 130,000 shares of Series A Redeemable Preferred Stock of the Company, as
contemplated by Section 5.10 of this Agreement. As of December 12, 1997,(i)
there were 865,950 Common Shares reserved for issuance pursuant to outstanding
Options and rights granted under the Stock Plans, and (ii) options to acquire
an aggregate of 2,134,050 Common Shares have been issued pursuant to Company
Stock Options. All the outstanding shares of the Company's capital stock are
duly authorized, validly issued, fully paid and non-assessable. There are no
bonds, debentures, notes or other indebtedness having voting rights (or
convertible into securities having such rights) ("Voting Debt") of the Company
or any of its Subsidiaries issued and outstanding.
(b) Except as set forth above, as set forth on Section 3.2 of the
Company Disclosure Schedule, and for the transactions contemplated by this
Agreement, (i) there are no shares of capital stock of the Company authorized,
issued or outstanding and (ii) there are no existing options, warrants, calls,
pre-emptive rights, subscriptions or other rights, convertible securities,
agreements, arrangements or commitments of any character, relating to the
issued or unissued capital stock of the Company or any of its Subsidiaries,
obligating the Company or any of its Subsidiaries to issue, transfer or sell
or cause to be issued, transferred or sold any shares of capital stock or
Voting Debt of, or other equity interest in, the Company or any of its
Subsidiaries or securities convertible into or exchangeable for such shares or
equity interests or obligations of the Company or any of its Subsidiaries to
grant, extend or enter into any such
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option, warrant, call, subscription or other right, convertible security,
agreement, arrangement or commitment.
(c) Except as set forth in Section 3.2 of the Company Disclosure
Schedule, there are no outstanding contractual obligations of the Company or
any of its Subsidiaries to repurchase, redeem or otherwise acquire any Shares
of the capital stock of the Company or any Subsidiary or affiliate of the
Company or to provide funds to make any investment (in the form of a loan,
capital contribution or otherwise) in any Subsidiary or any other entity.
Except as set forth in Section 3.2 of the Company Disclosure Schedule, and as
permitted by this Agreement, following the Merger, neither the Company nor any
of its Subsidiaries will have any obligation to issue, transfer or sell any
shares of its capital stock other than pursuant to employee benefit plans.
SECTION 3.3 The Purchased Shares. Upon delivery to Purchaser at
the Closing of certificates representing the Stock Purchase Common Shares, and
upon receipt of the Company of the payment in full therefor, (i) good and
valid title to the Stock Purchase Common Shares shall pass to the Purchaser,
free and clear of all liens and restrictions of any kind, except those
pursuant to applicable securities laws, and (ii) the Stock Purchase Common
Shares shall be validly issued, fully paid and nonassessable. Other than as
provided for in this Agreement, the Stock Purchase Common Shares are not, and
upon their issuance will not be, subject to any voting trust agreement or
other contract, agreement, commitment or understanding restricting or other-
wise relating to the voting, dividend rights or other disposition of the Stock
Purchase Common Shares. The Company has reserved 7,000,000 Common Shares for
issuance pursuant to the Stock Purchase.
SECTION 3.4 Authority Relative to this Agreement.
(a) The Company has the requisite corporate power and authority to
execute and deliver this Agreement and, except for the approval of this
Agreement by the stockholders of the Company, to consummate the transactions
contemplated hereby. The execution and delivery of this Agreement by the
Company and the consummation by the
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Company of the transactions contemplated hereby have been duly and validly
authorized by the Company Board and no other corporate proceedings on the part
of the Company are necessary to authorize this Agreement or to consummate the
transactions so contemplated (other than the approval of this Agreement by the
stockholders of the Company). This Agreement has been duly and validly
executed and delivered by the Company, and, assuming this Agreement consti-
tutes a valid and binding obligation of the Purchaser and Merger Sub, consti-
tutes a valid and binding agreement of the Company, enforceable against the
Company in accordance with its terms.
(b) The Company Board has taken any and all necessary and appro-
priate action to render inapplicable to the Merger and the transactions con-
templated by this Agreement, including the Voting and Stockholders Agreement,
dated as of December 18, 1997, by and between Stockholder and Mafco Holdings
Inc. (the "Stockholders Agreement"), the provisions of Section 203 of the
DGCL.
SECTION 3.5 No Violation; Required Filings and Consents.
(a) Except as set forth in Section 3.5 of the Company Disclosure
Schedule, the execution and delivery of this Agreement does not, and the
consummation of the transactions contemplated by this Agreement and compliance
with the provisions of this Agreement will not, result in any violation of, or
default (with or without notice or lapse of time, or both) under, or give rise
to a right of consent, termination, purchase, cancellation or acceleration of
any obligation or to loss of any property, rights or benefits under, or result
in the imposition of any additional obligation under, or result in the
creation of any Lien (as hereinafter defined) upon any of the properties or
assets of the Company or any of its Subsidiaries under, (i) the organizational
documents of the Company or any of its Subsidiaries, (ii) any contract,
instrument, permit, concession, franchise, license, loan or credit agreement,
note, bond, mortgage, indenture, lease or other property agreement, partner-
ship or joint venture agreement or other legally binding agreement, whether
oral or written (a "Contract"), applicable to the Company or any of its
Subsidiaries or their respective properties or assets or (iii) subject to the
governmental filings and other matters referred to in the
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following paragraph, any judgment, order, decree, statute, law, ordinance, rule
or regulation applicable to the Company or any of its Subsidiaries or their
respective properties or assets, other than, in the case of clauses (ii) and
(iii), any such violations, defaults, rights or Liens that individually or in
the aggregate would not have a Material Adverse Effect on the Company.
(b) Other than in connection with, or in compliance with, the
provisions of the DGCL with respect to the transactions contemplated hereby,
the Securities Exchange Act of 1934, as amended (the "Exchange Act"), the
Securities Act of 1933 (the "Securities Act"), the securities laws of the
various states and the Hart-Scott-Rodino Antitrust Improvements Act of 1976,
as amended (the "HSR Act"), no authorization, consent or approval of, or
filing with, any Governmental Entity (as hereinafter defined) is necessary for
the consummation by the Company of the transactions contemplated by this
Agreement other than authorizations, consents and approvals the failure to
obtain, or filings the failure to make, which would not, in the aggregate,
have a Material Adverse Effect on the Company. As used in this Agreement, the
term "Governmental Entity" means any government or subdivision thereof,
domestic, foreign or supranational or any administrative, governmental or
regulatory authority, agency, commission, tribunal or body, domestic, foreign
or supranational.
SECTION 3.6 SEC Reports and Financial Statements.
(a) The Company has filed all forms, reports and documents required
to be filed by it with the SEC since November 20, 1996 (collectively, the
"Company SEC Reports"). The Company SEC Reports (i) were prepared in accor-
dance with the requirements of the Securities Act or the Exchange Act, as the
case may be, and (ii) did not at the time they were filed contain any untrue
statement of a material fact or omit to state a material fact required to be
stated therein or necessary in order to make the statements made therein, in
the light of the circumstances under which they were made, not misleading. No
Subsidiary is required to file any form, report or other document with the
SEC.
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<PAGE>16
(b) Each of the consolidated financial statements (including, in
each case, any notes thereto) contained in the Company SEC Reports (the
"Company Financial Statements") (i) was prepared from the books of account and
other financial records of the Company and its Subsidiaries, (ii) was prepared
in accordance with United States generally accepted accounting principles
("U.S. GAAP") applied on a consistent basis throughout the periods indicated
(except as may be indicated in the notes thereto) and (iii) presented fairly
the consolidated financial position of the Company and its consolidated
Subsidiaries as at the respective dates thereof and the results of their
operations and their cash flows for the respective periods indicated therein
except as otherwise noted therein (subject, in the case of unaudited state-
ments, to the omission of footnotes and normal and recurring year-end adjust-
ments which were not and are not expected, individually or in the aggregate,
to have a Material Adverse Effect on the Company).
(c) The Company Financial Statements were prepared from the books
of account and other financial records of the Company and its Subsidiaries:
(i) to reflect all items of income and expense and all assets and liabilities
required to be reflected therein in accordance with U.S. GAAP applied on a
basis consistent with the past practices of the Company, (ii) are in all mate-
rial respects complete and correct, and do not contain or reflect any material
inaccuracies or discrepancies and (iii) have been maintained in accordance
with good business and accounting practices.
(d) Except for liabilities and obligations reflected on the
September 30, 1997 consolidated balance sheet of the Company (including the
notes thereto), liabilities and obligations disclosed in Company SEC Reports
filed prior to the date of this Agreement and other liabilities and obliga-
tions incurred in the ordinary course of business consistent with past
practice since September 30, 1997, neither the Company nor any Subsidiary has
any liabilities or obligation of any nature (whether accrued, absolute,
contingent or otherwise) which, individually or in the aggregate, are or are
reasonably likely to be material to the Company and its Subsidiaries taken as
a whole.
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<PAGE>17
(e) The Company has heretofore furnished to Purchaser complete and
correct copies of (i) all agreements, documents and other instruments not yet
filed by the Company with the SEC but that are currently in effect and that
the Company expects to file with the SEC after the date of this Agreement and
(ii) all amendments and modifications that have not been filed by the Company
with SEC to all agreements, documents and other instruments that previously
had been filed by the Company with the SEC and are currently in effect.
SECTION 3.7 No Undisclosed Liabilities. Except (a) to the extent
disclosed (1) in the Company SEC Documents filed prior to the date of this
Agreement or (2) set forth on Section 3.7 of the Company Disclosure Schedule
and (b) for liabilities and obligations incurred since September 30, 1997 in
the ordinary course of business consistent with past practice or pursuant to
the terms of this Agreement, neither the Company nor any of its Subsidiaries
has incurred any liabilities or obligations of any nature, whether or not ac-
crued, contingent or otherwise, that have, or would be reasonably likely to
have, a Material Adverse Effect on the Company. Section 3.7 of the Company
Disclosure Schedule sets forth each instrument evidencing indebtedness of the
Company and its Subsidiaries which will accelerate or become due or payable,
or result in a right of redemption or repurchase on the part of the holder of
such indebtedness, or with respect to which any other payment or amount will
become due or payable, in any such case with or without due notice or lapse of
time, as a result of this Agreement, the Merger or the other transactions
contemplated hereby.
SECTION 3.8 Litigation. Except as set forth on Section 3.8 of the
Company Disclosure Schedule, there is no litigation, suit, claim, action,
proceeding or investigation pending or, to the knowledge of the Company,
threatened, against or affecting the Company or any of its Subsidiaries, which
individually or in the aggregate, would have a Material Adverse Effect on the
Company or could prevent the consummation of the transactions contemplated by
this Agreement. Except as disclosed in the SEC Reports filed prior to the
date of this Agreement, neither the Company nor any of its Subsidiaries is
subject to any outstanding order, writ, injunction or decree which, individu-
ally or in the aggregate, would have a Material Adverse Effect on the Company
or could
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<PAGE>18
prevent the consummation of the transactions contemplated hereby.
SECTION 3.9 Properties and Assets; Real Property and Leases.
(a) With respect to the real property owned by the Company or its
Subsidiaries (the "Owned Property") the Company or its Subsidiaries have
sufficient title to all such property and assets to conduct their respective
businesses as currently conducted, with only such exceptions as set forth in
this Section 3.9 or which, individually or in the aggregate, would not have a
Material Adverse Effect on the Company.
(b) Set forth on Company Disclosure Schedule 3.9(b) is a true,
correct and complete list (including a general description of the uses for
such real property) of all real property owned or leased by the Company and
each of its Subsidiaries.
(c) Except as would not have a Material Adverse Effect on the
Company, each parcel of real property owned by the Company or any Subsidiary
(i) is owned free and clear of all mortgages, pledges, liens, security inter-
ests, conditional and installment sale agreements, encumbrances, charges or
other claims of third parties of any kind (collectively, "Liens"), other than
(A) those items set forth on the Company Disclosure Schedule 3.9(c), (B) Liens
for current taxes and assessments not yet past due and payable, or if due and
payable, which are being contested in good faith, (C) inchoate mechanics' and
materialman's Liens of construction in progress, (D) workmen's, repairmen's,
warehousemen's and carriers' Liens arising in the ordinary course of business
of the Company or such Subsidiary, (E) all liens, easements and other matters
of record, Liens and other imperfections of title and encumbrances which,
individually or in the aggregate, would not materially and adversely affect
the use of the property for its intended purpose (F) any condition that may be
shown by a current survey, title report or physical inspection, and (G)
zoning, building and other similar restrictions (Liens described in clauses
(A) through (G) being referred to herein as "Permitted Liens"), and (ii)
except as set forth on the Company Disclosure Schedule 3.9(c), with respect to
any Owned Property, the Company has not received written notice
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<PAGE>19
that such Owned Property is subject to any governmental decree or order to be
sold or is being condemned or otherwise taken by any public authority with or
without payment of compensation therefor, and, to the best knowledge of the
Company, no such condemnation or taking has been proposed.
(d) All leases of real property leased for the use or benefit of
the Company or any Subsidiary to which the Company or any Subsidiary is a
party or by which the Company or any Subsidiary is bound, and all amendments
and modifications thereto are in full force and effect and, except as set
forth on the Company Disclosure Schedule 3.9(d) have not been modified or
amended, and, except as set forth on the Company Disclosure Schedule 3.9(d),
the Company has not received notice of any default under any such lease by the
Company or any Subsidiary, or to the knowledge of the Company, no other party
thereto is in default thereunder, nor to the knowledge of the Company has any
event which with notice or lapse of time or both would constitute a default
thereunder by the Company or any Subsidiary or, to the knowledge of the Compa-
ny, any other party thereto, occurred, except as, individually or in the
aggregate, would not have a Material Adverse Effect on the Company.
SECTION 3.10 Insurance. Set forth in Section 3.10 of the Company
Disclosure Schedule is a complete and accurate list of all primary, excess and
umbrella policies, bonds and other forms of insurance currently owned or held
by or on behalf of or providing insurance coverage to the Company or any
Subsidiary, their respective businesses, properties and assets (or their
directors, officers, salespersons, agents or employees). All policies set
forth in Section 3.10 of the Company Disclosure Schedule are in full force and
effect and shall remain in full force and effect through the Closing Date,
except to the extent replaced by substantially similar insurance coverage, and
with respect to all policies, all premiums currently payable or previously due
have been paid, and, to the best knowledge of the Company, no notice of can-
cellation or termination has been received by the Company or any Subsidiary
with respect to any such policy, except for statutory notices. All such poli-
cies are sufficient for compliance with all requirements of law and of all
Contracts and agreements to which the Company or any Subsidiary is a party or
otherwise bound and are valid,
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<PAGE>20
outstanding, collectible and enforceable policies and provide insurance cover-
age which is adequate and customary for a business of the size and type of the
Company or any Subsidiary, as the case may be.
SECTION 3.11 Information. None of the information to be supplied
by the Company in writing specifically for inclusion or incorporation by
reference in (i) the definitive proxy statement to be used in connection with
a meeting (the "Special Meeting") of the Company's stockholders at which this
Agreement and the matters contemplated hereby will be considered and voted
upon and the Form S-4 of which such proxy statement will form a part (collec-
tively, the "Proxy Statement") or (ii) any other document to be filed with the
SEC or any other Governmental Entity in connection with the transactions
contemplated by this Agreement (the "Other Filings") will, at the respective
times filed with the SEC or other Governmental Entity and, in addition, in the
case of the Proxy Statement, at the date it or any amendment or supplement
thereto is mailed to stockholders, at the time of the Special Meeting and at
the Effective Time, contain any untrue statement of a material fact or omit to
state any material fact required to be stated therein or necessary in order to
make the statements made therein, in light of the circumstances under which
they were made, not misleading. The Company further represents that the Proxy
Statement will comply in all material respects with the provisions of applica-
ble federal securities laws.
SECTION 3.12 Employee Benefit Plans.
(a) Schedule 3.12(a) of the Company Disclosure Schedule contains a
true and complete list of each deferred compensation and each incentive
compensation, equity compensation plan, "welfare" plan, fund or program (with-
in the meaning of section 3(1) of the Employee Retirement Income Security Act
of 1974, as amended ("ERISA")); "pension" plan, fund or program (within the
meaning of section 3(2) of ERISA); each employment, termination or severance
agreement; and each other employee benefit plan, fund, program, agreement or
arrangement, in each case, that is sponsored, maintained or contributed to or
required to be contributed to by the Company or by any trade or business,
whether or not incorporated (an "ERISA Affiliate"), that together with the
Company would be deemed a "single employer" within
20
<PAGE>21
the meaning of section 4001(b) of ERISA, or to which the Company or an ERISA
Affiliate is party for the benefit of any employee or former employee of the
Company or any Subsidiary (the "Plans").
(b) With respect to each Plan, the Company has made available to
Purchaser true and complete copies of the Plan and any amendments thereto (or
if the Plan is not a written Plan, a description thereof), any related trust
or other funding vehicle, any reports or summaries required under ERISA or the
Code and the most recent determination letter received from the Internal
Revenue Service with respect to each Plan intended to qualify under section
401 of the Internal Revenue Code of 1986, as amended (the "Code").
(c) No liability under Title IV or section 302 of ERISA has been
incurred by the Company or any ERISA Affiliate that has not been satisfied in
full, and no condition exists that presents a material risk to the Company or
any ERISA Affiliate of incurring any such liability, other than liability for
premiums due the Pension Benefit Guaranty Corporation (which premiums have
been paid when due).
(d) No Plan is subject to Title IV of ERISA. Each Plan has been
operated and administered in all material respects in accordance with its
terms and applicable law, including but not limited to ERISA and the Code,
except whether failure to do so would not reasonably be expected to have a
Material Adverse Effect on the Company.
(e) Each Plan intended to be "qualified" within the meaning of
section 401(a) of the Code is so qualified and the trusts maintained thereun-
der are exempt from taxation under section 501(a) of the Code.
(f) Except as set forth in the Company Disclosure Schedule 3.12(a),
no Plan provides medical, surgical, hospitalization, death or similar benefits
(whether or not insured) for employees or former employees of the Company or
any Subsidiary for periods extending beyond their retirement or other termina-
tion of service, other than (i) coverage mandated by applicable law, (ii)
death benefits under any "pension plan," or (iii) benefits the
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<PAGE>22
full cost of which is borne by the current or former employee (or his benefi-
ciary).
(g) There are no pending, threatened or anticipated claims by or on
behalf of any Plan, by any employee or beneficiary covered under any such
Plan, or otherwise involving any such Plan (other than routine claims for
benefits), except to the extent that such claims would not reasonably be
expected to result in a Material Adverse Effect on the Company.
SECTION 3.13 Taxes.
(a) Except as set forth in Schedule 3.13(a) of the Company Disclo-
sure Schedule, all Tax Returns (as hereinafter defined) by or on behalf of the
Company or any Subsidiary or any affiliated, combined or unitary group of
which the Company or any Subsidiary is or was a member, which if not filed
would result in a Material Adverse Effect, have been duly and timely filed
with the appropriate taxing authorities and were, in all material respects,
true, complete and correct.
(b) Except as set forth in Schedule 3.13(b) of the Company Disclo-
sure Schedule, the Company and each Subsidiary has paid or will have had paid
to the appropriate taxing authority on its behalf, within the time and in the
manner prescribed by law, all Taxes (as hereinafter defined) for which it is
liable and which if not paid would result in a Material Adverse Effect.
(c) The Company and each Subsidiary has established on its books
and records adequate reserves for the payment of all Taxes for which it is
liable which are not yet due and payable, and with respect to any such Taxes
which have been proposed, assessed or asserted against them and which, in each
case, the failure to establish adequate reserves for such Taxes would result
in a Material Adverse Effect.
(d) The Company and each Subsidiary has complied in all respects
with all applicable laws, rules and regulations relating to the payment and
withholding of Taxes for which it is liable (including, without limitation,
withholding of such Taxes pursuant to sections 1441 and 1442 of the Code or
similar provisions under any state, local or foreign laws, and has, within the
time
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<PAGE>23
and in the manner prescribed by law, withheld and paid over to the appropriate
taxing authorities all amounts required to be so withheld and paid over under
all applicable domestic and foreign laws, in each case in which the failure to
so comply and so withhold would result in a Material Adverse Effect.
(e) Except as set forth in Schedule 3.13(e) of the Company Disclo-
sure Schedule, neither the Company nor any Subsidiary has requested any
extension of time within which to file any Tax Return in respect of any
taxable year, which Tax Return has not since been filed.
(f) Except as set forth in Schedule 3.13(f) of the Company Disclo-
sure Schedule, there are no outstanding waivers or comparable consents that
have been given by the Company or any Subsidiary or with respect to any Tax
Return of the Company or any Subsidiary regarding the application of any
statute of limitations with respect to any Taxes or Tax Returns of the Company
or any such Subsidiary.
(g) Except as set forth in Schedule 3.13(g) of the Company Disclo-
sure Schedule (which shall set forth the nature of the proceeding, the type of
return, the deficiencies claimed, asserted, proposed or assessed and the
amount thereof, and the taxable year in question), no United States federal,
state, local or foreign audits or other administrative proceedings or court
proceedings are presently pending against the Company or any Subsidiary with
regard to any Taxes or Tax Returns of the Company or any Subsidiary the
liability for which would result in a Material Adverse Effect on the Company
and no notification has been received by the Company or any Subsidiary that
such an audit or other proceeding is pending or threatened.
(h) Neither the Company nor any Subsidiary has participated in or
cooperated with an international boycott within the meaning of section 999 of
the Code.
(i) Neither the Company nor any Subsidiary has filed a consent
pursuant to section 341(f) of the Code (or any predecessor provision) or
agreed to have section 341(f)(2) of the Code apply to any disposition of a
subsection (f) asset (as such term is defined in section
23
<PAGE>24
341(f)(4) of the Code) owned by either the Company or any Subsidiary.
(j) No property of the Company or any Subsidiary is property that
the Subsidiary or any party to this transaction is or will be required to
treat as being owned by another person pursuant to the provisions of section
168(f)(8) of the Internal Revenue Code of 1954, as amended, as in effect prior
to the enactment of the Tax Reform Act of 1986.
(k) Panavision Inc., Panavision Remote Systems Inc., Victor Duncan
Inc., Keepco I Inc. and Keepco II Inc. are members of an affiliated group of
corporations within the meaning of section 1504(a) of the Code that includes
the Company; and such affiliated group filed a consolidated return with
respect to United States federal income taxes.
(l) Except as set forth in Schedule 3.13(l) of the Company Disclo-
sure Schedule, there are no encumbrances for taxes upon the assets or proper-
ties of the Company or any Subsidiary except for statutory encumbrances for
Taxes not yet due and payable.
(m) Except as set forth in Schedule 3.13(m) of the Company Disclo-
sure Schedule, neither the Company nor any Subsidiary has an obligation under
any Tax sharing agreement, Tax indemnification agreement or similar contract
or arrangement (including any agreement, contract or arrangement providing for
the sharing or ceding of credits or losses) or has a potential liability or
obligation to any person as a result of or pursuant to any such agreement,
contract, arrangement or commitment.
(n) Except as set forth in Schedule 3.13(n) of the Company Disclo-
sure Schedule, no closing agreement pursuant to section 7121 of the Code (or
any predecessor provision) or any similar provision of any state, local or
foreign law has been entered into by or on behalf of the Company or any
Subsidiary.
(o) Except as set forth in Schedule 3.13(o) of the Company Disclo-
sure Schedule, to the best knowledge of the Company and its Subsidiaries no
jurisdiction where the Company or any Subsidiary has not filed a Tax Return
24
<PAGE>25
has made a claim that the Company or such Subsidiary is required to file a Tax
Return in such jurisdiction.
(p) All material elections with respect to Taxes of the Company or
any Subsidiary are set forth in Schedule 3.13(p) of the Company Disclosure
Schedule.
(q) The Company has previously delivered or made available to Pur-
chaser complete and accurate copies of each of (i) all audit reports, letter
rulings and technical advice memoranda relating to United States federal,
state, local or foreign Taxes due with respect to the income or business of
the Company or Panavision International, L.P., (ii) all income Tax Returns
filed with any taxing authority (or the relevant portions of any combined,
consolidated, or unitary Tax Return filed in any jurisdiction of which the
Company or Panavision International, L.P. is a member, including, without
limitation, information relating to the computation of taxable income) filed
by or on behalf of the Company or Panavision International, L.P. in the last
three years, (iii) any closing agreement, settlement agreement or similar
agreement or arrangement entered into by or on behalf of the Company or
Panavision International, L.P. with any taxing authority, and (iv) any Tax
sharing agreement, Tax indemnification agreement or similar contract or
arrangement entered into by or on behalf of the Company or Panavision Interna-
tional, L.P.
(r) The net operating losses, capital losses, charitable contribu-
tions, foreign tax credits, general business credits and minimum tax credits
for United States federal, state, foreign and all other purposes, as applica-
ble, of each of the Company and any Subsidiary and the dates on which such net
operating losses and such other tax attributes will expire are set forth in
Schedule 3.13(r) of the Company Disclosure Schedule.
(s) Except as set forth in Schedule 3.13(s) of the Company Disclo-
sure Schedule, neither the Company nor any Subsidiary has an overall foreign
loss (as defined in section 904 of the Code and allocated under Treasury
Regulation section 1.1502-9) as of the taxable year ending December 31, 1996.
For all periods subsequent to the taxable year ending December 31, 1996,
through the Closing, the Company and its Affiliates (including any Subsidiary)
have not and will not take any action or
25
<PAGE>26
engage in any transaction including, without limitation, causing the Company or
any Subsidiary to incur additional liabilities and/or additional expenses
(other than (i) any actions or transaction made in the ordinary course of
business, (ii) any transactions contemplated by this Agreement or (iii) the
acquisition by the Company of the film services group of Visual Action
Holdings Plc) that would create an overall foreign loss allocable to the
Company or any Subsidiary under Treasury Regulation section 1.1502-9.
(t) Except as set forth in Schedule 3.13(t) of the Company Disclo-
sure Schedule, no QEF elections (as defined in section 1295 of the Code) have
been filed by or on behalf of the Company or any Subsidiary.
(u) For purposes of this Agreement, "Taxes" shall mean all taxes,
charges, fees, levies or other assessments, including, without limitation, all
net income, gross income, gross receipts, sales, use, ad valorem, goods and
services, capital, transfer, franchise, profits, license, withholding,
payroll, employment, employer health, excise, severance, stamp, occupation,
real and personal property, social security, estimated, recording, gift, value
assessed, windfall profits or other taxes, customs duties, fees, assessments
or charges of any kind whatsoever, whether computed on a separate, consolidat-
ed, unitary, combined or other basis, together with any interest, fines,
penalties, additions to tax or other additional amounts imposed by any taxing
authority (domestic or foreign). For purposes of this Agreement, "Tax Return"
shall mean any return, declaration, report, estimate, information or other
document (including any documents, statements or schedules attached thereto)
required to be filed with any federal, state, local or foreign tax authority
with respect to Taxes.
SECTION 3.14 Environmental Matters.
(a) Except as set forth on Section 3.14 of the Company Disclosure
Schedule:
(i) the Company and its Subsidiaries have been and are in compli-
ance with all applicable Environmental Laws as in effect on the date
hereof, except for such non-compliance violations and defaults as
26
<PAGE>27
would not, individually or in the aggregate, have a Material Adverse Effect
on the Company;
(ii) the Company and its Subsidiaries possess all Environmental
Permits required for the operation of the Business pursuant to Environ-
mental Laws as in effect on the date hereof, all such Environmental
Permits are in effect, there are no pending or, to the best knowledge of
the Company, threatened proceedings to revoke such Environmental Permits
and the Company and its Subsidiaries are, to the best knowledge of the
Company, in compliance with all terms and conditions thereof, except for
such failures to possess or comply with Environmental Permits as would
not, individually or in the aggregate, have a Material Adverse Effect on
the Company;
(iii) except for matters which would not, individually or in the
aggregate, have a Material Adverse Effect on the Company, neither the
Company nor any Subsidiary has received any written notification that the
Company or any Subsidiary, as a result of any of the current or past
operations of the Business, or any property currently or formerly owned
or leased in connection with the Business, is or may be the subject of
any proceeding, investigation, claim, lawsuit or order by any Governmen-
tal Entity or other person as to whether (x) any Remedial Action is or
may be needed to respond to a Release or threat of Release into the
environment of Hazardous Substances as defined under Environmental Laws
as in effect on or prior to the date hereof; (y) any Environmental
Liabilities and Costs imposed by, under or pursuant to Environmental Laws
as in effect on or prior to the date hereof shall be sought, or proceed-
ing commenced, related to or arising from the current or past operations
of the Business; or (z) the Company or any subsidiary is or may be a
"potentially responsible party" for a Remedial Action, pursuant to any
Environmental Law as in effect on or prior to the date hereof, for the
costs of investigating or remediating Releases or threatened Releases
into the environment of Hazardous Substances, whether or not such Release
or threatened Release has occurred or is occurring at properties current-
ly or formerly owned, leased or operated by the Company and its Subsid-
iaries;
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<PAGE>28
(iv) except for Environmental Permits, none of the Company and its
Subsidiaries has entered into any written agreement with any Governmental
Entity by which the Company or any Subsidiary has assumed responsibility,
either directly or as a guarantor or surety, for the remediation of any
condition arising from or relating to a Release of Hazardous Substances
as defined under Environmental Laws as in effect on or prior to the date
hereof into the environment in connection with the Business, including
for cost recovery with respect to such Releases or threatened Releases;
(v) there is not now and has not been at any time in the past, a
Release in connection with the current or former conduct of the Business
of Hazardous Substances as regulated under Environmental Laws as in
effect on or prior to the date hereof for which the Company or any
Subsidiary is required or is reasonably likely to be required to perform
a Remedial Action pursuant to Environmental Laws as currently in effect,
or will incur Environmental Liabilities and Costs that would, individu-
ally or in the aggregate, have a Material Adverse Effect on the Company.
(b) For purposes of this Section:
(i) "Business" means the current and former businesses of the
Company and its Subsidiaries including, but not limited to, businesses or
Subsidiaries that have been previously sold by the Company, its Subsid-
iaries or any predecessors thereto.
(ii) "Environmental Laws" means all Laws relating to the protection
of the environment, or to any emission, discharge, generation, process-
ing, storage, holding, abatement, existence, Release, threatened Release
or transportation of any Hazardous Substances, including, but not limited
to, (i) CERCLA, the Resource Conservation and Recovery Act, the Clean
Water Act, the Clean Air Act, the Toxic Substances Control Act, as
amended (the "TSCA"), property transfer statutes or requirements and (ii)
all other requirements pertaining to reporting, licensing, permitting,
investigation or remediation of emissions, discharges, Releases or
threatened
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<PAGE>29
Releases of Hazardous Substances into the air, surface water, groundwater
or land, or relating to the manufacture, processing, distribution, use,
sale, treatment, receipt, storage, disposal, transport or handling of
Hazardous Sub- stances.
(iii) "Environmental Liabilities and Costs" means all damages,
natural resource damages, claims, losses, expenses, costs, obligations,
and liabilities (collectively, "Losses"), whether direct or indirect,
known or unknown, current or potential, past, present or future, imposed
by, under or pursuant to Environmental Laws, including, but not limited
to, all Losses related to Remedial Actions, and all fees, capital costs,
disbursements, penalties, fines and expenses of counsel, experts, con-
tractors, personnel and consultants based on, arising out of or otherwise
in respect of (i) the Company, any Subsidiary (including predecessors and
former Subsidiaries) or property owned, used or leased by the Company or
any Subsidiary in respect of the Business at any time; (ii) conditions
existing on, under, around, above or migrating from any such property;
and (iii) expenditures necessary to cause any such property or the
Company or any Subsidiary to be in compliance with requirements of
Environmental Laws.
(iv) "Environmental Permits" means any federal, state, foreign,
provincial or local permit, license, registration, consent, order,
administrative consent order, certificate, approval or other autho-
rization necessary for the conduct of the Business as currently conducted
under any Environmental Law.
(v) "Hazardous Substances" means any substance that (a) is
defined, listed or identified or otherwise regulated as a "hazardous
waste," "hazardous material" or "hazardous substance" "toxic substance,"
"hazardous air pollution," "polluted," or "contaminated" or words of sim-
ilar meaning and regulatory effect under CERCLA, TSCA or the Resource
Conservation and Recovery Act or any other Environmental Law or analogous
state or foreign law (including, without limitation, radioactive sub-
stances, asbestos, polycholorinated biphenyls, petroleum and petroleum
derivatives and products) or (b) requires
29
<PAGE>30
investigation, removal or remediation under applicable Environmental Law.
(vi) "Laws" means all (A) constitutions, treaties, statutes, laws
(including, but not limited to, the common law), rules, regulations,
ordinances or codes of any Governmental Entity, (B) Environmental
Permits, and (C) orders, decisions, injunctions, judgments, awards and
decrees of any Governmental Entity.
(vii) "Release" means as defined in CERCLA or the Resource Conser-
vation and Recovery Act, without limiting its application to violations
or alleged violations of those statutes, but not including any discharge,
spill or emission that is the subject of, and in compliance with, an
Environmental Permit.
(viii) "Remedial Action" means all actions required by Governmental
Entity pursuant to Environmental Law or otherwise taken as necessary to
comply with Environmental Law to (i) clean up, remove, treat or in any
other way remediate any Hazardous Substances; (ii) prevent the release of
Hazardous Substances so that they do not migrate or endanger or threaten
to endanger public health or welfare or the environment; or (iii) perform
studies, investigations or monitoring in respect of any such matter.
SECTION 3.15 Absence of Certain Changes. Since September 30, 1997,
except as contemplated by this Agreement or as disclosed in Company SEC
Reports filed prior to the date of this Agreement, the Company and its
Subsidiaries have conducted their business only in the ordinary course and in
a manner consistent with past practice and, since such date, there has not
been (a) any Material Adverse Effect on the Company, (b) any material change
by the Company in its accounting methods, principles or practices, except as
may be required by GAAP, (c) any damage, destruction or loss (whether or not
covered by insurance) with respect to properties or assets of the Company or
any Subsidiary that, individually or in the aggregate, is material to the
Company and its Subsidiaries taken as a whole, (d) any declaration, setting
aside or payment of any dividend or distribution in respect of Common Shares
or any redemption, purchase or other acquisition of any of its securities, (e)
any revaluation by
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<PAGE>31
the Company and its Subsidiaries of any asset (including, without limitation,
any writing down of the value of inventory or writing off of notes or accounts
receivable), other than in the ordinary course of business consistent with
past practice, (f) any entry by the Company or any Subsidiary into any
commitment or transaction material to the Company and its Subsidiaries taken
as a whole, except in the ordinary course of business consistent with past
practice, (g) any increase in or establishment of any bonus, insurance,
severance, deferred compensation, pension, retirement, profit sharing, stock
option (including, without limitation, the granting of stock options, stock
appreciation rights, performance awards, or restricted stock awards), stock
purchase or other employee benefit plan, or any other increase in the compen-
sation payable or to become payable to any officers or key employees of the
Company or any Subsidiary, except in the ordinary course of business consis-
tent with past practice, (h) any acquisition or disposition by the Company of
any material asset, except in the ordinary course of business except consis-
tent with past practice, (i) any incurrence, assumption or guarantee of any
indebtedness or obligation relating to any lending or borrowing except current
liabilities and commitments incurred in the ordinary course of business
consistent with past practice, or (j) any amendment, modification or termina-
tion of any existing, or entering into any new, material contract, or any
material plan, lease, license, permit or franchise, except in the ordinary
course of business consistent with past practice.
SECTION 3.16 Broker. Except for the engagement of Goldman, Sachs &
Co., none of the Company, any of its Subsidiaries, or any of their respective
officers, directors or employees has employed any broker or finder or incurred
any liability for any brokerage fees, commissions or finder's fees in connec-
tion with the transactions contemplated by this Agreement.
SECTION 3.17 Opinion of Investment Banker. The Company has
received the opinion of Goldman, Sachs & Co. to the effect that, as of
December 17, 1997, the Merger Consideration is fair to the Company's stock-
holders from a financial point of view.
SECTION 3.18 Board Recommendation. The Company Board, at a meeting
duly called and held, has (a)
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determined that this Agreement and the transactions contemplated hereby, taken
together, are advisable and in the best interests of the Company and its
stockholders, and (b) subject to the other provisions hereof, resolved to
recommend that the holders of the Common Shares approve this Agreement and the
transactions contemplated hereby, including the Merger.
SECTION 3.19 Required Company Vote. The Company Stockholder
Approval, being the affirmative vote of a majority of the Common Shares, is
the only vote of the holders of any class or series of the Company's securi-
ties necessary to approve this Agreement, the Merger and the other transac-
tions contemplated hereby.
SECTION 3.20 Intellectual Property.
(a) Section 3.20 of the Company Disclosure Schedule sets forth a
list of all material domestic and foreign Intellectual Property (as hereinaf-
ter defined). Except as set forth on Section 3.20 of the Company Disclosure
Schedule:
(b) To the Company's knowledge, the Company or a Subsidiary is the
sole and exclusive owner of the Intellectual Property set forth on Section
3.20 of the Company Disclosure Schedule and has the sole and exclusive right
to use, sell, license, or bring actions for the infringement of its rights
thereto, free and clear of all Liens which would have a Material Adverse
Effect on the Company;
(c) To the Company's knowledge, there are no royalties, fees or
other payments payable by the Company or any of its Subsidiaries to any person
by reason of ownership, use, license or sale of any of the Intellectual Prop-
erty or the conduct of the Company or its Subsidiaries' business which would
have a Material Adverse Effect on the Company;
(d) To the Company's knowledge, neither the Company nor its Subsid-
iaries has entered into or is otherwise bound by any consent, forebearance to
sue, settlement agreement or other agreement which limits the Company's or its
Subsidiaries' rights to use, sell or license any of the Intellectual Property
except as would not have a Material Adverse Effect on the Company;
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<PAGE>33
(e) All patent, trademark, service mark, copyright and other
registrations and applications set forth on Section 3.20 of the Company
Disclosure Schedule (x) are standing in the name of the Company or a Subsid-
iary, (y) are, with respect to domestic registrations and applications, valid
and subsisting, and (z) to the Company's knowledge, are not subject to any
pending, actual or threatened interference, opposition, cancellation or other
proceeding before any court or registration authority which individually or in
the aggregate would have a Material Adverse Effect on the Company;
(f) To the Company's knowledge, neither the Company nor its
Subsidiaries is, in any material respect, in breach, violation or default of
the License Agreements (and the Company is not aware of any event which has
occurred which with the giving of notice or the passage of time or both would
constitute such a breach, violation or default or give rise to any right of
termination, amendment, renegotiation, cancellation or acceleration under any
such agreement), and to the Company's knowledge, no other party to any such
agreement is in breach, violation or default thereof except as would not have
a Material Adverse Effect on the Company;
(g) To the Company's knowledge, neither the manufacture, use, sale,
offering for sale, marketing or importation under, or the license of any of
the Intellectual Property set forth in Section 3.20 of the Company Disclosure
Schedule, nor the conduct of the Company's or its Subsidiaries' businesses in
the manner currently conducted or proposed to be conducted, violates, in any
material respect, any License Agreement, or conflicts with or infringes on the
rights of any person; no allegation of such an infringement has been made
within three (3) years preceding the date of this Agreement, and the Company
is not aware of any basis for such a claim; and, to the Company's knowledge,
there is no pending or threatened claim or litigation challenging or question-
ing the validity of, or the Company's or its Subsidiaries' ownership or right
to use, sell, license, or bring actions for the infringement of its rights to
the Intellectual Property set forth in Schedule 3.20 of the Company Disclosure
Schedule which individually or in the aggregate would have a Materially
Adverse Effect on the Company, and the Company is not aware of any basis for
such a claim;
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<PAGE>34
(h) To the Company's knowledge, no person has infringed, misap-
propriated, or misused any of the Intellectual Property, except as would not
have a Material Adverse Effect on the Company, and neither the Company nor any
of its subsidiaries has asserted any claim of infringement, misappropriation,
or misuse against any person within the past three (3) years;
(i) To the Company's knowledge, the Company and its Subsidiaries
have taken all reasonably necessary steps to maintain and protect the Intel-
lectual Property set forth on Schedule 3.20 of the Company Disclosure Sched-
ule; and
(j) Except as would not have a Material Adverse Effect on the
Company, the Company is not aware of any facts or circumstances that exist
which could render any of the Intellectual Property invalid or unenforceable.
(k) As employed herein, the term "Intellectual Property" shall
mean: (i) any and all registered and unregistered trademarks, service marks,
slogans, trade names, logos and trade dress, both domestic and foreign, which
are owned by the Company or a Subsidiary (collectively, and together with the
good will associated with each, "Trademarks"); (ii) any and all domestic and
foreign patents, patent applications, invention registrations and invention
disclosures which are owned by the Company or a Subsidiary (collectively,
"Patents"); (iii) any and all registered and unregistered copyrights, both
domestic and foreign, which are owned by the Company or a Subsidiary, includ-
ing, but not limited to, programs and databases which are owned by the Company
or a Subsidiary (together, "Software"); (iv) any and all unpatented or
unpatentable methods, devices, technology, trade secrets, proprietary informa-
tion and know-how which are owned by the Company or a Subsidiary (collective-
ly, "Technology"); and (v) any and all licenses, contracts or other agreements
which involve the development, acquisition, use, sale or license of intellec-
tual property rights and to which the Company or a Subsidiary is a party
(collectively, "License Agreements."
SECTION 3.21 Related Party Transactions. Except as set forth in
Section 3.21 of the Company Disclosure Schedule hereto or as disclosed in SEC
Reports
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<PAGE>35
filed prior to the date of this Agreement, there are no contracts, agreements,
arrangements or understandings of any kind between any affiliate (other than
any Subsidiary) of the Company, on the one hand, and the Company or any
Subsidiary, on the other hand.
SECTION 3.22 Labor Relations and Employment.
(a) Except as set forth on Section 3.22(a) of the Company Disclo-
sure Schedule and except to the extent that such matters would not result in a
Material Adverse Effect on the Company, (i) there is no labor strike, dispute,
slowdown, stoppage or lockout actually pending, or, to the best knowledge of
the Company, threatened against the Company or any of its Subsidiaries, and
during the past three years there has not been any such action; (ii) to the
best knowledge of the Company, there are no union claims to represent the
employees of the Company or any of its Subsidiaries; (iii) neither the Company
nor any of its Subsidiaries is a party to or bound by any collective bargain-
ing or similar agreement with any labor organization, or work rules or
practices agreed to with any labor organization or employee association
applicable to employees of the Company or any of its Subsidiaries; (iv) none
of the employees of the Company or any of its Subsidiaries is represented by
any labor organization and the Company does not have any knowledge of any
current union organizing activities among the employees of the Company or any
of its Subsidiaries, nor does any question concerning representation exist
concerning such employees; (v) the Company and its Subsidiaries are, and have
at all times been, in compliance with all applicable laws respecting employ-
ment and employment practices, terms and conditions of employment, wages,
hours of work and occupational safety and health, and are not engaged in any
unfair labor practices as defined in the National Labor Relations Act or other
applicable law, ordinance or regulation; (vi) there is no unfair labor prac-
tice charge or complaint against the Company or any of its Subsidiaries
pending or, to the best knowledge of the Company, threatened before the
National Labor Relations Board or any similar state or foreign agency; (vii)
there is no grievance arising out of any collective bargaining agreement or
other grievance procedure; (viii) no charges with respect to or relating to
the Company or any of its Subsidiaries are pending before the Equal Employment
35
<PAGE>36
Opportunity Commission or any other agency responsible for the prevention of
unlawful employment practices; (ix) neither the Company nor any of its Sub-
sidiaries has received notice of the intent of any federal, state, local or
foreign agency responsible for the enforcement of labor or employment laws to
conduct an investigation with respect to or relating to the Company or any of
its Subsidiaries and no such investigation is in progress; (x) there are no
complaints, lawsuits or other proceedings pending or, to the best knowledge of
the Company, threatened in any forum by or on behalf of any present or former
employee of the Company or any of its Subsidiaries alleging breach of any
express or implied contract of employment, any law or regulation governing
employment or the termination thereof or other discriminatory, wrongful or
tortious conduct in connection with the employment relationship; and (xi) to
the best knowledge of the Company, since the enactment of the Worker Adjust-
ment and Retraining Notification ("WARN") Act, there has not been (i) a "plant
closing" (as defined in the WARN Act) affecting any site of employment or one
or more facilities or operating units within any site of employment or facili-
ty of the Company or any of its Subsidiaries, or (ii) a "mass layoff" (as
defined in the WARN Act) affecting any site of employment or facility of the
Company or any of its Subsidiaries; nor has the Company or any of its Subsid-
iaries been affected by any transaction or engaged in layoffs or employment
terminations sufficient in number to trigger application of any similar state
or local law.
ARTICLE IV
REPRESENTATIONS AND WARRANTIES
OF PURCHASER AND MERGER SUB
Purchaser and Merger Sub represent and warrant to the Company as
follows:
SECTION 4.1 Organization and Qualification. Each of Purchaser and
Merger Sub is a corporation duly organized, validly existing and in good
standing under the laws of Delaware and is not required to be qualified as a
foreign corporation under the laws of any jurisdiction.
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<PAGE>37
SECTION 4.2 Authority Relative to this Agreement. Each of
Purchaser and Merger Sub has full corporate power and authority to execute and
deliver this Agreement and to consummate the transactions contemplated hereby.
The execution and delivery of this Agreement by each of Purchaser and Merger
Sub and the consummation by each of Purchaser and Merger Sub of the transac-
tions contemplated hereby have been duly and validly authorized by their
respective Board of Directors and sole stockholder of each of Purchaser and
Merger Sub and no other corporate proceedings on the part of either Purchaser
or Merger Sub are necessary to authorize this Agreement or to consummate the
transactions so contemplated. This Agreement has been duly and validly exe-
cuted and delivered by each of Purchaser and Merger Sub and, assuming this
Agreement constitutes a valid and binding obligation of the Company, consti-
tutes a valid and binding agreement of each of Purchaser and Merger Sub, en-
forceable against each of Purchaser and Merger Sub in accordance with its
terms.
SECTION 4.3 Capitalization of Merger Sub; Interests in the
Company. The authorized capital stock of Merger Sub consists of the Merger
Sub Common Stock. As of the close of business on December 17, 1997, 10 shares
of Merger Sub Common Stock were issued and outstanding, all of which are
entitled to vote, and no shares of Merger Sub Common Stock were held in the
Merger Sub's treasury. All the outstanding shares of the Merger Sub's capital
stock are duly authorized, validly issued, fully paid and non-assessable. As
of the date hereof, the Purchaser and Merger Sub do not beneficially hold any
Common Shares.
SECTION 4.4 No Violation. (a) Neither the execution nor delivery
of this Agreement by either Purchaser or Merger Sub nor the consummation by
either Purchaser or Merger Sub of the transactions contemplated hereby shall
(i) constitute a breach or violation of any provision of the Certificate of
Incorporation or By-Laws of either Purchaser or Merger Sub or (ii) constitute
a breach, violation or default (or any event which, with notice or lapse of
time or both, would constitute a default) under, or result in the termination
of, or accelerate the performance required by, or result in the creation of
any lien or encumbrance upon any of the properties or assets of either
Purchaser or Merger Sub
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<PAGE>38
under, any note, bond, mortgage, indenture, deed of trust, license, lease,
agreement or other Contract to which either Purchaser or Merger Sub is a party
or by which it or any of its properties or assets are bound or (iii) subject
to the governmental filings and other matters referred to in the following
paragraph, any judgment, order, decree, statute, law, ordinance, rule or
regulation applicable to either Purchaser or Merger Sub or its properties or
assets, other than, in the case of clauses (ii) and (iii), any such conflicts,
violations, defaults, rights or Lien that individually or in the aggregate
would not have a Material Adverse Effect on Purchaser or Merger Sub.
(b) Other than in connection with, or in compliance with, the
provisions of the DGCL with respect to the transactions contemplated hereby,
the Exchange Act, the Securities Act, the securities laws of the various
states and the HSR Act, no authorization, consent or approval of, or filing
with, any Governmental Entity is necessary for the consummation by the Company
of the transactions contemplated by this Agreement other than authorizations,
consents and approvals the failure to obtain, or filings the failure to make,
which would not, in the aggregate, have a Material Adverse Effect on Purchaser
or Merger Sub. The term "Material Adverse Effect on Purchaser or Merger
Sub", as used in this Agreement, means any change in or effect on the busi-
ness, financial condition, results of operations or prospects of Purchaser or
Merger Sub that would be materially adverse to Purchaser or Merger Sub,
respectively.
SECTION 4.5 Information. None of the information to be supplied
by either Purchaser or Merger Sub in writing specifically for inclusion or
incorporation by reference in (i) the Proxy Statement or (ii) the Other
Filings will, at the respective times filed with the SEC or other Governmental
Entity and, in addition, in the case of the Proxy Statement, at the date it or
any amendment or supplement is mailed to stockholders, at the time of the
Special Meeting and at the Effective Time, contain any untrue statement of a
material fact or omit to state any material fact required to be stated therein
or necessary in order to make the statements made therein, in light of the
circumstances under which they were made, not misleading.
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SECTION 4.6 No Prior Business. Neither Purchaser nor Merger Sub
has engaged in any business or activity of any kind or entered into any
agreement or arrangement with any Person or incurred, directly or indirectly,
any material liabilities or obligations, other than in connection with the
transactions contemplated by this Agreement.
SECTION 4.7 No Distribution. Purchaser shall acquire any Common
Shares purchased pursuant to this Agreement for its own account and not with a
view to or for sale in connection with any distribution thereof, and Purchaser
shall not sell or otherwise dispose of any Common Shares, except in each case
in compliance with the Securities Act and the rules and regulations thereun-
der.
SECTION 4.8 Broker. Neither the Purchaser nor Merger Sub, or any
of their affiliates, has employed any broker or finder or incurred any liabil-
ity for any brokerage fees, commissions or finder's fees in connection with
the transactions contemplated by this Agreement.
ARTICLE V
COVENANTS
SECTION 5.1 Conduct of Business of the Company. Except as
contemplated by this Agreement or as expressly agreed to in writing by
Purchaser, during the period from the date of this Agreement to the Effective
Time, the Company will, and will cause each of its Subsidiaries to, conduct
its operations according to its ordinary and usual course of business and
consistent with past practice and use its and their respective reasonable best
efforts to preserve intact their current business organizations, keep avail-
able the services of their current officers and employees and preserve their
relationships with customers, suppliers, licensors, licensees, advertisers,
distributors and others having business dealings with them and to preserve
goodwill. Without limiting the generality of the foregoing, and except as (x)
otherwise expressly provided in or contemplated by this Agreement, (y) re-
quired by law, or (z) set forth on Section 5.1 of the Company Disclosure
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<PAGE>40
Schedule, prior to the Effective Time, the Company will not, and will cause its
Subsidiaries not to, without the consent of Purchaser:
(a) except with respect to annual bonuses made in the ordinary
course of business consistent with past practice, adopt or amend in any
material respect any bonus, profit sharing, compensation, severance, termina-
tion, stock option, stock appreciation right, pension, retirement, employment
or other employee benefit agreement, trust, plan or other arrangement for the
benefit or welfare of any director, officer or employee of the Company or any
of its Subsidiaries or increase in any manner the compensation or fringe bene-
fits of any director, officer or employee of the Company or any of its Subsid-
iaries or pay any benefit not required by any existing agreement or place any
assets in any trust for the benefit of any director, officer or employee of
the Company or any of its Subsidiaries (in each case, except with respect to
employees and directors in the ordinary course of business consistent with
past practice);
(b) incur any indebtedness for borrowed money or issue any debt
securities or assume, guarantee or endorse, or otherwise as an accommodation
become responsible for, the obligations of any Person, or make any loans or
advances, except for (A) indebtedness incurred in the ordinary course of
business and consistent with past practice, (B) indebtedness of the Company to
a direct or indirect wholly owned Subsidiary to the Company or another direct
or indirect wholly owned Subsidiary and (C) other indebtedness with a maturity
of not more than one year incurred in the ordinary course of business consis-
tent with past practice;
(c) enter into any contract or agreement material to the business,
results of operations, or financial condition of the Company and its Subsid-
iaries taken as a whole other than in the ordinary course of business, consis-
tent with past practice;
(d) sell, lease, license, mortgage or otherwise encumber or subject
to any lien or otherwise dispose of any of its properties or assets other than
immaterial properties or assets (or immaterial portions of properties or
assets), (i) except in the ordinary course of business consistent with past
practice or (ii) as
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<PAGE>41
otherwise reasonably necessary to comply with the terms of any (a) mortgage
liens encumbering such Property, (b) insurance requirement or (c) laws, rules
or regulations or any governmental authority;
(e) (i) declare, set aside or pay any dividends on, or make any
other distributions in respect of, any of its capital stock, (ii) split,
combine or reclassify any of its capital stock or issue or authorize the issu-
ance of any other securities in respect of, in lieu of or in substitution for
shares of its capital stock or (iii) purchase, redeem or otherwise acquire any
shares of capital stock of the Company or any of its Subsidiaries or any other
securities thereof or any rights, warrants or options to acquire any such
shares or other securities;
(f) authorize for issuance, issue, deliver, sell or agree or commit
to issue, sell or deliver (whether through the issuance or granting of op-
tions, warrants, commitments, subscriptions, rights to purchase or otherwise),
pledge or otherwise encumber any shares of its capital stock or the capital
stock of any of its Subsidiaries, any other voting securities or any securi-
ties convertible into, or any rights, warrants or options to acquire, any such
shares, voting securities or convertible securities or any other securities or
equity equivalents (including without limitation stock appreciation rights)
(other than issuances upon exercise of options or pursuant to Company Stock
Options);
(g) amend its Amended and Restated Certificate of Incorporation,
By-Laws or equivalent organizational documents or alter through merger, liqui-
dation, reorganization, restructuring or in any other fashion the corporate
structure or ownership of the Company or of any material Subsidiary of the
Company;
(h) acquire or dispose of (including, without limitation, by
merger, consolidation, or acquisition or disposition or stock or assets) any
interest in any corporation, partnership, other business organization or any
division thereof or any assets, other than the acquisition or disposition of
assets in the ordinary course of business consistent with past practice and
any other acquisitions or dispositions for consideration
41
<PAGE>42
which is not, individually, in excess of $2,500,000, and in the aggregate, in
excess of $5,000,000;
(i) settle or compromise any stockholder derivative suits arising
out of the transactions contemplated hereby or any other litigation (whether
or not commenced prior to the date of this Agreement) or settle, pay or
compromise any claims not required to be paid, individually in an amount in
excess of $50,000, or in the aggregate in excess of $250,000, other than in
consultation and cooperation with Purchaser, and, with respect to any such
settlement, with the prior written consent of Purchaser;
(j) take any action, other than reasonable and usual actions in the
ordinary course of business and consistent with past practice, with respect to
accounting policies or procedures (including, without limitation, procedures
with respect to the payment of accounts payable and collection of accounts
receivable);
(k) make any tax election or settle or compromise any material
federal, state, local or foreign income tax liability;
(l) take any action that would result in (i) any of the representa-
tions or warranties of the Company set forth in this Agreement that are quali-
fied as to materiality becoming untrue, (ii) any of such representations or
warranties that are not so qualified becoming untrue in any material respect
or (iii) any of the conditions to the Merger set forth in Article VI not being
satisfied; and
(m) authorize or enter into any agreement to do anything prohibited
by Sections 5.1(a) through (m).
SECTION 5.2 Access to Information; Confidentiality. (a) To the
fullest extent possible, consistent with applicable Law, the Company shall
afford to Purchaser and its officers, employees, accountants, counsel, finan-
cial advisors and other representatives ("Representatives") reasonable access
during normal business hours during the period prior to Effective Time to all
the officers, employees, agents, properties, books, contracts, commitments and
records of the Company and its Subsidiaries, and shall cooperate in furnish-
ing,
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and cause its officers, employees and agents to furnish, promptly to Purchaser
and its representatives all information concerning the business, properties
and personnel of the Company and its Subsidiaries as Purchaser may reasonable
request.
(b) Until the Effective Time, Purchaser, Merger Sub and the Company
shall be bound by, and will hold any information received pursuant to this
Agreement in confidence in accordance with the terms of, the confidentiality
agreement by and between the Company and Mafco Consolidated Group, Inc., dated
October 8, 1997 (the "Confidentiality Agreement").
(c) No investigation by either the Company or Merger Sub shall
affect the representations and warranties of the other.
SECTION 5.3 Financing. Purchaser shall use its reasonable best
efforts to conclude any financing necessary to consummate the transactions
contemplated by this Agreement on or before the Closing Date. The Company
shall use, and shall cause William C. Scott, Chairman of the Board and Chief
Executive Officer, John S. Farrand, President and Chief Operating Officer and
Jeffrey J. Marcketta, Executive Vice President, Chief Financial Officer and
Treasurer to use, their respective reasonable best efforts (consistent with
the Company's obligations pursuant to Section 5.1 of this Agreement) to assist
the Purchaser in obtaining any financing pursuant to this Section 5.3.
SECTION 5.4 Stock Purchase. (a) Immediately prior to the consum-
mation of the Merger, the Company shall sell, transfer, assign and deliver the
Designated Number of Common Shares (as hereinafter defined) to the Purchaser,
and the Purchaser shall purchase the Designated Number of Common Shares from
the Company for the Designated Per Share Purchase Price (as hereinafter
defined), payable by wire transfer of same day funds; provided, that all
conditions to the Merger contained in this Agreement have been either satis-
fied or waived.
(b) For purposes hereof:
(i) "Designated Per Share Purchase Price" shall mean the number
obtained by dividing (x) the sum
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<PAGE>44
of (A) the number of Cashed Shares multiplied by $27.00, (B) the number Company
Stock Options to be cashed out pursuant to Section 2.4 of this Agreement
multiplied by $27.00, and (C) 100 times the number of redeemable preferred
shares to be exchanged for cash pursuant to Section 7.3 of the Stockholders
Agreement, multiplied by $26.50, by (y) the sum of (A) the number of Cashed
Shares, (B) the number Company Stock Options to be cashed out pursuant to
Section 2.4 of this Agreement, and (C) 100 times the number of redeemable
preferred shares to be exchanged for cash pursuant to Section 7.3 of the
Stockholders Agreement; and
(ii) "Designated Number of Common Shares" shall mean such number
of Common Shares which, when added to the number of Retained Shares and the
number of Common Shares to be retained by the Stockholder pursuant to Section
7.3 of the Stockholders Agreement, results in a number of Common Shares which,
when multiplied by the Designated Per Share Purchase Price, shall equal
$215,000,000.
SECTION 5.5 Efforts.
(a) Upon the terms and subject to the conditions of this Agreement,
each of the parties hereto agrees to use its reasonable best efforts to take,
or cause to be taken, all actions, and to do, or cause to be done, all things
necessary, proper or advisable under applicable laws and regulations to con-
summate and make effective the transactions contemplated by this Agreement as
promptly as practicable including, but not limited to, (i) the preparation and
filing of all forms, registrations and notices required to be filed to consum-
mate the transactions contemplated by this Agreement, including, (x) the
prompt preparation and filing with the SEC of the Proxy Statement, as well as
any other registration statement that may be required in connection with the
financing of the transactions contemplated by this Agreement, and (y) such ac-
tions as may be required to have the Proxy Statement, and such other reg-
istration statements, if any, declared effective under the Securities Act and
the Proxy Statement cleared by the SEC, in each case, as promptly as practi-
cable, including by consulting with each other as to and responding promptly
to, any SEC comments with respect thereto, and the taking of such actions as
are necessary to
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<PAGE>45
obtain any requisite approvals, consents, orders, exemptions or waivers by any
third party or Governmental Entity, and (ii) causing the satisfaction of all
conditions to the Closing.
(b) Each party shall promptly consult with the other with respect
to, provide any necessary information that is not subject to legal privilege
with respect to, and provide the other (or its counsel) copies of, all filings
made by such party with any Governmental Entity or any other information
supplied by such party to a Governmental Entity in connection with this Agree-
ment and the transactions contemplated by this Agreement. Each party hereto
shall promptly inform the other of any communication from any Governmental
Entity regarding any of the transactions contemplated by this Agreement. If
either party receives a request for additional information or documentary
material from any such Governmental Entity with respect to the transactions
contemplated by this Agreement, then such party will endeavor in good faith to
make, or cause to be made, as soon as reasonably practicable and after consul-
tation with the other party, an appropriate response in compliance with such
request.
SECTION 5.6 Public Announcements. The Company, on the one hand,
and Purchaser and Merger Sub, on the other hand, shall consult promptly with
each other prior to issuing any press release or otherwise making any public
statement with respect to the Merger, the Stock Purchase and the other trans-
actions contemplated hereby, shall provide to the other party for review a
copy of any such press release or statement, and shall not issue any such
press release or make any such public statement prior to such consultation and
review, unless required by applicable law or any listing agreement with a
securities exchange.
SECTION 5.7 Indemnification; Directors' and Officers' Insurance.
(a) From and after the Effective Time, Purchaser shall, and shall
cause the Surviving Corporation to, indemnify, defend and hold harmless the
present and former officers, directors, employees and agents of the Company
and its Subsidiaries (the "Indemnified Parties") from and against all losses,
claims, damages, expenses
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<PAGE>46
or liabilities arising out of or related to actions or omissions or alleged
actions or omissions occurring at or prior to the Effective Time to the same
extent and on the same terms and conditions (including with respect to
advancement of expenses) provided for in the Company's Amended and Restated
Certificate of Incorporation and By-Laws and agreements in effect at the date
hereof (to the extent consistent with applicable law), which provisions will
survive the Merger and continue in full force and effect for six years after
the Effective Time. It is further understood and agreed that the Company
shall, to the fullest extent permitted under the DGCL and regardless of
whether the Merger becomes effective, indemnify, defend and hold harmless, and
after the Effective Time, the Surviving Corporation shall, to the fullest
extent permitted under the DGCL, indemnify, defend and hold harmless, each
Indemnified Party against any costs or expenses (including reasonable attorne-
ys' fees), judgements, fines, losses, claims, damages, liabilities and amounts
paid in settlement in connection with any claim, action, suit, proceeding or
investigation, and in the event of any such claim, action, suit, proceeding or
investigation (whether arising before or after the Effective Time), (i) the
Company or the Surviving Corporation shall pay the reasonable fees and expens-
es of counsel selected by the Indemnified Parties, which counsel shall be
reasonably satisfactory to the Company or the Surviving Corporation, promptly
as statements therefor are received, and (ii) the Company and the Surviving
Corporation shall cooperate in the defense of any such matter; provided,
however, that neither the Company nor the Surviving Corporation shall be
liable for any settlement effected without its written consent (which consent
shall not be unreasonably withheld); and further, provided, that neither the
Company nor the Surviving Corporation shall be obliged pursuant to this Sec-
tion 5.7 to pay the fees and disbursements of more than one counsel for all
Indemnified Parties in any single action except to the extent that, in the
opinion of counsel for the Indemnified Parties, two or more of such Parties
have conflicting interests in the outcome of such action. Without limiting
the foregoing, Purchaser shall, and shall cause the Surviving Corporation to,
advance expenses, including reasonable attorney's fees and expenses, as in-
curred by an Indemnified Party with respect to the foregoing to the fullest
extent permitted under the DGCL, provided that the Indemnified Party to
46
<PAGE>47
whom expenses are advanced provides the undertaking to repay such advances
contemplated by Section 145(e) of the DGCL.
(b) The Surviving Corporation shall cause to be maintained in
effect for not less than four years from the Effective Time the current poli-
cies of the directors' and officers' liability insurance maintained by the
Company; provided that the Surviving Corporation may substitute therefor other
policies of at least the same coverage amounts and which contain terms and
conditions not less advantageous to the beneficiaries of the current policies
and provided that such substitution shall not result in any gaps or lapses in
coverage with respect to matters occurring prior to the Effective Time; and
provided, further, that the Surviving Corporation shall not be required to pay
an annual premium in excess of 200% of the last premium paid by the Company
prior to the date hereof and if the Surviving Corporation is unable to obtain
the insurance required by this Section 5.7(b) for such maximum amount then it
shall obtain as much comparable insurance as possible for an annual premium
equal to such maximum amount.
(c) This Section 5.7 shall survive the consummation of the Merger,
is intended to benefit the Company, the Surviving Corporation and the Indem-
nified Parties, and shall be binding on all successors and assigns of Purchas-
er, and the Surviving Corporation.
SECTION 5.8 Notification of Certain Matters. Purchaser and the
Company shall promptly notify each other of (i) the occurrence or non-occur-
rence of any fact or event which would be reasonably likely (A) to cause any
representation or warranty contained in this Agreement to be untrue or
inaccurate in any material respect at any time from the date hereof to the Ef-
fective Time or (B) to cause any covenant, condition or agreement under this
Agreement not to be complied with or satisfied and (ii) any failure of the
Company, Purchaser or Merger Sub, as the case may be, to comply with or sat-
isfy any covenant, condition or agreement to be complied with or satisfied by
it hereunder; provided, however, that no such notification shall affect the
representations or warranties of either party or the conditions to the
obligations of either party hereunder. Each of the Company, Purchaser and
Merger Sub shall give
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<PAGE>48
prompt notice to the other of any notice or other communication from any third
party alleging that the consent of such third party is or may be required in
connection with the transactions contemplated by this Agreement.
SECTION 5.9 No Solicitation.
(a) The Company and its Subsidiaries shall, and the Company shall
direct and use its reasonable best efforts to cause the officers, directors,
employees, representatives, agents and affiliates of the Company and its
Subsidiaries to, immediately cease any discussions or negotiations with any
parties that may be ongoing with respect to any Transaction Proposal (as
hereinafter defined). The Company shall not, nor shall it permit any of its
Subsidiaries to, nor shall it authorize or permit any of its officers,
directors, or employees or any investment banker, financial advisor, attorney,
accountant or other representative retained by it or any of its Subsidiaries
to, directly or indirectly,
(i) solicit, initiate or encourage (including by way of furnishing
information or assistance) any inquiries or the making of any proposal which
constitutes, or may be reasonably expected to lead to, any Transaction
Proposal or
(ii) enter into or participate in any discussions or negotiations
regarding any Transaction Proposal;
provided, however, that at any time prior to the receipt of the vote of the
Company's stockholders approving this Agreement and the transactions contem-
plated hereby (the "Required Vote") the Company may, in response to a Trans-
action Proposal which the Board of Directors reasonably believes may consti-
tute, or result in the making of, a Superior Proposal (as hereinafter defined)
which was not solicited subsequent to the date hereof (x) furnish information
with respect to the Company to any Person pursuant to a confidentiality agree-
ment on terms no less favorable to the Company than the Confidentiality Agree-
ment; and (y) enter into or participate in discussions, investigations or
negotiations regarding such Transaction Proposal. The Company shall promptly
give written notice to Purchaser of the names of the person
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<PAGE>49
or persons with respect to which it takes any action pursuant to subclauses (x)
and (y) of the preceding sentence and a general description of the actions
taken.
(b) Except as set forth in this Section 5.9, the Board of Directors
of the Company shall not (i) withdraw or modify, or propose publicly to
withdraw or modify, in a manner adverse to the Purchaser, the approval or rec-
ommendation by such Board of Directors of the Merger or this Agreement, (ii)
approve or recommend, or propose publicly to approve or recommend, any Trans-
action Proposal or (iii) cause the Company to enter into any letter of intent,
agreement in principle, acquisition agreement or other similar agreement
related to any Transaction Proposal. Notwithstanding the foregoing, if the
Board of Directors of the Company determines in good faith that it has
received a Superior Proposal (as defined below), the Board of Directors of the
Company may, prior to the receipt of the Required Vote, withdraw or modify its
approval or recommendation of the Merger and this Agreement, approve or
recommend a Superior Proposal or terminate this Agreement, but in each case,
only at a time that is at least four business days after Purchaser's receipt
of written notice advising Purchaser that the Board of Directors of the
Company has received a Transaction Proposal that may constitute a Superior
Proposal, specifying the material terms and conditions of such Superior
Proposal and the names of the person or persons making such Superior Proposal.
(c) Nothing contained in this Section 5.9 shall prohibit the
Company from taking and disclosing to its shareholders a position contemplated
by Rules 14d-9 and 14e-2 promulgated under the Exchange Act or from making any
disclosure to the Company's shareholders if, in the good faith judgement of
the Board of Directors of the Company, after consultation with outside
counsel, such disclosure is necessary in order to comply with its fiduciary
duties to the Company's shareholders under applicable law or is otherwise
required under applicable law.
(d) (i) For purposes of this Agreement, "Transaction Proposal" means
any bona fide inquiry, proposal or offer from any person relating to any
direct or indirect acquisition or purchase of more than 50% of the aggregate
assets of the Company and its subsidiaries,
49
<PAGE>50
taken as a whole, or more than 50% of the voting power of the shares of Common
Stock then outstanding or any merger, consolidation, business combination,
recapitalization, liquidation, dissolution or similar transaction involving
the Company, other than the transactions contemplated by this Agreement.
(ii) For purposes of this Agreement, a "Superior Proposal" means any
proposal determined by the Board of Directors of the Company in good faith,
after consultation with outside counsel, to be a bona fide proposal and made
by a third party to acquire, directly or indirectly, for consideration
consisting of cash, property and/or securities, more than 50% of the voting
power of the shares of Common Stock then outstanding or all or substantially
all the assets of the Company and otherwise on terms which the Board of Direc-
tors of the Company determines in its good faith judgment, after consultation
with outside counsel and with a financial advisor of nationally recognized
reputation, to be more favorable to the Company's shareholders than the Merger
(taking into account all factors relating to such proposal deemed relevant by
the Company Board, including, without limitation, the financing of such
proposal and all other conditions to closing).
SECTION 5.10 Redeemable Preferred Stock. The Company shall from
the date of this Agreement and until the Closing reserve 130,000 shares of
Series A Redeemable Preferred Stock of the Company, free and clear of any lien
or encumbrance thereon, for issuance pursuant to Section 7.3 of the Stockhold-
ers Agreement.
SECTION 5.11 Affiliate Letters. Prior to the Closing Date, the
Company shall deliver to Purchaser and Merger Sub a letter identifying all
persons who are, at the time this Agreement is submitted for approval to the
stockholders of the Company, "affiliates" of the Company for purposes of Rule
145 under the Securities Act. The Company shall use its reasonable best
efforts to cause each such person who makes or is deemed to have Retained
Common Shares to deliver to Purchaser on or prior to the Closing Date a writ-
ten agreement in a form reasonably satisfactory to Purchaser and the Company.
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<PAGE>51
SECTION 5.12 Reports. The Company shall provide Purchaser with
monthly financial statements, prepared in accordance with past practice, as
soon as reasonably practicable following delivery of such reports to the Chief
Executive Officer of the Company.
SECTION 5.13 Stockholders Meeting.
(a) The Company, acting through the Company Board, shall, in
accordance with applicable law:
(i) duly call, give notice of, convene and hold the Special Meeting
as soon as practicable following the execution of this Agreement;
(ii) prepare and file with the SEC a preliminary proxy statement
relating to this Agreement, and use its best efforts (A) to obtain and
furnish the information required to be included by the SEC in the Proxy
Statement and, after consultation with Purchaser, to respond promptly to
any comments made by the SEC with respect to the preliminary proxy state-
ment and cause the Proxy Statement to be mailed to its stockholders and
(B) to obtain the necessary approvals of the Merger and this Agreement by
its stockholders; and
(iii) subject to Section 5.9, include in the Proxy Statement the
recommendation of the Company Board that stockholders of the Company vote
in favor of the approval of this Agreement.
(b) The Company and Purchaser, shall promptly correct any informa-
tion provided by it for use in the Proxy Statement if and to the extent that
it shall have become false or misleading, and the Company shall further take
all steps necessary to cause the Proxy Statement as so corrected to be filed
with the SEC and to be disseminated to the holders of Common Shares, in each
case, as and to the extent required by applicable federal securities laws.
SECTION 5.14 Employee Benefits. As of the Effective Time, the
Surviving Corporation shall honor and satisfy all obligations and liabilities
with respect to the Plans. Notwithstanding the foregoing, the Surviving
Corporation shall not be required to continue any
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<PAGE>52
particular Plan after the Effective Time, and any Plan may be amended or
terminated subject to, and in accordance with, its terms and applicable law.
For a period of at least 18 months following the Effective Time, the Surviving
Corporation shall provide employee benefit plans, programs and arrangements,
either directly or through a plan of an affiliate ("Purchaser Plans") that, in
the aggregate, provide benefits not materially less favorable than the Plans
as currently in effect, provided that (i) each employee of the Company shall
receive full credit for years of service with the Company or any of its
subsidiaries prior to the Merger for all purposes for which such service was
recognized under applicable Plans, including, but not limited to, recognition
of service for eligibility, vesting (including acceleration thereof pursuant
to the terms of the applicable Plans) and, to the extent not duplicative of
benefits received under such Plans, the amount of benefits, (ii) each employee
of the Company shall participate in the Purchaser Plans on terms no less
favorable than those applicable to similarly situated employees in such Pur-
chaser Plans, and (iii) any and all pre-existing condition limitations (to the
extent such limitations did not apply to a pre-existing condition under the
Plans) and eligibility waiting periods under any group health plans shall be
waived with respect to such participants and their eligible dependents.
SECTION 5.15 Other Actions. With respect to each employee (the
"Individuals") of the Company who is a "disqualified individual" (within the
meaning of section 280G of the Code) the Company shall (i) pay to each such
individual, prior to January 1, 1998, the amount determined by the Company to
have been earned by such individual in respect of the current fiscal year of
the Company under the Company's Executive Incentive Compensation Plan, (ii)
take all such reasonable actions (including, but not limited to, accelerating
the exercisability of Company Stock Options held by the Individuals) as shall
be necessary to permit each Individual to exercise, prior to January 1, 1998,
a sufficient number of Company Stock Options so as to permit the condition set
forth in Section 6.2(f) hereto to be satisfied and (iii) use its commercially
reasonable best efforts to loan to each Individual, on commercially reasonable
terms, the amount (the "Withholding Amount") required to be withheld by the
Company under federal, state and local tax
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<PAGE>53
laws in respect of any exercise of a Company Stock Option after the date hereof
to the extent such exercise is intended by the Individual to satisfy the
condition set forth in Section 6.2(f) hereof. To the extent that the Company
is unable to lend all or part of the Withholding Amount to one or more of the
Individuals, Purchaser shall, or shall cause one of its affiliates to, lend to
each Individual an amount equal to the excess, if any, of the Withholding
Amount with respect to such Individual over the amount loaned to such Individ-
ual by the Company pursuant to the preceding sentence; provided, however, that
the Purchaser's obligations under this sentence shall be conditioned upon (1)
the receipt by the Purchaser or such affiliate of a first priority perfected
security interest in all of the shares of Common Shares acquired upon the
exercise of such Company Stock Options and (2) the making of arrangements
satisfactory to the Purchaser for the continuation of such first priority
perfected security interest in all proceeds of such Common Shares.
SECTION 5.16 Listing of Common Stock. The Company shall use its
reasonable best efforts to cause the Common Shares to be issued pursuant to
the Stock Purchase to be authorized for listing on the NYSE, subject to offi-
cial notice of issuance.
ARTICLE VI
CONDITIONS TO CONSUMMATION OF THE MERGER
SECTION 6.1 Conditions to the Obligations of Both Parties. The
respective obligations of Purchaser, Merger Sub and the Company to consummate
the Merger are subject to the satisfaction, at or before the Effective Time,
of each of the following conditions:
(a) Stockholder Approval. The stockholders of the Company shall
have duly approved the transactions contemplated by this Agreement (the
"Stockholder Approval").
(b) Form S-4. The Form S-4 of which the Proxy Statement consti-
tutes a part shall have become effective under the Securities Act and shall
not be the subject of any stop order or proceedings seeking a stop order, and
any material "blue sky" and other state securities
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<PAGE>54
laws applicable to the registration and qualification of Common Shares
shall have been complied with.
(c) Solvency Letters. The Company and Purchaser shall each have
received a solvency letter, in form and substance and from an independent
evaluation firm reasonably satisfactory to both parties, as to the solvency of
the Company and its Subsidiaries on a consolidated basis after giving effect
to the transactions contemplated by this Agreement.
(d) Orders and Injunctions. No Governmental Entity or court of
competent jurisdiction shall have enacted, issued, promulgated, enforced or
entered any Law, rule, regulation, executive order or Order which is then in
effect and has the effect of restraining or making the Merger or the Stock
Purchase illegal or otherwise prohibiting consummation of the Merger or the
Stock Purchase.
(e) HSR Act. Any waiting period (and any extension thereof) under
the HSR Act applicable to the Merger and the Stock Purchase shall have expired
or been terminated.
(f) The Stock Purchase. Purchaser shall have purchased and the
Company shall have issued and sold the Stock Purchase Shares pursuant to
Section 5.4 of this Agreement.
SECTION 6.2 Conditions to the Obligations of Purchaser and Merger
Sub. The obligations of Purchaser and Merger Sub to effect the Merger are
further subject to the following conditions:
(a) Accuracy of Representations and Warranties. The representa-
tions and warranties of the Company contained herein (without giving effect to
the materiality, Material Adverse Effect or knowledge qualifications contained
therein) shall be true and correct when made and shall be true and correct as
of the Closing Date as though made on and as of the Closing Date (except to
the extent that any such representation and warranty had by its terms been
made as of a specific date, in which case such representation and warranty
shall have been true and correct as of such specific date), except, in all in-
stances, where the failure to be so true and correct
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<PAGE>55
shall not result, individually or in the aggregate, in a Material Adverse
Effect; and Purchaser shall have received a certificate signed on behalf of
the Company by the chief executive office and the chief financial officer of
the Company to such effect.
(b) Performance of Obligations of the Company. The Company shall
have performed the obligations required to be performed by it under this
Agreement at or prior to the Closing Date, except for such failures to perform
as have not had or would not, individually or in the aggregate, have a
Material Adverse Effect on the Company or materially adversely affect the
ability of the Company to consummate the transactions contemplated hereby.
(c) Release of Lien. The lien referred to in Schedule 3.20(b) of
the Company Disclosure Schedule shall have been released.
(d) Material Adverse Effect. There shall not have been a Material
Adverse Effect on the Company.
(e) Exchange of Common Shares. Stockholder shall have exchanged
not less than 88% of the Common Shares it owns, either of record or bene-
ficially, for redeemable preferred common stock of the Company in accordance
with Section 7.3 of the Stockholders Agreement.
(f) Option Exercises. Each of William C. Scott, John S. Farrand
and Jeffery J. Marcketta shall have exercised, prior to January 1, 1998, a
number of Company Stock Options reasonably determined by the Company (based
upon the most recently available information and after taking into account the
actions contemplated by Section 5.15 hereof) as the amount necessary such
that, after giving effect to such exercise, no amount paid in respect of such
Company Stock Options shall be subject to the excise tax imposed under section
4999 of the Code; it being understood that the foregoing shall not constitute
a representation by the Company or any of Messrs. Scott, Farrand, or Marcketta
that no such excise tax will in fact be imposed in respect of such payments.
With respect to Individuals other than Messrs. Scott, Farrand, and Marcketta,
the Company shall use reasonable efforts to cause such Individuals to exercise
Company
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<PAGE>56
Stock Options as and to the extent described in the preceding sentence, it
being understood that no such Individual shall be obligated to so exercise
such Company Stock Options.
SECTION 6.3 Conditions to the Obligations of the Company. The
obligation of the Company to effect the Merger is further subject to the
following conditions:
(a) Accuracy of Representations and Warranties. The representa-
tions and warranties of Purchaser and Merger Sub contained herein (without
giving effect to the materiality, Material Adverse Effect or knowledge
qualifications contained therein) shall be true and correct when made and
shall be true and correct as of the Closing Date as though made on and as of
the Closing Date (except to the extent that any such representation and
warranty had by its terms been made as of a specific date, in which case such
representation and warranty shall have been true and correct as of such
specific date), except, in all instances, where the failure to be so true and
correct shall not result, individually or in the aggregate, in a Material
Adverse Effect on Purchaser and Merger Sub; and the Company shall have re-
ceived a certificate signed on behalf of Purchaser by the chief executive
officer and the chief financial officer of Purchaser to such effect.
(b) Performance of Obligations of Purchaser and Merger Sub.
Purchaser and Merger Sub shall each have performed their respective obliga-
tions required to be performed by it under this Agreement at or prior to the
Closing Date, except for such failures to perform as have not had or would
not, individually or in the aggregate, have a Material Adverse Effect on
Purchaser and Merger Sub or materially adversely affect the ability of Pur-
chaser and Merger Sub to consummate the transactions contemplated hereby.
ARTICLE VII
TERMINATION; AMENDMENT; WAIVER
SECTION 7.1 Termination. This Agreement may be terminated and the
Merger and the Stock Purchase contemplated hereby may be abandoned at any time
prior to
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the Effective Time, notwithstanding approval thereof by the stockholders of the
Company:
(a) by the mutual written consent of Purchaser and the Company, by
action of their respective Boards of Directors;
(b) by Purchaser or the Company if the Merger and the Stock Pur-
chase shall not have been consummated on or before the later (i) of April 30,
1998 and (ii) 45 days after the SEC has declared effective the Proxy Statement
(but in no event later than June 30, 1998); provided, however, that the right
to terminate this Agreement pursuant to this Section 7.1(b) shall not be
available to any party whose failure to perform any of its obligations under
this Agreement results in the failure of the Merger or the Stock Purchase to
be consummated by such time;
(c) by Purchaser or the Company if any court of competent jurisdic-
tion or other Governmental Entity has issued an order, decree or ruling or
taken any other action restraining, enjoining or otherwise prohibiting the
Merger and such order, decree, ruling or other action shall have become final
and nonappealable;
(d) by the Company, prior to the receipt of the Required Vote, in
accordance with Section 5.9; provided, that the Purchaser receives at least
the four business days' prior written notice specified in Section 5.9(b) and,
during such four business day period, the Company shall, and shall cause its
financial and legal advisors to, consider any adjustment in the terms and
conditions of this Agreement that the Purchaser may propose;
(e) by Purchaser, if the Company Board shall have (i) failed to
recommend Stockholder Approval, (ii) withdrawn or modified in a manner adverse
to Purchaser or Merger Sub its approval or recommendation of this Agreement,
the Merger or the Stock Purchase, (iii) shall have approved or recommended a
Transaction Proposal, or (iv) shall have resolved to effect any of the forego-
ing ; or
(f) by Purchaser or the Company, if Stockholder Approval shall not
have been obtained by reason
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of the failure to obtain the required vote upon a vote held at a duly held
meeting of stockholders or at any adjournment thereof.
SECTION 7.2 Effect of Termination. In the event of the termina-
tion of this Agreement pursuant to Section 7.1, this Agreement shall forthwith
become void and have no effect, without any liability on the part of any party
or its directors, officers or stockholders, except for the provisions of this
Section 7.2 and Section 7.3, which shall survive any such termination.
Nothing contained in this Section 7.2 shall relieve any party from liability
for any breach of this Agreement.
SECTION 7.3 Fees and Expenses.
(a) The parties to this Agreement shall, except as otherwise
specifically provided herein, bear their respective expenses incurred in
connection with the preparation, execution and performance of this Agreement
and the transactions contemplated hereby, whether or not the Merger or the
Stock Purchase is consummated, including, without limitation, all fees and ex-
penses of their respective agents.
(b) The prevailing party in any legal action undertaken to enforce
this Agreement or any provision hereof shall be entitled to recover from the
other party the costs and expenses (including attorneys' and expert witness
fees) incurred in connection with such action.
SECTION 7.4 Amendment. This Agreement may be amended by the
Company, Purchaser and Merger Sub at any time before or after any approval of
this Agreement by the stockholders of the Company but, after any such approv-
al, no amendment shall be made which decreases the Merger Consideration or
which adversely affects the rights of the Company's stockholders hereunder
without the approval of such stockholders. This Agreement may not be amended
except by an instrument in writing signed on behalf of all the parties.
SECTION 7.5 Extension; Waiver. At any time prior to the Effective
Time, Merger Sub, Purchaser and the Company may (i) extend the time for the
performance of any of the obligations or other acts of the other, (ii) waive
any inaccuracies in the representations and
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<PAGE>59
warranties contained herein of the other or in any document, certificate or
writing delivered pursuant hereto by the other or (iii) waive compliance by
the other with any of the agreements or conditions. Any agreement on the part
of either party to any such extension or waiver shall be valid only if set
forth in an instrument in writing signed on behalf of such party.
ARTICLE VIII
MISCELLANEOUS
SECTION 8.1 Non-Survival of Representations and Warranties. The
representations and warranties made in this Agreement shall not survive beyond
the Effective Time. Notwithstanding the foregoing, the agreements set forth
in Section 2.5, Section 5.6 and Section 5.7 shall survive the Effective Time
indefinitely (except to the extent a shorter period of time is explicitly
specified therein).
SECTION 8.2 Entire Agreement; Assignment.
(a) This Agreement (including the documents and the instruments
referred to herein) and the Confidentiality Agreement constitute the entire
agreement and supersede all prior agreements and understandings, both written
and oral, among the parties with respect to the subject matter hereof and
thereof.
(b) Neither this Agreement nor any of the rights, interests or
obligations hereunder may be assigned by either of the parties hereto (whether
by operation of law or otherwise) without the prior written consent of the
other party (except that Purchaser and Merger Sub may assign its rights,
interest and obligations to any of its affiliates without the consent of the
Company provided that no such assignment shall relieve Purchaser or Merger Sub
of any liability for any breach by such assignee). Subject to the preceding
sentence, this Agreement will be binding upon, inure to the benefit of and be
enforceable by the parties and their respective successors and assigns.
SECTION 8.3 Validity. The invalidity or unenforceability of any
provision of this Agreement
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shall not affect the validity or enforceability of any other provision of this
Agreement, each of which shall remain in full force and effect.
SECTION 8.4 Notices. All notices, requests, claims, demands and
other communications hereunder shall be in writing and shall be deemed to have
been duly given when delivered in person, by overnight courier or telecopier
to the respective parties as follows:
If to Purchaser or Merger Sub:
PX Holding Corporation
625 Madison Avenue
New York, New York, 10021
Attention: General Counsel
Telecopier Number: (212) 572-5056
with a copy to:
Skadden, Arps, Slate, Meagher & Flom LLP
919 Third Avenue
New York, New York 10022
Attention: Alan C. Myers, Esq.
Telecopier Number: (212) 735-2000
If to the Company:
Panavision Inc.
6219 De Soto Avenue
Woodland Hills, California 91367
Attention: Jeffrey J. Marcketta
Telecopier Number: (818) 316-1110
and
Panavision Inc.
885 Third Avenue, Suite 3020
New York, New York 10022
Attention: William C. Scott
Telecopier Number: (212) 688-4748
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with a copy to:
Willkie Farr & Gallagher
One Citicorp Center
New York, New York 10022-4669
Attention: Christopher E. Manno, Esq.
Telecopier Number: (212) 821-8111
or to such other address as the person to whom notice is given may have
previously furnished to the other in writing in the manner set forth above;
provided, that notice of any change of address shall be effective only upon
receipt thereof.
SECTION 8.5 Governing Law. This Agreement shall be governed by
and construed in accordance with the laws of the State of Delaware, regardless
of the laws that might otherwise govern under applicable principles of
conflicts of laws thereof.
SECTION 8.6 Descriptive Headings. The descriptive headings herein
are inserted for convenience of reference only and are not intended to be part
of or to affect the meaning or interpretation of this Agreement.
SECTION 8.7 Counterparts. This Agreement may be executed in two
or more counterparts, each of which shall be deemed to be an original, but all
of which shall constitute one and the same agreement.
SECTION 8.8 Parties in Interest. Except with respect to Sections
2.4 and 5.7 (which are intended to be for the benefit of the persons identi-
fied therein, and may be enforced by such persons), this Agreement shall be
binding upon and inure solely to the benefit of each party hereto, and nothing
in this Agreement, express or implied, is intended to confer upon any other
person any rights or remedies of any nature whatsoever under or by reason of
this Agreement.
SECTION 8.9 Certain Definitions. As used in this Agreement:
(a) the term "affiliate", as applied to any person, shall mean any
other person directly or indirectly controlling, controlled by, or under
common
61
<PAGE>62
control with, that person. For the purposes of the definition, "control"
(including, with correlative meanings, the terms "controlling," "controlled
by" and "under common control with"), as applied to any person, means the
possession, directly or indirectly, of the power to direct or cause the
direction of the management and policies of that person, whether through the
ownership of voting securities, by contract or otherwise;
(b) the term "Person" or "person" shall include individuals,
corporations, partnerships, trusts, other entities and groups (which term
shall include a "group" as such term is defined in Section 13(d)(3) of the Ex-
change Act); and
(c) the term "Subsidiary" or "Subsidiaries", with respect to any
person, means any corporation, partnership, joint venture or other legal
entity of which such person (either alone or through or together with any
other subsidiary), owns, directly or indirectly, stock or other equity
interests the holders of which are generally entitled to more than 50% of the
vote for the election of the board of directors or other governing body of
such corporation or other legal entity.
SECTION 8.10 Specific Performance. Irreparable damage would occur
in the event that any of the provisions of this Agreement were not performed
in accordance with their specific terms or were otherwise breached; according-
ly, the parties shall be entitled to an injunction or injunctions to prevent
breaches of this Agreement and to enforce specifically the terms and provi-
sions hereof in any court of the United States or any state having jurisdic-
tion, this being in addition to any other remedy to which they are entitled at
law or in equity.
62
<PAGE>63
IN WITNESS WHEREOF, each of the parties has caused this Agreement to
be executed on its behalf by its respective officer hereunto duly authorized,
all as of the day and year first above written.
PANAVISION INC.
By: /s/ W.C. Scott
Name: W.C. Scott
Title: Chairman and CEO
PX MERGER CORPORATION
By:/s/ Howard Gittis
Name:Howard Gittis
Title:
PX HOLDING CORPORATION
By:
Name:/s/Howard Gittis
Title:Howard Gittis
GUARANTEE
Mafco Holdings Inc. hereby unconditionally and irrevocably agrees to
guarantee due and punctual performance of all obligations of PX Merger
Corporation and PX Holding Corporation hereunder.
MAFCO HOLDINGS INC.,
a Delaware corporation
By:/s/Howard Gittis
Name:Howard Gittis
Title:
63
<PAGE>64
TABLE OF CONTENTS
Page
ARTICLE I THE MERGER
SECTION 1.1 The Merger . . . . . . . . . . . . . . . . . . . . . . . . . 2
SECTION 1.2 Effective Time . . . . . . . . . . . . . . . . . . . . . . . 2
SECTION 1.3 Effects of the Merger . . . . . . . . . . . . . . . . . . . 2
SECTION 1.4 Certificate of Incorporation and
By-Laws of the Surviving Corporation . . . . . . . . . . . . 3
SECTION 1.5 Directors and Officers . . . . . . . . . . . . . . . . . . . 3
SECTION 1.6 Closing . . . . . . . . . . . . . . . . . . . . . . . . . . 4
ARTICLE II EFFECT OF THE MERGER ON THE CAPITAL STOCK
OF THE CONSTITUENT CORPORATIONS
SECTION 2.1 Effect on Capital Stock . . . . . . . . . . . . . . . . . . 4
SECTION 2.2 Proration . . . . . . . . . . . . . . . . . . . . . . . . . 5
SECTION 2.3 Election Procedures . . . . . . . . . . . . . . . . . . . . 6
SECTION 2.4 Options; Stock Plans . . . . . . . . . . . . . . . . . . . . 8
SECTION 2.5 Exchange and Retention of Common Shares . . . . . . . . . . 8
ARTICLE III REPRESENTATIONS AND WARRANTIES OF THE COMPANY
SECTION 3.1 Organization and Qualification;
Subsidiaries . . . . . . . . . . . . . . . . . . . . . . . . 10
SECTION 3.2 Capitalization; Subsidiaries . . . . . . . . . . . . . . . . 11
SECTION 3.3 The Purchased Shares . . . . . . . . . . . . . . . . . . . . 12
SECTION 3.4 Authority Relative to this Agreement . . . . . . . . . . . . 13
SECTION 3.5 No Violation; Required Filings and
Consents . . . . . . . . . . . . . . . . . . . . . . . . . . 13
SECTION 3.6 SEC Reports and Financial Statements . . . . . . . . . . . . 14
SECTION 3.7 No Undisclosed Liabilities . . . . . . . . . . . . . . . . . 16
SECTION 3.8 Litigation . . . . . . . . . . . . . . . . . . . . . . . . . 16
SECTION 3.9 Properties and Assets;
Real Property and Leases . . . . . . . . . . . . . . . . . . 17
SECTION 3.10 Insurance . . . . . . . . . . . . . . . . . . . . . . . . . 18
SECTION 3.11 Information . . . . . . . . . . . . . . . . . . . . . . . . 19
SECTION 3.12 Employee Benefit Plans . . . . . . . . . . . . . . . . . . . 19
SECTION 3.13 Taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . 21
SECTION 3.14 Environmental Matters . . . . . . . . . . . . . . . . . . . 25
SECTION 3.15 Absence of Certain Changes . . . . . . . . . . . . . . . . . 29
SECTION 3.16 Broker . . . . . . . . . . . . . . . . . . . . . . . . . . . 30
SECTION 3.17 Opinion of Investment Banker . . . . . . . . . . . . . . . . 30
SECTION 3.18 Board Recommendation . . . . . . . . . . . . . . . . . . . . 31
SECTION 3.19 Required Company Vote . . . . . . . . . . . . . . . . . . . 31
SECTION 3.20 Intellectual Property . . . . . . . . . . . . . . . . . . . 31
SECTION 3.21 Related Party Transactions . . . . . . . . . . . . . . . . . 34
SECTION 3.22 Labor Relations and Employment . . . . . . . . . . . . . . . 34
64
<PAGE>65
ARTICLE IV REPRESENTATIONS AND WARRANTIES
OF PURCHASER AND MERGER SUB
SECTION 4.1 Organization and Qualification . . . . . . . . . . . . . . . 36
SECTION 4.2 Authority Relative to this Agreement . . . . . . . . . . . . 36
SECTION 4.3 Capitalization of Merger Sub . . . . . . . . . . . . . . . . 36
SECTION 4.4 No Violation . . . . . . . . . . . . . . . . . . . . . . . . 37
SECTION 4.5 Information . . . . . . . . . . . . . . . . . . . . . . . . 38
SECTION 4.6 No Prior Business . . . . . . . . . . . . . . . . . . . . . 38
SECTION 4.7 No Distribution . . . . . . . . . . . . . . . . . . . . . . 38
ARTICLE V COVENANTS
SECTION 5.1 Conduct of Business of the Company . . . . . . . . . . . . . 39
SECTION 5.2 Access to Information; Confidentiality . . . . . . . . . . . 42
SECTION 5.3 Financing . . . . . . . . . . . . . . . . . . . . . . . . . 42
SECTION 5.4 Stock Purchase . . . . . . . . . . . . . . . . . . . . . . . 43
SECTION 5.5 Efforts . . . . . . . . . . . . . . . . . . . . . . . . . . 44
SECTION 5.6 Public Announcements . . . . . . . . . . . . . . . . . . . . 45
SECTION 5.7 Indemnification; Directors' and
Officers' Insurance . . . . . . . . . . . . . . . . . . . . 45
SECTION 5.8 Notification of Certain Matters . . . . . . . . . . . . . . 47
SECTION 5.9 No Solicitation . . . . . . . . . . . . . . . . . . . . . . 47
SECTION 5.10 Redeemable Preferred Stock . . . . . . . . . . . . . . . . . 50
SECTION 5.11 Affiliate Letters . . . . . . . . . . . . . . . . . . . . . 50
SECTION 5.12 Reports . . . . . . . . . . . . . . . . . . . . . . . . . . 50
SECTION 5.13 Stockholders Meeting . . . . . . . . . . . . . . . . . . . . 50
ARTICLE VI CONDITIONS TO CONSUMMATION OF THE MERGER
SECTION 6.1 Conditions to the Obligations of
Both Parties . . . . . . . . . . . . . . . . . . . . . . . . 53
SECTION 6.2 Conditions to the Obligations of
Purchaser and Merger Sub . . . . . . . . . . . . . . . . . . 54
SECTION 6.3 Conditions to the Obligations of the
Company . . . . . . . . . . . . . . . . . . . . . . . . . . 55
ARTICLE VII TERMINATION; AMENDMENT; WAIVER
SECTION 7.1 Termination . . . . . . . . . . . . . . . . . . . . . . . . 56
SECTION 7.2 Effect of Termination . . . . . . . . . . . . . . . . . . . 57
SECTION 7.3 Fees and Expenses . . . . . . . . . . . . . . . . . . . . . 57
SECTION 7.4 Amendment . . . . . . . . . . . . . . . . . . . . . . . . . 58
SECTION 7.5 Extension; Waiver . . . . . . . . . . . . . . . . . . . . . 58
ARTICLE VIII MISCELLANEOUS
SECTION 8.1 Non-Survival of Representations and
Warranties . . . . . . . . . . . . . . . . . . . . . . . . . 58
SECTION 8.2 Entire Agreement; Assignment . . . . . . . . . . . . . . . . 59
65
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SECTION 8.3 Validity . . . . . . . . . . . . . . . . . . . . . . . . . . 59
SECTION 8.4 Notices . . . . . . . . . . . . . . . . . . . . . . . . . . 59
SECTION 8.5 Governing Law . . . . . . . . . . . . . . . . . . . . . . . 60
SECTION 8.6 Descriptive Headings . . . . . . . . . . . . . . . . . . . . 60
SECTION 8.7 Counterparts . . . . . . . . . . . . . . . . . . . . . . . . 61
SECTION 8.8 Parties in Interest . . . . . . . . . . . . . . . . . . . . 61
SECTION 8.9 Certain Definitions . . . . . . . . . . . . . . . . . . . . 61
SECTION 8.10 Specific Performance . . . . . . . . . . . . . . . . . . . . 62
66
<PAGE>67
INDEX OF DEFINED TERMS
Page
Affiliate . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 61
Agreement . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
Amended and Restated Certificate of Incorporation . . . . . . . . . . . . . 3
Business . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27
Cash Consideration . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
Cash Election Number . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
Cash Election Shares . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
Cashed Shares . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
Certificates . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
Closing . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
Closing Date . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
Code . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20
Common Shares . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
Company . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
Company Board . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
Company Financial Statements . . . . . . . . . . . . . . . . . . . . . . . 15
Company SEC Reports . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
Company Stock Option . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
Company Stockholder Approval . . . . . . . . . . . . . . . . . . . . . . . 1
Confidentiality Agreement . . . . . . . . . . . . . . . . . . . . . . . . . 42
Contract . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
DGCL . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
Effective Time . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
Election Date . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
Environmental Laws . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27
Environmental Liabilities and Costs . . . . . . . . . . . . . . . . . . . . 28
Environmental Permits . . . . . . . . . . . . . . . . . . . . . . . . . . . 28
ERISA . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19
ERISA Affiliate . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20
Exchange Act . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
Exchange Agent . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
Exchange Fund . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
Form of Election . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
Governmental Entity . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
Hazardous Substances . . . . . . . . . . . . . . . . . . . . . . . . . . . 28
HSR Act . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
Indemnified Parties . . . . . . . . . . . . . . . . . . . . . . . . . . . . 45
Intellectual Property . . . . . . . . . . . . . . . . . . . . . . . . . . . 33
Laws . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 29
License Agreements . . . . . . . . . . . . . . . . . . . . . . . . . . . . 34
Liens . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17
Losses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 28
Material Adverse Effect on Purchaser or Merger Sub . . . . . . . . . . . . 37
67
<PAGE>68
Material Adverse Effect on the Company . . . . . . . . . . . . . . . . . . 10
Merger . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
Merger Consideration . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
Merger Sub . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
Merger Sub Common Stock . . . . . . . . . . . . . . . . . . . . . . . . . . 36
NYSE . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
Other Filings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19
Patents . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 33
Permitted Liens . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18
Person . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 61
Plans . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20
Preferred Stock . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
Proration Factor . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
Proxy Statement . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19
Purchaser . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
Release . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 29
Remedial Action . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 29
Representatives . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 42
Retained Common Shares . . . . . . . . . . . . . . . . . . . . . . . . . . 5
SEC . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
Securities Act . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
Software . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 33
Special Meeting . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19
Stock Election Shares . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
Stock Purchase . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
Stockholder . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
Stockholder Approval . . . . . . . . . . . . . . . . . . . . . . . . . . . 53
Subsidiaries . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 61
Subsidiary . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 61
Surviving Corporation . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
Tax Return . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25
Taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25
Technology . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 33
Trademarks . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 33
TSCA . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 28
U.S. GAAP . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
Voting and Stockholders Agreement . . . . . . . . . . . . . . . . . . . . . 13
Voting Debt . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
WARN . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 35
68
<PAGE>
VOTING AND STOCKHOLDERS AGREEMENT
Voting and Stockholders Agreement, dated as of December 18, 1997, by and
among Warburg, Pincus Capital Company, L.P., a Delaware limited partnership
("Warburg"), Panavision Inc., a Delaware corporation (the "Company"), and Mafco
Holdings Inc., a Delaware corporation (the "Purchaser"). Capitalized terms used
but not defined herein shall have the meanings set forth in the Merger Agreement
(as defined below).
R E C I T A L S
WHEREAS, concurrently with the execution and delivery of this
Agreement, PX Holding Corporation, a Delaware corporation ("Holdings"), PX
Merger Corporation, a Delaware corporation and a wholly owned subsidiary of
Holdings ("Merger Sub"), and the Company have entered into an Agreement of
Recapitalization and Merger, dated as of December 18, 1997 (as such agreement
may hereafter be amended from time to time, the "Merger Agreement"), pursuant to
which Merger Sub shall be merged with and into the Company (the "Merger"); and
WHEREAS, as an inducement and a condition to the Company and the
Purchaser's subsidiaries entering into the Merger Agreement and incurring the
obligations set forth therein, each of the Company, the Purchaser and Warburg
has required the other parties hereto to enter into this Agreement.
NOW, THEREFORE, in consideration of the foregoing and the mutual
promises, representations, warranties, covenants and agreements contained herein
and in the Merger Agreement, the parties hereto, intending to be legally bound
hereby, agree as follows:
1. REPRESENTATIONS AND WARRANTIES OF WARBURG. Warburg hereby
represents and warrants as follows:
1.1 Ownership of Shares. Warburg is the beneficial owner, and
has sole power to vote and dispose, of 12,717,000 shares of Common
Stock, par value $.01 per share ("Company Common Stock"), of the
Company (such shares shall constitute the "Shares"). On the date
hereof, the Shares constitute all of the outstanding shares of Company
Common Stock owned of record or beneficially by Warburg.
1.2 Authorization; Validity of Agreement; Necessary Action.
Warburg has all necessary power and authority to execute and deliver this
Agreement and to consummate the transactions contemplated hereby. The execution,
delivery
<PAGE>
and performance by Warburg of this Agreement and the
consummation by Warburg of the transactions contemplated hereby have
been duly and validly authorized. This Agreement has been duly executed
and delivered by Warburg, and constitutes a valid and binding
obligation of Warburg, enforceable against it in accordance with its
terms, except that (i) such enforcement may be subject to applicable
bankruptcy, insolvency or other similar laws, now or hereafter in
effect, affecting creditors' rights generally, and (ii) the remedy of
specific performance and injunctive and other forms of equitable relief
may be subject to equitable defenses and to the discretion of the court
before which any proceeding therefor may be brought.
1.3 No Violations. (a) Except for filings, authorizations,
consents and approvals as may be required under, and other applicable
requirements of, the Hart-Scott-Rodino Antitrust Improvements Act of
1976, as amended (the "HSR Act") and the Securities Exchange Act of
1934, as amended (the "Exchange Act") (A) no filing with, and no
permit, authorization, consent or approval of, any state or federal
public body or authority is necessary for the execution of this
Agreement by Warburg and the consummation by Warburg of the
transactions contemplated hereby and (B) neither the execution and
delivery of this Agreement by Warburg nor the consummation by Warburg
of the transactions contemplated hereby nor compliance by Warburg with
any of the provisions hereof shall (x) conflict with or result in any
breach of any applicable partnership agreement or other agreements or
organizational documents applicable to Warburg, (y) result in a
violation or breach of, or constitute (with or without notice or lapse
of time or both) a default (or give rise to any third party right of
termination, cancellation, material modification or acceleration) under
any of the terms, conditions or provisions of any note, bond, mortgage,
indenture, license, contract, commitment, arrangement, understanding,
agreement or other instrument or obligation of any kind to which
Warburg is a party or by which Warburg or any of its properties or
assets may be bound or (z) violate any order, writ, injunction, decree,
judgment, statute, rule or regulation applicable to Warburg or any of
its properties or assets.
(b) The Shares and the certificates representing such Shares
are held by Warburg, or by a nominee or custodian for the benefit of
Warburg, free and clear of all liens, claims, security interests,
proxies, voting trusts or agreements, understandings or arrangements or
any other encumbrances whatsoever, except for any such encumbrances or
proxies
2
<PAGE>
arising hereunder. Warburg currently has, and upon the
exercise of the options set forth in Sections 3 and 4 hereof shall
sell, assign, transfer and deliver to the Purchaser at the Closing, and
the Purchaser shall receive at the Closing, good, valid and marketable
title to the Company Common Stock.
2. REPRESENTATIONS AND WARRANTIES OF THE PURCHASER. The Purchaser
hereby represents and warrants to Warburg and the Company as follows:
2.1 Organization. The Purchaser is a corporation duly
organized, validly existing and in good standing under the laws of the
State of Delaware.
2.2 Authorization; Validity of Agreement; Necessary Action.
The Purchaser has all necessary power and authority to execute and
deliver this Agreement and to consummate the transactions contemplated
hereby. The execution, delivery and performance by the Purchaser of
this Agreement and the consummation by the Purchaser of the
transactions contemplated hereby have been duly and validly authorized.
This Agreement has been duly executed and delivered by the Purchaser,
and constitutes a valid and binding obligation of the Purchaser,
enforceable against it in accordance with its terms, except that (i)
such enforcement may be subject to applicable bankruptcy, insolvency or
other similar laws, now or hereafter in effect, affecting creditors,
rights generally, and (ii) the remedy of specific performance and
injunctive and other forms of equitable relief may be subject to
equitable defenses and to the discretion of the court before which any
proceeding therefor may be brought.
2.3 No Violations. Except for filings, authorizations,
consents and approvals as may be required under, and other applicable
requirements of, the HSR Act and the Exchange Act (A) no filing with,
and no permit, authorization, consent or approval of, any state or
federal public body or authority is necessary for the execution of this
Agreement by the Purchaser and the consummation by it of the
transactions contemplated hereby and (B) neither the execution and
delivery of this Agreement by it nor the consummation by it of the
transactions contemplated hereby nor compliance by it with any of the
provisions hereof shall (x) conflict with or result in any breach of
any organizational documents of the Purchaser, (y) result in a
violation or breach of, or constitute (with or without notice or lapse
of time or both) a default (or give rise to any third party right of
termination, cancellation, material modification or acceleration) under
any of the terms,
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conditions or provisions of any note, bond, mortgage,
indenture, license, contract, commitment, arrangement, understanding,
agreement or other instrument or obligation of any kind to which the
Purchaser is a party or by which the Purchaser or any of its properties
or assets may be bound or (z) violate any order, writ, injunction,
decree, judgment, statute, rule or regulation applicable to the
Purchaser or any of its properties or assets.
3. OPTION GRANTED TO THE PURCHASER. (a) Warburg hereby grants to the
Purchaser an irrevocable option to purchase, in whole and not in part, the
Shares held by Warburg during the Option Period (as defined below), on the terms
and subject to the conditions set forth herein (the "Purchaser Option").
(b) The Purchaser Option may be exercised by the Purchaser
during the period commencing at 9:00 a.m., New York time on the day
following the first anniversary of the Effective Time of the Merger and
ending at 5:00 p.m., New York time on the second anniversary of the
Effective Time of the Merger (the "Option Period").
(c) If the Purchaser wishes to exercise the Purchaser Option,
the Purchaser shall send a written notice to Warburg of its irrevocable
election to exercise the Purchaser option, specifying the place, and,
if then known, the time and the date (the "Purchaser Option Closing
Date") of the closing (the "Purchaser Option Closing") of the purchase.
The Purchaser Option Closing Date shall occur on the fifth business day
(or such longer period as may be required by applicable law or
regulation) after the later of (i) the date on which such notice is
delivered and (ii) the satisfaction of the conditions set forth in
Section 3(f) hereof.
(d) At the Purchaser option Closing, Warburg shall deliver to
the Purchaser (or its designee) all of the Shares by delivery of a
certificate or certificates evidencing such Shares, duly endorsed to
the Purchaser or accompanied by stock powers duly executed in favor of
the Purchaser, with all necessary stock transfer stamps affixed.
(e) At the Purchaser Option Closing, the Purchaser shall pay
to Warburg, by wire transfer in immediately available funds to the
account of Warburg specified in writing no less than one day prior to
the Purchaser Option Closing, an amount equal to the product of $30.00
and the number of Shares (such number being subject to adjustment for
stock splits, recapitalizations and other similar events, as set forth
in Section 13.11 hereof) purchased
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pursuant to the exercise of the Purchaser Option (the "Purchaser
Option Purchase Price").
(f) The Purchaser Option Closing shall be subject to the
satisfaction of each of the following conditions:
(i) no court, arbitrator or governmental body, agency
or official shall have issued any order, decree or ruling (which has
not been stayed or suspended pending appeal) and there shall not be any
effective statute, rule or regulation, restraining, enjoining or
prohibiting the consummation of the purchase and sale of the Shares
pursuant to the exercise of the Purchaser Option;
(ii) any waiting period applicable to the
consummation of the purchase and sale of the Shares pursuant to the
exercise of the Purchaser Option under the HSR Act shall have expired
or been terminated; and
(iii) all actions by or in respect of, and any filing
with, any governmental body, agency, official, or authority required to
permit the consummation of the purchase and sale of the Shares pursuant
to the exercise of the Purchaser Option shall have been obtained or
made and shall be in full force and effect.
4. OPTION GRANTED TO WARBURG. (a) The Purchaser hereby grants to
Warburg an irrevocable option to sell to the Purchaser, in whole and not in
part, the Shares held by Warburg, on the terms and subject to the conditions set
forth herein (the "Warburg Option").
(b) The Warburg Option may be exercised by Warburg during the
Option Period.
(c) If Warburg wishes to exercise the Warburg Option, Warburg
shall send a written notice to the Purchaser of its irrevocable
election to exercise the Warburg Option, specifying the place, and, if
then known, the time and the date (the "Warburg Option Closing Date")
of the closing (the "Warburg Option Closing") of the purchase. The
Warburg Option Closing Date shall occur on the fifth business day (or
such longer period as may be required by applicable law or regulation)
after the later of (i) the date on which such notice is delivered and
(ii) the satisfaction of the conditions set forth in Section 4(f)
hereof.
(d) At the Warburg Option Closing, Warburg shall deliver to
the Purchaser (or its designee) all of the Shares by delivery of a
certificate or certificates evidencing such
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Shares, duly endorsed to the Purchaser or accompanied by stock
powers duly executed in favor of the Purchaser, with all necessary
stock transfer stamps affixed.
(e) At the Warburg option Closing, the Purchaser shall pay to
Warburg, by wire transfer in immediately available funds to the account
of Warburg specified in writing no less than one day prior to the
Warburg Option Closing, an amount equal to the product of $25.00 and
the number of Shares (such number being subject to adjustment for stock
splits, recapitalizations and other similar events, as set forth in
Section 13.11 hereof) purchased pursuant to the exercise of the Warburg
Option (the "Warburg Option Purchase Price").
(f) The Warburg option Closing shall be subject to the
satisfaction of each of the following conditions:
(i) no court, arbitrator or governmental body, agency
or official shall have issued any order, decree or ruling (which has
not been stayed or suspended pending appeal) and there shall not be any
effective statute, rule or regulation, restraining, enjoining or
prohibiting the consummation of the purchase and sale of the Shares
pursuant to the exercise of the Warburg Option;
(ii) any waiting period applicable to the
consummation of the purchase and sale of the Shares pursuant to the
exercise of the Warburg Option under the HSR Act shall have expired or
been terminated; and
(iii) all actions by or in respect of, and any filing
with, any governmental body, agency, official, or authority required to
permit the consummation of the purchase and sale of the Shares pursuant
to the exercise of the Warburg Option shall have been obtained or made
and shall be in full force and effect.
5. THIRD PARTY BUSINESS COMBINATION; REMEDY. (a) If (i) the Merger
Agreement is terminated in accordance with Section 7.1(d),(e) or (f) of the
Merger Agreement, or (ii) the Merger Agreement shall have been amended to
increase the amount of the Merger Consideration in effect on the date hereof,
and, upon or following any such termination or any such amended Merger
Agreement, Warburg receives any cash or non-cash consideration (the "Alternative
Consideration") in respect of all or any portion of the Shares in connection
with (A) a Transaction Proposal for which definitive documentation has been
executed by all the parties to such transaction (the "Alternative Transaction")
during the period commencing on the date hereof and ending nine months from the
date the Merger Agreement is
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terminated, or (B) an amended Merger Agreement, Warburg shall promptly
upon receipt of the Alternative Consideration pay to the Purchaser or its
designee on demand in cash, by wire transfer of same day funds to an account
designated by the Purchaser:
(x) in the case of termination of the Merger Agreement in
accordance with the above-referenced sections of the Merger Agreement,
if the Alternative Consideration is greater than $26.50, but not
greater than $30 per Share, the excess of (x) such Alternative
Consideration over $26.50 multiplied by (y) the number of shares with
respect to which Warburg received such Alternative Consideration;
provided that (i) if the Alternative Consideration received by Warburg
shall be securities listed on a national securities exchange or traded
on the Nasdaq National Market ("Nasdaq"), the per share value of such
consideration shall be equal to the average closing price per share
listed on such national securities exchange or Nasdaq on the five
trading days prior to the date such transaction is consummated and (ii)
if the consideration received by Warburg shall be in a form other than
such listed securities, the per share value shall be determined in good
faith as of the date such transaction is consummated by the Purchaser
or its designee and Warburg, or, if the Purchaser or its designee and
Warburg cannot reach agreement, by a nationally recognized investment
banking firm reasonably acceptable to the parties; and
(y) in the case of termination of the Merger Agreement in
accordance with the above-referenced sections of the Merger Agreement,
if the Alternative Consideration is greater than $30 per Share, the sum
of (I) for the portion of such consideration not greater than $30 per
Share, the amounts payable pursuant to subparagraph (a) hereof and (II)
for the portion of such consideration exceeding $30 per Share, one half
of such Alternative Consideration; provided that (i) if the Alternative
Consideration received by Warburg shall be securities listed on a
national securities exchange or traded on the Nasdaq, the per share
value of such consideration shall be equal to the average closing price
per share listed on such national securities exchange or Nasdaq on the
five trading days prior to the date such transaction is consummated and
(ii) if the consideration received by Warburg shall be in a form other
than such listed securities, the per share value shall be determined in
good faith as of the date such transaction is consummated by the
Purchaser or its designee and Warburg, or, if the Purchaser or its
designee and Warburg cannot reach agreement, by a nationally recognized
investment banking firm reasonably acceptable to the parties;
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(z) in the case of an amended Merger Agreement, an amount
equal to any and all Alternative Consideration above $26.50 per Share.
(b) In connection with an Alternative Transaction, the
Alternative Consideration per Share to be received by the stockholders
of the Company other than Warburg shall not exceed by more than $.50
per share the Alternative Consideration to be received by Warburg.
Warburg shall not enter into any agreement, arrangement or
understanding with any Person the effect of which would be inconsistent
or violative of the provisions and agreement contained in this Section
5(b).
6. AGREEMENT TO VOTE; PROXY.
(a) Voting. Warburg hereby agrees that, until the Termination
Date (as defined in Section 11), at any meeting of the stockholders of
the Company or in connection with any written consent of the
stockholders of the Company, Warburg shall vote (or cause to be voted)
the Shares held of record or beneficially by Warburg (i) in favor of
the Merger, and each of the other actions contemplated by the Merger
Agreement and this Agreement and any actions required in furtherance
hereof and thereof; (ii) against any action or agreement that would
result in a breach of any covenant, representation or warranty or any
other obligation or agreement of the Company under the Merger Agreement
or this Agreement; and (iii) except as specifically requested in
writing by the Purchaser in advance, against the following actions
(other than the Merger and the transactions contemplated by the Merger
Agreement): (1) any extraordinary corporate transaction, such as a
merger, consolidation or other business combination involving the
Company or its subsidiaries; (2) a sale, lease or transfer of a
material amount of assets of the Company or its subsidiaries or a
reorganization, recapitalization, dissolution or liquidation of the
Company or its subsidiaries; (3) any material change in the present
capitalization of the company including any proposal to sell any equity
interest in the Company or any of its subsidiaries or any amendment of
the Articles of Incorporation of the Company; or (4) any material
change in the Company's corporate structure or business; or (d) any
other action which is intended, or could reasonably be expected, to
impede, interfere with, delay, postpone, discourage or materially
adversely affect the Merger or the transactions contemplated by the
Merger Agreement or this Agreement. Warburg shall not enter into any
agreement, arrangement or understanding with any Person the effect of
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which would be inconsistent or violative of the provisions and
agreement contained in this Section 6(a).
(b) Proxy. WARBURG HEREBY GRANTS TO, AND APPOINTS, BARRY F.
SCHWARTZ AND JORAM C. SALIG IN THEIR RESPECTIVE CAPACITIES AS OFFICERS
OF THE PURCHASER, AND ANY INDIVIDUAL WHO SHALL HEREAFTER SUCCEED TO ANY
SUCH OFFICE OF THE PURCHASER, AND ANY OTHER DESIGNEE OF THE PURCHASER,
EACH OF THEM INDIVIDUALLY, WARBURG'S IRREVOCABLE (UNTIL THE TERMINATION
DATE) PROXY AND ATTORNEY-IN-FACT (WITH FULL POWER OF SUBSTITUTION) TO
VOTE THE SHARES AS INDICATED IN SECTION 6(a) ABOVE. WARBURG INTENDS
THIS PROXY TO BE IRREVOCABLE (UNTIL THE TERMINATION DATE) AND COUPLED
WITH AN INTEREST AND WILL TAKE SUCH FURTHER ACTION AND EXECUTE SUCH
OTHER INSTRUMENTS AS MAY BE NECESSARY TO EFFECTUATE THE INTENT OF THIS
PROXY AND HEREBY REVOKES ANY PROXY PREVIOUSLY GRANTED BY WARBURG WITH
RESPECT TO WARBURG'S SHARES.
7. CERTAIN COVENANTS OF WARBURG. Except in accordance with the terms of
this Agreement, Warburg hereby covenants and agrees as follows:
7.1 No Solicitation. Prior to the Termination Date, Warburg
shall not, directly or indirectly (including through advisors, agents
or other intermediaries), solicit (including by way of furnishing
information) or respond to any inquiries or the making of any proposal
by any person or entity with respect to the Company that constitutes or
could reasonably be expected to lead to an Alternative Transaction; and
shall use its reasonable best efforts to cause any such party in
possession of confidential information about the Company that was
furnished by or on behalf of Warburg to return or destroy all such
information in the possession of any such party (other than the
Purchaser) or in the possession of any Representative of any such
party, provided, however, that the foregoing shall not restrict Warburg
or any of its representatives on the Board of Directors of the Company
from taking actions to the same extent and in the same circumstances
permitted for the Board and the Company by Section 5.9 of the Merger
Agreement.
7.2 Restriction on Transfer, Proxies and Noninterference;
Restriction on Withdrawal. Prior to the Termination Date, Warburg shall
not, directly or indirectly (i) except pursuant to the terms of the
Merger Agreement and to the Purchaser pursuant to this Agreement, offer
for sale, sell, transfer, tender, pledge, encumber, assign or otherwise
dispose of, enforce or permit the execution of the provisions of any
redemption agreement with the Company or enter into any contract,
option or other arrangement or
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understanding with respect to or consent to the offer for
sale, sell, transfer, tender, pledge, encumbrance, assignment or other
disposition of, or exercise any discretionary powers to distribute, any
or all of the Shares or any interest therein, including any trust
income or principal, except in each case to a transferee who is or
agrees to become bound by this Agreement, (ii) except as contemplated
hereby, grant any proxies or powers of attorney with respect to any
Shares, deposit any Shares into a voting trust or enter into a voting
agreement with respect to any Shares or (iii) take any action that
would make any representation or warranty of Warburg contained herein
untrue or incorrect or would result in a breach by Warburg of its
obligations under this Agreement or a breach by the Company of its
obligations under the Merger Agreement.
7.3 Redeemable Preferred Stock. Immediately prior to the
consummation of the Merger, Warburg shall exchange 88% of the Company
Common Stock it beneficially owns for redeemable preferred stock of the
Company (the "Redeemable Preferred Stock"), on the basis of 100 shares
of Company Common Stock for each share of Redeemable Preferred Stock,
redeemable at the option of the holder at $26.50 per share of
Redeemable Preferred Stock, and shall surrender such Redeemable
Preferred Stock for redemption immediately upon the consummation of the
Merger; provided, however, that in the event the number of Cash
Election Shares is less than the Cash Election Number (as each such
term is defined in the Merger Agreement), immediately prior to the
consummation of the Merger Warburg shall also exchange for Redeemable
Preferred Stock upon the same terms and conditions a number of shares
of additional Company Common Stock (to the extent of Company Common
Stock beneficially owned by it) equal to such deficiency. Warburg shall
elect to retain, in accordance with the terms of the Merger Agreement,
the Company Common Stock not exchanged for Redeemable Preferred Stock
pursuant to this Section.
7.4 Proprietary Information. Except as required by law or as
contemplated by this Agreement, Warburg shall not, directly or
indirectly, make use of or divulge or otherwise disclose to any Person
other than the Purchaser, any trade secret, confidential information or
other proprietary information or data (including any financial data,
mailing lists, customer lists or employee data or records) concerning
the business or policies of the Company or its subsidiaries that
Warburg may have learned, directly or indirectly, as a stockholder,
employee, officer or director of the Company or any of its
subsidiaries.
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8. CERTAIN COVENANTS OF THE PURCHASER AND THE COMPANY. Except in
accordance with the terms of this Agreement, the Purchaser and the Company
hereby severally and not jointly covenant and agree as follows:
8.1 Tag-Along Rights. If, at any time on or prior to December
31, 1999, the Purchaser intends to sell ("Sale"), in a single
transaction or a series of related transactions, more than 25% of
shares of Company Common Stock it beneficially owns other than (i) to
any of its Affiliates who agree to be bound by this Merger Agreement,
(ii) pursuant to a public offering pursuant to an effective
registration statement under the Securities Act of 1933, as amended
(the "Securities Act") or (iii) pursuant to a merger or similar
acquisition transaction, in which all the Company Common Stock is
acquired, the Purchaser shall notify all other stockholders of the
Company (the "Public Stockholders"), in writing, of such proposed Sale
and its terms and conditions. Within twenty (20) business days of the
date of such notice, each Public Stockholder shall notify the Purchaser
if it elects to participate in such Sale. Any Public Stockholder that
fails to notify the Purchaser within such twenty (20) business day
period will be deemed to have waived its rights hereunder. Each Public
Stockholder that so notifies the Purchaser shall have the right to
sell, at the same price and on the same terms and conditions as the
Purchaser, an amount of shares of Company Common Stock equal to the
number of shares of Company Common Stock the third party actually
proposes to purchase multiplied by a fraction, the numerator of which
shall be the number of shares of Company Common Stock issued and owned
by such Public Stockholder and the denominator of which shall be the
aggregate number of shares of Company Common Stock issued and owned by
the Purchaser and each Public Stockholder exercising its rights under
this Section 8.1. Notwithstanding anything contained in this Section
8.1, in the event that all or a portion of the purchase price consists
of securities and the sale of such securities to the Public
Stockholders would require either a registration under the Securities
Act, or the preparation of a disclosure document pursuant to Regulation
D under the Securities Act (or any successor regulation) or a similar
provision of any state securities law, then, at the option of the
Purchaser, any one or more of the Public Stockholders may receive, in
lieu of such securities, the fair market value of such securities in
cash, as determined in good faith by unanimous vote of the Board of
Directors of the Company.
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8.2 Independent Directors. From and after the Effective Time
of the Merger until the date on which the Company shall no longer have
any Public Stockholders, the Purchaser and the Company shall take all
action within their respective power to include on the Board of
Directors of the Company two directors, each of whom is (i) considered
to be an independent director pursuant to the rules contained in the
NYSE Listed Company Manual and (ii) is not an officer or employee of
any company affiliated with the Purchaser.
9. FURTHER ASSURANCES. From time to time, at the other party's request
and without further consideration, each party hereto shall execute and deliver
such additional documents and take all such further action as may be necessary
or desirable to consummate and make effective, in the most expeditious manner
practicable, the transactions contemplated by this Agreement.
10. STOP TRANSFER. Warburg agrees with, and covenants to, the Purchaser
that Warburg shall not request that the Company register the transfer
(book-entry or otherwise) of any certificate or uncertificated interest
representing any of Warburg's Shares, unless such transfer is made in compliance
with this Agreement.
11. TERMINATION. The obligations under Sections 6 and 7 hereof shall
terminate upon the first to occur of (i) the Effective Time of the Merger and
(ii) the date the Merger Agreement is terminated in accordance with its terms
(the "Termination Date"). Except as set forth in this Section 11, all other
agreements and obligations of the parties hereto shall survive the Effective
Time of the Merger and/or the Termination Date, as applicable, and in the case
of Section 5 hereof, to the extent set forth in such section.
12. RESTRICTIONS ON TRANSFER.
12.1 Transfer of Shares. (a) During the period of time between
(i) the Effective Time of the Merger Agreement and (ii) the expiration
of the Option Period, Warburg shall not offer for sale, sell, transfer,
tender, pledge, encumber, assign or otherwise dispose of, place in
trust (voting or otherwise), enforce or permit the execution of the
provisions of any redemption agreement with the Company or enter into
any contract, option or other arrangement or understanding with respect
to or consent to the offer for sale, sale, transfer, tender, pledge,
encumbrance, assignment or other disposition of, or exercise any
discretionary powers to distribute, any or all of Warburg's Shares,
except for transfers made both in compliance with
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all federal and state securities laws and pursuant to the terms hereof.
12.2 Permitted Transfers. Notwithstanding any provision in
this Section to the contrary, the Shares may be transferred (a) to an
Affiliate of Warburg who agrees to be bound by this Agreement or (b) to
any partner of (i) Warburg or (ii) an Affiliate of Warburg, who, in
each case, agrees to be bound by this Agreement.
13. MISCELLANEOUS.
13.1 Entire Agreement; Assignment. This Agreement (i)
constitutes the entire agreement between the parties with respect to
the subject matter hereof and supersedes all other prior agreements and
understandings, both written and oral, between the parties with respect
to the subject matter hereof and (ii) shall not be assigned by
operation of law or otherwise without the prior written consent of the
other party.
13.2 Amendments. This Agreement may not be modified, amended,
altered or supplemented, except upon the execution and delivery of a
written agreement executed by the parties hereto.
13.3 Notices. All notices, requests, claims, demands and other
communications hereunder shall be in writing and shall be given (and
shall be deemed to have been duly received if so given) by hand
delivery, telegram, telex or telecopy, or by mail (registered or
certified mail, postage prepaid, return receipt requested) or by any
courier service, such as Federal Express, providing proof of delivery.
All communications hereunder shall be delivered to the respective
parties at the following addresses:
If to Warburg: Warburg, Pincus Capital Company, L.P.
c/o E.M. Warburg, Pincus & Co., LLC
466 Lexington Avenue
New York, New York 10019
Attn: Sidney Lapidus
Telecopier: (212) 878-6162
copy to: Willkie Farr & Gallagher
One Citicorp Center
153 East 53rd Street
New York, New York 10022-4669
Attention: Christopher E. Manno, Esq.
Telecopier Number: (212) 821-8111
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If to the Mafco Holdings Inc.
Purchaser: 625 Madison Avenue
New York, New York 10021
Attention:
Telecopier Number: (212) 867-5428
copy to: Skadden, Arps, Slate, Meagher
& Flom LLP
919 Third Avenue
New York, New York 10022
Attention: Alan C. Myers, Esq.
Telecopier Number: (212) 735-2000
or to such other address as the person to whom notice is given may have
previously furnished to the others in writing in the manner set forth
above.
13.4 Governing Law. This Agreement shall be governed by and
construed in accordance with the laws of the State of Delaware,
regardless of the laws that might otherwise govern under applicable
principles of conflicts of laws thereof.
13.5 Enforcement. The parties agree that irreparable damage
would occur in the event that any of the provisions of this Agreement
were not performed in accordance with their specific terms or were
otherwise breached. It is accordingly agreed that the parties shall be
entitled to an injunction or injunctions to prevent breaches of this
Agreement and to enforce specifically the terms and provisions of this
Agreement.
13.6 Counterparts. This Agreement may be executed in two or
more counterparts, each of which shall be deemed to be an original, but
both of which shall constitute one and the same Agreement.
13.7 Descriptive Headings. The descriptive headings used
herein are inserted for convenience of reference only and are not
intended to be part of or to affect the meaning or interpretation of
this Agreement.
13.8 Severability. Whenever possible, each provision or
portion of any provision of this Agreement will be interpreted in such
manner as to be effective and valid under applicable law but if any
provision or portion of any provision of this Agreement is held to be
invalid, illegal or unenforceable in any respect under any applicable
law or rule in any jurisdiction, such invalidity, illegality or
unenforceability will not affect any other provision or portion of any
provision in such jurisdiction, and this
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Agreement will be reformed, construed and enforced in such
jurisdiction as if such invalid, illegal or unenforceable provision or
portion of any provision had never been contained herein.
13.9 Definitions; Construction. For purposes of this
Agreement:
(a) "beneficially own" or "beneficial ownership" with respect
to any securities shall mean having "beneficial ownership" of such
securities (as determined pursuant to Rule 13d-3 under the Exchange
Act), including pursuant to any agreement, arrangement or
understanding, whether or not in writing. Without duplicative counting
of the same securities by the same holder, securities Beneficially
owned by a Person shall include securities Beneficially owned by all
other Persons with whom such Person would constitute a "group" as
described in Section 13(d)(3) of the Exchange Act.
(b) "Person" shall mean an individual, corporation,
partnership, joint venture, association, trust, unincorporated
organization or other entity.
(c) In the event of a stock dividend or distribution, or any
change in the Company Common Stock by reason of any stock dividend,
split-up, recapitalization, combination, exchange of shares or the
like, the term "Shares" shall be deemed to refer to and include the
Shares as well as all such stock dividends and distributions and any
shares into which or for which any or all of the Shares may be changed
or exchanged.
13.10 Stockholder Capacity. Notwithstanding anything herein to
the contrary, nothing set forth herein shall in any way restrict any
director in the exercise of his or her fiduciary duties as a director
of the Company.
13.11 Adjustment Upon Changes in Capitalization. In the event of
any change in the Common Stock by reason of any stock dividend,
extraordinary dividend or distribution, split-up, recapitalization,
combination, exchange of shares or the like, the number of Shares
subject to Sections 3 and 4 hereof, and the purchase prices therefor,
shall be appropriately adjusted.
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IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
duly executed as of the day and year first above written.
PANAVISION INC.
By:/s/ W. C. Scott
Name:W. C. Scott
Title:
MAFCO HOLDINGS INC.
By:/s/ Howard Gittis
Name:Howard Gittis
Title:
WARBURG, PINCUS CAPITAL COMPANY, L.P.
By: WARBURG, PINCUS & CO., ITS GENERAL
PARTNER
By:/s/ Sidney Lapidus
Name:Sidney Lapidus
Title:
<PAGE>
PANAVISION
140 EAST 45TH STREET, 35TH FLOOR, NEW YORK, NEW YORK 10017 (212) 867-5420
FOR IMMEDIATE RELEASE TELEFAX: (212) 867-5428
MAFCO HOLDINGS INC. AND PANAVISION INC. ANNOUNCE
AGREEMENT FOR RECAPITALIZATION OF PANAVISION
New York, New York and Woodland Hills, California, December
18, 1997 - Mafco Holdings Inc. and Panavision Inc. (NYSE: PVI) announced today
that they have entered into a definitive agreement, unanimously approved by the
Panavision board of directors, providing for the recapitalization of Panavision.
Under the agreement, Panavision stockholders will have the opportunity to
exchange up to 88% of their shares for $27 per share in cash while Panavision's
controlling stockholder, Warburg, Pincus Capital Company, L.P., has agreed to
exchange 88% of its shares for $26.50 per share in cash, and to vote all of its
shares in favor of the transaction. Shares not exchanged will be retained by
existing stockholders. Upon the completion of these transactions and an equity
investment by Mafco to recapitalize Panavision, Mafco expects to own
approximately 72% of the stock of Panavision.
Funds required in connection with the transaction, including
to acquire the shares, to refinance existing indebtedness and to pay related
fees and expenses, are expected to aggregate about $600 million, and will be
obtained through a combination of bank financing, the issuance of subordinated
debt, and the purchase by Mafco of equity in the recapitalized company.
"Panavision is acknowledged throughout the film world as the
pre-eminent designer, manufacturer and supplier of the highest quality motion
picture camera systems," said Ronald O. Perelman, Chairman and Chief Executive
Officer of Mafco Holdings. "While it enjoys commanding shares in several
markets, Panavision holds the promise of significant future growth. We plan to
expand Panavision by building on its heritage of technological innovation and
increasing our presence in all sectors of the worldwide television and
theatrical film industries," said Mr. Perelman.
<PAGE>
Panavision Chairman and Chief Executive Officer William C.
Scott stated, "This transaction in effect transfers control of Panavision from
Warburg, Pincus to Mafco Holdings while preserving the company as a publicly
traded entity. Ronald Perelman has long been an investor in the entertainment
industry which Panavision serves; we welcome this change and we feel it will
enhance our future prospects and opportunities."
Closing of the transaction is subject to customary conditions,
including stockholder approval at a special stockholder meeting expected to be
held in the first quarter of 1998, expiration of the waiting period under the
Hart-Scott-Rodino Act and the absence of a material adverse change in the
Company's business. The transaction is not subject to the receipt of financing.
Panavision Inc. is a leading designer and manufacturer of
high-precision film camera systems, comprising cameras, lenses and accessories
for the motion picture and television industries. Panavision systems are rented
worldwide through the company's owned and operated facilities and agent network.
Mafco Holdings Inc. is a diversified private holding company.
Among the operating companies in which it owns a controlling interest are
Revlon, Inc.; The Coleman Company; Consolidated Cigar Corporation and California
Federal Bank.
# # #
For further information contact:
William C. Scott Jeff Majtyka
Chairman & CEO Brainerd Communicators, Inc.
Panavision Inc. 212-986-6667
212-688-4748
James T. Conroy
Mafco Holdings Inc.
212-572-5980
