<PAGE>
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON JULY 17, 1998
REGISTRATION NO.
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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
------------------------
FORM S-1
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
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PANAVISION INC.
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
<TABLE>
<S> <C> <C>
DELAWARE 5043 13-3593063
(STATE OR OTHER JURISDICTION OF (PRIMARY STANDARD INDUSTRIAL (I.R.S. EMPLOYER
INCORPORATION OR ORGANIZATION) CLASSIFICATION CODE NUMBER) IDENTIFICATION NUMBER)
</TABLE>
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625 MADISON AVENUE
NEW YORK, NEW YORK 10022
(212) 527-4000
(ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER,
INCLUDING AREA CODE, OF REGISTRANT'S PRINCIPAL EXECUTIVE OFFICES)
------------------------
PANAVISION INC.
625 MADISON AVENUE
NEW YORK, NEW YORK 10022
(212) 527-4000
(NAME, ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER,
INCLUDING AREA CODE, OF AGENT FOR SERVICE)
------------------------
Copies to:
STACY J. KANTER, ESQ.
SKADDEN, ARPS, SLATE, MEAGHER & FLOM LLP
919 THIRD AVENUE
NEW YORK, NEW YORK 10022
(212) 735-3000
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CALCULATION OF REGISTRATION FEE
<TABLE>
<CAPTION>
PROPOSED PROPOSED
TITLE OF EACH CLASS AMOUNT TO BE MAXIMUM OFFERING MAXIMUM AGGREGATE AMOUNT OF
OF SECURITIES TO BE REGISTERED REGISTERED PRICE PER UNIT OFFERING PRICE REGISTRATION FEE
<S> <C> <C> <C> <C>
9 5/8% Senior Subordinated Discount
Exchange Notes due 2006.......... $217,903,000 68.838% $150,000,000 $44,250
</TABLE>
APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO THE PUBLIC: As soon as
practicable after the effective date of this Registration Statement.
If any of the securities being registered on this Form are to be offered on
a delayed or continuous basis pursuant to Rule 415 under the Securities Act of
1933, check the following box. /x/
If this Form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act of 1933, please check the
following box and list the Securities Act registration statement number of the
earlier effective registration statement for the same offering. / /
If this form is a post-effective amendment filed pursuant to Rule 462(c)
under the Securities Act of 1933, check the following box and list the
Securities Act registration statement number of the earlier effective
registration statement for the same offering. / /
If delivery of the prospectus is expected to be made pursuant to Rule 434
under the Securities Act of 1933, please check the following box. / /
------------------------
THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR
DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT SHALL
FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS REGISTRATION
STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(A) OF
THE SECURITIES ACT OF 1933 OR UNTIL THIS REGISTRATION STATEMENT SHALL BECOME
EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING PURSUANT TO SAID SECTION 8(A),
MAY DETERMINE.
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<PAGE>
INFORMATION CONTAINED HEREIN IS SUBJECT TO COMPLETION OR AMENDMENT. A
REGISTRATION STATEMENT RELATING TO THESE SECURITIES HAS BEEN FILED WITH THE
SECURITIES AND EXCHANGE COMMISSION. THESE SECURITIES MAY NOT BE SOLD NOR MAY
OFFERS TO BUY BE ACCEPTED PRIOR TO THE TIME THE REGISTRATION STATEMENT BECOMES
EFFECTIVE. THIS PROSPECTUS SHALL NOT CONSTITUTE AN OFFER TO SELL OR THE
SOLICITATION OF AN OFFER TO BUY NOR SHALL THERE BE ANY SALE OF THESE SECURITIES
IN ANY STATE IN WHICH SUCH OFFER, SOLICITATION OR SALE WOULD BE UNLAWFUL PRIOR
TO REGISTRATION OR QUALIFICATION UNDER THE SECURITIES LAWS OF ANY SUCH STATE.
SUBJECT TO COMPLETION DATED JULY 17, 1998
PROSPECTUS
OFFER FOR ALL OUTSTANDING 9 5/8% SENIOR SUBORDINATED DISCOUNT NOTES DUE 2006
IN EXCHANGE FOR 9 5/8% SENIOR SUBORDINATED DISCOUNT EXCHANGE NOTES DUE 2006
OF
PANAVISION INC.
The Exchange Offer will expire at 5:00 P.M.,
New York City time, on , 1998, unless extended
Panavision Inc., a Delaware corporation (the 'Company' or 'Panavision'),
hereby offers, upon the terms and subject to the conditions set forth in this
Prospectus and the accompanying Letter of Transmittal (which together constitute
the 'Exchange Offer'), to exchange an aggregate principal amount at maturity of
up to $217,903,000 of its 9 5/8% Senior Subordinated Discount Exchange Notes due
2006 (the 'New Notes'), which have been registered under the Securities Act of
1933, as amended (the 'Securities Act'), for a like principal amount of its
issued and outstanding 9 5/8% Senior Subordinated Discount Notes due 2006 (the
'Old Notes' and, together with the New Notes, the 'Notes') from the holders
thereof. The terms of the New Notes are identical in all material respects to
the Old Notes, except for certain transfer restrictions and registration rights
relating to the Old Notes and except that, if the Exchange Offer is not
consummated by December 1, 1998, interest will accrue on the Old Notes (in
addition to the accretion of Original Issue Discount (as defined herein)) from
and including December 1, 1998 until but excluding the date of consummation of
the Exchange Offer payable in cash semiannually in arrears on February 1 and
August 1, commencing February 1, 1999, at a rate per annum equal to .50% of the
Accreted Value (as defined herein) of the Old Notes as of the August 1 or
February 1 immediately preceding such interest payment date. The Old Notes were
originally issued by PX Escrow Corp. ('PX Escrow') on February 6, 1998 pursuant
to an offering (the 'Offering'), which was exempt from registration under the
Securities Act. The Company assumed the obligations of PX Escrow under the Old
Notes and related indenture (the 'Indenture') upon consummation of the
recapitalization of the Company (the 'Panavision Recapitalization') which
occurred on June 4, 1998.
The Issue Price of each of the Old Notes was $688.38 per $1,000 principal
amount at maturity. Except as set forth above, through February 1, 2002, there
will be no periodic payments of interest on the Notes. The Notes will begin to
accrue interest at a rate of 9 5/8% per annum commencing February 1, 2002, and
interest will be payable thereafter on February 1 and August 1 of each year.
Concurrently with the closing of the Offering, PX Escrow deposited the net
proceeds of the Offering (the 'Escrowed Funds') with an escrow agent (the
'Escrow Agent'). On June 4, 1998, the Escrowed Funds were used to finance the
Panavision Recapitalization.
The Notes will be redeemable at the option of the Company, in whole or in
part, on or after February 1, 2002, at the redemption prices set forth herein.
Prior to February 1, 2002, the Notes are redeemable at the option of the
Company, in whole but not in part, at a redemption price equal to the Accreted
Value (as defined herein) on the date of redemption plus the Applicable Premium
(as defined herein). On or prior to February 1, 2001, in connection with certain
public offerings of common stock, the Company may, at its option, redeem the
Notes at a redemption price equal to 109 5/8% of the Accreted Value on the date
of redemption, provided that at least $141,637,000 aggregate principal amount at
maturity of Notes remains outstanding after each such redemption. Upon a Change
of Control (as defined herein), each holder of the Notes will have the right to
require the Company to repurchase all or a portion of such holder's Notes at a
price equal to 101% of the Accreted Value of the Notes on the date of repurchase
plus accrued and unpaid interest, if any, to the date of repurchase. See
'Description of the Notes.'
The Old Notes are, and the New Notes will be subordinate in right of
payment to all existing and future Senior Debt (as defined herein), pari passu
with all existing and future Senior Subordinated Debt (as defined herein) and
senior to all future subordinated debt, if any is issued, of Panavision. At
March 31, 1998, after giving effect to the Panavision Recapitalization,
Panavision would have had outstanding approximately $305 million of Senior Debt.
In addition, the Old Notes are, and the New Notes will be effectively
subordinated to all existing and future liabilities of Panavision's
subsidiaries. At March 31, 1998, after giving effect to the Panavision
Recapitalization, the outstanding liabilities of such subsidiaries would have
been approximately $47 million.
For each Old Note accepted for exchange, the holder of such Old Note will
receive a New Note having a principal amount at maturity equal to that of the
surrendered Old Note. Original Issue Discount on the New Notes
(Cover continued on next page)
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SEE 'RISK FACTORS' COMMENCING ON PAGE 13 OF THIS PROSPECTUS FOR A
DESCRIPTION OF CERTAIN RISKS TO BE CONSIDERED BY HOLDERS WHO TENDER THEIR OLD
NOTES IN THE EXCHANGE OFFER.
------------------
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE
SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION
PASSED UPON THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY
REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
------------------
THE DATE OF THIS PROSPECTUS IS , 1998.
<PAGE>
(continued from cover)
will accrue from February 11, 1998, the date of original issuance of the Old
Notes. Holders whose Old Notes are accepted for exchange may, in the limited
circumstances described above have the right to receive, in cash, accrued
interest (if any) thereon to, but not including, the consummation of the
Exchange Offer, such interest to be payable on the February 1 or August 1 next
following such date of consummation. Holders of Old Notes accepted for exchange
will be deemed to have waived the right to receive any other payments or accrued
interest on the Old Notes.
The New Notes are being offered hereunder in order to satisfy certain
obligations of the Company contained in the Registration Agreement dated
February 6, 1998 among the Company and the other signatories thereto (the
'Registration Agreement'). Based on interpretations by the staff of the
Securities and Exchange Commission (the 'Commission') as set forth in no-action
letters issued to third parties, the Company believes that New Notes issued
pursuant to the Exchange Offer in exchange for Old Notes may be offered for
resale, resold and otherwise transferred by holders thereof (other than any such
holder which is an 'affiliate' of the Company within the meaning of Rule 405
under the Securities Act) without compliance with the registration and
prospectus delivery provisions of the Securities Act, provided that such New
Notes are acquired in the ordinary course of such holder's business and such
holder has no arrangement with any person to participate in the distribution of
such New Notes. However, the Company does not intend to request the Commission
to consider, and the Commission has not considered, the Exchange Offer in the
context of a no-action letter and there can be no assurance that the staff of
the Commission would make a similar determination with respect to the Exchange
Offer as in such other circumstances. Each holder, other than a broker-dealer,
must acknowledge that it is not engaged in, and does not intend to engage in, a
distribution of such New Notes and has no arrangement or understanding to
participate in a distribution of New Notes. Each broker-dealer that receives New
Notes for its own account pursuant to the Exchange Offer must acknowledge that
it will deliver a prospectus in connection with any resale of such New Notes.
The Letter of Transmittal states that by so acknowledging and by delivering a
prospectus, a broker-dealer will not be deemed to admit that it is an
'underwriter' within the meaning of the Securities Act. This Prospectus, as it
may be amended or supplemented from time to time, may be used by a broker-dealer
in connection with resales of New Notes received in exchange for Old Notes where
such Old Notes were acquired by such broker-dealer as a result of market-making
activities or other trading activities. The Company has agreed that, for a
period of 180 days after the Expiraiton Date (as defined herein), it will make
this Prospectus available to any broker-dealer for use in connection with any
such resale. See 'Plan of Distribution.'
The Company will not receive any proceeds from the Exchange Offer. The
Company will pay all the expenses incident to the Exchange Offer. Tenders of Old
Notes pursuant to the Exchange Offer may be withdrawn at any time prior to the
Expiration Date. In the event the Company terminates the Exchange Offer and does
not accept for exchange any Old Notes, the Company will promptly return the Old
Notes to the holders thereof. See 'The Exchange Offer.'
Following consummation of the Exchange Offer, the Company may, in its sole
discretion, commence one or more additional exchange offers to holders of Old
Notes who did not exchange their Old Notes for New Notes in the Exchange Offer
on terms which may differ from those contained in the Registration Agreement.
This Prospectus, as it may be amended or supplemented from time to time, may be
used by the Company in connection with any such additional exchange offers.
There is no existing trading market for the New Notes, and there can be no
assurance regarding the future development of a market for the New Notes, or the
ability of holders of the New Notes to sell their New Notes or the price at
which such holders may be able to sell their New Notes. Credit Suisse First
Boston Corporation and Schroder & Co. Inc. (the 'Initial Purchasers') have
advised the Company that they currently intend to make a market in the New
Notes. The Initial Purchasers are not obligated to do so, however, and any
market-making with respect to the New Notes may be discontinued at any time
without notice. The Company does not intend to apply for listing or quotation of
the New Notes on any securities exchange or stock market.
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Panavision(Registered), PRIMO ZOOM(Registered), Panaflex(Registered),
Panahead(Registered), 3-Perf(Registered) and Panastar(Registered) are registered
trademarks of the Company. Oscar(Registered) is a registered trademark of the
Academy of Motion Picture Arts and Sciences.
ii
<PAGE>
AVAILABLE INFORMATION
The Company has filed with the Commission a Registration Statement on Form
S-1 (the 'Registration Statement') under the Securities Act, with respect to the
New Notes being offered by this Prospectus. This Prospectus does not contain all
the information set forth in the Registration Statement and the exhibits
thereto, to which reference is hereby made. Any statements made in this
Prospectus concerning the provisions of certain documents are not necessarily
complete and, in each instance, reference is made to the copy of such document
filed as an exhibit to the Registration Statement.
The Registration Statement and the exhibits thereto may be inspected and
copied at the public reference facilities maintained by the Commission at Room
1024, Judiciary Plaza, 450 Fifth Street, N.W., Washington, D.C. 20549 and will
also be available for inspection and copying at the regional offices of the
Commission located at 7 World Trade Center, New York, New York 10048 and at
Citicorp Center, 500 West Madison Street (Suite 1400), Chicago, Illinois 60661.
Copies of such material may also be obtained from the Public Reference Section
of the Commission at 450 Fifth Street, N.W., Washington, D.C. 20549 at
prescribed rates. The Company is subject to the informational requirements of
the Securities Exchange Act of 1934, as amended (the 'Exchange Act'), and in
accordance therewith files periodic reports and other information with the
Commission. The Commission maintains a Web site that contains reports, proxy and
information statements and other information regarding registrants, such as the
Company, that file electronically with the Commission and the address of such
site is http://www.sec.gov. In the event the Company is not required to be
subject to the reporting requirements of the Exchange Act in the future, the
Company will be required under the Indenture, pursuant to which the Old Notes
have been, and the New Notes will be, issued, to continue to file with the
Commission and to furnish to holders of the Notes the information, documents and
other reports specified in Sections 13 and 15(d) of the Exchange Act, including
reports on Forms 10-K, 10-Q and 8-K, for so long as any Notes are outstanding.
iii
<PAGE>
PROSPECTUS SUMMARY
The following summary is qualified in its entirety by, and should be read
in conjunction with, the more detailed information including 'Risk Factors' and
the Panavision consolidated financial statements and notes thereto (the
'Consolidated Financial Statements') contained elsewhere in this Prospectus.
Unless the context otherwise requires, (i) the 'Company' and 'Panavision' refer
to Panavision Inc. and its consolidated subsidiaries, collectively and include
Panavision's predecessors, (ii) the 'Panavision Recapitalization' shall include
the financing therefor and the assumption of the Notes by Panavision, and (iii)
the term 'pro forma' will have the meaning assigned to it in 'Unaudited Pro
Forma Financial Data.'
THE COMPANY
Panavision is a leading designer, manufacturer and supplier of high
precision film camera systems, comprising cameras, lenses and accessories, for
the motion picture and television industries. In 1997 in North America,
Panavision equipment was utilized in over 80% of feature films produced by major
motion picture studios and over 80% of episodic or 'series' television
productions shot on film (such as E.R. and SEINFELD). Unlike equipment
manufactured by its competitors, Panavision camera systems are not available for
sale and are rented exclusively through the Company's domestic and international
owned and operated facilities as well as its network of independent agents. The
Company believes that its position as an industry leader results from its
control over the manufacturing and distribution process, its broad range of
technologically superior and innovative products, its long-standing
collaborative relationships with filmmakers and studios, the breadth of its
camera equipment inventory and its dedication to customer service. Panavision is
the only supplier of cinematography equipment that manufactures a complete
camera system incorporating its own proprietary prime and zoom lenses, the most
critical components of a camera system.
Panavision is recognized in the motion picture and television industries as
the preeminent brand name for cinematography equipment. Since the Company's
inception in 1954, Panavision has continually introduced new camera systems,
lenses, and accessories that have become industry standards. The Company's close
relationship with producers, directors and cinematographers results in a
cooperative effort to design and produce unique systems and accessories that
meet filmmakers' creative needs. Panavision has received two OSCARS and 18
Awards for Scientific and Technical Achievement from the Academy of Motion
Picture Arts and Sciences. Since 1990, two-thirds of the Academy Award nominees
for Best Cinematography, and six of the seven cinematographers who have won the
OSCAR for Best Cinematography, used Panavision camera systems. Panavision camera
systems were used to film nine of the top ten box office movies shot on film in
each of 1997 and 1996, including MEN IN BLACK, THE LOST WORLD: JURASSIC PARK,
LIAR, LIAR, JERRY MAGUIRE, MY BEST FRIEND'S WEDDING, MISSION: IMPOSSIBLE,
INDEPENDENCE DAY, RANSOM, TWISTER and A TIME TO KILL. Panavision camera systems
were also used to film the 1998 blockbuster hits TITANIC and TOMORROW NEVER
DIES, the latest James Bond film. In addition to Panavision's involvement in the
motion picture industry, a predominant number of U.S. prime time episodic or
'series' television programs that are shot on film use Panavision camera
systems, including FRIENDS and N.Y.P.D. BLUE.
Renting, rather than purchasing, equipment is more cost-effective for
feature film, television and commercial producers given the periods of
inactivity typically experienced between productions. In addition, renting
camera systems from Panavision ensures continual access to state-of-the-art
equipment as well as the availability of the proper equipment combinations for
each specific project. Since the average cost of camera rental represents less
than 1% of the average film budget, customers tend to place a higher priority on
quality of service and the availability of a broad range of technologically
superior equipment than on price considerations, which enables Panavision to
receive a premium for its equipment.
Panavision dominates an otherwise fragmented rental market for
cinematographic equipment. Panavision is the only supplier of cinematographic
equipment that has a network of rental offices and maintenance facilities
throughout North America, Europe and the Asia Pacific Region and is the only
major manufacturer located near Hollywood. As the only vertically integrated
provider of camera systems to the film and television industries, Panavision is
better able to meet its customers' needs effectively. In contrast, the Company's
manufacturing competitors are located in Europe and sell their products to
rental companies, which then rent the equipment to the ultimate user.
The demand for cinematographic equipment is driven by the number and
complexity of feature films, television programs and commercials being produced.
Demand for film-based entertainment has continued to
1
<PAGE>
grow steadily in recent years as evidenced by the growth in the number of
feature film starts in North America from 350 in 1992 to 576 in 1997, an
increase in domestic box office receipts of 28.1% from 1992 to 1997, and an
increase of approximately 6,400 exhibitor screens over the same period.
Additionally, the number of action films and special effects in feature film and
television productions have increased significantly, thereby increasing the
equipment required and lengthening the rental period. In addition, an increase
in the number of television networks and channels and in their demand for
original programming has also driven the increased use of camera systems.
OPERATIONS
The Company's operations primarily consist of (i) camera rental services,
(ii) design and manufacture of cameras and lenses, (iii) lighting rental
services and (iv) sale of lighting filters and other consummable products.
CAMERA RENTAL SERVICES. Panavision supplies cinematographic equipment,
such as cameras, lenses and accessories to its customers on a project-by-project
basis. The Company has a rental inventory of over 1,000 cameras (including
non-Panavision manufactured equipment) and 5,000 lenses, as well as associated
accessories. The Company rents its equipment through 24 owned and operated
rental facilities which are strategically located in cities where the most
feature films are produced, including Los Angeles, Toronto, London and Paris.
The Company also rents its equipment through ten independent agents, including
agents located in New York, Tokyo and Hong Kong. Panavision's network of owned
and operated rental offices and independent agents provides it with a
competitive advantage as it is the only rental company that offers clients
equipment and service on a national and worldwide basis. The Company believes
that its sales force, which is segmented by the end markets served, is the most
experienced and knowledgeable in the industry.
The rental process for feature film and episodic television takes about
four to eight months from the time the producer approves the project until
filming is completed and the equipment package is returned to Panavision for
servicing. The decision makers for the various markets are the producers,
directors and cinematographers. In general, after production is approved, the
decision makers discuss the requirements with their Panavision sales
representative and then finalize the equipment package. The equipment is
subsequently prepped at the Panavision rental facility and shipped to the studio
or location to commence principal photography. Once the equipment is returned,
the Company services its equipment in preparation for the next rental. The
average feature film rental is for 10 to 12 weeks, the average episodic
television rental is for 32 weeks and the average commercial rental is for
approximately 2 days. For the year ended December 31, 1997, approximately 34% of
camera rental revenue was derived from feature film rentals, approximately 29%
was derived from episodic television and movies of the week, approximately 31%
was derived from commercials and approximately 6% was derived from other
rentals. Panavision rents camera packages that include cameras, lenses and
accessories. The average weekly rental package price for feature films and
commercials has increased since 1992 due to the addition of value-added
proprietary lenses and accessories as well as modest price increases on its
existing inventory.
Management believes that it has been able to achieve increases in the
Company's equipment utilization rate because of Panavision's breadth and mix of
equipment, along with an MIS system that enables the Company to transfer
equipment to areas of greatest demand. The Company's Woodland Hills rental
facility, its largest, generated approximately 32% of the Company's camera
rental revenue during the year ended December 31, 1997 and has achieved an
increase of approximately 25% in utilization of Panaflex cameras from 1993
through 1997. Although the Company believes it can achieve further modest
increases in utilization, additional significant increases will be difficult to
achieve because of (i) the need to have sufficient inventory available for the
peak feature film and television production season (typically the third and
fourth quarters), (ii) time needed for service and maintenance, (iii) slippage
in movie production start dates and (iv) time needed to prepare and customize
equipment for each given project.
On June 5, 1997, the Company completed its acquisition (the 'FSG
Acquisition') of Visual Action Holdings plc's Film Services Group ('Film
Services Group' or 'FSG') for approximately $61 million in cash. FSG includes
camera rental operations which rent primarily non-Panavision manufactured
equipment in the United Kingdom, France, Australia and two U.S. cities, Chicago
and Dallas, as well as smaller rental operations in New Zealand, Malaysia and
Indonesia. Management intends to augment the existing FSG equipment inventory
base with Panavision camera systems over time. Management believes that the FSG
Acquisition has substantially improved its competitive position internationally
as well as in the mid-western U.S. commercial market.
2
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CAMERA AND LENS MANUFACTURING. The Company manufactures cameras, lenses
and accessories designed by the Company's in-house research and development
staff. The Company has over 100 non-union employees at its recently renovated
and expanded 150,000 square foot manufacturing facility in Woodland Hills,
California, located near Hollywood. Panavision is the only major manufacturer of
cameras and lenses located in the Hollywood area, enabling the Company to
develop close relationships with filmmakers and television producers as well as
enabling the Company to rapidly respond to its customers' needs. While the
breadth of the Company's rental inventory has allowed it to adequately service
certain segments of the feature film and television industries, until mid-1996
capital constraints precluded Panavision from investing in additional rental
equipment to expand its market share in other attractive markets, including both
North American and international independent feature films and commercials. In
1997, the Company increased its camera manufacturing production to take
advantage of what it believes to be favorable rates of return as well as high
demand for its equipment, doubling the number of new camera systems manufactured
in 1997 to 72 from 35 in 1996. Panavision expects to manufacture a similar
number of camera systems in 1998. The Company believes that its existing
manufacturing facility has sufficient capacity to increase manufacturing of
camera systems beyond the level achieved in 1997.
The Company is in the process of expanding its research and development
group, which currently comprises approximately 40 mechanical, software,
electronic and optical engineers, draftsmen and machinists. Additionally, the
research and development group has a dedicated machine shop that manufactures
prototype equipment. These internal capabilities enable the Company to develop
proprietary technology in collaboration with filmmakers to address their unique
requirements. For example, in 1997, the Company introduced a new sync-sound
camera which is lighter and quieter than current Panavision cameras and
incorporates enhanced view finding and video monitoring capabilities. In
addition, the Company is in the process of developing a digital video assist
device that will enable the director and cinematographer to perform certain
immediate on-set digital editing functions.
LEE LIGHTING AND LEE FILTERS. In addition to manufacturing and renting
camera systems, Panavision also rents lighting, lighting grip, power generation
and related transportation equipment through Lee Lighting Limited ('Lee
Lighting'), the largest lighting rental company in the United Kingdom, as well
as through its owned and operated facilities in Chicago, Dallas, Orlando,
Toronto, Australia, Malaysia and Indonesia. Recently, Lee Lighting has supplied
the entire lighting needs of such major feature films as THE AVENGERS, LOST IN
SPACE, FOUR WEDDINGS AND A FUNERAL, ROB ROY, MISSION: IMPOSSIBLE, 101
DALMATIANS, EVITA and THE SAINT. Panavision also manufactures and sells lighting
filters and other color-correction and diffusion filters through Lee Filters,
located in the United Kingdom, with sales offices in Los Angeles and the New
York metropolitan area.
COMPETITIVE STRENGTHS
Panavision's leading market position is demonstrated by its premier brand
name recognition and its market share of over 80% of the major studio feature
films and episodic television programs produced in North America in 1997. The
Company's leading position results from the following competitive strengths
which provide substantial barriers to entry for new competitors.
CONTROL OVER MANUFACTURING AND DISTRIBUTION PROCESS. Panavision is the
only vertically integrated renter of camera systems to the film and television
industry. The Company's control over both the manufacturing and distribution
processes enables it to (i) rapidly incorporate technological development and
filmmakers' suggestions into new products, (ii) maintain product exclusivity and
(iii) offer products with greater quality and higher performance at a premium
price.
REPUTATION FOR QUALITY AND TECHNOLOGICALLY ADVANCED PRODUCTS. Panavision
is recognized as the industry leader in the development of high quality,
technologically advanced camera systems and its products have become industry
standards. Panavision has received two OSCARS and 18 other Academy Awards
granted for Scientific and Technical Achievement, including a 1998 award for the
Panavision/Frazier Lens System. In addition to the development of new products,
Panavision is also better able to upgrade its existing inventory to meet
continually changing market demands, thereby reducing obsolescence, achieving
better control of inventory and product availability, and providing its
customers with access to the latest technological advances.
CLOSE RELATIONS WITH FILMMAKERS. As a result of Panavision's significant
relationships with cinematographers, directors and producers and its dominant
market position, Panavision gains early access to productions and is able to
influence the selection of camera systems. Additionally, Panavision offers
instruction and training in the handling of Panavision equipment to young
directors and cinematographers while they are still in film
3
<PAGE>
school as well as thereafter, thereby developing loyalty to Panavision and
providing a foundation for Panavision to sustain its strong market position.
RANGE AND BREADTH OF CAMERA EQUIPMENT. Panavision believes that it has the
world's largest inventory of camera systems, with over 1,000 cameras and 5,000
lenses. It also offers a broad range of choices, including equipment that is
exclusively available through Panavision and its agents. The Company believes
that the range and breadth of its camera inventory permit it to serve a greater
number of productions throughout the world and make it the only company in the
industry with the ability to serve multiple large-scale feature film productions
simultaneously.
DEDICATION TO CUSTOMER SERVICE. Panavision places special emphasis on
customer service. The Company's customer service, repair and maintenance
personnel are 'on call' and available to assist customers 24 hours a day. In
order to provide filmmakers with a high level of support, the Company sends
marketing representatives and technicians to film production sets to provide
advice or immediate assistance with any equipment needs or questions. The
Company assigns to each production a sales representative who possesses skills
and experience appropriate to the needs of that production in an attempt to
foster a strong and lasting working relationship with the customer. In addition,
as part of its customer service, the Company often develops, customizes or
procures equipment for specific customers or projects.
GROWTH STRATEGY
The Company's growth strategy is to increase its market share in the
worldwide commercial and feature film markets by leveraging its strong
competitive position and brand name in the feature film and television
industries in North America. The Company's strategy involves the following
elements:
INCREASE INVENTORY OF AVAILABLE CAMERA EQUIPMENT. Until mid-1996, the
Company's growth was inhibited by equipment shortages resulting from limited
manufacturing capacity and capital expenditure constraints in its prior credit
facilities. The Company believes that its move to its current manufacturing
facility in 1996 as well as its enhanced access to capital will enable the
Company to continue to expand its equipment base in order to meet expected
market demand and to capture a larger market share, particularly in the
worldwide commercial and independent feature film markets.
EXPAND NEW PRODUCT DEVELOPMENT. The Company intends to continue developing
and manufacturing the next generation of technologically superior cameras,
lenses and accessories. The Company is currently rolling out its Millennium
camera system and focusing its development efforts on value-added accessories
that increase the overall size and rental price of a camera package. The
Company's move into a larger manufacturing facility enabled the Company to hire
additional personnel and significantly increase its research and development of
new products in an effort to extend its leadership in technology and product
development and to further facilitate collaborative efforts with filmmakers. For
example, the Company has recently introduced a new close focus macro-zoom lens
and the Panavision/Frazier Lens System which provide filmmakers with unique
creative tools that were previously unavailable.
GEOGRAPHICAL EXPANSION AND STRATEGIC ACQUISITIONS. From time to time, the
Company has pursued strategic acquisitions, such as the FSG Acquisition, as a
means of expanding market share in existing markets and as a gateway to new
geographical markets. The Company will continue to evaluate such opportunities
as they arise, as well as other opportunities, such as strategic alliances or
the expansion of its agent network.
THE PANAVISION RECAPITALIZATION
On June 4, 1998, as contemplated by (i) the Agreement of Recapitalization
and Merger dated as of December 18, 1997 (the 'Recapitalization Agreement'), by
and among PX Holding Corporation, a Delaware corporation ('PX Holding'), PX
Merger Corporation, a Delaware corporation ('PX Merger') and Panavision and (ii)
the Amended and Restated Voting and Stockholders Agreement, dated as of April
16, 1998 (the 'Stockholders Agreement'), by and among Warburg, Pincus Capital
Company, L.P., a Delaware limited partnership ('Warburg'), Mafco Holdings Inc.,
a Delaware corporation ('Mafco Holdings'), and Panavision, Panavision
consummated a merger whereby PX Merger was merged with and into Panavision (the
'Merger'), with Panavision as the surviving corporation.
Immediately prior to the consummation of the Merger, PX Holding purchased
5,784,199 shares of Panavision's common stock, par value $.01 per share (the
'Company Common Stock'), from Panavision at a purchase price of $154,376,801
(the 'PX Stock Purchase').
4
<PAGE>
In connection with the Merger, holders of in excess of 88% of the shares of
Company Common Stock held by shareholders other than Warburg elected to receive
cash for their shares. As a result, pursuant to the Recapitalization Agreement,
the right to receive cash for such shares was subject to proration. As a result
of the Merger, (i) 5,466,120 shares of Company Common Stock were exchanged for
$27.00 per share, or an aggregate of $147,585,240, and (ii) 745,380 shares of
Company Common Stock were retained by holders either through election or
proration. In addition, as part of the Panavision Recapitalization, Warburg
exchanged 88%, or 11,199,060 shares, of the shares of Company Common Stock it
beneficially owns (the 'Warburg Shares') for preferred stock of Panavision that
was redeemed immediately upon consummation of the Merger at a price equivalent
to $26.50 in cash per share of Company Common Stock.
In addition, pursuant to the Stockholders Agreement, Warburg granted to
Mafco Holdings an option to purchase at $30.00 per share of Company Common
Stock, and Mafco Holdings granted to Warburg an option to sell at $25.00 per
share of Company Common Stock, the 1,526,040 Warburg Shares not exchanged for
redeemable preferred stock as described above. Each such option is exercisable
in whole, but not in part, during the period beginning one year, and ending two
years, following consummation of the Merger. If Mafco Holdings acquired the
remaining 1,526,040 shares of Company Common Stock upon the exercise by either
Warburg or it of the option described above, then, assuming no changes in the
number of shares of Company Common Stock outstanding prior to the date of such
exercise, Mafco Holdings would then beneficially own 91% of the shares of
Company Common Stock outstanding.
The net proceeds of the Offering, borrowings under the New Credit Agreement
and the proceeds from the PX Stock Purchase were used to fund the payment of the
cash consideration and the fees and expenses in connection with the Merger as
well as to retire existing indebtedness and to provide working capital for
Panavision. See 'Management's Discussion and Analysis of Financial Condition and
Results of Operations-- Liquidity and Capital Resources.' In connection with the
transactions contemplated by the Recapitalization Agreement, the assets of PX
Escrow (consisting of funds held in escrow and deferred charges) and the
obligations of PX Escrow under the Notes and the Indenture were assumed by
Panavision (the 'Panavision Assumption').
As a result of the Merger, PX Holding, a wholly owned subsidiary of Mafco
Holdings, acquired a 72% interest in the Company. Warburg owns approximately 19%
of the issued and outstanding Company Common Stock and approximately 9% is owned
by public stockholders (including management).
5
<PAGE>
The following chart sets forth in simplified form the ownership of the
common equity of Panavision following consummation of the Panavision
Recapitalization.
POST-PANAVISION RECAPITALIZATION ORGANIZATIONAL STRUCTURE
------------------------
| Mafco Holdings Inc. |
| ("Mafco Holdings") |
------------------------
|
|100%
|
------------------------
|PX Holding Corporation| 100%
| ("PX Holding") |--------------
------------------------ |
| |
| -------------------------
| | PX Escrow Corp. |
| | ("PX Escrow") |
| -------------------------
| 72%
- ------------------------- | -------------------------
| Public | | | Warburg, Pincus |
| Stockholders |----- | ---- | Capital Company, L.P. |
|(including Management) | |9% | 19%| | ("Warburg") |
- ------------------------- | | | -------------------------
| | |
------------------------
| Panavision Inc. |
| |
------------------------
6
<PAGE>
THE EXCHANGE OFFER
<TABLE>
<S> <C>
SECURITIES OFFERED........................ Up to $217,903,000 principal amount at maturity of 9 5/8% Senior
Subordinated Discount Exchange Notes due 2006 which have been
registered under the Securities Act. The terms of the New Notes and
the Old Notes are identical in all material respects, except for
certain transfer restrictions and registration rights relating to the
Old Notes and except that, if the Exchange Offer is not consummated
by December 1, 1998, interest will accrue on the Old Notes (in
addition to the accretion of Original Issue Discount) from and
including such date until but excluding the date of consummation of
the Exchange Offer payable in cash semiannually in arrears on
February 1 and August 1, commencing February 1, 1999, at a rate per
annum equal to .50% of the Accreted Value of the Old Notes as of the
August 1 or February 1 immediately preceding such interest payment
date. See '--Summary Description of the New Notes' and 'Description
of the Notes--Registration Rights.'
THE EXCHANGE OFFER........................ The New Notes are being offered in exchange for a like aggregate
principal amount of Old Notes. The issuance of the New Notes is
intended to satisfy obligations of the Company contained in the
Registration Agreement. For procedures for tendering the Old Notes,
see 'The Exchange Offer--Procedures for Tendering Old Notes.'
TENDERS; EXPIRATION DATE;
WITHDRAWAL.............................. The Exchange Offer will expire at 5:00 p.m., New York City time, on
, 1998, or such later date and time to which it is
extended (the 'Expiration Date'). The tender of Old Notes pursuant to
the Exchange Offer may be withdrawn at any time prior to the
Expiration Date. Any Old Note not accepted for exchange for any
reason will be returned without expense to the tendering holder
thereof as promptly as practicable after the expiration or
termination of the Exchange Offer. See 'The Exchange Offer--Terms of
the Exchange Offer; Period for Tendering Old Notes' and 'The Exchange
Offer--Withdrawal Rights.'
CERTAIN CONDITIONS TO EXCHANGE OFFER...... The Company shall not be required to accept for exchange, or to issue
New Notes in exchange for, any Old Notes and may terminate or amend
the Exchange Offer if at any time before the acceptance of the Old
Notes for exchange or the exchange of the New Notes for such Old
Notes certain events have occurred, which, in the reasonable judgment
of the Company, make it inadvisable to proceed with the Exchange
Offer and/or with such acceptance for exchange or with such exchange.
Such events include (i) any threatened, instituted or pending action
seeking to restrain or prohibit the Exchange Offer, (ii) a general
suspension of trading in securities on any national securities
exchange or in the over-the-counter market, (iii) a general banking
moratorium, (iv) the commencement of a war or armed hostilities
involving the United States and (v) a material adverse change or
development involving a prospective material adverse change in the
Company's business, properties, assets, liabilities, financial
condition, operations, results of operations or prospects that may
affect the value of the Old Notes or the New Notes. In addition, the
Company will not accept for exchange any Old Notes tendered, and no
New Notes will be issued in exchange for any such Old Notes, at any
such time as any stop order shall be threatened or in effect with
respect to the Registration Statement of which this Prospectus
constitutes a part or the qualification of the Indentures under the
Trust Indenture Act of 1939. See 'The Exchange Offer--Certain
Conditions to the Exchange Offer.'
FEDERAL INCOME TAX CONSEQUENCES........... The exchange pursuant to the Exchange Offer will not result in gain
or loss to the holders or the Company for federal income tax
purposes. See 'Certain U.S. Federal Income Tax Considerations.'
USE OF PROCEEDS........................... There will be no proceeds to the Company from the exchange pursuant
to the Exchange Offer. See 'Use of Proceeds.'
</TABLE>
7
<PAGE>
<TABLE>
<S> <C>
EXCHANGE AGENT............................ The Bank of New York is serving as exchange agent (the 'Exchange
Agent') in connection with the Exchange Offer.
</TABLE>
CONSEQUENCES OF EXCHANGING OR FAILING TO EXCHANGE OLD NOTES
Holders of Old Notes who do not exchange their Old Notes for New Notes
pursuant to the Exchange Offer will continue to be subject to the provisions in
the Indenture regarding transfer and exchange of the Old Notes and the
restrictions on transfer of such Old Notes as set forth in the legend thereon as
a consequence of the issuance of the Old Notes pursuant to exemptions from, or
in transactions not subject to, the registration requirements of the Securities
Act and applicable state securities laws. In general, the Old Notes may not be
offered or sold, unless registered under the Securities Act, except pursuant to
an exemption from, or in a transaction not subject to, the Securities Act and
applicable state securities laws. The Company does not currently anticipate that
it will register Old Notes under the Securities Act. See 'Description of the
Notes--Registration Rights.' Based on interpretations by the staff of the
Commission, as set forth in no-action letters issued to third parties, the
Company believes that New Notes issued pursuant to the Exchange Offer in
exchange for Old Notes may be offered for resale, resold or otherwise
transferred by holders thereof (other than any holder which is an 'affiliate' of
the Company within the meaning of Rule 405 under the Securities Act) without
compliance with the registration and prospectus delivery provisions of the
Securities Act, provided that such New Notes are acquired in the ordinary course
of such holders' business and such holders have no arrangement with any person
to participate in the distribution of such New Notes. However, the Company does
not intend to request the Commission to consider, and the Commission has not
considered, the Exchange Offer in the context of a no-action letter and there
can be no assurance that the staff of the Commission would make a similar
determination with respect to the Exchange Offer as in such other circumstances.
Each holder, other than a broker-dealer, must acknowledge that it is not engaged
in, and does not intend to engage in, a distribution of New Notes and has no
arrangement or understanding to participate in a distribution of New Notes. If
any holder is an affiliate of the Company, is engaged in or intends to engage in
or has any arrangement or understanding with respect to the distribution of the
New Notes to be acquired pursuant to the Exchange Offer, such holder (i) could
not rely on the applicable interpretations of the staff of the Commission and
(ii) must comply with the registration and prospectus delivery requirements of
the Securities Act in connection with any resale transaction. Each broker-dealer
that receives New Notes for its own account in exchange for Old Notes must
acknowledge that such Old Notes were acquired by such broker-dealer as a result
of market-making activities or other trading activities and that it will deliver
a prospectus in connection with any resale of such New Notes. The Letter of
Transmittal states that by so acknowledging and by delivering a prospectus, a
broker-dealer will not be deemed to admit that it is an 'underwriter' within the
meaning of the Securities Act. This Prospectus, as it may be amended or
supplemented from time to time, may be used by a broker-dealer in connection
with resales of New Notes received in exchange for Old Notes where such Old
Notes were acquired by such broker-dealer as a result of market-making
activities or other trading activities. The Company has agreed that, for a
period of 180 days after the Expiration Date, it will make this Prospectus
available to any broker-dealer for use in connection with any such resale. See
'Plan of Distribution.' In addition, to comply with the state securities laws,
the New Notes may not be offered or sold in any state unless they have been
registered or qualified for sale in such state or an exemption from registration
or qualification is available and is complied with. The offer and sale of the
New Notes to 'qualified institutional buyers' (as such term is defined under
Rule l44A of the Securities Act) is generally exempt from registration or
qualification under the state securities laws. The Company currently does not
intend to register or qualify the sale of the New Notes in any state where an
exemption from registration or qualification is required and not available. See
'The Exchange Offer--Consequences of Exchanging or Failing to Exchange Old
Notes' and 'Description of the Notes--Registration Rights.'
SUMMARY DESCRIPTION OF THE NEW NOTES
The terms of the New Notes and the Old Notes are identical in all material
respects, except for certain transfer restrictions and registration rights
relating to the Old Notes and except that, if the Exchange Offer is not
consummated by December 1, 1998, interest will accrue on the Old Notes (in
addition to the accretion of Original Issue Discount) from and including such
date until but excluding the date of consummation of the Exchange Offer payable
in cash semiannually in arrears on February 1 and August 1, commencing February
1, 1999 at a
8
<PAGE>
rate per annum equal to .50% of the Accreted Value of the Old Notes as of the
August 1 or February 1 immediately preceding such interest payment date.
<TABLE>
<S> <C>
NEW NOTES OFFERED......................... Up to $217,903,000 principal amount at maturity of 9 5/8% Senior
Subordinated Discount Exchange Notes Due 2006, which have been
registered under the Securities Act.
MATURITY DATE............................. February 1, 2006.
YIELD TO MATURITY; INTEREST............... 9 5/8% per annum (computed on a semiannual bond equivalent basis)
calculated from February 11, 1998. There will be no periodic payments
of interest on the New Notes through February 1, 2002. Thereafter,
the New Notes will bear interest at a rate of 9 5/8% per annum,
payable semi-annually on February 1 and August 1 of each year,
commencing August 1, 2002.
ORIGINAL ISSUE DISCOUNT................... The Old Notes were issued at an issue price of $688.38 per $1,000
aggregate principal amount at maturity. Because the New Notes will be
treated as a continuation of the Old Notes, which were issued at an
original issue discount ('Original Issue Discount') for federal
income tax purposes, the New Notes will have Original Issue Discount.
Prospective holders of New Notes should be aware that, although there
will be no periodic payments of interest on the New Notes through
February 1, 2002, accrued Original Issue Discount will be includable,
periodically, in a holder's gross income for United States federal
income tax purposes in advance of the receipt of cash payments to
which such income is attributable. See 'Certain U.S. Federal Income
Tax Considerations.'
OPTIONAL REDEMPTION....................... Prior to February 1, 2002, the Notes are redeemable at the option of
the Company, in whole but not in part, at a redemption price equal to
the Accreted Value on the date of redemption plus the Applicable
Premium. The Notes may be redeemed at the option of the Company in
whole or from time to time in part at any time on and after February
1, 2002 at the redemption prices set forth herein on the date of
redemption, together with accrued and unpaid interest to the date of
redemption. Prior to February 1, 2001, in connection with certain
public offerings of common stock, the Company may, at its option,
redeem Notes at a redemption price equal to 109 5/8% of the Accreted
Value of the Notes on the date of redemption, together with accrued
and unpaid interest, if any, to the date of redemption; provided,
however, that at least $141,637,000 aggregate principal amount at
maturity of Notes remains outstanding after each such redemption. See
'Description of the Notes--Optional Redemption.'
CHANGE OF CONTROL......................... Upon a Change of Control, each holder of the Notes will have the
right to require the Company to repurchase all or a portion of such
holder's Notes at a price equal to the Put Amount on the date of
repurchase. See 'Description of the Notes--Change of Control.'
RANKING................................... The Old Notes are, and the New Notes will be, unsecured obligations
of the Company and the Old Notes are, and the New Notes will be,
subordinate in right of payment to all existing and future Senior
Debt of the Company. The Old Notes rank, and the New Notes will rank
pari passu in right of payment with all existing and future Senior
Subordinated Debt of the Company and senior to all future
subordinated debt of the Company, if any is issued. At March 31,
1998, after giving effect to the Panavision Recapitalization,
Panavision would have had outstanding approximately $305 million of
Senior Debt, consisting of borrowings under the New Credit Agreement,
and $150 million of Senior Subordinated Debt, consisting of the
Notes. In addition, the Old Notes are, and the New Notes will be,
effectively subordinated to all existing and future liabilities of
Panavision's subsidiaries. At March 31, 1998, after giving effect to
the Panavision Recapitalization, the outstanding liabilities of such
subsidiaries would have been approximately $47 million. See 'Risk
Factors--Subordination to Senior Debt and Subsidiary Liabilities' and
'Description of the Notes--Subordination.'
</TABLE>
9
<PAGE>
<TABLE>
<S> <C>
EXCHANGE OFFER; REGISTRATION RIGHTS....... Holders of New Notes are not entitled to any registration rights with
respect to the New Notes. Pursuant to the Registration Agreement, PX
Escrow and the Company agreed that they would, at their cost, use
their best efforts to cause a registration statement to be declared
effective under the Securities Act for the exchange of Old Notes for
registered notes. The Registration Statement of which this Prospectus
is a part constitutes the registration statement for purposes of the
Registration Agreement. See 'Description of the Notes--Registration
Rights.'
CERTAIN COVENANTS......................... The Indenture under which the Notes were issued contains certain
covenants with respect to the Company and its Subsidiaries (as
defined herein) that limit, among other things, (i) the incurrence of
additional indebtedness by the Company or its Subsidiaries, (ii) the
payment of dividends or other distributions or the making of certain
other restricted payments by the Company or its Subsidiaries, (iii)
the sale of assets of the Company, (iv) certain transactions with
affiliates or (v) certain mergers or consolidations or transfers of
all or substantially all of the Company's assets. The Indenture also
prohibits certain restrictions on distributions from certain
subsidiaries. All these limitations and prohibitions, however, are
subject to a number of important qualifications. See 'Description of
the Notes--Certain Covenants.'
USE OF PROCEEDS........................... The Company will not receive any proceeds from the Exchange Offer.
The Company used the net proceeds of the Offering, which were
approximately $144 million (net of discounts to the Initial
Purchasers and fees and expenses), to finance the Panavision
Recapitalization. Pending such use, the Escrowed Funds were held in
escrow and invested in accordance with the provisions of the Escrow
Agreement (as defined herein). See 'Use of Proceeds.'
</TABLE>
RISK FACTORS
Prospective holders of New Notes should consider carefully all of the
information set forth in this Prospectus and, in particular, should evaluate the
specific factors set forth under 'Risk Factors' before making a decision to
tender their Old Notes in the Exchange Offer.
10
<PAGE>
SUMMARY FINANCIAL DATA
The following table sets forth summary historical financial data for the
Company for each of the fiscal years in the five year period ended December 31,
1997 and for the three month periods ended March 31, 1997 and 1998,
respectively. The summary financial data for each of the fiscal years in the
five year period ended December 31, 1997 have been derived from the Company's
audited consolidated financial statements. The summary financial data for the
three months ended March 31, 1997 and 1998 have been derived from the Company's
unaudited interim condensed consolidated financial statements, which in the
opinion of management include all adjustments, consisting only of normal
recurring adjustments, which the Company considers necessary for a fair
presentation of the financial position and results of operations of the Company
for these periods. Operating results for the three months ended March 31, 1998
are not necessarily indicative of the results that may be expected for the full
year. The following summary financial data should be read in conjunction with
'Capitalization,' 'Selected Historical Financial Data,' 'Management's Discussion
and Analysis of Financial Condition and Results of Operations' and the
Consolidated Financial Statements of the Company included elsewhere in this
Prospectus.
The following table also sets forth unaudited summary pro forma statement
of operations and other data for the three months ended March 31, 1998 which
give pro forma effect to the Panavision Recapitalization (including the
Panavision Assumption) and the unaudited summary pro forma statement of
operations data and other data for the year ended December 31, 1997, which give
pro forma effect to the FSG Acquisition and the Panavision Recapitalization in
each case, as if such transactions had occurred on January 1, 1997. The
unaudited summary pro forma balance sheet data as of March 31, 1998, give effect
to the Panavision Recapitalization as if it had occurred on March 31, 1998. The
pro forma adjustments are based upon available information and certain
assumptions that management believes are reasonable under the circumstances. The
summary pro forma financial data do not purport to represent the results of
operations or the financial position of Panavision and its subsidiaries that
actually would have occurred had the foregoing transactions been consummated on
the aforesaid dates. The summary pro forma financial data should be read in
conjunction with the Consolidated Financial Statements of Panavision and the
Unaudited Pro Forma Financial Data, both of which are included elsewhere in this
Prospectus.
11
<PAGE>
<TABLE>
<CAPTION>
(DOLLARS IN THOUSANDS)
---------------------------------------------------------------------------------------------
PRO FORMA
THREE MONTHS ENDED ------------
YEAR ENDED DECEMBER 31, MARCH 31, YEAR ENDED
---------------------------------------------------- ----------------------- DECEMBER 31,
1993 1994 1995(A) 1996(B) 1997(C) 1997 1998 1997
-------- -------- -------- -------- -------- ------------- ------- ------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
INCOME STATEMENT DATA:
Revenue:
Camera rental........ $ 54,031 $ 61,642 $ 75,083 $ 89,785 $117,028 $ 20,926 $30,280 $134,686
Lighting rental...... 933 1,160 4,121 14,917 30,562 5,125 4,998 31,820
Sales and other...... 11,746 14,298 16,124 19,936 29,273 5,105 7,876 36,340
-------- -------- -------- -------- -------- ------------- ------- ------------
Total.............. 66,710 77,100 95,328 124,638 176,863 31,156 43,154 202,846
Gross margin.......... 30,278 36,105 50,959 65,165 85,984 15,327 19,061 97,120
Selling, general and
administrative
expenses ............ 18,875 19,210 28,486 30,688 47,575 8,126 13,512 58,973
Research and
development
expenses............. 2,272 2,442 2,986 4,310 4,494 1,315 1,057 4,494
-------- -------- -------- -------- -------- ------------- ------- ------------
Operating income...... 9,131 14,453 19,487 30,167 33,915 5,886 4,492 33,653
OTHER FINANCIAL DATA:
Depreciation and
amortization......... $ 14,596 $ 15,031 $ 17,479 $ 19,203 $ 26,573 $ 5,151 $7,549 $ 31,218
Capital
expenditures(d)...... 12,678 16,251 19,454 27,816 46,732 12,227 15,627 51,330
Ratio of earnings to
fixed charges(e)..... 1.6x 2.3x 1.9x 2.8x 4.1x 4.6x 2.3x (f)
<CAPTION>
PRO FORMA
------------------
THREE MONTHS ENDED
MARCH 31,
1998
------------------
<S> <C>
INCOME STATEMENT DATA:
Revenue:
Camera rental........ $ 30,280
Lighting rental...... 4,998
Sales and other...... 7,876
-------
Total.............. 43,154
Gross margin.......... 19,061
Selling, general and
administrative
expenses ............ 13,824
Research and
development
expenses............. 1,057
-------
Operating income...... 4,180
OTHER FINANCIAL DATA:
Depreciation and
amortization......... 7,861
Capital
expenditures(d)...... 15,627
Ratio of earnings to
fixed charges(e)..... (g)
</TABLE>
<TABLE>
<CAPTION>
AS OF
MARCH
AS OF DECEMBER 31, 31, 1998
------------------------------------------------------------ --------
1993 1994 1995 1996 1997 ACTUAL
-------- -------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C> <C>
BALANCE SHEET DATA:
Cash and cash equivalents................ $ 16,118 $ 22,734 $ 31,685 $ 10,629 $ 11,020 $ 5,835
Working capital, excluding cash.......... 714 (2,693) (5,682) 688 5,923 12,448
Net property, plant and equipment........ 106,710 108,197 111,801 130,441 199,038 205,102
Total assets............................. 140,075 149,707 165,751 176,746 281,937 284,324
Total long-term debt, including current
maturities.............................. 139,500 131,000 128,952 60,000 125,382 122,201
Stockholders' (deficit) equity........... (6,706) 922 6,456 93,018 109,444 115,308
<CAPTION>
PRO FORMA
---------
<S> <C>
BALANCE SHEET DATA:
Cash and cash equivalents................ $ 10,571
Working capital, excluding cash.......... 8,817
Net property, plant and equipment........ 205,102
Total assets............................. 288,215
Total long-term debt, including current
maturities.............................. 455,204
Stockholders' (deficit) equity........... (213,804)
</TABLE>
- ------------------
(a) Includes operating results of Panavision Canada Corporation, a former agent,
since January 20, 1995, the date of the acquisition.
(b) Includes operating results of Lee Lighting Limited since July 1, 1996, the
effective date of the acquisition.
(c) Includes operating results of FSG since June 5, 1997, the date of the
acquisition.
(d) Capital expenditures include manufacturing costs and purchases of equipment.
(e) For the purposes of calculating the ratio of earnings to fixed charges,
earnings include (loss) income before income taxes plus fixed charges. Fixed
charges consist of interest expense, the amortization of debt issue costs
and the interest portion of rent expense.
(f) For the pro forma year ended December 31, 1997, the deficiency of earnings
to fixed charges was $3,716.
(g) For the pro forma three months ended March 31, 1998, the deficiency of
earnings to fixed charges was $4,626.
12
<PAGE>
RISK FACTORS
Prospective holders of New Notes should consider carefully all of the
information set forth in this Prospectus and, in particular, should evaluate the
following risks before tendering their Old Notes in the Exchange Offer, although
the risk factors set forth below (other than '--Consequences of Failure to
Exchange') are generally applicable to the Old Notes as well as the New Notes.
CONSEQUENCES OF FAILURE TO EXCHANGE
Holders of Old Notes who do not exchange their Old Notes for New Notes
pursuant to the Exchange Offer will continue to be subject to the provisions in
the Indenture regarding transfer and exchange of the Old Notes and the
restrictions on transfer of such Old Notes as set forth in the legend thereon as
a consequence of the issuance of the Old Notes pursuant to exemptions from, or
in transactions not subject to, the registration requirements of the Securities
Act and applicable state securities laws. In general, the Old Notes may not be
offered or sold, unless registered under the Securities Act, except pursuant to
an exemption from, or in a transaction not subject to, the Securities Act and
applicable state securities laws. The Company does not currently anticipate that
it will register the Old Notes under the Securities Act or under any applicable
state securities laws. See 'The Exchange Offer--Consequences of Exchanging or
Failing to Exchange Old Notes.'
SUBSTANTIAL INDEBTEDNESS AND ABILITY TO REPAY THE NOTES
As of March 31, 1998, after giving effect to the Panavision
Recapitalization, Panavision would have had approximately $455 million of total
indebtedness on a consolidated basis, consisting of the Notes and approximately
$305 million of borrowings outstanding under the New Credit Agreement, and a
stockholders' deficit of approximately $213.8 million. See 'Capitalization.' The
pro forma deficiency of earnings to fixed charges for the three months ended
March 31, 1998 is $4.6 million. This level of indebtedness could adversely
affect Panavision's ability to make payments on or repurchase the Notes. In
addition, subject to certain restrictions imposed by the Indenture, Panavision
and its subsidiaries may incur from time to time substantial additional
indebtedness.
Panavision's level of indebtedness could have important consequences for
Panavision, including the following: (i) the ability of Panavision to obtain
additional financing for working capital, capital expenditures, acquisitions,
debt service requirements or other purposes may be impaired; (ii) a substantial
portion of Panavision's cash flow from operations will be required to pay
Panavision's interest expense and principal repayment obligations and will not
be available for its general corporate needs; and (iii) Panavision's flexibility
to adjust to changing market conditions may be limited, and its ability to
compete against its competitors may be reduced.
Panavision currently anticipates that in order to pay the principal amount
at maturity of the Notes or upon the occurrence of an Event of Default (as
defined herein), to redeem the Notes or to repurchase the Notes upon the
occurrence of a Change of Control, Panavision will be required to adopt one or
more alternatives, such as seeking capital contributions or loans from its
affiliates, refinancing its indebtedness or selling its equity securities. None
of the affiliates of Panavision will be required to make any capital
contributions or other payments to Panavision with respect to Panavision's
obligations on the Notes, and the obligations of Panavision with respect to the
Notes will not be guaranteed by any affiliate of Panavision or any other person.
There can be no assurance that any of the foregoing actions could be effected on
satisfactory terms, that they would be sufficient to enable Panavision to make
any payments in respect of the Notes when required or that any of such actions
would be permitted by the terms of the Indenture or the debt instruments of
Panavision then in effect. See 'Management's Discussion and Analysis of
Financial Condition and Results of Operations--Liquidity and Capital Resources,'
'Description of Other Indebtedness' and 'Description of the Notes.'
HOLDING COMPANY STRUCTURE
Panavision is a holding company whose only material asset is the capital
stock of and partnership interests in its subsidiaries. Panavision's principal
business operations are conducted by its subsidiaries, and Panavision has no
operations of its own. Accordingly, Panavision's only source of cash to pay its
obligations with respect to the Notes and any other obligations is expected to
be distributions with respect to its ownership interests in its
13
<PAGE>
subsidiaries. There can be no assurance that Panavision's subsidiaries will
generate sufficient cash flow to pay dividends or distribute funds to Panavision
or that applicable state law and contractual restrictions, including negative
covenants contained in the debt instruments of such subsidiaries, will permit
such dividends or distributions. See '--Restrictions Imposed by Terms of the
Company's Indebtedness; Consequences of Failure to Comply' and 'Description of
Other Indebtedness.'
SUBORDINATION TO SENIOR DEBT AND SUBSIDIARY LIABILITIES
The Old Notes are, and the New Notes will be, subordinate in right of
payment to all Senior Debt of Panavision. At March 31, 1998, after giving effect
to the Panavision Recapitalization, Panavision would have had outstanding
approximately $305 million of Senior Debt, consisting of borrowings under the
New Credit Agreement. Panavision may not pay principal of, premium or interest
on the Notes, make any deposit pursuant to defeasance provisions or repurchase,
redeem or otherwise retire the Notes if any Senior Debt is not paid when due or
any other default on Senior Debt occurs and the maturity of such Senior Debt is
accelerated in accordance with its terms unless, in either case, and until such
default has been cured or waived or has ceased to exist, any such acceleration
has been rescinded or such Senior Debt has been discharged or paid in full. In
addition, if a default exists with respect to certain Senior Debt and certain
other conditions are satisfied, Panavision may not make any payments on the
Notes for a designated period of time. Upon any payment or distribution of
assets of Panavision upon a total or partial liquidation, dissolution,
reorganization or similar proceeding, the holders of Senior Debt will be
entitled to receive payment in full before the holders of the Notes are entitled
to receive any payment. See 'Description of the Notes--Subordination.'
In addition, as a result of the holding company structure, any right of
Panavision and its creditors, including holders of the Notes, to participate in
the assets of any of Panavision's subsidiaries, upon any liquidation or
reorganization of any such subsidiary will be subject to the prior claims of
that subsidiary's creditors (except to the extent that Panavision may itself be
a creditor of such subsidiary). Accordingly, at March 31, 1998, after giving
effect to the Panavision Recapitalization, the outstanding liabilities
(including trade payables) of such subsidiaries would have been approximately
$47 million. See 'Management's Discussion and Analysis of Financial Condition
and Results of Operations--Liquidity and Capital Resources.'
RESTRICTIONS IMPOSED BY TERMS OF THE COMPANY'S INDEBTEDNESS; CONSEQUENCES OF
FAILURE TO COMPLY
The terms and conditions of the Indenture and the New Credit Agreement
impose restrictions that affect, among other things, the ability of Panavision
to incur debt, pay dividends or make distributions, make acquisitions, create
liens, sell assets and make certain investments. The New Credit Agreement also
requires Panavision to achieve certain financial ratios, some of which become
more restrictive with the passage of time. In addition, the occurrence of a
change of control (as defined in the relevant agreement) of Panavision would be
an event of default under the New Credit Agreement and would give the holders of
the Notes the right to require repurchase of their notes. See 'Description of
Other Indebtedness.' The ability of Panavision to comply with the foregoing
provisions can be affected by events beyond Panavision's control. The breach of
any of these covenants could result in a default under one or more of the debt
instruments of Panavision. In the event of a default under any indebtedness of
Panavision or its subsidiaries, the holders of such indebtedness could elect to
declare all amounts outstanding under their respective debt instruments to be
due and payable. Any such declaration under a debt instrument of Panavision or
its subsidiaries is likely to result in an event of default under one or more of
the other debt instruments of Panavision or its subsidiaries. There could be no
assurance that the assets of Panavision or its subsidiaries, as the case may be,
would be sufficient to repay in full borrowings under all of such debt
instruments, including the Notes whether upon maturity or if such indebtedness
were to be accelerated upon an event of default or, in the case of the Notes,
upon a required repurchase in the event of a change of control, or that
Panavision would be able to refinance or restructure its payments on such
indebtedness. See '--Substantial Indebtedness and Ability to Repay the Notes'
and 'Description of the Notes.'
ORIGINAL ISSUE DISCOUNT; LIMITATION ON HOLDERS' CLAIMS
The Old Notes were, and the New Notes will be, issued at a substantial
Original Issue Discount from their stated principal amount at maturity. Except
under certain limited circumstances described in 'Description of the
Notes--General,' there will be no periodic cash payments of interest with
respect to the Notes for the period
14
<PAGE>
through and including February 1, 2002. Consequently, for such period,
purchasers of Notes will be required to include amounts in gross income for U.S.
federal income tax purposes in advance of receipt of the cash payments to which
the income is attributable. See 'Certain U.S. Federal Income Tax Considerations'
for a more detailed discussion of the U.S. federal income tax consequences to
the purchasers of the Notes resulting from the purchase, ownership or
disposition thereof.
Under the Indenture, in the event of an acceleration of the maturity of the
Notes upon the occurrence of an Event of Default, the holders of the Notes will
be entitled to recover only the amount which may be declared due and payable
pursuant to the Indenture, which, prior to February 1, 2002, will be less than
the principal amount at maturity of such Notes. See 'Description of the
Notes--Defaults.'
If a bankruptcy case is commenced by or against the Company under the
United States Bankruptcy Code, the claim of a holder of Notes with respect to
the principal amount thereof may be limited to an amount equal to the sum of (i)
the Issue Price of the Notes and (ii) that portion of the Original Issue
Discount which is not deemed to constitute 'unmatured interest' for purposes of
the United States Bankruptcy Code. Accordingly, holders of the Notes under such
circumstances may, even if sufficient funds are available, receive a lesser
amount than they would be entitled to under the express terms of the Indenture.
In addition, there can be no assurance that a bankruptcy court would compute the
accrual of interest by the same method as that used for the calculation of
Original Issue Discount under U.S. federal income tax law and, accordingly, a
holder might be required to recognize gain or loss in the event of a
distribution related to such a bankruptcy case.
DIFFICULTY IN EXECUTING GROWTH STRATEGY
The Company's growth strategy is based on the Company's current and
historical operations and the operations of other companies in the entertainment
industry. The Company's management may decide to alter or discontinue certain
parts of its business strategy described herein and may adopt alternative or
additional strategies. In addition, there can be no assurance that such a
strategy, if implemented, will be successful or will improve operating results.
Further, other conditions may exist, such as increased competition, reduction in
demand for filmed entertainment or an economic downturn, which may offset any
improved operating results that are attributable to such a strategy.
DEPENDENCE ON FEATURE FILM INDUSTRY
The Company's operations are heavily dependent on the production of feature
films, including, in particular, the U.S. market. During the four year period
including 1993 through 1996, the Company benefited from an increase in the
number of major studio feature films (and especially large-budget action films),
which tend to use larger camera packages than the feature films made by
independent producers. In 1997 in North America, the major studios started
approximately 38 fewer feature films than in 1996, or a reduction of
approximately 31%, while independent producers started 123 more feature films
than in 1996, or an increase of approximately 34%. Significant declines in the
total number of feature films produced in the future including, in particular,
major studio or large-budget action films, could have a material adverse impact
on the Company's operations.
COMPETITION
The market for cinematography equipment is highly competitive, primarily
driven by technology, customer service and, to a lesser extent, price. As a
manufacturer of equipment, the Company has two primary competitors, located in
Europe, who sell their products to rental companies, which then rent the
equipment to the ultimate user. As a renter of equipment, the Company competes
with numerous rental companies, which purchase equipment from other
manufacturers and then rent that equipment to their customers. There can be no
assurance that the Company will be able to continue to develop, manufacture and
market its products successfully against existing or new competitors. See
'Business--Competition.'
TECHNOLOGICAL CHANGE
The motion picture and television industries are subject to technological
change, evolving industry standards, changing customer requirements and
improvements in and expansion of product offerings. The Company's ability to
anticipate and adapt to changes in technology, industry standards, customer
requirements
15
<PAGE>
and product offerings and to develop and introduce new and enhanced products
will be significant factors in the Company's ability to remain a leader in the
manufacturing and rental of cinematography equipment. Although the Company
believes it is well-positioned to meet the changing needs of the motion picture
and television industries, there can be no assurance that products or
technologies developed by others will not render the Company's products or
technologies noncompetitive or obsolete. See 'Business--Products--Research and
Product Development.'
DEPENDENCE ON KEY PERSONNEL
The Company is dependent upon the continued services of the key officers
and management personnel listed under 'Management.' The loss of key personnel
could have a material adverse effect on the Company. The Company believes that
its future success also will depend significantly upon its ability to attract,
motivate and retain additional highly skilled managerial, operational, technical
and sales and marketing personnel. Competition for such personnel is intense,
and there can be no assurance that the Company will be successful in attracting,
assimilating and retaining the personnel it requires to develop, manufacture and
market its products or expand its operations. See 'Business--Employees' and
'Management.'
DEPENDENCE UPON KEY SUPPLIERS
The Company uses outside vendors for the manufacture of certain components
used in its products, such as the grinding, manufacture and polishing of certain
camera lens elements. The Company generally does not have supply contracts with
its outside vendors. Although the Company believes that such vendors could be
replaced, the loss of one or more of such vendors could disrupt the Company's
business. See 'Business--Manufacturing and Assembly.'
INTERNATIONAL SALES; FOREIGN EXCHANGE RISK
In 1995, 1996, 1997 and the first three months of 1998, approximately 45%,
40%, 55% and 54% of the Company's revenue, respectively, was generated outside
of the United States, primarily in the United Kingdom and Canada. In 1997, as a
result of the FSG Acquisition the Company expanded the scope of its operations
outside of the United States and expects that international operations will
continue to account for a significant and increasing portion of its revenue in
future periods. The results of operations of the Company's foreign subsidiaries
are translated from local currency to United States dollars. Therefore, the
Company's results of operations are affected by fluctuations in exchange rates
between such currencies. In addition to foreign exchange risk, international
operations are subject to a number of special risks, including trade barriers,
exchange controls, national and regional labor strikes, political risks and
risks of increases in duties, taxes and governmental royalties, as well as
changes in laws and policies governing operations of foreign-based companies. In
addition, earnings of foreign subsidiaries and intercompany payments are subject
to foreign income tax rules that may reduce cash flow available to meet required
debt service and other obligations of Panavision.
DEPENDENCE ON MANUFACTURING FACILITY
The Company's manufacturing facility is located in Woodland Hills,
California. Since the Company is dependent on its manufacturing facility, a
disruption of the Company's manufacturing operations could have a material
adverse effect on the Company's business, financial condition and results of
operations. Such disruption could result from various factors including human
error or a natural disaster such as earthquake, fire or flood.
FRAUDULENT TRANSFER CONSIDERATIONS
Under relevant federal bankruptcy law and state fraudulent transfer laws,
the Notes under certain circumstances may be subject to avoidance or may be
subordinated to existing or future indebtedness of the Company (in addition to
the Senior Debt to which the Notes are expressly subordinated). Such
circumstances would include a court finding in a suit by an unpaid creditor or
representative of creditors, such as a trustee in bankruptcy or the Company as
debtor-in-possession, that the incurrence of other indebtedness in connection
with the Panavision Recapitalization and the application of the net proceeds
therefrom either (a) the Company received less than a reasonably equivalent
value or fair consideration for the Panavision Assumption and either (i) was
insolvent at the time of such assumption or was rendered insolvent thereby, (ii)
was engaged in business
16
<PAGE>
or transactions for which the assets remaining with the Company constituted
unreasonably small capital or (iii) intended to incur, or believed that it would
incur, debts beyond its ability to pay as such debts matured; or (b) the Company
assumed the obligations under the Notes with actual intent to hinder, delay or
defraud its existing creditors. In such case, the court could avoid the Notes
and order that all or part of any payments on the Notes be returned to the
Company or to a fund for the benefit of its creditors, or subordinate the Notes
to some or all other indebtedness of the Company, or take other action
detrimental to the holders of the Notes.
LACK OF PUBLIC MARKET FOR THE NOTES
The New Notes are being offered to the holders of the Old Notes. The Old
Notes were issued on February 11, 1998 to qualified institutional buyers (as
defined in Rule 144A under the Securities Act ('Rule 144A')) and to certain
persons in offshore transactions in reliance on Regulation S under the
Securities Act and are eligible for trading in the Private Offering, Resale and
Trading through Automated Linkages (PORTAL) Market, the National Association of
Securities Dealers' screenbased, automated market for trading of securities
eligible for resale under Rule 144A. To the extent that Old Notes are tendered
and accepted in the Exchange Offer, the trading market for the remaining
untendered Old Notes could be adversely affected. There is no existing trading
market for the New Notes, and there can be no assurance regarding the future
development of a market for the New Notes, or the ability of holders of the New
Notes to sell their New Notes or the price at which such holders may be able to
sell their New Notes. Although the Initial Purchasers have informed the Company
that they currently intend to make a market in the New Notes, they are not
obligated to do so, and any such market-making may be discontinued at any time
without notice. As a result, the market price of the New Notes could be
adversely affected. The Company does not intend to apply for listing or
quotation of the New Notes on any securities exchange or stock market.
Historically, the market for non-investment grade debt has been subject to
disruptions that have caused substantial volatility in the prices of such
securities. There can be no assurance that the market for the Notes will not be
subject to similar disruptions. Any such disruptions could have an adverse
effect on Holders of the Notes.
CONTROL BY MAFCO HOLDINGS
Mafco Holdings indirectly owns approximately 72% of the capital stock of
Panavision. As a result, Mafco Holdings is able to direct and control the
policies of Panavision, including mergers, sales of assets and similar
transactions. See 'Certain Transactions--Relationship with Mafco Holdings.'
FORWARD-LOOKING STATEMENTS
This Prospectus contains certain forward-looking statements and information
relating to Panavision that are based on the beliefs of the management of
Panavision as well as assumptions made by and information currently available to
management. Such forward-looking statements are principally contained in the
sections 'Prospectus Summary,' 'Management's Discussion and Analysis of
Financial Condition and Results of Operations' and 'Business--Growth Strategy.'
In addition, in those and other portions of this Prospectus, the words
'anticipate,' 'believe,' 'estimate,' 'expect,' 'plans,' 'intends' and similar
expressions, as they relate to Panavision or management, are intended to
identify forward-looking statements. Such statements reflect the current views
of Panavision and its subsidiaries with respect to future events and are subject
to certain risks, uncertainties and assumptions, including the risk factors
described in this Prospectus. Should one or more of these risks or uncertainties
materialize, or should underlying assumptions prove incorrect, actual results
may vary materially from those described herein as anticipated, believed,
estimated or expected. Panavision does not intend to update these
forward-looking statements.
17
<PAGE>
THE PANAVISION RECAPITALIZATION
On June 4, 1998, as contemplated by (i) the Recapitalization Agreement and
(ii) the Stockholders Agreement, Panavision consummated the Merger whereby PX
Merger was merged with and into Panavision, with Panavision as the surviving
corporation. Immediately prior to the consummation of the Merger, PX Holding
purchased 5,784,199 shares of Company Common Stock from Panavision at a purchase
price of $154,376,801.
In connection with the Merger, holders of in excess of 88% of the shares of
Company Common Stock held by shareholders other than Warburg elected to receive
cash for their shares. As a result, pursuant to the Recapitalization Agreement,
the right to receive cash for such shares was subject to proration. As a result
of the Merger, (i) 5,466,120 shares of Company Common Stock were exchanged for
$27.00 per share, or an aggregate of $147,585,240, and (ii) 745,380 shares of
Company Common Stock were retained by holders either through election or
proration. In addition, as part of the Panavision Recapitalization, Warburg
exchanged 88%, or 11,199,060 shares, of the shares of Company Common Stock it
beneficially owns for preferred stock of Panavision that was redeemed
immediately upon consummation of the Merger at a price equivalent to $26.50 in
cash per share of Company Common Stock.
In addition, pursuant to the Stockholders Agreement, Warburg granted to
Mafco Holdings an option to purchase at $30.00 per share of Company Common
Stock, and Mafco Holdings granted to Warburg an option to sell at $25.00 per
share of Company Common Stock, the 1,526,040 Warburg Shares not exchanged for
redeemable preferred stock as described above. Each such option is exercisable
in whole, but not in part, during the period beginning one year, and ending two
years, following consummation of the Merger. If Mafco Holdings acquired the
remaining 1,526,040 shares of Company Common Stock upon the exercise by either
Warburg or it of the option described above, then, assuming no changes in the
number of shares of Company Common Stock outstanding prior to the date of such
exercise, Mafco Holdings would then beneficially own 91% of the shares of
Company Common Stock outstanding.
The net proceeds of the Offering, borrowings under the New Credit Agreement
and the proceeds from the PX Stock Purchase, were used to fund the payment of
the cash consideration and the fees and expenses in connection with the Merger
as well as to retire existing indebtedness and to provide working capital for
Panavision. See 'Management's Discussion and Analysis of Financial Condition and
Results of Operations-- Liquidity and Capital Resources.' In connection with the
transactions contemplated by the Recapitalization Agreement, the assets of PX
Escrow (consisting of funds held in escrow and deferred charges) and the
obligations of PX Escrow under the Notes and the Indenture were assumed by
Panavision.
As a result of the Merger, PX Holding, a wholly owned subsidiary of Mafco
Holdings, acquired a 72% interest in the Company. Warburg owns approximately 19%
of the issued and outstanding Company Common Stock and approximately 9% is owned
by public stockholders (including management).
USE OF PROCEEDS
Panavision will not receive any proceeds from the Exchange Offer.
Panavision used the net proceeds of the Offering, which were approximately
$144.0 million, together with borrowings under the New Credit Agreement and a
cash investment by PX Holding, to finance the Panavision Recapitalization.
Pending such use, the Escrowed Funds were held in escrow and invested in
accordance with the provisions of the Escrow Agreement.
18
<PAGE>
CAPITALIZATION
The following table sets forth the actual consolidated cash and cash
equivalents and capitalization of Panavision as of March 31, 1998 and the pro
forma consolidated cash and cash equivalents and capitalization of Panavision at
such date. The pro forma information assumes that the proceeds of the Offering
and borrowings under the New Credit Agreement were applied as described under
'Use of Proceeds.' This table should be read in conjunction with the
Consolidated Financial Statements and the Unaudited Pro Forma Financial Data of
Panavision included elsewhere in this Prospectus.
<TABLE>
<CAPTION>
MARCH 31, 1998
---------------------
ACTUAL PRO FORMA
-------- ---------
(IN THOUSANDS,
EXCEPT SHARE AMOUNTS)
<S> <C> <C>
Cash and cash equivalents................................................................ $ 5,835 $ 10,571
-------- ---------
-------- ---------
Long-term debt, including current maturities:
Old Credit Agreement:
Term Facility....................................................................... $ 55,984 $ --
Revolving Facility (a).............................................................. 66,013 --
New Credit Agreement:
Revolving Facility (a).............................................................. -- 65,000
Term Facility (b)................................................................... -- 240,000
Other.................................................................................. 204 204
9 5/8% Senior Subordinated Discount Exchange Notes Due 2006............................ -- 150,000
-------- ---------
Total long-term debt, including current maturities.................................. 122,201 455,204
-------- ---------
Stockholders' equity (deficit) (c):
Common stock, $.01 par value; 50,000 shares authorized; 18,929 shares issued and
outstanding at March 31, 1998; 8,056 shares issued and oustanding as adjusted....... 189 81
Additional paid-in capital............................................................. 80,094 --
Retained earnings (accumulated deficit)................................................ 36,935 (211,975)
Foreign currency translation adjustment................................................ (1,910) (1,910)
-------- ---------
Total stockholders' equity (deficit)................................................ 115,308 (213,804)
-------- ---------
Total capitalization..................................................................... $237,509 $ 241,400
-------- ---------
-------- ---------
</TABLE>
- ------------------
(a) The Company has entered into a 6-year Revolving Facility of $100.0 million.
See 'Description of Other Indebtedness.'
(b) The Company has entered into a $240.0 million Term Facility in two tranches:
the Tranche A Term Facility, which is a 6-year facility in an aggregate
principal amount of $90.0 million and the Tranche B Term Facility, which is
a 7-year facility in an aggregate principal amount of $150.0 million. The
weighted average life of the term loans is approximately 6.6 years. See
'Description of Other Indebtedness.'
(c) See Unaudited Pro Forma Condensed Consolidated Balance Sheet for summary of
adjustments to stockholders' equity (deficit).
19
<PAGE>
UNAUDITED PRO FORMA FINANCIAL DATA
The following unaudited pro forma condensed consolidated statement of
operations and other data for the three months ended March 31, 1998 give pro
forma effect to the Panavision Recapitalization (including the Panavision
Assumption) and the unaudited pro forma condensed consolidated statement of
operations and other data for the year ended December 31, 1997 give pro forma
effect to the FSG Acquisition and the Panavision Recapitalization (including the
Panavision Assumption), in each case, as if such transactions had been
consummated on January 1, 1997. The pro forma condensed consolidated balance
sheet data as of March 31, 1998 gives pro forma effect to the Panavision
Recapitalization (including the Panavision Assumption) as if it had been
consummated on March 31, 1998. The pro forma adjustments are based upon
available information and certain assumptions that management believes are
reasonable under the circumstances. The pro forma financial data do not purport
to represent the results of operations or the financial position of Panavision
and its subsidiaries that actually would have occurred had the foregoing
transactions been consummated on the aforesaid dates.
The pro forma condensed consolidated statements of operations and other
data exclude the following non-recurring charges which will be reflected in the
Company's second quarter statement of operations in connection with the
Panavision Recapitalization: (i) $29.3 million relating to the cash settlement
of unexercised stock options; (ii) $17.5 million relating to the purchase by the
Company of shares acquired through the exercise of certain stock options; (iii)
$6.0 million relating to transaction expenses; (iv) $2.3 million increase in the
valuation allowance on deferred tax assets in connection with the Panavision
Recapitalization; and (v) an extraordinary charge of $1.8 million relating to
the write-off of deferred financing costs relating to the repayment of
borrowings under the existing credit agreement.
The Panavision Recapitalization is being accounted for as a
recapitalization of the Company and not as an acquisition which would have been
required to be accounted for under the purchase method of accounting.
The FSG Acquisition has been recorded under the purchase method of
accounting, and accordingly, FSG's operating results have been included in the
Company's consolidated financial statements since the acquisition date of June
5, 1997. The purchase price of the FSG Acquisition plus direct
acquisition-related costs have been allocated based on fair values of the
acquired assets and assumed liabilities. The Company provided approximately $6.3
million to cover the estimated transaction costs, lease cancellation costs and
severance related to the acquired businesses. Goodwill of approximately $9.7
million was recognized as part of the transaction and is being amortized over 30
years. The amounts for FSG included in the accompanying unaudited pro forma
condensed consolidated financial statements for the period ended December 31,
1997, are based on unaudited management information compiled for each FSG
operation from January 1, 1997 up to the date of the acquisition, June 4, 1997.
All amounts have been converted into U.S. dollars at the appropriate exchange
rates (after adjustment for minor differences between U.K. and the U.S.
generally accepted accounting principles, as more fully described in the notes
to the FSG financial statements).
The Unaudited Pro Forma Financial Data should be read in conjunction with
the Consolidated Financial Statements of Panavision and the consolidated
financial statements of FSG and the notes thereto, both of which are included
elsewhere in this Prospectus.
20
<PAGE>
PANAVISION INC.
UNAUDITED PRO FORMA CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31, 1997
--------------------------------------------------------------------------------
HISTORICAL
--------------------------------
FSG PRO FORMA ADJUSTMENTS
JANUARY 1, 1997 -------------------------------
TO FSG PANAVISION PANAVISION
PANAVISION JUNE 4, 1997 ACQUISITION RECAPITALIZATION PRO FORMA
------------- --------------- ----------- ---------------- ---------
<S> <C> <C> <C> <C> <C>
Revenues....................................... $ 176,863 $27,802 $(1,819)(a) $ $202,846
Cost of revenues............................... 90,879 16,751 (1,819)(a) 105,726
(85)(b)
------------- --------------- ----------- ---------------- ---------
Gross margin................................... 85,984 11,051 85 97,120
Operating costs................................ 52,069 10,488 130(c) 1,531(g) 63,467
(500)(d) (251)(g)
------------- --------------- ----------- ---------------- ---------
Operating income............................... 33,915 563 455 (1,280) 33,653
Interest income................................ 484 484
Interest expense............................... (6,869) (280) (1,471)(e) (39,339)(h) (39,339)
8,620(h)
Foreign exchange (loss)........................ (105) (105)
Other, net..................................... 1,315 276 1,591
------------- --------------- ----------- ---------------- ---------
Income (loss) before income taxes.............. 28,740 559 (1,016) (31,999) (3,716)
Income tax (provision) benefit................. (9,252) (179) 287(f) 6,273(f) (2,871)
------------- --------------- ----------- ---------------- ---------
Net income (loss) before extraordinary item.... $ 19,488 $ 380 $ (729) $(25,726) $ (6,587)
------------- --------------- ----------- ---------------- ---------
------------- --------------- ----------- ---------------- ---------
Basic earnings (loss) per common share......... $ 1.07 $ (0.82)
Shares used in the computation................. 18,174 8,056
Diluted earnings (loss) per common share....... $ 1.03 $ (0.82)
Shares used in the computation................. 19,012 8,056
</TABLE>
See Notes to Unaudited Pro Forma Condensed Consolidated Statements of Operations
for the year ended December 31, 1997.
21
<PAGE>
PANAVISION INC.
NOTES TO UNAUDITED PRO FORMA CONDENSED CONSOLIDATED
STATEMENTS OF OPERATIONS
FOR THE YEAR ENDED DECEMBER 31, 1997
(IN THOUSANDS)
a. To eliminate intercompany revenues between the Company and FSG and the
related cost of sales.
b. To adjust depreciation expense for the revaluation of assets and to conform
estimated useful lives.
c. To reflect the amortization of goodwill resulting from the FSG Acquisition.
d. To eliminate management fees paid to Visual Action Holdings, plc.
e. To reflect higher interest expense due to additional borrowings required for
the acquisition of FSG.
f. The pro forma provision for income taxes primarily consists of state, local
and foreign taxes. Pro forma tax adjustments reflect the elimination of
federal and state income taxes (other than certain state minimum taxes) as a
result of additional interest expense and amortization of deferred charges
related to the Panavision Recapitalization. The Company has not reflected a
federal tax benefit relating to its losses as it is more likely than not that
it will not be able to realize benefit for such losses in the future.
g. To reflect the elimination of historical amortization of deferred financing
charges on debt retired and the amortization of deferred financing charges on
the Notes assumed in connection with the Panavision Recapitalization and the
New Credit Agreement.
h. To reflect interest expense on the Notes, compounded semiannually, borrowings
under the New Credit Agreement and elimination of historical interest
expense:
<TABLE>
<CAPTION>
YEAR
ENDED
DECEMBER 31,
INTEREST EXPENSE 1997
- ------------------------------------------------------------------ ------------
<S> <C>
Notes at 9.625% $ 14,438
Revolving Facility at 7.9663% 5,178
Tranche A Term Loan at 7.94% 7,146
Tranche B Term Loan at 8.238% 12,357
Other fees 220
------------
39,339
Less:
Interest expense on retired debt 8,620
------------
Net interest adjustment $ 30,719
------------
------------
</TABLE>
A 0.125% change in the interest rate payable on borrowings under the New Credit
Agreement would change annual interest expense as follows:
<TABLE>
<S> <C>
Revolving Facility $ 77
Tranche A Term Facility 113
Tranche B Term Facility 187
------------
$ 377
------------
------------
</TABLE>
22
<PAGE>
PANAVISION INC.
UNAUDITED PRO FORMA CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<TABLE>
<CAPTION>
THREE MONTHS ENDED MARCH 31, 1998
-----------------------------------------
PANAVISION
ACTUAL RECAPITALIZATION PRO FORMA
------- ---------------- ---------
<S> <C> <C> <C>
Revenues................................................................ $43,154 $ $43,154
Cost of revenues........................................................ 24,093 24,093
------- ---------------- ---------
Gross margin............................................................ 19,061 19,061
Operating costs......................................................... 14,569 383(a) 14,881
(71)(a)
------- ---------------- ---------
Operating income (loss)................................................. 4,492 (312) 4,180
Interest income......................................................... 166 166
Interest expense........................................................ (2,294) (10,191)(b) (10,243)
2,242(b)
Foreign exchange gain................................................... 277 277
Other, net.............................................................. 994 994
------- ---------------- ---------
Income (loss) before income taxes....................................... 3,635 (8,261) (4,626)
Income tax (provision) benefit.......................................... (1,163) 1,018(c) (145)
------- ---------------- ---------
Net income (loss)....................................................... $ 2,472 $ (7,243) $(4,771)
------- ---------------- ---------
------- ---------------- ---------
Basic earnings (loss) per common share.................................. $ 0.13 $ (0.59)
Shares used in the computation.......................................... 18,929 8,056
Diluted earnings (loss) per common share................................ $ 0.13 $ (0.59)
Shares used in the computation.......................................... 19,354 8,056
</TABLE>
See Notes to Unaudited Pro Forma Condensed Consolidated Statements of Operations
for the three months ended March 31, 1998.
23
<PAGE>
PANAVISION INC.
NOTES TO UNAUDITED PRO FORMA CONDENSED CONSOLIDATED
STATEMENTS OF OPERATIONS
FOR THE THREE MONTHS ENDED MARCH 31, 1998
(IN THOUSANDS)
a. To reflect the elimination of historical amortization of deferred financing
charges on debt retired and the amortization of deferred financing charges on
the Notes assumed in connection with the Panavision Recapitalization and the
New Credit Agreement.
b. To reflect interest expense on the Notes, compounded semiannually, borrowings
under the New Credit Agreement and elimination of historical interest
expense:
<TABLE>
<CAPTION>
THREE MONTHS
ENDED
INTEREST EXPENSE MARCH 31, 1998
- ---------------------------------------------------------- --------------
<S> <C>
Notes at 9.625%........................................... $ 3,965
Revolving Facility at 7.9663%............................. 1,295
Tranche A Term Loan at 7.94%.............................. 1,787
Tranche B Term Loan at 8.238%............................. 3,089
Other fees................................................ 55
--------------
10,191
Less:
Interest expense on retired debt.......................... 2,242
--------------
Net interest adjustment................................. $ 7,949
--------------
--------------
</TABLE>
A 0.125% change in the interest rate payable on borrowings under the New
Credit Agreement would change interest expense as follows:
<TABLE>
<S> <C>
Revolving Facility........................................ $ 20
Tranche A Term Facility................................... 28
Tranche B Term Facility................................... 47
--------------
$ 95
--------------
--------------
</TABLE>
c. The pro forma provision for income taxes primarily consists of state, local
and foreign taxes. Pro forma tax adjustments reflect the elimination of
federal and state income taxes (other than certain state minimum taxes) as a
result of additional interest expense and amortization of deferred charges
related to the Panavision Recapitalization. The Company has not reflected a
federal tax benefit relating to its losses as it is more likely than not that
it will not be able to realize benefit for such losses in the future.
24
<PAGE>
PANAVISION INC.
UNAUDITED PRO FORMA CONDENSED CONSOLIDATED BALANCE SHEET
(IN THOUSANDS)
<TABLE>
<CAPTION>
MARCH 31, 1998
-----------------------------------------
PANAVISION
ACTUAL RECAPITALIZATION PRO FORMA
-------- ---------------- ---------
<S> <C> <C> <C>
ASSETS
Current Assets:
Cash and cash equivalents............................................. $ 5,835 $ 144,000(a) $ 10,571
300,650(b)
154,377(c)
(444,145)(d)
(29,264)(e)
(121,997)(f)
(6,000)(g)
7,115(i)
Accounts receivable, net.............................................. 25,932 25,932
Inventories........................................................... 8,510 8,510
Prepaid expenses and other current assets............................. 19,665 (7,115)(i) 12,550
-------- ---------------- ---------
Total current assets.................................................... 59,942 (2,379) 57,563
Property, plant and equipment, net...................................... 205,102 205,102
Deferred tax assets..................................................... 2,329 (2,329)(h)
Goodwill................................................................ 9,866 9,866
Other................................................................... 7,085 6,000(a) 15,684
4,350(b)
(1,751)(f)
-------- ---------------- ---------
$284,324 $ 3,891 $ 288,215
-------- ---------------- ---------
-------- ---------------- ---------
LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT)
Current Liabilities:
Accounts payable...................................................... $ 9,810 $ $ 9,810
Accrued liabilities................................................... 22,777 22,777
Current maturities of long-term debt.................................. 3,685 (3,484)(f) 201
Deferred tax liabilities.............................................. 5,387 5,387
-------- ---------------- ---------
Total current liabilities............................................... 41,659 (3,484) 38,175
Long-term debt.......................................................... 118,516 (118,513)(f) 455,003
150,000(a)
305,000(b)
Deferred tax liabilities................................................ 6,380 6,380
Other liabilities....................................................... 2,461 2,461
Common stock............................................................ 189 58(c) 81
(166)(d)
Additional paid-in capital.............................................. 80,094 154,319(c) --
(234,413)(d)
Retained earnings (accumulated deficit)................................. 36,935 (209,566)(d) (211,975)
(29,264)(e)
(1,751)(f)
(6,000)(g)
(2,329)(h)
Foreign currency translation adjustment................................. (1,910) (1,910)
-------- ---------------- ---------
Total stockholders' equity (deficit).................................. 115,308 (329,112) (213,804)
-------- ---------------- ---------
$284,324 $ 3,891 $ 288,215
-------- ---------------- ---------
-------- ---------------- ---------
</TABLE>
See Notes to Unaudited Pro Forma Condensed Consolidated Balance Sheet.
25
<PAGE>
PANAVISION INC.
NOTES TO UNAUDITED PRO FORMA CONDENSED CONSOLIDATED BALANCE SHEET
(IN THOUSANDS, EXCEPT SHARE DATA)
(a) Reflects the assumption of the Notes net of the Initial Purchasers' discount
and related fees and expenses.
(b) Reflects borrowings of $305,000 under the New Credit Agreement net of
related fees and expenses.
(c) Reflects the purchase by PX Holding of 5.8 million shares of Company Common
Stock at $26.69 per share.
(d) Reflects the conversion of 11.2 million shares of Company Common Stock owned
by Warburg into redeemable preferred stock of the Company and the redemption
of such stock at a price equivalent to $26.50 in cash per share of Company
Common Stock and the purchase of 5.5 million shares from the public and
management at a price of $27.00 per share of which $17,547 will be charged
to expense in the Company's statement of operations due to the cash
settlement of shares acquired through the exercise of certain stock options.
(e) Reflects the cash payment made to settle unexercised options in connection
with the Panavision Recapitalization which will be charged to expense in the
Company's statement of operations.
(f) Reflects the payment of existing debt of the Company and the write-off of
related deferred charges of $1,751.
(g) Reflects fees and expenses related to the Panavision Recapitalization which
will be charged to expense in the Company's statement of operations.
(h) Reflects the increase in the valuation allowance on deferred tax asset in
connection with the Panavision Recapitalization.
(i) Reflects the repayment of notes due to the Company from officers and key
employees upon completion of the Panavision Recapitalization.
26
<PAGE>
SELECTED HISTORICAL FINANCIAL DATA
The following table sets forth selected financial data for the Company for
each of the fiscal years in the five-year period ended December 31, 1997 and for
the three month periods ended March 31, 1997 and 1998, respectively. The
selected financial data for each of the fiscal years in the five year period
ended December 31, 1997 have been derived from the Company's audited
consolidated financial statements. The selected financial data for the three
months ended March 31, 1997 and 1998 have been derived from the Company's
unaudited interim consolidated financial statements, which in the opinion of
management include all adjustments, consisting only of normal recurring
adjustments, which the Company considers necessary for a fair presentation of
the financial position and results of operations of the Company for these
periods. Operating results for the three months ended March 31, 1998 are not
necessarily indicative of the results that may be expected for the full year.
The following selected historical financial data should be read in conjunction
with 'Capitalization,' 'Management's Discussion and Analysis of Financial
Condition and Results of Operations' and the Consolidated Financial Statements
of Panavision included elsewhere in this Prospectus.
<TABLE>
<CAPTION>
THREE MONTHS ENDED
YEAR ENDED DECEMBER 31, MARCH 31,
-------------------------------------------------------- --------------------
1993 1994 1995(A) 1996(B) 1997(C) 1997 1998
-------- -------- -------- -------- -------- -------- --------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C> <C>
INCOME STATEMENT DATA:
Revenue........................... $ 66,710 $ 77,100 $ 95,328 $124,638 $176,863 $ 31,156 $ 43,154
Cost of sales..................... 36,432 40,995 44,369 59,473 90,879 15,829 24,093
-------- -------- -------- -------- -------- -------- --------
Gross margin...................... 30,278 36,105 50,959 65,165 85,984 15,327 19,061
Selling, general and
administrative expenses......... 18,875 19,210 28,486 30,688 47,575 8,126 13,512
Research and development
expenses........................ 2,272 2,442 2,986 4,310 4,494 1,315 1,057
-------- -------- -------- -------- -------- -------- --------
Operating income.................. 9,131 14,453 19,487 30,167 33,915 5,886 4,492
Net interest expense.............. (5,229) (5,318) (5,616) (7,435) (6,385) (877) (2,128)
Net other (expense) income(d)..... 183 665 415 (1,425) 1,210 164 1,271
-------- -------- -------- -------- -------- -------- --------
Income before non-controlling
partners' interest in PILP and
income taxes.................... 4,085 9,800 14,286 21,307 28,740 5,173 3,635
Non-controlling partners' interest
in PILP......................... (327) (879) (7,348) (4,500) -- -- --
-------- -------- -------- -------- -------- -------- --------
Income before income taxes........ 3,758 8,921 6,938 16,807 28,740 5,173 3,635
Income tax benefit (provision).... (453) (1,843) (1,375) (3,536) (9,252) (1,655) (1,163)
-------- -------- -------- -------- -------- -------- --------
Net income........................ $ 3,305 $ 7,078 $ 5,563 $ 13,271 $ 19,488 $ 3,518 $ 2,472
-------- -------- -------- -------- -------- -------- --------
-------- -------- -------- -------- -------- -------- --------
OTHER FINANCIAL DATA:
Depreciation and amortization..... 14,596 15,031 17,479 19,203 26,573 5,151 7,549
Capital expenditures.............. 12,678 16,251 19,454 27,816 46,732 12,227 15,627
Ratio of earnings to fixed
charges(e)...................... 1.6x 2.3x 1.9x 2.8x 4.1x 4.6x 2.3x
BALANCE SHEET DATA (END OF
PERIOD):
Cash and cash equivalents......... $ 16,118 $ 22,734 $ 31,685 $ 10,629 $ 11,020 $ 1,687 $ 5,835
Working capital, excluding cash... 714 (2,693) (5,682) 688 5,923 (1,686) 12,448
Net property, plant and
equipment....................... 106,710 108,197 111,801 130,441 199,038 136,696 205,102
Total assets...................... 140,075 149,707 165,751 176,746 281,937 171,476 284,324
Long-term debt, including current
maturities...................... 139,500 131,000 128,952 60,000 125,382 53,500 122,201
Stockholders' (deficit) equity.... (6,706) 922 6,456 93,018 109,444 95,582 115,308
</TABLE>
- ------------------
(a) Includes operating results of Panavision Canada Corporation, a former agent,
since January 20, 1995, the date of its acquisition.
(b) Includes operating results of Lee Lighting Limited since July 1, 1996, the
effective date of its acquisition.
(c) Includes operating results of FSG since June 5, 1997, the date of its
acquisition.
(d) In the fourth quarter of 1996, deferred financing costs in the amount of
$1.8 million were written off.
(e) For purposes of calculating the ratio of earnings to fixed charges, earnings
include loss (income) before income taxes plus fixed charges. Fixed charges
consist of interest expense, the amortization of debt issue costs and the
interest portion of rent expense.
27
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
The following discussion should be read in conjunction with the
Consolidated Financial Statements of Panavision included elsewhere in this
Prospectus. See 'Index to Financial Statements.'
INTRODUCTION
THE 1996 RECAPITALIZATION
Panavision is a holding company that owns 100% of the non-voting Class A
and voting Class B limited partnership units of Panavision International, L.P.
('PILP'). All business operations of the Company are conducted within PILP and
other subsidiaries of Panavision. In May 1996, the Company effected a
recapitalization (the '1996 Recapitalization'), pursuant to which, for a total
of $126.1 million in cash, the Company acquired all of the equity interests in
PILP it did not previously own and retired all of PILP's outstanding debt
securities. Prior to the 1996 Recapitalization, certain non-controlling partners
owned 70% of the non-voting Class A and 30% of the voting Class B limited
partnership units of PILP. The non-controlling partners consisted of members of
the bank group that provided PILP's prior credit facility and were not otherwise
affiliated with the Company, PILP or Warburg. The non-controlling partners
acquired their interest in PILP in connection with PILP's prior credit facility.
As a result of the 1996 Recapitalization, the Company owns 100% of the
outstanding interests of PILP and Warburg and management owned 90% and 10%,
respectively, of the common stock of the Company prior to the initial public
offering, described below.
The 1996 Recapitalization was financed by (i) borrowings of $110.0 million
under a new credit facility, (ii) funds from working capital and (iii) loans
from Warburg and management. The loans consisted of subordinated demand notes of
$11,608,000, $580,400, $165,829 and $82,914 issued to Warburg and Messrs. Scott,
Farrand and Marcketta, respectively. These notes were repaid subsequent to the
initial public offering. In addition, effective July 1, 1996, Warburg
contributed substantially all of the assets of Lee Lighting to the Company as a
capital contribution in the amount of $8.0 million and made an additional
capital contribution of $0.8 million in cash.
Prior to the 1996 Recapitalization, the non-controlling partners owned 70%
of the non-voting Class A and 30% of the voting Class B limited partnership
units. However, since the non-controlling partners had a deficit in their
capital accounts at the formation of PILP, such deficit was allocated entirely
to the Company as the general partner of PILP. In addition, PILP's losses for
1991 and 1992 and distributions made by PILP to various taxing authorities on
behalf of the non-controlling partners were charged to the Company's capital
account. In 1993, 1994 and 1995, as PILP generated earnings before the
non-controlling partners' interest, a portion of their interest in those
earnings was allocated to the Company's capital account to restore the
proportionate amount of the non-controlling partners' deficits and distributions
for taxes previously charged to the Company's capital account. The significant
increase in the non-controlling partners' interest in PILP from $0.9 million in
1994 to $7.3 million in 1995 reflects the substantial completion of the
restoration of the Company's capital account. Since the 1996 Recapitalization,
no additional provision for non-controlling partners' interest in PILP has been
made in the Company's statement of income.
INITIAL PUBLIC OFFERING
On November 20, 1996, the Company completed its initial public offering of
4,025,000 shares of common stock at a price of $17 per share which raised net
proceeds of $61.6 million. Of the net proceeds from the offering, $47.0 million
were used to repay bank debt and approximately $12.9 million were used to repay
subordinated notes and accrued interest payable to Warburg and Messrs. Scott,
Farrand and Marcketta. The balance of the net proceeds was maintained as working
capital for ongoing operations.
28
<PAGE>
RECENT ACQUISITIONS
In July 1996, the Company acquired Lee Lighting, the largest lighting
rental company in the United Kingdom. The acquisition was accounted for using
the purchase method of accounting and therefore, only the results of operations
of Lee Lighting since the acquisition date are included in the consolidated
results of operations of the Company.
On June 5, 1997, the Company, together with certain of its subsidiaries,
completed the FSG Acquisition, pursuant to which it acquired all of the share
capital of Samuelson Group Limited, a U.K. company, from Visual Action Holdings
plc. In connection with this transaction, the Company also acquired all of the
outstanding capital stock of Victor Duncan, Inc., a Delaware corporation, and of
Visual Action Holdings (N.Z.) Limited, a New Zealand company. The majority of
the equipment acquired as a result of these transactions included film cameras,
lenses and complementary product accessories which rent to the film production
community. The purchase price was approximately $61.0 million and was reduced by
the amount of certain debt assumed by the Company.
The acquisition has been recorded under the purchase method of accounting
and the operating results of FSG have been included in the Company's
consolidated financial statements since the acquisition date of June 5, 1997.
The purchase price and direct acquisition costs have been allocated to the
acquired assets and assumed liabilities based on their relative fair values.
This allocation is preliminary and subject to adjustments until the Company
completes its review and evaluation of the acquired assets and assumed
liabilities. The Company provided approximately $6.3 million to cover the
estimated costs, lease cancellations and severance pay related to the FSG
Acquisition. Goodwill of approximately $9.7 million was recognized as part of
the transaction and is being amortized over 30 years.
THE PANAVISION RECAPITALIZATION
On June 4, 1998, as contemplated by (i) the Recapitalization Agreement and
(ii) the Stockholders Agreement, Panavision consummated the Merger whereby PX
Merger was merged with and into Panavision, with Panavision as the surviving
corporation. Immediately prior to the consummation of the Merger, PX Holding
purchased 5,784,199 shares of Company Common Stock from Panavision at a purchase
price of $154,376,801.
In connection with the Merger, holders of in excess of 88% of the shares of
Company Common Stock held by shareholders other than Warburg elected to receive
cash for their shares. As a result, pursuant to the Recapitalization Agreement,
the right to receive cash for such shares was subject to proration. As a result
of the Merger, (i) 5,466,120 shares of Company Common Stock were exchanged for
$27.00 per share, or an aggregate of $147,585,240, and (ii) 745,380 shares of
Company Common Stock were retained by holders either through election or
proration. In addition, as part of the Panavision Recapitalization, Warburg
exchanged 88%, or 11,199,060 shares, of the shares of Company Common Stock it
beneficially owns for preferred stock of Panavision that was redeemed
immediately upon consummation of the Merger at a price equivalent to $26.50 in
cash per share of Company Common Stock.
In addition, pursuant to the Stockholders Agreement, Warburg granted to
Mafco Holdings an option to purchase at $30.00 per share of Company Common
Stock, and Mafco Holdings granted to Warburg an option to sell at $25.00 per
share of Company Common Stock, the 1,526,040 Warburg Shares not exchanged for
redeemable preferred stock as described above. Each such option is exercisable
in whole, but not in part, during the period beginning one year, and ending two
years, following consummation of the Merger. If Mafco Holdings acquired the
remaining 1,526,040 shares of Company Common Stock upon the exercise by either
Warburg or it of the option described above, then, assuming no changes in the
number of shares of Company Common Stock outstanding prior to the date of such
exercise, Mafco Holdings would then beneficially own 91% of the shares of
Company Common Stock outstanding.
The net proceeds of the Offering, borrowings under the New Credit Agreement
and the proceeds from the PX Stock Purchase, were used to fund the payment of
the cash consideration and the fees and expenses in connection with the Merger
as well as to retire existing indebtedness and to provide working capital for
Panavision. See 'Management's Discussion and Analysis of Financial Condition and
Results of Operations-- Liquidity and Capital Resources.' In connection with the
transactions contemplated by the Recapitalization
29
<PAGE>
Agreement, the assets of PX Escrow (consisting of funds held in escrow and
deferred charges) and the obligations of PX Escrow under the Notes and the
Indenture were assumed by Panavision.
As a result of the Merger, PX Holding, a wholly owned subsidiary of Mafco
Holdings, acquired a 72% interest in the Company. Warburg owns approximately 19%
of the issued and outstanding Company Common Stock and approximately 9% is owned
by public stockholders (including management).
RESULTS OF OPERATIONS
THREE MONTHS ENDED MARCH 31, 1998 COMPARED TO THREE MONTHS ENDED MARCH 31, 1997
Camera rental revenue increased $9.4 million, or 45.0%, to $30.3 million
for the quarter ended March 31, 1998 from $20.9 million for the quarter ended
March 31, 1997. This increase resulted primarily from the acquisition of the
Film Services Group of Visual Action Holdings plc on June 5, 1997, which
resulted in increased camera rental revenues of $7.8 million, and from the
rental of newly manufactured camera systems, specialty lenses and accessories to
supply the increased demand in the North American independent feature film,
commercial and episodic television markets.
Lighting rental revenue decreased $0.1 million, or 2.0%, to $5.0 million
for the quarter ended March 31, 1998 from $5.1 million for the quarter ended
March 31, 1997. This decrease was primarily due to decreased lighting rental
revenue at Lee Lighting in the U.K. of $0.7 million, offset by an increase in
lighting rental revenue of $0.5 million which resulted primarily from the FSG
Acquisition in June 1997 and an increase of $0.1 million in lighting rental
revenue at Panavision Canada.
Sales and other revenue increased $2.8 million, or 54.9%, to $7.9 million
for the quarter ended March 31, 1998 from $5.1 million for the quarter ended
March 31, 1997. This increase was due to the FSG Acquisition, which resulted in
increased sales and other revenue of $2.8 million.
Cost of camera rental increased $5.3 million, or 58.9%, to $14.3 million
for the quarter ended March 31, 1998 from $9.0 million for the quarter ended
March 31, 1997. This increase was primarily due to the FSG Acquisition in June
1997 of which $1.8 million related to increased depreciation of camera rental
equipment.
Cost of lighting rental increased $0.5 million, or 12.2%, to $4.6 million
for the quarter ended March 31, 1998 from $4.1 million for the quarter ended
March 31, 1997. This increase was due to the FSG Acquisition in June 1997 of
which $0.2 million related to increased depreciation of lighting rental
equipment.
Cost of sales and other increased $2.5 million, or 92.6%, to $5.2 million
for the quarter ended March 31, 1998 from $2.7 million for the quarter ended
March 31, 1997. This increase was primarily due to the FSG Acquisition in June
1997, which resulted in increased cost of sales and other revenue of $2.1
million and other small increases in cost of sales and other revenue across the
other operations.
Selling, general and administrative expenses increased $5.4 million, or
66.7%, to $13.5 million for the quarter ended March 31, 1998 from $8.1 million
for the quarter ended March 31, 1997. This increase was primarily due to the FSG
Acquisition in June 1997, which resulted in increased selling, general and
administrative expenses of $4.5 million. The remaining increase was due to small
increases in operating and personnel costs throughout the Company.
Research and development expenses decreased $0.2 million, or 15.4%, to $1.1
million for the quarter ended March 31, 1998 from $1.3 million for the quarter
ended March 31, 1997. This decrease was primarily due to a change in timing of
material costs for the projects within the first quarter.
Net interest expense increased $1.2 million to $2.1 million for the quarter
ended March 31, 1998 from $0.9 million for the quarter ended March 31, 1997. The
increase was due to the additional borrowings incurred in June 1997 relative to
the FSG Acquisition.
Net other income increased $1.1 million to $1.3 million for the quarter
ended March 31, 1998 from net other income of $0.2 million for the quarter ended
March 31, 1997. The increase was primarily due to the net gain on disposal from
the sale of two buildings in the U.K. of $0.8 million and the gain on foreign
exchange of $0.3 million.
30
<PAGE>
Income before income taxes decreased $1.6 million, or 30.8%, to $3.6
million for the quarter ended March 31, 1998 from $5.2 million for the quarter
ended March 31, 1997. The decrease was primarily due to the factors discussed
above.
The effective tax rate for the quarters ended March 31, 1998 and March 31,
1997 was 32.0%.
Net income decreased $1.0 million, or 28.6%, to $2.5 million for the
quarter ended March 31, 1998 from $3.5 million for the quarter ended March 31,
1997.
YEAR ENDED DECEMBER 31, 1997 COMPARED TO YEAR ENDED DECEMBER 31, 1996
Camera rental revenue increased $27.2 million, or 30.3%, to $117.0 million
for the year ended December 31, 1997 from $89.8 million for the year ended
December 31, 1996. The increase resulted primarily from the FSG Acquisition,
which resulted in increased camera rental revenue of $23.4 million and from the
rental of newly manufactured camera systems, specialty lenses and accessories to
supply the increased demand in the North American independent feature film,
commercial and episodic television markets as well as the U.K. feature film and
commercial markets.
Lighting rental revenue increased $15.7 million to $30.6 million for the
year ended December 31, 1997 from $14.9 million for the year ended December 31,
1996. The increase was primarily due to improved lighting rental revenue at Lee
Lighting in the U.K. of $12.3 million, which was primarily related to the
comparison of twelve months of Lee Lighting results included in 1997 as compared
to six months results in 1996; and at Panavision Canada of $1.3 million, offset
by a slight decrease in lighting rental revenue at Panavision Florida. The
remaining increase of $2.2 million resulted primarily from the FSG Acquisition
in June 1997.
Sales and other revenue increased $9.4 million, or 47.2%, to $29.3 million
for the year ended December 31, 1997 from $19.9 million for the year ended
December 31, 1996. The increase was primarily due to the FSG Acquisition in June
1997, which resulted in increased sales and other revenue of $8.7 million, and
an increase in sales and other revenue at Lee Lighting in the U.K. of $0.7
million, which was primarily related to the comparison of twelve months of Lee
Lighting results included in 1997 as compared to six months results in 1996.
Cost of camera rental increased $14.0 million, or 37.5%, to $51.3 million
for the year ended December 31, 1997 from $37.3 million for the year ended
December 31, 1996. The increase was primarily due to the FSG Acquisition in June
1997, which resulted in increased cost of camera rental of $12.7 million,
increased depreciation expense related to additional camera systems of $1.6
million and small decreases in the cost of camera rental at various operations.
Cost of lighting rental increased $12.4 million to $22.2 million for the
year ended December 31, 1997 from $9.8 million for the year ended December 31,
1996. The increase was primarily due to increased cost of lighting rental at Lee
Lighting of $9.9 million, which was primarily related to the comparison of
twelve months of Lee Lighting results included in 1997 as compared to six months
results in 1996, and due to the FSG Acquisition in June 1997, which resulted in
increased cost of lighting rental of $1.6 million. The remaining increase was
due to increased cost of lighting rental at Panavision Canada.
Cost of sales and other increased $5.0 million, or 40.3%, to $17.4 million
for the year ended December 31, 1997 from $12.4 million for the year ended
December 31, 1996. The increase was primarily due to the FSG Acquisition in June
1997, which resulted in increased cost of sales and other of $4.8 million, and
due to a small increase in cost of sales and other at Lee Lighting.
Gross margin increased $20.8 million, or 31.9%, to $86.0 million for the
year ended December 31, 1997 from $65.2 million for the year ended December 31,
1996. The increase was primarily due to the factors discussed above. Total gross
margin percentage decreased to 49% in 1997 from 52% in 1996. Camera rental gross
margin percentage decreased to 56% in 1997 from 58% in 1996 due to the FSG
Acquisition in June 1997. The gross margin percentage for camera rental revenue
for the FSG companies is lower than that of the Panavision companies. Lighting
rental gross margin percentage decreased to 27% in 1997 from 34% in 1996 due to
the acquisition of Lee Lighting in 1996. The inclusion of twelve months results
of Lee Lighting in 1997 as compared to the inclusion of six months results of
Lee Lighting in 1996 had the effect of lowering the gross margin percentage in
1997. Lee Lighting's gross margin percentage for lighting rental is lower than
for the operations in Canada and Florida, which were the only lighting rental
operations in the Company in 1996 prior to
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<PAGE>
the acquisition of Lee Lighting in July 1996. Sales and other gross margin
percentage increased to 40% in 1997 from 38% in 1996 due to the higher gross
margin percentage on sales and other revenue generated by the FSG companies.
Selling, general and administrative expenses increased $16.9 million, or
55.0%, to $47.6 million for the year ended December 31, 1997 from $30.7 million
for the year ended December 31, 1996. This increase was primarily due to the FSG
Acquisition in June 1997, which resulted in increased selling, general and
administrative expenses of $12.7 million, and increased selling, general and
administrative expenses at Lee Lighting of $1.7 million, which was primarily
related to the comparison of twelve months of Lee Lighting results included in
1997 as compared to six months results in 1996. The remaining increase was also
due to small increases in operating and personnel costs throughout the Company
and the expensing of $0.3 million for a payroll tax charge related to the
exercise of options in December 1997 and the expensing of $0.3 million for legal
fees related to the Panavision Recapitalization.
Research and development expenses increased $0.2 million, or 4.7%, to $4.5
million for the year ended December 31, 1997 from $4.3 million for the year
ended December 31, 1996. The increase related to additional personnel costs
incurred in connection with the development of a new sync-sound camera system
and a digital video assist device. The Company expects research and development
costs to continue to increase as the Company hires additional personnel to
develop new specialty lenses and accessory products targeted primarily to
service the feature film and commercial markets.
Operating income increased $3.7 million, or 12.3%, to $33.9 million for the
year ended December 31, 1997 from $30.2 million for the year ended December 31,
1996. The increase was primarily due to the factors discussed above.
Net interest expense decreased $1.0 million, or 13.5%, to $6.4 million for
the year ended December 31, 1997 from $7.4 million for the year ended December
31, 1996. The decrease was primarily due to reduced borrowing during the first
six months of 1997 and the difference in rates during 1997 as compared to 1996.
The Company's interest expense will increase significantly as a result of the
additional debt to be incurred in connection with the successful completion of
the Panavision Recapitalization.
Net other income increased $2.6 million to $1.2 million for the year ended
December 31, 1997 from net other expense of $1.4 million for the year ended
December 31, 1996. The increase was primarily due to a one time charge of $1.8
million in 1996 to write off deferred financing costs and the recognition of
approximately $0.5 million in unused reserves in 1997, due to the favorable
settlement of termination benefit disputes related to the Company's former
French and Italian operations.
Income before income taxes increased $11.9 million, or 70.8%, to $28.7
million for the year ended December 31, 1997 from $16.8 million for the year
ended December 31, 1996. The increase was due primarily to the factors discussed
above and the elimination of the charge for the non-controlling partners'
interest in PILP which was $4.5 million in 1996.
The effective tax rates for years ended December 31, 1997 and 1996 were
32.2% and 21.0%, respectively. The increase in the effective tax rate for
December 31, 1997 was primarily due to a decrease in the amount of benefit
attributable to NOL and AMT credit carryforwards and a higher effective rate
relating to income from foreign operations. In both years the effective tax
rates were lower than the statutory rate principally due to the reduction in the
valuation allowance for deferred tax assets.
Net income increased $6.2 million, or 46.6%, to $19.5 million for the year
ended December 31, 1997 from $13.3 million for the year ended December 31, 1996.
The increase was primarily due to the factors discussed above.
YEAR ENDED DECEMBER 31, 1996 COMPARED TO YEAR ENDED DECEMBER 31, 1995
Camera rental revenue increased $14.7 million, or 19.6%, to $89.8 million
for the year ended December 31, 1996 from $75.1 million for the year ended
December 31, 1995. The increase resulted primarily from the rental of newly
manufactured camera systems, specialty lenses and accessories to supply the
increased demand in the North American and international feature film and
commercial markets as well as the North American episodic television market.
Revenue also increased as a result of a small increase in rental rates.
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<PAGE>
Lighting rental revenue increased $10.8 million to $14.9 million for the
year ended December 31, 1996 from $4.1 million for the year ended December 31,
1995. The increase was primarily due to the acquisition of Lee Lighting in July
1996.
Sales and other revenue increased $3.8 million, or 23.6%, to $19.9 million
for the year ended December 31, 1996 from $16.1 million for the year ended
December 31, 1995. The increase was primarily due to increased sales of Lee
Filters through the Company's U.S. distribution operation, which contributed
revenue of approximately $4.4 million.
Cost of camera rental increased $4.6 million, or 14.1%, to $37.3 million
for the year ended December 31, 1996 from $32.7 million for the year ended
December 31, 1995. The increase was primarily due to the increase in
maintenance, service and labor costs required to service additional rental
customers. Additionally, third-party camera agent rental commissions increased
as a result of an increase in third-party agent revenue around the world.
Cost of lighting rental increased $8.1 million to $9.8 million for the year
ended December 31, 1996 from $1.7 million for the year ended December 31, 1995.
The increase was primarily due to the acquisition of Lee Lighting in July 1996.
Cost of sales and other increased $2.4 million, or 24.0%, to $12.4 million
for the year ended December 31, 1996 from $10.0 million for the year ended
December 31, 1995. The increase was primarily due to the increase in sales of
Lee Filters and a small increase in the cost of sales in the United Kingdom.
Gross margin increased $14.2 million, or 27.8%, to $65.2 million for the
year ended December 31, 1996 from $51.0 million for the year ended December 31,
1995. The increase was primarily due to the factors discussed above.
Selling, general and administrative expenses increased $2.2 million, or
7.7%, to $30.7 million for the year ended December 31, 1996 from $28.5 million
for the year ended December 31, 1995. The 1996 results include a $1.8 million
increase in costs related to the acquisition of Lee Lighting. Corporate general
and administrative expenses increased $0.9 million as a result of non-cash
compensation for options and shares of Company Common Stock issued to certain
members of senior management. Selling, general and administrative expenses at
the other operations decreased by a net $0.4 million as a result of
non-recurring charges in 1995 of $1.8 million, relating to an early lease
termination for the Company's former corporate headquarters, and $1.7 million,
for the write-down of the carrying value of certain real property owned by the
Company's U.K. rental operation. These decreases were partially offset by a $3.1
million increase in selling, distribution and other general and administrative
expenses to support the increase of business activity at the Woodland Hills,
Hollywood, U.K. and Lee Filters operations.
Research and development expenses increased $1.3 million, or 43.3%, to $4.3
million for the year ended December 31, 1996 from $3.0 million for the year
ended December 31, 1995. The increase related to additional personnel costs
incurred in connection with the development of a new sync-sound camera system
and a digital video assist device.
Operating income increased $10.7 million, or 54.9%, to $30.2 million for
the year ended December 31, 1996 from $19.5 million for the year ended December
31, 1995. The increase was primarily due to the factors discussed above.
Net interest expense increased $1.8 million, or 32.1%, to $7.4 million for
the year ended December 31, 1996 from $5.6 million for the year ended December
31, 1995. The increase was primarily due to an increase in interest bearing debt
and a decrease in interest income due to the decrease in cash resulting from the
1996 Recapitalization.
Net other expense increased $1.8 million to $1.4 million for the year ended
December 31, 1996 from net other income of $0.4 million for the year ended
December 31, 1995. The increase was due to a one time non-cash charge of $1.8
million to write off deferred financing issuance costs incurred in connection
with the 1996 Recapitalization.
Income before income taxes increased $9.9 million, or 143.5%, to $16.8
million for the year ended December 31, 1996 from $6.9 million for the year
ended December 31, 1995. The increase was primarily due to
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<PAGE>
the factors discussed above as well as a $2.8 million decrease in the charge for
the non-controlling partners' interest to $4.5 million in 1996 from $7.3 million
in 1995 resulting from the purchase by the Company of the non-controlling
partners' interest in the 1996 Recapitalization.
The effective tax rates for years ended December 31, 1996 and 1995 were
21.0% and 19.8%, respectively, and were lower than the statutory rate
principally due to the reduction in the valuation allowance for deferred tax
assets.
Net income increased $7.7 million, or 137.5%, to $13.3 million for the year
ended December 31, 1996 from $5.6 million for the year ended December 31, 1995.
The increase was primarily due to the factors discussed above.
LIQUIDITY AND CAPITAL RESOURCES
In connection with the Panavision Recapitalization, the Company entered
into the New Credit Agreement. Borrowings under the New Credit Agreement were
used to, among other things, repay existing borrowings under the Old Credit
Agreement and finance a portion of the Panavision Recapitalization.
The New Credit Agreement is comprised of two facilities, the Term Facility
and the Revolving Facility. The Term Facility includes a 6-year facility in an
aggregate principal amount equal to $90.0 million and a 7-year facility in an
aggregate principal amount of $150.0 million. The Revolving Facility is a 6-year
facility in an aggregate principal amount of $100.0 million.
The Tranche A Term Facility is repayable in quarterly installments in an
aggregate principal amount for each year following the Closing Date (as defined
herein) (commencing with the second year following the Closing Date) as follows:
$5.0 million; $10.0 million; $20.0 million; $25.0 million; and $30.0 million.
The Tranche B Term Facility is repayable in quarterly installments in an
aggregate principal amount for each year following the Closing Date (commencing
with the second year following the Closing Date) as follows: $1.0 million for
years 2 through 5; $21.0 million for year 6; and $125.0 million for year 7.
Borrowings under the New Credit Agreement bear interest at a rate per annum
equal to the Alternate Base Rate (as defined in the New Credit Agreement) or the
Eurodollar Rate (as defined in the New Credit Agreement) plus, in each case, a
margin that will be based on the performance of the Company at agreed upon
levels. The initial margin on loans under the Revolving Facility and the Tranche
A Term Facility is 2.25% for Eurodollar Loans (as defined herein) and 1.25% for
ABR Loans (as defined herein). The initial margin on loans under the Tranche B
Term Facility is 2.50% for Eurodollar Loans and 1.50% for ABR Loans. The Company
may select interest periods of one, two, three or six months for Eurodollar
Loans. At any time when the Company is in default in the payment of any amount
of principal due under the New Credit Agreement, such amount shall bear interest
at 2% above the rate otherwise applicable. Overdue interest, fees and other
amounts shall bear interest at 2% above the rate applicable to ABR Loans. See
'Description of Other Indebtedness.'
Upon consummation of the Panavision Recapitalization, borrowings under the
Term Facility aggregated $240.0 million and under the Revolving Facility
aggregated $65.0 million.
With the exception of its initial public offering, the Company has relied
primarily upon cash provided by operations to finance its operations, repay
long-term indebtedness and fund capital expenditures primarily for manufacturing
camera systems, lenses and accessories and purchasing other rental equipment.
The following table sets forth certain information from the Company's
Consolidated Statements of Cash Flows for the periods indicated (in thousands):
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31, THREE MONTHS
--------------------------------- ENDED
1995 1996 1997 MARCH 31, 1998
-------- --------- -------- --------------
<S> <C> <C> <C> <C>
Net cash provided by (used in):
Operating activities............................... $ 34,317 $ 26,432 $ 50,500 $ 7,168
Investing activities............................... (15,699) (33,472) (107,506) (11,440)
Financing activities............................... (9,724) (14,296) 57,589 (931)
</TABLE>
34
<PAGE>
For the quarter ended March 31, 1998, cash provided by operating activities
was $7.2 million. Net income of $2.5 million, adjusted for depreciation and
amortization of $7.5 million, provided $10.0 million, which was decreased by
$2.8 million from the net change in non-cash working capital and miscellaneous
items. Total investing activities of $11.4 million were comprised of capital
expenditures of $15.6 million, offset by $4.2 million of proceeds received from
the disposition of fixed assets. The majority of the capital expenditures were
used to manufacture camera rental systems. Cash used in financing activities of
$0.9 million was used as a reduction of outstanding borrowings of $3.9 million
offset by a contribution from Warburg of $3.0 million.
For 1997, cash provided by operating activities was $50.5 million. Net
income of $19.5 million, adjusted for depreciation and amortization of $26.6
million, provided $46.1 million, which was partially offset by a use of $1.0
million, resulting from a change in non-cash working capital items, and
miscellaneous non-cash items of $5.4 million. Total cash used in investing
activities of $107.5 million was comprised of capital expenditures of $46.7
million, offset by $1.7 million of proceeds received from the disposition of
certain equipment. The majority of the capital expenditures were used to
manufacture camera rental systems and to purchase other rental equipment. The
net investing activities also reflect a use of $58.7 million for business
acquisitions, a use of $5.1 million due to changes in other long-term assets and
a source of $1.3 million from the disposition of the Company's investment in
Aaton, a French camera manufacturing company. Cash provided in financing
activities of $57.6 million was comprised of additional net borrowings of $63.8
million, primarily related to the FSG Acquisition, offset by loans due from
officers and key employees of $7.1 million, and proceeds from the exercise of
options of $0.9 million.
For 1996, cash provided by operating activities was $26.4 million. Net
income of $13.3 million, adjusted for depreciation and amortization of $19.2
million and the non-controlling partners' interest in PILP of $4.5 million,
provided $37.0 million, which was partially offset by a use of $11.9 million,
resulting from the net change in non-cash working capital items, and
miscellaneous non-cash items of $(1.4) million. Total investing activities of
$33.5 million were comprised of capital expenditures of $27.8 million, offset by
$1.4 million of proceeds received from the disposition of certain equipment. The
majority of the capital expenditures were used to manufacture camera rental
systems and to purchase other rental equipment, with approximately $1.2 million
incurred to complete the leasehold improvements at the new facility in Woodland
Hills. The net investing activities also reflect a benefit of $1.0 million for
cash on the balance sheet of Lee Lighting which was acquired in July 1996. In
addition, $8.1 million was used to acquire the non-controlling partners'
interest in PILP in connection with the 1996 Recapitalization. Cash used in
financing activities of $14.3 million was comprised of the reduction in
outstanding borrowings in connection with the 1996 Recapitalization and $1.5
million of distributions to taxing authorities on behalf of the partners in
PILP.
The Company intends to use the cash provided by operating activities to
make additional capital expenditures to manufacture camera systems and purchase
other rental equipment. The Company increased capital expenditures from $27.8
million in 1996 to $46.7 million in 1997, and to $15.6 million during the three
months ended March 31, 1998. During 1998, the Company expects to spend
approximately $47.0 million in order to maintain its current production level of
camera systems and to provide additional rental and capital equipment for Lee
Lighting and all other Company operations. The Company increased research and
development expenses incurred in developing new rental products from $4.3
million in 1996 to $4.5 million in 1997 and to $1.1 million during the three
months ended March 31, 1998. The Company intends to spend approximately $5.3
million on research and development in 1998. All research and development
expenses and capital expenditures for 1997 were funded by cash flow from
operations and the Company expects all such expenditures in 1998 to be funded by
cash flow from operations.
Additional cash flow provided by operating activities will be used to repay
debt outstanding under the New Credit Agreement. Although there can be no
assurance, the Company believes that its existing working capital together with
borrowings under the New Credit Agreement and anticipated cash flow from
operating activities will be sufficient to meet its expected operating and
capital spending requirements for the foreseeable future. The Company will not
be required to pay interest on the Notes until August 1, 2002, which management
believes will assist the Company in implementing its growth strategy.
Panavision currently anticipates that in order to pay the principal amount
at maturity of the Notes or upon the occurrence of an Event of Default, to
redeem the Notes or to repurchase the Notes upon the occurrence of a
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<PAGE>
Change of Control, Panavision will be required to adopt one or more
alternatives, such as seeking capital contributions or loans from its
affiliates, refinancing its indebtedness or selling its equity securities. None
of the affiliates of the Company will be required to make any capital
contributions or other payments to the Company with respect to the Company's
obligations on the Notes, and the obligations of the Company with respect to the
Notes will not be guaranteed by any affiliate of the Company or any other
person. There can be no assurance that any of the foregoing actions could be
effected on satisfactory terms, that they would be sufficient to enable the
Company to make any payments in respect of the Notes when required or that any
of such actions would be permitted by the terms of the Indenture or the debt
instruments of Panavision then in effect. See 'Risk Factors-- Substantial
Indebtedness and Ability to Repay the Notes,' 'Description of Other
Indebtedness' and 'Description of the Notes.'
Panavision is a holding company whose only material asset is the capital
stock of and partnership interests in its subsidiaries. Panavision's principal
business operations are conducted by its subsidiaries, and Panavision has no
operations of its own. Accordingly, Panavision's only source of cash to pay its
obligations with respect to the Notes and any other obligations is expected to
be distributions with respect to its ownership interests in its subsidiaries.
There can be no assurance that Panavision's subsidiaries will generate
sufficient cash flow to pay dividends or distribute funds to Panavision or that
applicable state law and contractual restrictions, including negative covenants
contained in the debt instruments of such subsidiaries, will permit such
dividends or distributions. See 'Risk Factors--Holding Company Structure,' 'Risk
Factors--Restrictions Imposed by Terms of the Company's Indebtedness;
Consequences of Failure to Comply' and 'Description of Other Indebtedness.'
SEASONALITY
The Company's revenue and net income are subject to seasonal fluctuations
experienced primarily in the first and second calendar quarters. Feature film
and commercial production activity typically reaches its peak in the third and
fourth quarters. In North America, episodic television programs cease filming in
the second quarter for several months, and typically resume production in
August.
IMPACT OF INFLATION
The Company's results of operations and financial condition are presented
based upon historical cost. While it is difficult to accurately measure the
impact of inflation due to the imprecise nature of the estimates required, the
Company believes that the effects of inflation, if any, on its results of
operations and financial condition have been minor.
YEAR 2000 COMPLIANCE
The year 2000 problem is the result of computer programs that were written
using two digits rather than four to define the applicable year; accordingly,
computer programs that have time-sensitive software may recognize a date using
'00' as the year 1900 rather than the year 2000. This could result in a system
failure or miscalculation causing disruptions of operations, including, among
other things, a temporary inability to process transactions, send invoices, or
engage in similar normal activities.
The Company has commenced its process for reviewing its worldwide
operations for compliance with the year 2000 problem. Based upon this
preliminary review, internal systems either are, or are anticipated to be, in
compliance. Although the Company has commenced the process of inquiring of
outside vendors whether or not they will also be year 2000 compliant, the
Company has not been able to determine precisely the impact, if any, on its
operations if outside vendors fail to comply with the year 2000 requirements. In
the event that the Company's internal systems or systems of significant outside
vendors are not converted or modified in a timely manner to make them year 2000
compliant, there could be a material adverse effect upon the business and
financial results of the Company. The overall anticipated cost of year 2000
compliance for the internal systems of the Company is not expected to be
material.
36
<PAGE>
THE EXCHANGE OFFER
TERMS OF THE EXCHANGE OFFER; PERIOD FOR TENDERING OLD NOTES
Upon the terms and subject to the conditions set forth in this Prospectus
and in the accompanying Letter of Transmittal (which together constitute the
Exchange Offer), the Company will accept for exchange Old Notes which are
properly tendered on or prior to the Expiration Date and not withdrawn as
permitted below. As used herein, the term 'Expiration Date' means 5:00 p.m., New
York City time, on , 1998; provided, however, that if the Company, in
its sole discretion, has extended the period of time for which the Exchange
Offer is open, the term 'Expiration Date' means the latest time and date to
which the Exchange Offer is extended.
As of the date of this Prospectus, $217,903,000 principal amount at
maturity of the Old Notes was outstanding. This Prospectus, together with the
Letter of Transmittal, is first being sent on or about , 1998, to all
holders of Old Notes known to the Company. The Company's obligation to accept
Old Notes for exchange pursuant to the Exchange Offer is subject to certain
conditions as set forth below under '--Certain Conditions to the Exchange
Offer.'
The Company expressly reserves the right, at any time or from time to time,
to extend the period of time during which the Exchange Offer is open, and
thereby delay acceptance for exchange of any Old Notes, by giving oral or
written notice of such extension to the holders thereof as described below.
During any such extension, all Old Notes previously tendered will remain subject
to the Exchange Offer and may be accepted for exchange by the Company. Any Old
Notes not accepted for exchange for any reason will be returned without expense
to the tendering holder thereof as promptly as practicable after the expiration
or termination of the Exchange Offer.
Old Notes tendered in the Exchange Offer must be in denominations of
principal amount of $1,000 and any integral multiple thereof.
The Company expressly reserves the right to amend or terminate the Exchange
Offer, and not to accept for exchange any Old Notes not therefore accepted for
exchange, upon the occurrence of any of the events specified below under
'--Certain Conditions to the Exchange Offer.' The Company will give oral or
written notice of any extension, amendment, non-acceptance or termination to the
holders of the Old Notes as promptly as practicable, such notice in the case of
any extension to be issued by means of a press release or other public
announcement no later than 9:00 a.m., New York City time, on the next business
day after the previously scheduled Expiration Date.
Following consummation of the Exchange Offer, the Company may, in its sole
discretion, commence one or more additional exchange offers to those holders of
Old Notes who did not exchange their Old Notes for New Notes in the Exchange
Offer on terms which may differ from those contained in the Registration
Agreement. This Prospectus, as it may be amended or supplemented from time to
time, may be used by the Company in connection with any such additional exchange
offers. Such additional exchange offers will take place from time to time until
all outstanding Old Notes have been exchanged for New Notes pursuant to the
terms and conditions contained herein.
PROCEDURES FOR TENDERING OLD NOTES
The tender to the Company of Old Notes by a holder thereof as set forth
below and the acceptance thereof by the Company will constitute a binding
agreement between the tendering holder and the Company upon the terms and
subject to the conditions set forth in this Prospectus and in the accompanying
Letter of Transmittal. Except as set forth below, a holder who wishes to tender
Old Notes for exchange pursuant to the Exchange Offer must transmit either (i) a
properly completed and duly executed Letter of Transmittal, including all other
documents required by such Letter of Transmittal, to The Bank of New York, as
Exchange Agent, at the address set forth below under '--Exchange Agent' on or
prior to the Expiration Date, or (ii) if such Old Notes are tendered pursuant to
the procedures for book-entry transfer set forth below, a holder tendering Old
Notes may transmit an Agent's Message (as defined herein) to the Exchange Agent
in lieu of the Letter of Transmittal on or prior to the Expiration Date. In
addition, either (i) certificates for such Old Notes must be received by the
Exchange Agent along with the Letter of Transmittal, (ii) a timely confirmation
of a book-entry transfer (a
37
<PAGE>
'Book-Entry Confirmation') of such Old Notes, if such procedure is available,
into the Exchange Agent's account at The Depository Trust Company (the
'Book-Entry Transfer Facility') pursuant to the procedure for book-entry
transfer described below, along with the Letter of Transmittal or an Agent's
Message, as the case may be, must be received by the Exchange Agent prior to the
Expiration Date, or (iii) the holder must comply with the guaranteed delivery
procedures described below. The term 'Agent's Message' means a message,
transmitted to the Book-Entry Transfer Facility and received by the Exchange
Agent and forming a part of the Book-Entry Confirmation, which states that the
Book-Entry Transfer Facility has received an express acknowledgment from the
tendering Participant (as defined herein) that such Participant has received and
agrees to be bound by the Letter of Transmittal and the Company may enforce the
Letter of Transmittal against such Participant. THE METHOD OF DELIVERY OF OLD
NOTES, LETTERS OF TRANSMITTAL OR AGENT'S MESSAGES AND ALL OTHER REQUIRED
DOCUMENTS IS AT THE ELECTION AND RISK OF THE HOLDERS. IF SUCH DELIVERY IS BY
MAIL, IT IS RECOMMENDED THAT REGISTERED MAIL, PROPERLY INSURED, WITH RETURN
RECEIPT REQUESTED, BE USED. IN ALL CASES, SUFFICIENT TIME SHOULD BE ALLOWED TO
ASSURE TIMELY DELIVERY. NO LETTERS OF TRANSMITTAL OR OLD NOTES SHOULD BE SENT TO
THE COMPANY.
Signatures on a Letter of Transmittal or a notice of withdrawal, as the
case may be, must be guaranteed unless the Old Notes surrendered for exchange
pursuant thereto are tendered (i) by a registered holder of the Old Notes who
has not completed the box entitled 'Special Issuance Instructions' or 'Special
Delivery Instructions' on the Letter of Transmittal or (ii) for the account of
an Eligible Institution (as defined herein). In the event that signatures on a
Letter of Transmittal or a notice of withdrawal, as the case may be, are
required to be guaranteed, such guarantees must be by a firm which is a member
of a registered national securities exchange or a member of the National
Association of Securities Dealers, Inc. or by a commercial bank or trust company
having an office or correspondent in the United States (collectively, 'Eligible
Institutions'). If Old Notes are registered in the name of a person other than a
signer of the Letter of Transmittal, the Old Notes surrendered for exchange must
be endorsed by, or be accompanied by a written instrument or instruments of
transfer or exchange, in satisfactory form as determined by the Company in its
sole discretion, duly executed by, the registered Holder with the signature
thereon guaranteed by an Eligible Institution.
All questions as to the validity, form, eligibility (including time of
receipt) and acceptance of Old Notes tendered for exchange will be determined by
the Company in its sole discretion, which determination shall be final and
binding. The Company reserves the absolute right to reject any and all tenders
of any particular Old Notes not properly tendered or to not accept any
particular Old Notes which acceptance might, in the judgment of the Company or
its counsel, be unlawful. The Company also reserves the absolute right to waive
any defects or irregularities or conditions of the Exchange Offer as to any
particular Old Notes either before or after the Expiration Date (including the
right to waive the ineligibility of any holder who seeks to tender Old Notes in
the Exchange Offer). The interpretation of the terms and conditions of the
Exchange Offer as to any particular Old Notes either before or after the
Expiration Date (including the Letter of Transmittal and the instructions
thereto) by the Company shall be final and binding on all parties. Unless
waived, any defects or irregularities in connection with tenders of Old Notes
for exchange must be cured within such reasonable period of time as the Company
shall determine. Neither the Company, the Exchange Agent nor any other person
shall be under any duty to give notification of any defect or irregularity with
respect to any tender of Old Notes for exchange, nor shall any of them incur any
liability for failure to give such notification.
If the Letter of Transmittal is signed by a person or persons other than
the registered holder or holders of Old Notes, such Old Notes must be endorsed
or accompanied by appropriate powers of attorney, in either case signed exactly
as the name or names of the registered holder or holders that appear on the Old
Notes.
If the Letter of Transmittal or any Old Notes or powers of attorney are
signed by trustees, executors, administrators, guardians, attorneys-in-fact,
officers of corporations or others acting in a fiduciary or representative
capacity, such persons should so indicate when signing, and, unless waived by
the Company, proper evidence satisfactory to the Company of their authority to
so act must be submitted.
By tendering, each holder will represent to the Company that, among other
things, the New Notes acquired pursuant to the Exchange Offer are being obtained
in the ordinary course of business of the person receiving such New Notes,
whether or not such person is the holder, and that neither the holder nor such
other person has any
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arrangement or understanding with any person to participate in the distribution
of the New Notes. In the case of a holder that is not a broker-dealer, each such
holder, by tendering, will also represent to the Company that such holder is not
engaged in, or intends to engage in, a distribution of the New Notes. If any
holder or any such other person is an 'affiliate,' as defined under Rule 405 of
the Securities Act, of the Company, or is engaged in or intends to engage in or
has an arrangement or understanding with any person to participate in a
distribution of such New Notes to be acquired pursuant to the Exchange Offer,
such holder or any such other person (i) could not rely on the applicable
interpretations of the staff of the Commission and (ii) must comply with the
registration and prospectus delivery requirements of the Securities Act in
connection with any resale transaction. Each broker-dealer that receives New
Notes for its own account in exchange for Old Notes, where such Old Notes were
acquired by such broker-dealer as a result of market-making activities or other
trading activities, must acknowledge that it will deliver a prospectus in
connection with any resale of such New Notes. See 'Plan of Distribution.' The
Letter of Transmittal states that by so acknowledging and by delivering a
prospectus, a broker-dealer will not be deemed to admit that it is an
'underwriter' within the meaning of the Securities Act.
ACCEPTANCE OF OLD NOTES FOR EXCHANGE; DELIVERY OF NEW NOTES
Upon satisfaction or waiver of all of the conditions to the Exchange Offer,
the Company will accept, promptly after the Expiration Date, all Old Notes
properly tendered and will issue the New Notes promptly after acceptance of the
Old Notes. See '--Certain Conditions to the Exchange Offer.' For purposes of the
Exchange Offer, the Company shall be deemed to have accepted properly tendered
Old Notes for exchange when, as and if the Company has given oral or written
notice thereof to the Exchange Agent, with written confirmation of any oral
notice to be given promptly thereafter.
For each Old Note accepted for exchange, the holder of such Old Note will
receive a New Note having a principal amount at maturity equal to that of the
surrendered Old Note. Original Issue Discount on the New Notes will accrue from
February 11, 1998, the date of original issuance of the Old Notes. If the
Exchange Offer is not consummated by December 1, 1998, interest will accrue on
the Old Notes (in addition to the accrual of Original Issue Discount) from and
including such date until but excluding the date of consummation of the Exchange
Offer payable in cash semiannually in arrears on February 1 and August 1
commencing February 1, 1999, at a rate per annum equal to .50% of the Accreted
Value of the Old Notes as of the August 1 or February 1 immediately preceding
such interest payment date. Payments of such interest, if any, on Old Notes in
exchange for which the New Notes were issued will be made to the persons who, at
the close of business on January 15 or July 15 next preceding the interest
payment date, are registered holders of such Old Notes if such record date
occurs prior to such exchange, or are registered holders of the New Notes if
such record date occurs on or after the date of such exchange, even if Notes are
cancelled after the record date and on or before the interest payment date.
In all cases, issuance of New Notes for Old Notes that are accepted for
exchange pursuant to the Exchange Offer will be made only after timely receipt
by the Exchange Agent of certificates for such Old Notes or a timely Book-Entry
Confirmation of such Old Notes into the Exchange Agent's account at the
Book-Entry Transfer Facility, a properly completed and duly executed Letter of
Transmittal and all other required documents or, in the case of a Book-Entry
Confirmation, an Agent's Message in lieu thereof. If any tendered Old Notes are
not accepted for any reason set forth in the terms and conditions of the
Exchange Offer or if Old Notes are submitted for a greater principal amount than
the holder desired to exchange, such unaccepted or non-exchanged Old Notes will
be returned without expense to the tendering holder thereof (or, in the case of
Old Notes tendered by book-entry transfer into the Exchange Agent's account at
the Book-Entry Transfer Facility pursuant to the book-entry procedures described
below, such non-exchanged Old Notes will be credited to an account maintained
with such Book-Entry Transfer Facility) as promptly as practicable after the
expiration or termination of the Exchange Offer.
BOOK-ENTRY TRANSFER
The Exchange Agent will make a request to establish an account with respect
to the Old Notes at the Book-Entry Transfer Facility for purposes of the
Exchange Offer within two business days after the date of this Prospectus, and
any financial institution that is a participant in the Book-Entry Transfer
Facility's systems may make book-entry delivery of Old Notes by causing the
Book-Entry Transfer Facility to transfer such Old Notes
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into the Exchange Agent's account at the Book-Entry Transfer Facility in
accordance with such Book-Entry Transfer Facility's procedures for transfer.
However, although delivery of Old Notes may be effected through book-entry
transfer at the Book-Entry Transfer Facility, the Letter of Transmittal or
facsimile thereof, with any required signature guarantees, or an Agent's Message
in lieu of a Letter of Transmittal, and any other required documents, must, in
any case, be transmitted to and received by the Exchange Agent at one of the
addresses set forth below under '--Exchange Agent' on or prior to the Expiration
Date or the guaranteed delivery procedures described below must be complied
with.
GUARANTEED DELIVERY PROCEDURES
If a registered holder of the Old Notes desires to tender such Old Notes
and the Old Notes are not immediately available, or time will not permit such
holder's Old Notes or other required documents to reach the Exchange Agent
before the Expiration Date, or the procedure for book-entry transfer cannot be
completed on a timely basis, a tender may be effected if (i) the tender is made
through an Eligible Institution, (ii) prior to the Expiration Date, the Exchange
Agent receives from such Eligible Institution a properly completed and duly
executed Letter of Transmittal (or a facsimile thereof) and Notice of Guaranteed
Delivery, substantially in the form provided by the Company (by telegram, telex,
facsimile transmission, mail or hand delivery), setting forth the name and
address of the holder of Old Notes and the amount of Old Notes tendered, stating
that the tender is being made thereby and guaranteeing that within three New
York Stock Exchange ('NYSE') trading days after the date of execution of the
Notice of Guaranteed Delivery, the certificates for all physically tendered Old
Notes, in proper form for transfer, or a Book-Entry Confirmation, as the case
may be, and any other documents required by the Letter of Transmittal will be
deposited by the Eligible Institution with the Exchange Agent, and (iii) the
certificates for all physically tendered Old Notes, in proper form for transfer,
or a Book-Entry Confirmation, as the case may be, and all other documents
required by the Letter of Transmittal, are received by the Exchange Agent within
three NYSE trading days after the date of the execution of the Notice of
Guaranteed Delivery.
WITHDRAWAL RIGHTS
Tenders of Old Notes may be withdrawn at any time prior to the Expiration
Date.
For a withdrawal to be effective, a written notice of withdrawal must be
received by the Exchange Agent at one of the addresses set forth below under
'--Exchange Agent.' Any such notice of withdrawal must specify the name of the
person having tendered the Old Notes to be withdrawn, identify the Old Notes to
be withdrawn (including the principal amount of such Old Notes), and (where
certificates for Old Notes have been transmitted) specify the name in which such
Old Notes are registered, if different from that of the withdrawing holder. If
certificates for Old Notes have been delivered or otherwise identified to the
Exchange Agent, then, prior to the release of such certificates the withdrawing
holder must also submit the serial numbers of the particular certificates to be
withdrawn and signed notice of withdrawal with signatures guaranteed by an
Eligible Institution unless such holder is an Eligible Institution. If Old Notes
have been tendered pursuant to the procedure for book-entry transfer described
above, any notice of withdrawal must specify the name and number of the account
at the Book-Entry Transfer Facility to be credited with the withdrawn Old Notes
and otherwise comply with the procedures of such facility. All questions as to
the validity, form and eligibility (including time of receipt) of such notices
will be determined by the Company, whose determination shall be final and
binding on all parties. Any Old Notes so withdrawn will be deemed not to have
been validly tendered for exchange for purposes of the Exchange Offer. Any Old
Notes which have been tendered for exchange but which are not exchanged for any
reason will be returned to the holder thereof without cost to such holder (or,
in the case of Old Notes tendered by book-entry transfer into the Exchange
Agent's account at the Book-Entry Transfer Facility pursuant to the book-entry
transfer procedures described above, such Old Notes will be credited to an
account maintained with such Book-Entry Transfer Facility for the Old Notes) as
soon as practicable after withdrawal, rejection of tender or termination of the
Exchange Offer. Properly withdrawn Old Notes may be retendered by following one
of the procedures described under '--Procedures for Tendering Old Notes' above
at any time on or prior to the Expiration Date.
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CERTAIN CONDITIONS TO THE EXCHANGE OFFER
Notwithstanding any other provision of the Exchange Offer, the Company
shall not be required to accept for exchange, or to issue New Notes in exchange
for, any Old Notes and may terminate or amend the Exchange Offer, if at any time
before the acceptance of such Old Notes for exchange or the exchange of the New
Notes for such Old Notes, any of the following events shall occur:
(a) there shall be threatened, instituted or pending any action or
proceeding before, or any injunction, order or decree shall have been
issued by, any court or governmental agency or other governmental
regulatory or administrative agency or commission, (i) seeking to restrain
or prohibit the making or consummation of the Exchange Offer or any other
transaction contemplated by the Exchange Offer, or assessing or seeking any
damages as a result thereof, or (ii) resulting in a material delay in the
ability of the Company to accept for exchange or exchange some or all of
the Old Notes pursuant to the Exchange Offer; or any statute, rule,
regulation, order or injunction shall be sought, proposed, introduced,
enacted, promulgated or deemed applicable to the Exchange Offer or any of
the transactions contemplated by the Exchange Offer by any government or
governmental authority, domestic or foreign, or any action shall have been
taken, proposed or threatened, by any government, governmental authority,
agency or court, domestic or foreign, that in the reasonable judgment of
the Company might directly or indirectly result in any of the consequences
referred to in clauses (i) or (ii) above or, in the reasonable judgment of
the Company, might result in the holders of New Notes having obligations
with respect to resales and transfers of New Notes which are greater than
those described in the interpretation of the Commission referred to on the
cover page of this Prospectus, or would otherwise make it inadvisable to
proceed with the Exchange Offer; or
(b) there shall have occurred (i) any general suspension of or general
limitation on prices for, or trading in, securities on any national
securities exchange or in the over-the-counter market, (ii) any limitation
by any governmental agency or authority which may adversely affect the
ability of the Company to complete the transactions contemplated by the
Exchange Offer, (iii) a declaration of a banking moratorium or any
suspension of payments in respect of banks in the United States or any
limitation by any governmental agency or authority which adversely affects
the extension of credit or (iv) a commencement of a war, armed hostilities
or other similar international calamity directly or indirectly involving
the United States, or, in the case of any of the foregoing existing at the
time of the commencement of the Exchange Offer, a material acceleration or
worsening thereof; or
(c) any change (or any development involving a prospective change)
shall have occurred or be threatened in the business, properties, assets,
liabilities, financial condition, operations, results of operations or
prospects of the Company and its subsidiaries taken as a whole that, in the
reasonable judgment of the Company, is or may be adverse to the Company, or
the Company shall have become aware of facts that, in the reasonable
judgment of the Company, have or may have adverse significance with respect
to the value of the Old Notes or the New Notes;
which in the reasonable judgment of the Company in any case, and regardless of
the circumstances (including any action by the Company) giving rise to any event
described above, makes it inadvisable to proceed with the Exchange Offer and/or
with such acceptance for exchange or with such exchange.
The foregoing conditions are for the sole benefit of the Company and may be
asserted by the Company regardless of the circumstances giving rise to any such
condition or may be waived by the Company in whole or in part at any time and
from time to time in its sole discretion. The failure by the Company at any time
to exercise any of the foregoing rights shall not be deemed a waiver of any such
right and each such right shall be deemed an ongoing right which may be asserted
at any time and from time to time.
In addition, the Company will not accept for exchange any Old Notes
tendered, and no New Notes will be issued in exchange for any such Old Notes, if
at such time any stop order shall be threatened or in effect with respect to the
Registration Statement of which this Prospectus constitutes a part or the
qualification of the Indentures under the Trust Indenture Act of 1939 (the
'TIA').
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EXCHANGE AGENT
The Bank of New York has been appointed as the Exchange Agent for the
Exchange Offer. All executed Letters of Transmittal and Agent's Messages should
be directed to the Exchange Agent at one of the addresses set forth below.
Questions and requests for assistance, requests for additional copies of this
Prospectus or of the Letter of Transmittal or Agent's Message and requests for
Notices of Guaranteed Delivery should be directed to the Exchange Agent
addressed as follows:
DELIVERY TO: THE BANK OF NEW YORK, EXCHANGE AGENT
<TABLE>
<S> <C>
By Mail: By Overnight Courier or Hand:
Attention:
By Facsimile:
Confirm by Telephone:
</TABLE>
DELIVERY OF THE LETTER OF TRANSMITTAL TO AN ADDRESS OTHER THAN AS SET FORTH
ABOVE OR TRANSMISSION OF INSTRUCTIONS VIA FACSIMILE OTHER THAN AS SET FORTH
ABOVE DOES NOT CONSTITUTE A VALID DELIVERY OF SUCH LETTER OF TRANSMITTAL.
FEES AND EXPENSES
The Company will not make any payment to brokers, dealers, or others
soliciting acceptances of the Exchange Offer.
The estimated cash expenses to be incurred in connection with the Exchange
Offer will be paid by the Company and are estimated in the aggregate to be
$ .
TRANSFER TAXES
Holders who tender their Old Notes for exchange will not be obligated to
pay any transfer taxes in connection therewith, except that holders who instruct
the Company to register New Notes in the name of, or request that Old Notes not
tendered or not accepted in the Exchange Offer be returned to, a person other
than the registered tendering holder will be responsible for the payment of any
applicable transfer tax thereon.
CONSEQUENCES OF EXCHANGING OR FAILING TO EXCHANGE OLD NOTES
Holders of Old Notes who do not exchange their Old Notes for New Notes
pursuant to the Exchange Offer will continue to be subject to the provisions in
the Indentures regarding transfer and exchange of the Old Notes and the
restrictions on transfer of such Old Notes as set forth in the legend thereon as
a consequence of the issuance of the Old Notes pursuant to exemptions from, or
in transactions not subject to, the registration requirements of the Securities
Act and applicable state securities laws. In general, the Old Notes may not be
offered or sold, unless registered under the Securities Act, except pursuant to
an exemption from, or in a transaction not subject to, the Securities Act and
applicable state securities laws. The Company does not currently anticipate that
it will register Old Notes under the Securities Act. See 'Description of the
Notes--Registration Rights.' Based on interpretations by the staff of the
Commission, as set forth in no-action letters issued to third parties, the
Company believes that New Notes issued pursuant to the Exchange Offer in
exchange for Old Notes may be offered for resale, resold or otherwise
transferred by holders thereof (other than any such holder which is an
'affiliate' of the Company within the meaning of Rule 405 under the Securities
Act) without compliance with the registration and prospectus delivery provisions
of the Securities Act, provided that such New Notes are acquired in the ordinary
course of such holders' business and such holders have no arrangement or
understanding with any person to participate in the distribution of such New
Notes. However, the Company does not intend to request the Commission to
consider, and the Commission has not considered, the Exchange Offer in the
context of a no-action letter and there can be no assurance that the staff of
the Commission would make a similar determination with respect to the Exchange
Offer as in such other circumstances. Each holder, other than a broker-dealer,
must acknowledge that it is not engaged in, and does not intend to engage in, a
distribution of New Notes and has no arrangement or understanding to participate
in a distribution of New Notes. If any holder is an
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affiliate of the Company, is engaged in or intends to engage in or has any
arrangement or understanding with respect to the distribution of the New Notes
to be acquired pursuant to the Exchange Offer, such holder (i) could not rely on
the applicable interpretations of the staff of the Commission and (ii) must
comply with the registration and prospectus delivery requirements of the
Securities Act in connection with any resale transaction. Each broker-dealer
that receives New Notes for its own account in exchange for Old Notes, where
such Old Notes were acquired by such broker-dealer as a result of market-making
activities or other trading activities, must acknowledge that it will deliver a
prospectus in connection with any resale of such New Notes. See 'Plan of
Distribution.' In addition, to comply with state securities laws, the New Notes
may not be offered or sold in any state unless they have been registered or
qualified for sale in such state or an exemption from registration or
qualification is available and is complied with. The offer and sale of the New
Notes to 'qualified institutional buyers' (as such term is defined under Rule
144A of the Securities Act) is generally exempt from registration or
qualification under the state securities laws. The Company currently does not
intend to register or qualify the sale of the New Notes in any state where an
exemption from registration or qualification is required and not available.
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BUSINESS
GENERAL
Panavision is a leading designer, manufacturer and supplier of high
precision film camera systems, comprising cameras, lenses and accessories, for
the motion picture and television industries. In 1997 in North America,
Panavision equipment was utilized in over 80% of feature films produced by major
motion picture studios, and over 80% of episodic or 'series' television
productions shot on film (such as E.R. and SEINFELD). In addition, Panavision
estimates that in 1997 it serviced nearly 40% of the independent feature film
market in North America and over 20% of the feature film market in the United
Kingdom and Europe. Panavision also supplies camera systems to the television
commercial market in North America, the United Kingdom, Europe and the Asia
Pacific region, which includes Japan, Australia, New Zealand, Indonesia and
Malaysia.
Unlike equipment manufactured by its competitors, Panavision camera systems
are not available for sale and are rented exclusively through the Company's
domestic and international owned and operated facilities as well as its network
of independent agents. The Company believes that its position as an industry
leader results from its control over the manufacturing and distribution process,
its broad range of technologically superior and innovative products, its
long-standing collaborative relationships with filmmakers and studios, the
breadth of its camera equipment inventory and its dedication to customer
service. Panavision is the only supplier of cinematography equipment that
manufactures a complete camera system incorporating its own proprietary prime
and zoom lenses, the most critical components of a camera system.
Panavision is recognized in the motion picture and television industries as
the preeminent brand name for cinematography equipment. Since the Company's
inception in 1954, Panavision has continually introduced new camera systems,
lenses, and accessories that have become industry standards. The Company's close
relationship with producers, directors and cinematographers results in a
cooperative effort to design and produce unique systems and accessories that
meet filmmakers' creative needs. Panavision has received two OSCARS and 18
Awards for Scientific and Technical Achievement from the Academy of Motion
Picture Arts and Sciences. Since 1990, two-thirds of the Academy Award nominees
for Best Cinematography, and six of the seven cinematographers who have won the
OSCAR for Best Cinematography, used Panavision camera systems. Panavision camera
systems were used to film nine of the top ten box office movies shot on film in
each of 1997 and 1996, including MEN IN BLACK, THE LOST WORLD: JURASSIC PARK,
LIAR, LIAR, JERRY MAGUIRE, MY BEST FRIEND'S WEDDING, MISSION: IMPOSSIBLE,
INDEPENDENCE DAY, RANSOM, TWISTER and A TIME TO KILL. Panavision camera systems
were also used to film the 1998 blockbuster hits TITANIC and TOMORROW NEVER
DIES, the latest James Bond film. In addition to the Company's involvement in
the motion picture industry, a predominant number of U.S. prime time episodic or
'series' television programs that are shot on film use Panavision camera
systems, including FRIENDS and N.Y.P.D. BLUE.
Renting, rather than purchasing, equipment is more cost-effective for
feature film, television and commercial producers given the periods of
inactivity typically experienced between productions. In addition, renting
camera systems from Panavision ensures continual access to state-of-the-art
equipment as well as the availability of the proper equipment combinations for
each specific project. Since the average cost of camera rental represents less
than 1% of the average film budget, customers tend to place a higher priority on
quality of service and the availability of a broad range of technologically
superior equipment than on price considerations, which enables Panavision to
receive a premium for its equipment.
Panavision dominates an otherwise fragmented rental market for
cinematographic equipment. Panavision is the only supplier of cinematographic
equipment that has a network of rental offices and maintenance facilities
throughout North America, Europe and the Asia Pacific Region and is the only
major manufacturer located near Hollywood. As the only vertically integrated
provider of camera systems to the film and television industries, Panavision is
better able to meet its customers' needs effectively. In contrast, the Company's
manufacturing competitors are located in Europe and sell their products to
rental companies, which then rent the equipment to the ultimate user.
The demand for cinematographic equipment is driven by the number and
complexity of feature films, television programs and commercials being produced.
Demand for film-based entertainment has continued to
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grow steadily in recent years as evidenced by the growth in the number of
feature film starts in North America from 350 in 1992 to 576 in 1997, an
increase in domestic box office receipts of 28.1% from 1992 to 1997, and an
increase of approximately 6,400 exhibitor screens over the same period.
Additionally, the number of action films and special effects in feature film and
television productions have increased significantly, thereby increasing the
equipment required and lengthening the rental period. In addition, an increase
in the number of television networks and channels and in their demand for
original programming has also driven the increased use of camera systems.
On June 5, 1997, the Company completed its acquisition (the 'FSG
Acquisition') of Visual Action Holdings plc's Film Services Group ('Film
Services Group' or 'FSG') for approximately $61 million in cash. FSG includes
camera rental operations which rent primarily non-Panavision manufactured
equipment in the United Kingdom, France, Australia and two U.S. cities, Chicago
and Dallas, as well as smaller rental operations in New Zealand, Malaysia and
Indonesia. Management intends to augment the existing FSG equipment inventory
base with Panavision camera systems over time. Management believes that the FSG
Acquisition has substantially improved its competitive position internationally
as well as in the mid-western U.S. commercial market.
In addition to manufacturing and renting camera systems, the Company also
rents lighting, lighting grip, power distribution, generation and related
transportation equipment through Lee Lighting, the largest lighting rental
company in the United Kingdom, as well as through its owned and operated
facilities in Chicago, Dallas, Orlando, Toronto and Australia. The Company also
manufactures and sells lighting filters and other color-correction and diffusion
filters through Lee Filters.
Panavision was incorporated in Delaware in 1990. Predecessors of Panavision
have been engaged in the design and manufacturing of cinematography equipment
since 1954.
COMPETITIVE STRENGTHS
Panavision's leading market position is demonstrated by its premier brand
name recognition and its market share of over 80% of the major studio feature
films and episodic television programs produced in North America in 1997. The
Company's leading position results from the following competitive strengths
which provide substantial barriers to entry for new competitors.
CONTROL OVER MANUFACTURING AND DISTRIBUTION PROCESS. Panavision is
the only vertically integrated renter of camera systems to the film and
television industry. The Company's control over both the manufacturing and
distribution processes enables it to (i) rapidly incorporate technological
development and filmmakers' suggestions into new products, (ii) maintain
product exclusivity and (iii) offer products with greater quality and
higher performance at a premium price.
REPUTATION FOR QUALITY AND TECHNOLOGICALLY ADVANCED
PRODUCTS. Panavision is recognized as the industry leader in the
development of high quality, technologically advanced camera systems and
its products have become industry standards. Panavision has received two
OSCARS and 18 other Academy Awards granted for Scientific and Technical
Achievement, including a 1998 award for the Panavision/Frazier Lens System.
In addition to the development of new products, Panavision is also better
able to upgrade its existing inventory to meet continually changing market
demands, thereby reducing obsolescence, achieving better control of
inventory and product availability, and providing its customers with access
to the latest technological advances.
CLOSE RELATIONS WITH FILMMAKERS. As a result of Panavision's
significant relationships with cinematographers, directors and producers
and its dominant market position, Panavision gains early access to
productions and is able to influence the selection of camera systems.
Additionally, Panavision offers instruction and training in the handling of
Panavision equipment to young directors and cinematographers while they are
still in film school as well as thereafter, thereby developing loyalty to
Panavision and providing a foundation for Panavision to sustain its strong
market position.
RANGE AND BREADTH OF CAMERA EQUIPMENT. Panavision believes that it
has the world's largest inventory of camera systems, with over 1,000
cameras and 5,000 lenses. It also offers a broad range of choices,
including equipment that is exclusively available through Panavision and
its agents. The Company believes that the range and breadth of its camera
inventory permit it to serve a greater number of productions
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throughout the world and make it the only company in the industry with the
ability to serve multiple large-scale feature film productions
simultaneously.
DEDICATION TO CUSTOMER SERVICE. Panavision places special emphasis on
customer service. The Company's customer service, repair and maintenance
personnel are 'on call' and available to assist customers 24 hours a day.
In order to provide filmmakers with a high level of support, the Company
sends marketing representatives and technicians to film production sets to
provide advice or immediate assistance with any equipment needs or
questions. The Company assigns to each production a sales representative
who possesses skills and experience appropriate to the needs of that
production in an attempt to foster a strong and lasting working
relationship with the customer. In addition, as part of its customer
service, the Company often develops, customizes or procures equipment for
specific customers or projects.
GROWTH STRATEGY
The Company's growth strategy is to increase its market share in the
worldwide commercial and feature film markets by leveraging its strong
competitive position and brand name in the feature film and television
industries in North America. The Company's strategy involves the following
elements:
INCREASE INVENTORY OF AVAILABLE CAMERA EQUIPMENT. Until mid-1996, the
Company's growth has been inhibited by equipment shortages resulting from
limited manufacturing capacity and capital expenditure constraints in its prior
credit facilities. The Company believes that its move to its current
manufacturing facility in 1996 as well as its enhanced access to capital will
enable the Company to continue to expand its equipment base in order to meet
expected market demand and to capture a larger market share, particularly in the
worldwide commercial and independent feature film markets.
EXPAND NEW PRODUCT DEVELOPMENT. The Company intends to continue developing
and manufacturing the next generation of technologically superior cameras,
lenses and accessories. The Company is currently rolling out its Millennium
camera system and focusing its development efforts on value-added accessories
that increase the overall size and rental price of a camera package. The
Company's move into a larger manufacturing facility enabled the Company to hire
additional personnel and significantly increase its research and development of
new products in an effort to extend its leadership in technology and product
development and to further facilitate collaborative efforts with filmmakers. For
example, the Company has recently introduced a new close focus macro-zoom lens
and the Panavision/Frazier Lens System which provide filmmakers with unique
creative tools that were previously unavailable.
GEOGRAPHIC EXPANSION AND STRATEGIC ACQUISITIONS. From time to time the
Company has pursued strategic acquisitions, such as the FSG Acquisition, as a
means of expanding market share in existing markets and as a gateway to new
geographical markets. The Company will continue to evaluate such opportunities
as they arise, as well as other opportunities, such as strategic alliances or
the expansion of its agent network.
CAMERA RENTAL MARKETS
Panavision supplies cinematographic equipment, such as cameras, lenses and
accessories to its customers on a project-by-project basis. The Company has a
rental inventory of over 1,000 cameras (including non-Panavision manufactured
equipment) and 5,000 lenses, as well as associated accessories. The Company
rents its equipment through 24 owned and operated rental facilities which are
strategically located in cities where the most feature films are produced,
including Los Angeles, Toronto, London and Paris. The Company also rents its
equipment through ten independent agents, including agents located in New York,
Tokyo and Hong Kong. Panavision's network of owned and operated rental offices
and independent agents provides it with a competitive advantage as it is the
only rental company that offers clients equipment and service on a national and
worldwide basis.
For the year ended December 31, 1997, approximately 63% of the Company's
camera rental revenue was derived from productions based in North America. The
Company believes that its sales force, which is segmented by the end markets
served, is the most experienced and knowledgeable in the industry.
Management believes that it has been able to achieve increases in the
Company's equipment utilization rate because of Panavision's breadth and mix of
equipment, along with an MIS system that enables the Company to
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transfer equipment to areas of greatest demand. The Company's Woodland Hills
rental facility, its largest, generated approximately 43% of the Company's
camera rental revenue during the year ended December 31, 1997 and achieved an
increase of approximately 25% in utilization of Panaflex cameras from 1993
through 1997. Although the Company believes it can achieve further modest
increases in utilization, additional significant increases will be difficult to
achieve because of (i) the need to have sufficient inventory available for the
peak feature film and television production season (typically the third and
fourth quarters), (ii) time needed for service and maintenance, (iii) slippage
in movie production start dates and (iv) time needed to prepare and customize
equipment for each given project.
FEATURE FILMS
The rental process for feature films takes about four to seven months from
the time the producer approves the project until filming is completed and the
equipment package is returned to Panavision for servicing. The decision makers
for the various markets are the producers, directors and cinematographers. In
general, after production is approved, the decision makers discuss the
requirements with their Panavision sales representative and then finalize the
equipment package. The equipment is subsequently prepped at the Panavision
rental facility and shipped to the studio or location to commence principal
photography. Once the equipment is returned, the Company services its equipment
in preparation for the next rental. The average feature film rental is for 10 to
12 weeks. Panavision rents camera packages that include cameras, lenses and
accessories. The average weekly rental package price for feature films has
increased since 1992 due to the addition of value-added proprietary lenses and
accessories as well as modest price increases on its existing inventory.
The number of feature films produced in North America increased from
approximately 350 in 1992 to 576 in 1997. Major studio feature film productions
decreased to approximately 86 in 1997 from approximately 104 in 1992, the first
decline in any year since 1992. However, the number of independent feature films
produced in North America increased from approximately 246 in 1992 to
approximately 490 in 1997. Major studio feature films are typically large-budget
productions with camera rental budgets that require greater depth of product and
experienced customer service personnel. The Company expects that the production
of large-budget action films will continue due in large part to their success in
the international theater, television and home video markets. For the year ended
December 31, 1997, approximately 34% of its camera rental revenue was generated
from feature films. In addition, the Company estimates that its camera rental
revenue from feature films for the year ended December 31, 1997 has grown 57%
since 1992. The Company believes the feature film market, particularly
independent productions, offers significant growth opportunities.
COMMERCIALS
Although commercial productions generally last for only one to seven days,
daily rental rates for camera systems are equivalent to feature film rental
rates and represent a significant part of the camera equipment rental market.
Many of the creative people involved in the filming of commercials seek to
distinguish their products by using innovative techniques requiring
technologically advanced equipment--the ability to achieve a unique 'look,'
which the Company believes can, in many cases, be achieved best by using
Panavision products. By pursuing opportunities to expand its presence in the
television commercial market, the Company believes that it can develop brand
loyalty to Panavision products and beneficial long-term relationships with
directors and cinematographers, many of whom begin their careers filming
television commercials. For the year ended December 31, 1997, approximately 31%
of its camera rental revenue was generated from commercials. The Company
estimates that its camera rental revenue from commercials has grown 289% since
1992. The Company believes this market offers significant opportunities for
growth.
EPISODIC TELEVISION
The episodic or series television market in North America is comprised
primarily of dramas, situation comedies and action programs produced on film
which are aired in both prime and non-prime time slots. These programs are
broadcast on the four major television networks as well as on the WB, UPN and
cable networks. The number of episodic shows produced on film has increased by
approximately 100% since 1992, resulting primarily from the advent of new
broadcast networks and increased original programming on cable networks. Over
the same period, the Company believes that the use of film rather than videotape
in episodic television has
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increased because of a number of factors. Film is an excellent storage or
archival medium and may be digitally transferred to other media, such as the
evolving high definition television technologies, with greater resolution than
videotape. The image quality that film offers is very important to television
programs that will be syndicated into many markets. In contrast, videotape may
not be fully compatible with high definition television and may deteriorate more
rapidly over time.
For the year ended December 31, 1997, approximately 25% of its camera
rental revenue was generated from episodic television. The Company estimates
that its camera rental revenue for the year ended December 31, 1997 from
episodic television has grown 205% since 1992. The Company believes it will
continue to make inroads in this market as a result of new network programming
requirements and innovative Panavision products such as the 3-Perf(Registered)
System, the Pedestal Camera System and a 2,000-foot film magazine.
MOVIES OF THE WEEK
In addition to episodic television, there are also movies of the week shot
specifically for network and cable television. The number of movies of the week
productions in North America has increased from approximately 185 in 1992 to
approximately 227 in 1997. However, due to the relatively low budgets associated
with these productions, overall cost is a major factor in the selection of the
camera equipment that is used and, accordingly, the dollar size of this market
is relatively small.
For the year ended December 31, 1997, approximately 4% of its camera rental
revenue was generated from movies of the week. The Company estimates that its
camera rental revenue from movies of the week has grown 17% since 1992. While
the Company will continue to serve this market, given its size and price
sensitivity, the Company expects to focus on higher-budget productions.
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PRODUCTS
The following chart details the primary cameras and lenses manufactured and
rented by the Company.
<TABLE>
<CAPTION>
PRODUCTS DESCRIPTION
- --------------------------------------------------- ------------------------------------------------------------
<S> <C>
CAMERA
Millennium....................................... Recently introduced, this top-of-the-line camera
incorporates all functions of the previous cameras as well
as new advanced optics and electronics. The camera is
designed for feature films and high-end commercials.
Platinum Panaflex................................ As the flagship of the Panavision camera line until the
introduction of the Millennium, the Platinum Panaflex is
used primarily for large-budget feature films and commercial
production.
Golden Panaflex II............................... As the workhorse of the Panavision camera line, the Golden
Panaflex II is used across all markets.
Golden Panaflex.................................. The Golden Panaflex is used primarily for episodic
television, movies of the week and low-budget feature films.
Panastar......................................... The Panastar is a high speed MOS special effects and
commercial camera.
LENSES
Primo Primes..................................... Primo Prime lenses are color matched, high contrast and
resolution spherical lenses ranging from 10mm to 150mm.
Primo Zooms:
Primo 3:1 Zoom Lens
Primo 4:1 Zoom Lens
Primo 11:1 Zoom Lens.......................... Primo Zoom lenses have performance equal to the Primo
Primes, enabling seamless intercutting. Due to Primo Zoom
lenses' flexibility, they are suitable for virtually any
type of production.
Panavision/Frazier Lens Systems.................. This new lens system is versatile and enables a continual
image rotation while the camera system remains stationary in
extreme depth of field, allowing previously impossible
camera shots and placements to be made.
ACCESSORIES
Panavision Color Video Assist.................... The Panavision Color Video Assist captures a color video
image of the scene being filmed, which can be simultaneously
monitored by the director. It comes in a compact package
utilizing the latest technology in video cameras and
processing.
Pedestal Camera System........................... The Pedestal Camera System was developed to shoot
multi-camera television shows, enabling a single operator to
control the entire camera system.
FTZSAC........................................... FTZSAC, or Focus, T-Stop, Zoom, Speed Aperture Control, is a
digital remote control system.
Super Panhead.................................... The camera body is mounted to a Super Panhead (geared head),
which is used to control the panning and tilt motion of the
camera.
Magazines........................................ Magazines are used with every camera system to hold film and
are available in 250, 500, 1,000 and 2,000 foot sizes.
</TABLE>
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RESEARCH AND PRODUCT DEVELOPMENT
The Company is in the process of expanding its research and development
group, which currently comprises approximately 40 mechanical, software,
electronic and optical engineers, draftsmen and machinists. Additionally, the
research and development group has a dedicated machine shop that manufactures
prototype equipment. These internal capabilities enable the Company to develop
proprietary technology in collaboration with filmmakers to address their unique
requirements.
The Company has long been a leader in the research and development of film
camera lenses. Since the first Panavision lens was introduced in 1957, the
Company has introduced many innovative spherical and anamorphic lenses,
including the PRIMO(Registered) series which won Academy Awards in 1990, 1991,
1994 and 1995. During 1997, the Company completed the development of a new macro
close-focus, wide-angle zoom lens. This new lens is designed to address the need
within the commercial market for a compact lens with the ability to operate in
low light environments and maintain focus at extremely close ranges (e.g.,
table-top or other close-up work). In 1997, the Company introduced a new
sync-sound camera which is lighter and quieter than current Panavision cameras
and incorporates enhanced view finding and video monitoring capabilities. In
addition, the Company is in the process of developing a digital video assist
device that will enable the director and cinematographer to perform certain
immediate on-set digital editing functions.
Research and development expenses for the years ended 1995, 1996 and 1997
were $3.0 million, $4.3 million and $4.5 million respectively, and were $1.1
million for the three months ended March 31, 1998.
CAMERA SYSTEMS
The Company is the only provider of camera systems with an integrated
design that provides customers with compatible products that are available
worldwide. Each camera package rented for a project is comprised of a number of
camera systems, each of which includes a camera, lenses and accessories. A
cinematographer's needs may include a sync-sound camera, such as the Platinum
Panaflex(Registered) and a high-speed Panastar(Registered) camera. Each camera's
rental price includes a variety of accessories such as eyepieces, viewfinders,
cables, brackets and grips.
Cameras. There are two basic types of motion picture cameras--Synchronous,
or 'sync-sound,' and Mit Out Sound ('MOS'). Sync-sound cameras are used to shoot
pictures while recording dialogue. MOS cameras are used primarily to shoot
high-speed footage and special effects and may also be used as backup cameras in
situations where dialogue is not being recorded. The Company's camera inventory
consists of both sync-sound and MOS cameras with various features and at a range
of prices. While the majority of the Company's sync-sound cameras are 35mm
cameras, the Company also manufactures 16mm cameras, which are used primarily on
episodic television shows, and 65mm cameras, which are used primarily for
special effects and special venue presentations.
The Company's inventory also includes a number of non-Panavision cameras
which are used to supplement the Company's product line. Due to its ability to
purchase non-Panavision cameras if there is a business need to do so, the
Company is able to compete with independent renters of cinematography equipment
on the same level and with the same equipment. Its competitors, on the other
hand, do not have the corresponding ability to purchase Panavision equipment, as
Panavision equipment is not available to rental companies other than the
Company's agents.
Lenses. Panavision develops, designs and manufactures its own prime (fixed
focal length) and zoom lenses, the most critical component affecting picture
quality and an important consideration for the filmmaker. For many years, the
Company specialized in anamorphic lenses, which are used for the wide-screen
movie format. While the Company remains the world's leading supplier of these
lenses, in 1985 a strategic decision was made to design and develop a new series
of prime and zoom lenses specifically for cinematography applications.
Accordingly, the Company created a line of advanced spherical lenses for the
non-wide screen format, producing its proprietary PRIMO PRIME(Registered) and
PRIMO ZOOM(Registered) lenses. The PRIMO(Registered) lenses have performance
characteristics that exceed the other lenses available in the marketplace.
Accessories. In order to provide its customers with a fully integrated
camera system, the Company frequently introduces new camera accessories and
currently offers an extensive range of products requested by and developed in
conjunction with filmmakers. Certain accessories may reduce overall production
costs by
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lowering the labor intensiveness of the production process and thereby
decreasing the shooting days. Moreover, an accessory product often achieves such
widespread acceptance among the Company's customers that the Company
incorporates it into the base camera package, thereby increasing the overall
package price.
MANUFACTURING AND ASSEMBLY
The Company manufactures cameras, lenses and accessories designed by the
Company's in-house research and development staff. The Company has over 100
non-union employees at its recently renovated and expanded 150,000 square foot
manufacturing facility in Woodland Hills, California, located near Hollywood.
Panavision is the only major manufacturer of cameras and lenses located in the
Hollywood area, enabling the Company to develop close relationships with
filmmakers as well as enabling the Company to rapidly respond to its customers'
needs. While the breadth of the Company's rental inventory has allowed it to
adequately service certain segments of the feature film and television
industries, until mid-1996 capital constraints precluded Panavision from
investing in additional rental equipment to expand its market share in other
attractive markets, including both North American and international independent
feature films and commercials. In 1997, the Company increased its camera
manufacturing production to take advantage of what it believes to be favorable
rates of return as well as high demand for its equipment, doubling the number of
new camera systems manufactured in 1997 to 72 from 35 in 1996. Panavision
expects to manufacture a similar number of camera systems in 1998. The Company
believes that its existing manufacturing facility has sufficient capacity to
increase manufacturing of camera systems beyond the level achieved in 1997.
The Company develops and designs all the critical components for its camera
systems, including the camera movement and lens. An entire camera system
consists of hundreds of parts, each carefully produced, assembled and tested.
The manufacturing process takes up to four months and primarily involves the
fabrication and assembly of camera and lens components by over 100 highly
skilled workers, each of whom generally has an area of specialization. Following
the assembly process, each camera system is rigorously tested to achieve the
high standard of performance that customers expect from Panavision.
While the Company manufactures most of the components internally, certain
components and subassembly work, including glass grinding, lens element
polishing and die casting, are outsourced to selected suppliers. The Company has
developed long-standing relationships with its significant suppliers and
believes that they will continue to supply high-quality products in quantities
sufficient to satisfy its requirements. Since certain components, particularly
the lens element, require long lead times, precise production schedules are
critical. Inventory levels are determined based on input from marketing,
operations and the agent network. The Company maintains a fairly constant
production schedule in order to utilize efficiently its resources and service
its customers' requirements.
MARKETING AND CUSTOMER SERVICE
The principal decision makers in the selection of the camera packages are
cinematographers, directors and producers, who view their cameras and related
equipment as critical artistic tools. Camera packages typically comprise a very
small percentage of a production budget. Accordingly, absent budget constraints,
the selection of equipment is driven by its suitability, technological
capabilities and reliability, as well as by the degree to which the manufacturer
or renter is able to rapidly service the technical needs of the filmmaker, both
before and during film production.
The Company's skilled sales representatives have established close working
relationships with numerous filmmakers. To cultivate these relationships, the
Company assigns to each production a sales representative who possesses skills
and experience appropriate to the needs of that production. Based on discussions
with the filmmaker, the sales representative recommends a camera package
tailored to achieve the filmmaker's desired visual effect and meet the
production budget. In addition, sales representatives provide further advice and
support by visiting film production sites throughout the production. As a result
of providing high-quality customer service, many of the Company's
representatives have been working with the same filmmakers throughout their
careers and in many instances the collaborative effort with the filmmaker has
prompted the design of innovative camera systems and accessories.
After preliminary decisions have been made with respect to the proper
camera package, the camera equipment is delivered to a preparation room in one
of the Company's facilities reserved for that filmmaker. The
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filmmaker, together with his own and Panavision's representatives, then
inspects, tests and experiments with the equipment at the facility's prep floor,
sound stage, film studio and screening room.
DISTRIBUTION
Camera packages are rented to the motion picture and television industries
through rental houses owned and operated by Panavision as well as by independent
agents. These rental houses serve as a single point of contact for the
cinematographers and often provide services including maintenance and technical
advice. Panavision is the only manufacturer to have a significant portion of its
revenue generated through owned and operated rental houses, primarily because of
the Company's choice not to sell its equipment. The Company does not currently
intend to begin selling its camera systems.
Panavision owns and operates camera rental facilities domestically in
Woodland Hills, Hollywood, Chicago, Dallas, Orlando and Wilmington, and
internationally in Toronto and Vancouver, Canada, Dublin, Ireland and London
(five) and Manchester, England, Paris, France (two), Sydney, Brisbane, and
Melbourne, Australia, Auckland and Wellington, New Zealand, Jakarta, Indonesia,
and Kuala Lumpur, Malaysia. The Chicago, Dallas, Orlando, Toronto and Australia
facilities also provide lighting, lighting grip and power distribution and
generation equipment.
In addition to its owned and operated facilities, the Company serves its
customers through a network of domestic and international third-party agents who
are responsible for the rental of the Company's equipment in locations that are
not serviced by the owned and operated facilities. Agents pay approximately 60%
of their rental revenue to the Company and retain the balance, which is charged
as a commission expense in the Company's statement of income. The Company uses
10 third-party agents to facilitate the rental of its products, accounting for
approximately 6% of the Company's revenue in 1997 and approximately 7% for the
three months ended March 31, 1998. All of the Company's agents are well-trained
in the use of Panavision equipment and are supported by the Company's technical
staff.
The Company's domestic third-party agent network includes agents in New
York and San Francisco, and internationally, agents are located in Canada,
Mexico, Italy, Spain, Sweden, Hong Kong, Japan and South Africa. The Hong Kong
agent has offices in mainland China.
For information as to the Company's operations in different geographical
areas, see Note 10 of Notes to the Consolidated Financial Statements of the
Company included elsewhere in this Prospectus.
COMPETITION
The market for high-precision cinematography equipment is highly
competitive, primarily driven by technology, customer service and, to a lesser
extent, price. As a manufacturer of cinematography equipment, the Company has
two primary competitors, located in Europe. Both of these companies manufacture
only cameras and certain accessories, primarily for sale to rental houses and
individuals, who are not the end users. Because Panavision manufactures lenses,
cameras, and a full range of accessories, has close relationships with
filmmakers and has in-house design and manufacturing capabilities, the Company
believes that it is better able to develop the innovative camera systems
demanded by its customers.
As a renter of cinematography equipment, the Company competes with numerous
rental facilities which must purchase their equipment from other manufacturers
and then rent that equipment to their customers. While the overall rental
business is price competitive and subject to discounting, the Company has chosen
to compete on the basis of its large inventory base, technologically advanced
proprietary products, broad product line, extensive sales and marketing force
and commitment to customer service. The Company believes that it, as both the
manufacturer and rental house, is able to respond to many user requests on
shorter notice and more effectively than its rental competitors. In addition to
its existing competitors, the Company may encounter competition from new
competitors, as well as from new types of equipment.
LIGHTING RENTAL
In addition to manufacturing and renting camera systems, the Company rents
lighting, lighting grip, transportation and distribution equipment and mobile
generators used in the production of feature films, television programs and
commercials, outside broadcasts and other events from its owned and operated
facilities located in the United Kingdom, Chicago, Dallas, Orlando, Toronto and
Australia. In addition, the Company sells
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consumable products including lighting filters, light bulbs and gaffer tape,
which are used in all types of production. Effective July 1, 1996, the Company
acquired Lee Lighting, which for the year ended December 31, 1997 had revenue of
approximately $23.4 million. The Company's other lighting rental operations had
combined revenue of approximately $7.2 million for the year ended December 31,
1997.
LEE LIGHTING
Lee Lighting is the largest lighting rental operation in the United
Kingdom. Lee Lighting purchases lighting equipment, lighting grip equipment and
generators from independent manufacturers to maintain and build its rental asset
base. Lee Lighting currently has the largest inventory of lampheads, the core
element of lighting equipment used by filmmakers in all areas of the industry,
in the United Kingdom. This large rental asset base and Lee Lighting's
experienced management and electricians allow it to service a number of films
which may be shooting concurrently. Lee Lighting operates lighting rental
operations in London, Bristol, Manchester and Glasgow, each of which has its own
rental inventories. From these four locations, Lee Lighting is able to service
any productions in England, Wales or Scotland. In addition, Lee Lighting
maintains a rental base at Shepperton Studios, the second largest studio complex
in the United Kingdom for the production of feature films.
Lee Lighting also supplies equipment to any U.K.-based production crew for
shoots in Europe, South America or Africa. Typically, Lee Lighting does not
service productions based outside of the United Kingdom, except occasionally in
Ireland. Recently, Lee Lighting has supplied the entire lighting needs of such
major feature films as THE AVENGERS, LOST IN SPACE, FOUR WEDDINGS AND A FUNERAL,
ROB ROY, MISSION: IMPOSSIBLE, 101 DALMATIANS, EVITA and THE SAINT.
Competition. Lee Lighting services both the motion picture and television
industries, including studio programs, outside broadcasts, commercials and
made-for-television movies (equivalent to movies of the week). These markets
require a similar range of lighting products and related support equipment;
however, feature films and episodic television programs generally require larger
equipment packages than commercials. The composition of equipment packages is
frequently determined by the producer, director or cinematographer, who may
desire a specific type of image or lighting effect. Although Lee Lighting is the
largest lighting rental company in the United Kingdom, the lighting rental
market is price competitive.
Competitive Strengths. The Company believes Lee Lighting is well-positioned
in the U.K. lighting rental industry because of the following competitive
strengths:
Reputation for Outstanding Service. Over the last two decades Lee
Lighting has developed a reputation among U.K. producers of feature films,
television programs and commercials for providing outstanding service. Lee
Lighting is the only lighting company in the United Kingdom that supplies
its own electricians in connection with the rental of its equipment. Many
major U.K. feature film producers regularly use Lee Lighting's equipment
and the services of its skilled gaffers and electricians. This service
force is on call 24 hours a day, seven days a week and is supplemented by
freelance labor when required. This affords Lee Lighting the competitive
advantage of providing customers with a higher quality and more consistent
service, which is critical to success in capturing feature film work. Many
of Lee Lighting's technicians are considered to be among the best in the
film industry and their services are requested by some of the world's
leading cinematographers.
Depth of Inventory. Lee Lighting maintains the largest rental asset
base of lighting equipment, transport, mobile generators and power
distribution equipment in the United Kingdom. This permits Lee Lighting to
service as many as 15 feature films at the same time. The Company believes
that its extensive inventory of equipment provides it with an important
competitive advantage. Its substantial inventory enables Lee Lighting to
service projects with large-scale equipment and personnel requirements,
such as feature films and outside broadcasts, while still maintaining
sufficient capacity to service other projects simultaneously. Lee Lighting
believes that its position as the inventory market leader makes it the only
source for certain large-scale projects. Lee Lighting intends to add to its
rental asset base while actively pursuing opportunities to increase its
share in the U.K. feature film market as well as the television market,
including commercials and television broadcasts.
Experienced Management. Lee Lighting currently employs senior
management who have developed relationships over many years with
influential individuals in the U.K. motion picture and television
industries. Under this management there is a sizable field force of gaffers
and electricians who work exclusively for Lee Lighting.
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LEE FILTERS
Lee Filters is a manufacturer of light control media for the motion
picture, television and theater industries. Sales of filters or gels used by
lighting directors to control or correct lighting conditions during productions
comprise 80% of Lee Filters' business. The balance consists of the sale of
photographic filters and related products. Lee Filters' revenue was
approximately $12.8 million in 1997 and $2.9 million for the three months ended
March 31, 1998.
Lee Filters' lighting filters are available in a wide range of colors and
applications. These lighting filters are made either from polyester or
polycarbonate film purchased from U.K. and European petrochemical companies. Lee
Filters' range of light control filters includes tungsten conversion, daylight
conversion, arc correction, fluorescent, diffusion and ultraviolet grades. The
film base is impervious to water, is totally transparent and has a high melting
point, making it ideal for the manufacture of filter systems. Rolls of film are
coated on both sides with specially prepared lacquers which give them exactly
the color or light management properties demanded by the user. The color
formulas are proprietary to Lee Filters and are computer filed to ensure exact
reproduction from one batch to the next. Lee Filters also makes stills
photographic resin and polyester filters and a camera filter holder system for
amateur stills photographers, and produces bellows for stills camera
manufacturers.
Lighting filter distribution is handled primarily through a network of
third-party dealers who have been selected because of their specific knowledge
of the filters' market in their respective countries. For the three months ended
March 31, 1998 approximately 54% of Lee Filters' sales are in the United Kingdom
and Europe. In the United Kingdom, Lee Filters sells on a direct basis to end
users and rental houses as well as to distributors and dealers. In Europe, Lee
Filters has distributors in France, Germany, Italy, Spain, Benelux, Portugal,
Scandinavia and Switzerland.
For the three months ended March 31, 1998, approximately 42% of Lee
Filters' sales were generated in North America where it has established
distribution operations in Los Angeles, California and the New York metropolitan
area to service U.S. dealers. A third-party distributor has been established in
Toronto to serve the Canadian market. The remaining 4% of sales are generated
primarily in Japan, Hong Kong, Singapore and Australia.
COMPETITION
Lee Filters has one principal competitor and several smaller competitors.
Some of these competitors are contract processors or coaters who supply the end
user through other distributors, and some are sales companies which usually
purchase and resell filters. Its principal competitor offers a full range of
filters, some of which are made in-house and some of which are purchased.
COMPETITIVE STRENGTHS
Wide Range of Filter Types and Colors. Lee Filters believes it manufactures
more types of filters and a wider range of colors than its competitors and is
the only company which does not sell on a private label basis to others. Lee
Filters does not resell filters made by other manufacturers, thereby enabling it
to maintain better quality control.
Large Inventory. Lee Filters maintains a sizable inventory of filters in
three locations in order to provide same-day service to production companies.
This is especially important in servicing feature films while on location.
Quality and availability of product are the principal reasons Lee Filters is a
preeminent supplier to the U.K., European and U.S. feature film industry.
Lee Filters intends to expand its position in lighting filters for the
film, television and theater markets by improving its distribution and dealer
network, particularly in North and South America and in the Far East. In
addition, it plans to increase its product offerings on a selective basis to the
stills photography market in the United Kingdom and the United States.
INTELLECTUAL PROPERTY
The Company relies on a combination of patents, licensing arrangements,
trade names, trademarks, service marks, trade secrets, know-how and proprietary
technology to protect its intellectual property rights. The Company owns or has
been assigned or licensed under several domestic and foreign patents and patent
applications relating to its cameras, lenses and accessories. The Company also
owns or has been assigned several
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domestic and foreign trademark or service mark registrations including
Panavision(Registered), Panaflex(Registered), Panahead(Registered), Panalite,
Panavid(Registered), Panastar(Registered), Primo Zoom(Registered),
Primo-L(Registered) and 3-Perf(Registered) which are material to its business.
The Company may file additional patent and trademark applications in the
future, although there can be no assurance that the Company will be successful
in obtaining patents or trademark registrations based upon such applications.
There also can be no assurance that the Company's patents, patent applications,
trademarks, service marks, licenses and trade secret protections will adequately
protect the Company from potential infringements or misappropriations of its
intellectual property by third parties, that others will not obtain access to or
independently develop technologies or know-how similar to that of the Company,
or that future litigation by the Company will not be necessary to enforce its
trademark, patent and other proprietary rights, or to defend the Company against
claimed infringement of the rights of others, adverse determinations which could
have a material adverse effect on the Company.
ENVIRONMENTAL MATTERS
The Company is subject to foreign, federal, state and local environmental
laws and regulations relating to the use, storage, handling, generation,
transportation, emission, discharge, disposal and remediation of hazardous and
non-hazardous substances, materials and wastes ('Environmental Laws'). The
Company also is subject to laws and regulations relating to worker health and
safety. Certain Environmental Laws can impose liability on present and former
real property owners or operators, without regard to fault or legality of the
original actions, for the cost of cleaning up or removing contamination caused
by hazardous or toxic substances. The Company also could be held responsible for
third-party property or personal injury claims or for violations of
Environmental Laws relating to such contamination. The Company believes that its
operations are in substantial compliance with all applicable Environmental Laws.
The Company expects to spend approximately $2.0 million at its Lee Filters'
Andover, England facility during 1998 and 1999 to comply with anticipated air
emissions requirements in the United Kingdom. Although no other material capital
or operating expenditures relating to environmental controls or other
environmental matters are currently anticipated, there can be no assurance that
the Company will not incur costs in the future relating to environmental matters
that would have a material adverse effect on the Company's business or financial
condition.
EMPLOYEES
As of December 31, 1997, the Company had a total of approximately 1,227
full time employees, consisting of 502 employees based in the United States, 64
employees based in Canada, 502 employees based in the United Kingdom, 63
employees based in France, 70 employees based in Australia and 26 employees
based in New Zealand. The Company is not a party to any collective bargaining
agreements. The Company believes that its relationships with its employees are
satisfactory.
PROPERTIES
The Company's headquarters and principal manufacturing facility are located
at its 150,000 square-foot facility in Woodland Hills, California. The Company
also operates domestic rental facilities in Woodland Hills, Hollywood, Chicago,
Dallas, Orlando and Wilmington. To service its international markets, Panavision
operates rental facilities in Toronto and Vancouver, Canada, Dublin, Ireland and
London (five) and Manchester, England, Paris, France (two), Sydney, Brisbane and
Melbourne, Australia, Auckland and Wellington, New Zealand, Jakarta, Indonesia,
and Kuala Lumpur, Malaysia. Lee Lighting operates rental facilities in London,
Bristol and Manchester, England and Glasgow, Scotland. Lee Filters has
operations in Burbank, California and Teterboro, New Jersey as well as a
manufacturing facility located in Andover, England. All of the Company's
facilities are leased, with the exception of two of the Company's greater London
facilities, a small fabricating facility in Sydney, Australia and its facility
located in Glasgow, Scotland, which are owned.
LEGAL PROCEEDINGS
The Company is not engaged in any legal proceeding other than ordinary
routine litigation incidental to its business. Panavision does not believe that
any such proceedings currently pending will have a material adverse effect on
its business or financial condition.
55
<PAGE>
MANAGEMENT
DIRECTORS AND EXECUTIVE OFFICERS
The following table sets forth certain information as of June 30, 1998,
concerning the directors and executive officers of Panavision. Each director
holds office until his successor is duly elected and qualified or until his
resignation or removal, if earlier.
<TABLE>
<CAPTION>
NAME AGE POSITION
- ------------------------------------------ --- ---------------------------------------------------------------
<S> <C> <C>
Ronald O. Perelman........................ 55 Director
Howard Gittis............................. 64 Director
James R. Maher............................ 48 Director
Joseph P. Page............................ 44 Director
Martin D. Payson.......................... 62 Director
Kenneth Ziffren........................... 58 Director
William C. Scott.......................... 64 Chairman of the Board, Chief Executive Officer and Director
John S. Farrand........................... 54 President, Chief Operating Officer and Director
Jeffrey J. Marcketta...................... 43 Executive Vice President and Chief Financial Officer
Christopher M.R. Phillips................. 38 Controller and Secretary
</TABLE>
Ronald O. Perelman has been Chairman of the Executive Committee of the
Board and a Director of Panavision, since June 1998. Mr. Perelman has been
Chairman of the Board and Chief Executive Officer of Mafco Holdings and various
of its affiliates since 1980. Mr. Perelman also is Chairman of the Executive
Committees of the Boards of Directors of Consolidated Cigar Holdings Inc.
('Cigar Holdings') and M&F Worldwide Corp. ('MFW') and Chairman of the Board of
Meridian Sports Incorporated ('Meridian') and Revlon, Inc. ('Revlon'). Mr.
Perelman is a Director of the following corporations which file reports pursuant
to the Securities Exchange Act of 1934, as amended (the 'Exchange Act'):
California Federal Bank, A Federal Savings Bank ('California Federal'), Cigar
Holdings, First Nationwide Holdings Inc. ('FN Holdings'), First Nationwide
(Parent) Holdings Inc. ('FN Parent'), MFW, Meridian, Revlon Consumer Products
Corporation ('Products Corporation'), Revlon and REV Holdings Inc. ('REV
Holding'). (On December 27, 1996, Marvel, Marvel (Parent) Holdings Inc. ('Marvel
Parent'), Marvel Holdings Inc. ('Marvel Holding'), of which Mr. Perelman was a
Director, Marvel III Holdings Inc. ('Marvel III'), of which Mr. Perelman is a
Director and several subsidiaries of Marvel filed voluntary petitions for
reorganization under Chapter 11 of the United States Bankruptcy Code.)
Howard Gittis has been a Director of Panavision since June 1998. He has
been Vice Chairman of Mafco Holdings and various of its affiliates since 1985.
Mr. Gittis is a Director of the following corporations which file reports
pursuant to the Exchange Act: Aames Financial Corporation, California Federal,
Cigar Holdings, FN Holdings, FN Parent, MFW, Products Corporation, Revlon, REV
Holdings, Jones Apparel Group, Inc., Loral Space & Communications Ltd.,
Rutherford-Moran Oil Corporation and Sunbeam Corporation.
James R. Maher has been a Director of Panavision since June 1998. Mr. Maher
has been President of Mafco Holdings since 1998 and President and Chief
Executive Officer of Mafco Consolidated Group, Inc. since 1995. Mr. Maher was
Chairman of the Board of Laboratory Corporation of America Holdings ('Lab
Corp'), a clinical laboratory company from 1995 to April 1996 and was President
and Chief Executive Officer of National Health Laboratories Holdings Inc., a
clinical laboratory company, and a predecessor to Lab Corp, from 1992 to 1995.
Mr. Maher was Vice Chairman of The First Boston Corporation, an investment bank,
from 1990 to 1992 and Managing Director of The First Boston Corporation from
1982 to 1990. Mr. Maher is a Director of First Brands Corporation, which file
reports pursuant to the Exchange Act.
Joseph P. Page has been a Director of Panavision since June 1998. Mr. Page
was Executive Vice President and Chief Financial Officer of The Coleman Company,
Inc. from mid-1997 to March 30, 1998 and was
56
<PAGE>
Executive Vice President and Chief Financial Officer of New World Communications
Group Inc. from 1994 to 1996. Prior to that, Mr. Page was a partner in the
accounting firm of Price Waterhouse for more than five years.
Martin D. Payson has been a director of Panavision since November 1996. Mr.
Payson has been active in investment and philanthropic activities since December
1992. From January 1990 to December 1992, he was Vice Chairman of the Board of
Directors of Time Warner, Inc., and from 1970 to December 1990, he was an
executive officer of Warner Communications Inc. Mr. Payson is also a director of
Bestform Group, Inc., Meridian, Delta Financial Corporation and Unapix
Entertainment, Inc.
Kenneth Ziffren has been a Director of Panavision since June 1998. Mr.
Ziffren has been a partner with the law firm of Ziffren, Brittenham, Branca &
Fischer since 1979. Mr. Ziffren is also a director of City National Corp.
William C. Scott has been Chairman of the Board and Chief Executive Officer
of Panavision since 1988. From 1972 until 1987, Mr. Scott was President and
Chief Operating Officer of Western Pacific Industries Inc., a company listed on
the New York Stock Exchange. Prior to 1972, Mr. Scott was a Group Vice President
of Cordura Corporation (a business information company) for three years, a Vice
President of Booz Allen & Hamilton Inc. (management consulting firm) for five
years and an owner/operator of several small businesses for eight years. Mr.
Scott is also a director of Edison Control Corporation.
John S. Farrand has been the President and Chief Operating Officer of
Panavision since 1985. From 1980 to 1985, Mr. Farrand was employed by Warner
Communications Inc. in several senior executive positions. He was President of
their Atari Coin-Operated Games Division and subsequently was appointed
President and Chief Operating Officer of Atari Holdings, Inc. Prior to 1980, Mr.
Farrand spent 14 years with Music Hire Group Limited, a U.K. company
specializing in coin-operated music systems (juke boxes), and from 1973 to 1980
served as Managing Director. Mr. Farrand is a member of the Academy of Motion
Picture Arts and Sciences, a member of the Society of Motion Picture and
Television Engineers and an associate member of the American Society of
Cinematographers.
Jeffrey J. Marcketta has been Executive Vice President and Chief Financial
Officer of Panavision since 1993 and Treasurer since 1996. From 1991 to 1993,
Mr. Marcketta served as the President of Panavision Europe Limited, a wholly
owned subsidiary of the Company, and was responsible for the general management
of the Company's European operations. From 1989 until 1991, he was Vice
President of Corporate Development, assisting the Chief Executive Officer in the
restructuring and rationalization of the Company's business operations. Prior to
joining the Company in 1989, he worked for Ernst & Young LLP for almost ten
years, the last three of which were spent in the Mergers and Acquisitions
Consulting Group of the New York office.
Christopher M.R. Phillips has served as Controller of Panavision since 1993
and Secretary since 1996. Mr. Phillips was the controller for the domestic
operations of the Company from 1989 to 1993 and the assistant controller for the
domestic operations of the Company from 1986 to 1989.
EXECUTIVE COMPENSATION
The following table sets forth information regarding compensation paid to
or accrued by all the executive officers of the Company for each of the last
three completed fiscal years. Compensation accrued during one year and paid in
another is recorded under the year of accrual.
57
<PAGE>
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
LONG TERM
COMPENSATION AWARDS
ANNUAL COMPENSATION -------------------------------
----------------------------------------------------- SECURITIES
NAME AND PRINCIPAL OTHER ANNUAL UNDERLYING ALL OTHER
POSITION YEAR SALARY BONUS(1) COMPENSATION(2) OPTIONS(#) COMPENSATION(3)
- --------------------- ---- -------- ---------- ---------------- ---------- ----------------
<S> <C> <C> <C> <C> <C> <C>
William C. Scott .... 1997 $800,000 $ 400,000 $ -- -- $7,125
Chairman of the 1996 800,000 400,000 -- 576,681 7,125
Board and Chief 1995 600,000 1,172,000 -- -- 6,930
Executive Officer
John S. Farrand ..... 1997 $600,000 $ 300,000 $ -- -- $7,125
President and Chief 1996 600,000 359,400 54,163 726,812 7,125
Operating Officer 1995 400,000 785,000 -- -- 6,930
Jeffrey J. Marcketta 1997 $240,423 $ 180,317 $ -- -- $7,125
Executive Vice 1996 228,846 201,335 27,081 224,314 7,125
President, Chief 1995 218,769 314,000 -- -- 6,930
Financial Officer
and Treasurer
Christopher M.R. 1997 $111,058 $ 51,577 $ -- -- $7,125
Phillips .......... 1996 99,615 24,904 -- 43,076 6,504
Controller and 1995 88,077 45,000 -- -- 4,842
Secretary
</TABLE>
- ------------------
(1) Bonuses paid pursuant to the Company's Executive Incentive Compensation Plan
(the 'Executive Incentive Compensation Plan'), in which the Chairman and
Chief Executive Officer is eligible to participate, as well as any other
employees selected by the Chief Executive Officer. The plan allows
participants to earn bonuses up to a stated percentage of their base salary.
The bonuses were paid in part based on the Company's achievement of
operating results, and in part based on achievement of individual goals
established for the participant. Mr. Farrand's and Mr. Marcketta's 1996
bonus also reflects the issuance of shares of Common Stock (the '1996
Recapitalization Stock') at the time of the 1996 Recapitalization, which
shares at such time had a fair market value of $59,400 and $29,700,
respectively.
(2) Consists of tax reimbursement payments relating to the 1996 Recapitalization
Stock.
(3) Consists of matching contributions by the Company under its 401(k) plan.
OPTION GRANT TABLE
No stock options were granted to any named executive officers during the
last fiscal year.
AGGREGATED OPTION EXERCISES IN LAST FISCAL YEAR AND FISCAL YEAR-END OPTION
VALUES
The following table sets forth the number of shares as to which options
were exercised by Messrs. Scott, Farrand, Marcketta and Phillips during 1997,
the value realized upon such exercise, and the number and value of options held
by such persons as of December 31, 1997. In connection with the Panavision
Recapitalization all such outstanding unexercised stock options were cancelled
in exchange for a lump sum cash payment.
<TABLE>
<CAPTION>
NUMBER OF SECURITIES VALUE OF UNEXERCISED
UNDERLYING UNEXERCISED IN-THE-MONEY OPTIONS AT
SHARES OPTIONS AT FY-END(#) FY-END($)(1)
ACQUIRED ON VALUE ---------------------------- ----------------------------
NAME EXERCISE(#) REALIZED EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
- ---------------------------- ----------- ----------- ----------- ------------- ----------- -------------
<S> <C> <C> <C> <C> <C> <C>
William C. Scott............ 210,000 $ 5,216,925 101,408 265,273 $ 2,617,594 $ 6,847,359
John S. Farrand............. 420,000 10,533,850 0 306,812 0 7,919,585
Jeffrey J. Marcketta........ 105,000 2,608,463 16,130 103,184 416,356 2,663,437
Christopher M.R. Phillips... 0 0 15,101 27,975 389,795 722,105
</TABLE>
- ------------------------
(1) Based on a closing price of $25.8125 per share of Company Common Stock on
December 31, 1997.
58
<PAGE>
MANAGEMENT CONTRACTS AND CHANGE IN CONTROL AGREEMENTS
William C. Scott. Pursuant to an employment agreement with the Company,
William C. Scott serves as Chairman of the Board of Directors and Chief
Executive Officer of the Company at an annual salary of $800,000, subject to
annual increases as determined by the Company. The employment agreement provides
that Mr. Scott shall be granted bonuses pursuant to the Executive Incentive
Compensation Plan and Non-Statutory Options pursuant to the terms of the Stock
Option Plan. The employment agreement expires on June 11, 1999. The Company may
terminate the employment agreement for cause. In the event of Mr. Scott's
voluntary termination (except during the six-month period commencing six months
after a change of control) or termination for cause by the Company, the Company
shall pay Mr. Scott only an amount equal to his annual base salary and all
previously unreimbursed expenses. Upon a voluntary termination by Mr. Scott
during such six-month period commencing six months after a change of control, or
upon termination of Mr. Scott's employment by the Company without good cause or
by Mr. Scott for good reason, Mr. Scott is entitled to the greater of (x)
$1,600,000 or (y) twice his annual base salary, and all accrued but previously
unpaid salary, bonuses and unreimbursed expenses through the date of
termination. Mr. Scott intends to terminate such contract prior to the Merger
and, accordingly, upon such termination will not be entitled to any payments
thereunder. Upon a termination of Mr. Scott by death or disability, the Company
shall make a lump sum payment equal to the greater of $800,000 or Mr. Scott's
base salary currently then in effect, as well as all accrued but previously
unpaid salary, bonuses and unreimbursed expenses through the date of
termination.
The employment agreement contains a covenant prohibiting the improper
disclosure and use of the Company's confidential information. In addition, the
employment agreement contains a covenant prohibiting Mr. Scott from directly or
indirectly competing with the Company. This covenant expires two years following
Mr. Scott's voluntary termination.
John S. Farrand. The Company has entered into an employment agreement with
Mr. Farrand pursuant to which he is entitled to receive, upon termination of his
employment by the Company (other than for cause or upon his death or
disability), severance payments equal to the greater of (i) $600,000 or (ii) his
annual base salary in effect at the time.
Jeffrey J. Marcketta. The Company has entered into an employment agreement
with Mr. Marcketta pursuant to which he is entitled to receive, upon termination
of his employment by the Company (other than for cause or upon his death or
disability), severance payments equal to the greater of (i) $237,500 or (ii) his
annual base salary in effect at the time.
Messrs. Scott, Farrand and Marcketta have waived their rights to receive
severance payments upon termination of employment as described above prior to
the Effective Time.
COMPENSATION COMMITTEE AND STOCK OPTION COMMITTEE REPORT ON EXECUTIVE
COMPENSATION
No officer or employee of the Company, other than Messrs. Scott and
Farrand, who serve on the Board of Directors of the Company, participated in the
deliberations of the Board of Directors of the Company concerning executive
compensation.
The Stock Option Committee and the Compensation Committee were formed on
May 8, 1996, upon the consummation of the 1996 Recapitalization. Set forth below
is a description of the policies and practices that the Compensation Committee
will implement with respect to future compensation determinations.
Compensation Philosophy. The Company's compensation program is designed to
attract, reward and retain highly qualified executives and to encourage the
achievement of business objectives and superior corporate performance. The
program ensures the Board of Directors and stockholders that (1) the achievement
of the overall goals and objectives of the Company can be supported by adopting
an appropriate executive compensation policy and implementing it through an
effective total compensation program and (2) the total compensation program and
practices of the Company are designed with full consideration of all accounting,
tax, securities law and other regulatory requirements and are of the highest
quality.
59
<PAGE>
The Company's executive compensation program consists of two key elements:
(1) an annual compensation component composed of base salary and bonus, and (2)
a long-term compensation component composed of equity-based awards pursuant to
the Stock Option Plan.
Annual Compensation. Base salaries will be determined by evaluating the
responsibilities associated with the position being evaluated and the
individual's overall level of experience. In addition, the compensation of the
Chief Executive Officer determined by the Compensation Committee is subject to
the terms of Mr. Scott's existing employment agreement. Annual salary
adjustments will be determined by giving consideration to the Company's
performance and the individual's contribution to that performance.
Bonuses are paid pursuant to the Company's Executive Incentive Compensation
Plan, in which the Chairman and Chief Executive Officer is eligible to
participate, as well as any other employees selected by the Chief Executive
Officer. The plan allows participants to earn bonuses up to a stated percentage
of their base salary. The bonuses are paid in part based on the Company's
achievement of operating results, and in part based on achievement of individual
goals established for the participant.
With the exception of Mr. Phillips, all of the Company's named executive
officers are currently under employment contracts. See 'Management Contracts and
Change in Control Agreements.' The annual compensation for Messrs. Marcketta and
Phillips and the bonus portion of Mr. Scott's annual compensation will be based
upon the considerations noted above. Mr. Scott's base salary is determined
pursuant to his employment agreement.
Long-term Compensation. In order to align stockholder and executive
officer interests, the long-term component of the Company's executive
compensation program utilizes equity-based awards whose value is directly
related to the value of the Company Common Stock. These equity-based awards will
be granted by the Stock Option Committee pursuant to the Stock Option Plan.
Individuals to whom equity-based awards are to be granted and the amount of
Company Common Stock related to equity-based awards will be determined solely at
the discretion of the Stock Option Committee. Because individual equity-based
award levels will be based on a subjective evaluation of each individual's
overall past and expected future contribution, no specific formula is used to
determine such awards for any executive.
Tax Deductibility of Executive Compensation. Section 162(m) of the Code
limits the tax deductibility of compensation in excess of $1 million paid to
certain members of senior management, unless the payments are made under a
performance-based plan as defined in Section 162(m). The Company's general
policy is to structure its compensation programs to preserve the tax
deductibility of compensation paid to its executive officers and other members
of management. All compensation paid pursuant to the Stock Option Plan is
intended to be exempt from the application of Section 162(m). Although Messrs.
Scott's and Farrand's total annual salary and bonus in 1997 exceeded $1 million,
such amounts were exempt from the application of Section 162(m) because of
certain grandfather provisions and therefore are fully deductible by the
Company. While the Company currently intends to pursue a strategy of maximizing
deductibility of senior management compensation, it also believes it is
important to maintain the flexibility to take actions it considers to be in the
best interests of the Company and its stockholders, which may be based on
considerations in addition to Section 162(m).
<TABLE>
<CAPTION>
COMPENSATION AND STOCK OPTION
COMMITTEE AUDIT COMMITTEE EXECUTIVE COMMITTEE
----------------------------- ----------------------------- -----------------------------
<S> <C> <C> <C>
Howard Gittis Martin D. Payson Ronald O. Perelman
James R. Maher Kenneth Ziffren Howard Gittis
Kenneth Ziffren James R. Maher
</TABLE>
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
During the last completed fiscal year, Mr. Scott and Mr. Lapidus and Ms.
Wenig, both former directors of the Company, served as members of the
Compensation Committee. Mr. Scott is Chief Executive Officer of the Company.
60
<PAGE>
OWNERSHIP OF COMMON STOCK
PX Holding owns 72% of the issued and outstanding Company Common Stock,
with 19% owned by Warburg and 9% owned by public stockholders (including 3%
owned by management).
CERTAIN TRANSACTIONS
RELATIONSHIP WITH MAFCO HOLDINGS
PX Holding is a 100% owned indirect subsidiary of Mafco Holdings and
Panavision is a majority owned indirect subsidiary of Mafco Holdings. As a
result, Mafco Holdings is or will be able to direct and control the policies of
PX Holding, Panavision and its subsidiaries, including with respect to mergers,
sales of assets and similar transactions.
Mafco Holdings is a diversified holding company with interests in several
industries. Through its 83% ownership of Revlon, Mafco Holdings is engaged in
the cosmetics and skin care, fragrance and personal care products business.
Mafco Holdings also owns 65% of Meridian, a manufacturer and marketer of ski
boats. Through its 64% ownership of Cigar Holdings, Mafco Holdings is engaged in
the manufacture and distribution of cigars and pipe tobacco. Through its 39%
ownership of MFW (assuming conversion of certain preferred stock), Mafco
Holdings is in the business of processing licorice and other flavors. Mafco
Holdings is also in the financial services business through its 80% ownership of
California Federal. The principal executive offices of Mafco Holdings are
located at 35 East 62nd Street, New York, New York 10021.
LOANS TO EXECUTIVE OFFICERS
Mr. Farrand, an executive officer of Panavision, was the obligor in respect
of a promissory demand note issued to the Company in January 1987. The principal
amount of and accrued interest on this note were $540,000 and $38,681,
respectively, as of December 31, 1997. The note accrued interest at a rate of
7.04% per annum, and, was repaid upon consummation of the Panavision
Recapitalization.
In December 1997, in order to facilitate the payment of taxes related to
the exercise of options, which were issued pursuant to the Panavision Inc. Stock
Option Plan, the Company made advances to certain officers and key employees in
the form of notes. Notes were issued by Messrs. Scott, Farrand and Marcketta in
the amount of $2,152,503, $3,698,800 and $924,700, respectively. Interest on the
notes was compounded semiannually at the applicable federal rate in effect on
the date the notes were issued. The notes matured on the date of consummation of
the Panavision Recapitalization.
61
<PAGE>
DESCRIPTION OF THE NOTES
The New Notes will be issued under the Indenture dated as of February 11,
1998 between the Company and The Bank of New York, as trustee (the 'Trustee'),
as supplemented by the First Supplemental Indenture thereto among the Company,
PX Escrow and the Trustee dated as of June 4, 1998 (the 'Supplemental
Indenture') copies of which are filed as exhibits to the Registration Statement
of which this Prospectus constitutes a part. Pursuant to the Supplemental
Indenture, the obligations of PX Escrow under the Indenture were assumed by the
Company upon the consummation of the Panavision Recapitalization, which occurred
on June 4, 1998. The following summary, which describes certain provisions of
the Indenture and the Notes, does not purport to be complete and is subject to,
and is qualified in its entirety by reference to, the Trust Indenture Act of
1939, as in effect on the date of the original issue of the Notes (the 'TIA'),
and all the provisions of the Indenture and the Notes, including the definitions
therein of terms not defined in this Prospectus. Certain terms used herein are
defined below under '--Certain Definitions.' The New Notes are identical in all
material respects to the terms of the Old Notes, except for certain transfer
restrictions and registration rights relating to the Old Notes and except that,
if the Exchange Offer is not consummated by December 1, 1998, interest will
accrue on the Old Notes (in addition to the accretion of Original Issue
Discount) from and including such date, until but excluding the date of
consummation of the Exchange Offer payable in cash semiannually in arrears on
February 1 and August 1, commencing February 1, 1999, at a rate per annum equal
to .50% of the Accreted Value as of the August 1 and February 1 immediately
preceding such interest payment date. See '--Registration Rights.'
GENERAL
The Old Notes are, and the New Notes will be, unsecured obligations of the
Company, and will mature on February 1, 2006. The Trustee authenticated and
delivered Old Notes for original issue in an aggregate principal amount at
maturity of $217,903,000. The Old Notes are, and the New Notes will be,
subordinated in right of payment to all existing and future Senior Debt of the
Company. Prior to February 1, 2002, there will be no periodic cash payments of
interest on the New Notes, except as described below.
The New Notes will be treated as a continuation of the Old Notes, which
were offered at a substantial discount from their principal amount at maturity.
See 'Certain U.S. Federal Income Tax Consequences.' The calculation of the
accretion of Original Issue Discount (the difference between the original issue
price of the Notes and their principal amount at maturity) in the period during
which a Note remains outstanding will be on a semi-annual bond equivalent basis
using a 360-day year composed of twelve 30-day months; such accretion will
commence from the Issue Date and end on February 1, 2002. Thereafter, the Notes
will bear interest at a rate equal to 9 5/8% per annum, payable semiannually in
arrears on February 1 and August 1 of each year, commencing August 1, 2002, to
the persons who are registered holders thereof at the close of business on the
January 15 or July 15 preceding such interest payment date. The aggregate
principal amount at maturity of the Notes represents a yield to maturity of
9 5/8%, without giving effect to any periodic payments of interest described
below. Redemption or purchase by the Company of a Note will cause the Original
Issue Discount and interest, if any, to cease to accrue on such Note, under the
terms and subject to the conditions of the Indenture.
All interest on the Notes will be computed on the basis of a 360-day year
of twelve 30-day months. Principal and interest, if any, will be payable at the
office of the Trustee, but, at the option of the Company interest may be paid by
check mailed to the registered holders of the Notes at their registered
addresses. The Notes will be transferable and exchangeable at the office of the
Trustee and will be issued only in fully registered form, without coupons, in
denominations of principal amount at maturity of $1,000 and any integral
multiple thereof.
Any Old Notes that remain outstanding after the consummation of the
Exchange Offer, together with all New Notes and Private Exchange Notes issued in
connection with the Exchange Offer, will be treated as a single class of
securities under the Indenture.
ESCROW OF PROCEEDS AND OTHER AMOUNTS
On February 11, 1998, PX Escrow entered into an escrow agreement with The
Bank of New York, as escrow agent (the 'Escrow Agent') (such agreement, the
'Escrow Agreement'), pursuant to which PX Escrow deposited with the Escrow Agent
the net proceeds of the Offering and cash or Treasury Securities (as defined in
the Escrow Agreement) (such proceeds, cash and Treasury Securities, together
with the interest, dividends and distributions thereon, the 'Escrowed Property')
in an aggregate amount sufficient to redeem in cash the Notes at a redemption
price equal to 100% of the Accreted Value of the Notes (the 'Initial Deposit').
62
<PAGE>
Upon consummation of the Panavision Assumption, the Escrow Agent released
all Escrowed Property to Panavision. Panavision paid over to PX Escrow an amount
equal to the portion of the Initial Deposit in excess of the net proceeds of the
Offering, plus a portion of the earnings, if any, on such excess.
OPTIONAL REDEMPTION
Except as set forth below, the Notes may not be redeemed by the Company
prior to February 1, 2002. On and after February 1, 2002, the Company may redeem
the Notes in whole at any time or in part from time to time at the redemption
prices listed below (expressed as percentages of Accreted Value as of the
redemption date) for the periods indicated plus accrued and unpaid interest, if
any, to the redemption date (subject to the right of holders of record on the
relevant record date to receive interest due, if any, on the relevant interest
payment date):
if redeemed during the 12-month period commencing on February 1 of the
years set forth below:
<TABLE>
<CAPTION>
PERIOD REDEMPTION PRICE
- -------------------------------------------------------- ----------------
<S> <C>
2002.................................................... 104.813%
2003.................................................... 103.208%
2004.................................................... 101.604%
2005.................................................... 100.000%
</TABLE>
'Accreted Value' as of any date (the 'Specified Date') means, with respect
to each $1,000 principal amount at maturity of Notes:
(i) if the Specified Date is one of the following dates (each a
'Semi-Annual Accrual Date'), the amount set forth opposite such date below:
<TABLE>
<CAPTION>
SEMI-ANNUAL ACCRUAL DATE ACCRETED VALUE
- ---------------------------------------------------------- --------------
<S> <C>
February 11, 1998......................................... $ 688.38
August 1, 1998............................................ 719.63
February 1, 1999.......................................... 754.26
August 1, 1999............................................ 790.56
February 1, 2000.......................................... 828.61
August 1, 2000............................................ 868.48
February 1, 2001.......................................... 910.28
August 1, 2001............................................ 954.08
February 1, 2002.......................................... 1,000.00
</TABLE>
(ii) if the Specified Date occurs between two Semi-Annual Accrual
Dates, the sum of (A) the Accreted Value for the Semi-Annual Accrual Date
immediately preceding the Specified Date and (B) an amount equal to the
product of (i) the Accreted Value for the immediately following Semi-Annual
Accrual Date less the Accreted Value for the immediately preceding
Semi-Annual Accrual Date and (ii) a fraction, the numerator of which is the
number of days from the immediately preceding Semi-Annual Accrual Date to
the Specified Date, using a 360-day year of twelve 30-day months, and the
denominator of which is 180 (or, if the Semi-Annual Accrual Date
immediately preceding the Specified Date is February 11, 1998, the
denominator of which is 170); and
(iii) if the Specified Date occurs after February 1, 2002, $1,000.00.
In addition, the Company may redeem the Notes in whole at any time before
February 1, 2002 at a redemption price equal to the sum of (i) the Accreted
Value thereof at the date of redemption, plus (ii) accrued and unpaid interest,
if any, to the date of redemption, plus (iii) the Applicable Premium at the date
of redemption.
Until February 1, 2001, the Company may also redeem with, and to the extent
the Company actually receives, the net proceeds of an underwritten public
offering of common stock of the Company or Parent pursuant to an effective
registration statement under the Securities Act, the Notes in part from time to
time at a redemption price equal to 109 5/8% of the Accreted Value as of the
redemption date, plus accrued interest, if any, to such redemption date (subject
to the right of holders of record on the relevant record date to receive
interest due, if any, on the relevant interest payment date); provided, however,
that at least $141,637,000 aggregate principal amount at maturity of the Notes
are required to remain outstanding after each such redemption.
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Notice of any optional redemption will be mailed at least 30 days but not
more than 60 days before any redemption date to each holder of Notes to be
redeemed at its registered address. Notes in denominations larger than $1,000
principal amount at maturity may be redeemed in part but only in whole multiples
thereof. If money sufficient to pay the redemption price of all Notes (or
portions thereof) to be redeemed on the redemption date is deposited with the
Paying Agent on or before the redemption date and certain other conditions are
satisfied, on and after such redemption date Accreted Value ceases to increase
and interest (if any) ceases to accrue on such Notes (or such portions thereof)
called for redemption.
The following definitions are used to determine the Applicable Premium:
'Applicable Premium' means, with respect to a Note at any time, the greater
of (i) 1.0% of the Accreted Value of such Note at such time and (ii) the excess
of (A) the present value at such time of the principal amount at maturity plus
any required interest payments due on such Note, computed using a discount rate
equal to the Treasury Rate plus 100 basis points, over (B) the Accreted Value of
such Note at such time.
'Treasury Rate' means the yield to maturity at the time of computation of
United States Treasury securities with a constant maturity (as compiled and
published in the most recent Federal Reserve Statistical Release H.15(519) which
has become publicly available at least two Business Days prior to the date fixed
for repayment or, in the case of defeasance, prior to the date of deposit (or,
if such Statistical Release is no longer published, any publicly available
source of similar market data)) most nearly equal to the then remaining average
life to Stated Maturity of the Notes; provided, however, that if the average
life to Stated Maturity of the Notes is not equal to the constant maturity of a
United States Treasury security for which a weekly average yield is given, the
Treasury Rate will be obtained by linear interpolation (calculated to the
nearest one-twelfth of a year) from the weekly average yields of United States
Treasury securities for which such yields are given, except that if the average
life to Stated Maturity of the Notes is less than one year, the weekly average
yield on actually traded United States Treasury securities adjusted to a
constant maturity of one year will be used.
SINKING FUND
There will be no mandatory sinking fund payments for the Notes.
SUBORDINATION
The payment of the principal of, premium (if any) and interest on the Notes
is subordinated in right of payment, as set forth in the Indenture, to the
payment when due of all Senior Debt of the Company. However, payments from the
money or the proceeds of U.S. Government Obligations held in any defeasance
trust described under 'Defeasance' below is not subordinate to any Senior Debt
of the Company or subject to the restrictions described herein. As of March 31,
1998, after giving effect to the Panavision Recapitalization, the aggregate
principal amount of outstanding Senior Debt would have been $305 million,
consisting of borrowings under the New Credit Agreement. Although the Indenture
contains limitations in the amount of additional Debt which the Company may
incur, under certain circumstances the amount of such Debt could be substantial
and, in any case, such Debt may be Senior Debt of the Company. See 'Certain
Covenants--Limitation on Debt' below. A substantial portion of the operations of
Panavision is conducted through its Subsidiaries. Claims of creditors of such
Subsidiaries, including trade creditors, secured creditors and creditors holding
guarantees issued by such Subsidiaries (including holders of Bank Debt), and
claims of preferred stockholders (if any) of such Subsidiaries generally will
have priority with respect to the assets and earnings of such Subsidiaries over
the claims of creditors of Panavision, including holders of the Notes, even
though such obligations may not constitute Senior Debt of the Company. The
Notes, therefore, will be effectively subordinated to creditors (including trade
creditors) and preferred stockholders (if any) of Subsidiaries of the Company.
As of March 31, 1998, after giving effect to the Panavision Recapitalization,
the outstanding liabilities of such Subsidiaries (including trade payables)
would have been approximately $502 million (excluding indebtedness representing
guarantees of such Subsidiaries that is otherwise included in Senior Debt of the
Company). Although the Indenture limits the incurrence of Debt and Preferred
Stock of the Company's Subsidiaries, such limitation is subject to a number of
significant qualifications; moreover, the Indenture does not impose any
limitation on the incurrence by such Subsidiaries of liabilities that are not
considered Debt under the Indenture. See 'Certain Covenants--Limitation on
Debt.'
Only indebtedness of the Company that is Senior Debt of the Company will
rank senior to the Notes in accordance with the provisions of the Indenture. The
Notes will in all respects rank pari passu with all other
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Senior Subordinated Debt of the Company. The Company has covenanted in the
Indenture that it will not issue, directly or indirectly, any Debt which is
subordinate or junior in ranking in any respect to Senior Debt of the Company
unless such Debt is Senior Subordinated Debt or is expressly subordinated in
right of payment to the Notes. Unsecured Debt is not deemed to be subordinated
or junior to secured Debt merely because it is unsecured.
'Senior Debt' is defined to mean, with respect to any person, the following
obligations, whether outstanding on the Issue Date or thereafter created,
incurred or assumed, and whether at any time owing actually or contingent: (i)
all obligations of such person consisting of the Bank Debt; (ii) all obligations
of such person consisting of the principal of and premium (if any) and accrued
and unpaid interest (including interest accruing on or after the filing of any
petition in bankruptcy or for reorganization relating to such person), and all
fees, expenses and other amounts in respect of (A) indebtedness of such person
for money borrowed and (B) indebtedness evidenced by notes, debentures, bonds or
other similar instruments for the payment of which such person is responsible or
liable; (iii) all Capital Lease Obligations of such person; (iv) all obligations
of such person (A) for the reimbursement of any obligor on any letter of credit,
banker's acceptance or similar credit transaction, (B) under interest rate
swaps, caps, collars, options and similar arrangements and foreign currency
hedges entered into in respect of any obligations described in clauses (i), (ii)
and (iii) or (C) issued or assumed as the deferred purchase price of property
and all conditional sale obligations of such person and all obligations of such
person under any title retention agreement; (v) all obligations of other persons
of the type referred to in clauses (ii), (iii) and (iv) and all dividends of
other persons for the payment of which, in either case, such person is
responsible or liable as obligor, guarantor or otherwise, including by means of
any agreement which has the economic effect of a guarantee; and (vi) all
obligations consisting of Refinancings of any obligation described in clauses
(i), (ii), (iii), (iv) or (v); unless, in the case of any particular obligation,
in the instrument creating or evidencing the same or pursuant to which the same
is outstanding, it is provided that such obligations are not superior in right
of payment to the Notes, if such person is the Company, or to the Subsidiary
Guarantee (as defined in '--Limitation on Issuances of Guarantees of Debt') of
such person if such person is a Subsidiary of the Company. However, Senior Debt
of such person will not include (1) any obligation of such person to the Company
or to any Subsidiary of the Company, (2) any liability for Federal, state, local
or other taxes owed or owing by such person, (3) any accounts payable or other
liability to trade creditors arising in the ordinary course of business
(including guarantees thereof or instruments evidencing such liabilities), (4)
any indebtedness, guarantee or obligation of such person that is subordinate or
junior in any respect to any other indebtedness, guarantee or obligation of such
person, (5) that portion of any Debt which at the time of issuance is issued in
violation of the Indenture; provided, however, that in the case of Debt
described in clause (5), (A) any Debt issued to any person who had no actual
knowledge that the issuance of such Debt was not permitted under the Indenture
and who received on the date of issuance thereof a certificate from an officer
of the Company or a Subsidiary of the Company to the effect that the issuance of
such Debt would not violate the Indenture will constitute Senior Debt and (B)
any Debt arising from the honoring by a bank or other financial institution of a
check, draft or similar instrument inadvertently (except in the case of daylight
overdrafts) drawn against insufficient funds in the ordinary course of business
will constitute Senior Debt provided that such Debt would normally be
extinguished within three Business Days of issuance or (6) the Initial Notes,
the Exchange Notes or the Private Exchange Notes.
The Company may not pay principal of, or premium (if any) or interest on,
the Notes or make any deposit pursuant to the provisions described under
'Defeasance' below and may not repurchase, redeem or otherwise retire any Notes
(collectively, 'pay the Notes') if (i) any Senior Debt of the Company is not
paid when due or (ii) any other default on Senior Debt of the Company occurs and
the maturity of such Senior Debt is accelerated in accordance with its terms
unless, in either case, the default has been cured or waived and any such
acceleration has been rescinded or such Senior Debt has been paid in full.
During the continuance of any default (other than a default described in clause
(i) or (ii) of the preceding sentence) with respect to any Designated Senior
Debt pursuant to which the maturity thereof may be accelerated immediately
without further notice (except such notice as may be required to effect such
acceleration) or the expiration of any applicable grace periods, the Company may
not pay the Notes for a period (a 'Payment Blockage Period') commencing upon the
receipt by the Company and the Trustee of written notice (a 'Payment Blockage
Notice') of such default from the Representative of such Designated Senior Debt
specifying an election to effect a Payment Blockage Period and ending 179 days
thereafter (or earlier if such Payment Blockage Period is terminated (x) by
written notice to the
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Trustee and the Company from the Representative which gave such Payment Blockage
Notice, (y) by repayment in full of such Designated Senior Debt or (z) because
the default specified in such Payment Blockage Notice is no longer continuing).
Notwithstanding the provision described in the immediately preceding sentence
(but subject to the provisions contained in the first sentence of this
paragraph), unless the holders of such Designated Senior Debt or the
Representative of such holders have accelerated the maturity of such Designated
Senior Debt, the Company may resume payments (including any missed payment) on
the Notes after the termination of such Payment Blockage Period irrespective of
the number of defaults with respect to Designated Senior Debt during such
period. Not more than one Payment Blockage Notice may be given in any
consecutive 360-day period. However, if any Payment Blockage Notice within such
360-day period is given by or on behalf of any holders of any Designated Senior
Debt (other than the Bank Debt), the Representative of the Bank Debt may give
another Payment Blockage Notice within such period. In no event, however, may
the total number of days during which any Payment Blockage Period or Periods is
in effect exceed 179 days in the aggregate during any consecutive 360-day
period.
Upon any payment or distribution of the assets of the Company upon a total
or partial liquidation or dissolution or reorganization of or similar proceeding
relating to the Company or its property, the holders of Senior Debt of the
Company will be entitled to receive payment in full before the holders of the
Notes are entitled to receive any payment.
Notwithstanding the foregoing, the subordination provisions will not have
any effect on the right of the Holders to accelerate the maturity of the Notes.
If payment of the Notes is accelerated because of an Event of Default, the
Company or the Trustee will promptly notify the holders of the Designated Senior
Debt or their Representatives of such acceleration.
By reason of such subordination provisions contained in the Indenture, in
the event of insolvency, creditors of the Company who are holders of Senior Debt
may recover more, ratably, than the holders of the Notes, and creditors of the
Company who are not holders of Senior Debt or of Senior Subordinated Debt
(including the Notes) may recover less, ratably, than holders of Senior Debt and
may recover more, ratably than the holders of Senior Subordinated Debt.
CHANGE OF CONTROL
Upon the occurrence of any of the following events on or after the Issue
Date (each a 'Change of Control'), each holder of Notes will have the right to
require the Company to repurchase all or any part of such holder's Notes at a
repurchase price equal to their Put Amount as of the date of repurchase plus
accrued and unpaid interest, if any, to the date of repurchase:
(i) any 'person' (as such term is used in Sections 13(d) and 14(d) of
the Exchange Act), other than one or more Permitted Holders, is or becomes
the beneficial owner (as defined in Rules 13d-3 and 13d-5 under the
Exchange Act, except that a person will be deemed to have 'beneficial
ownership' of all shares that any such person has the right to acquire,
whether such right is exercisable immediately or only after the passage of
time), directly or indirectly, of more than 35% of the total voting power
of the Voting Stock of the Company; provided, however, that the Permitted
Holders 'beneficially own' (as so defined), directly or indirectly, in the
aggregate a lesser percentage of the total voting power of the Voting Stock
of the Company than such other person and do not have the right or ability
by voting power, contract or otherwise to elect or designate for election a
majority of the Board of Directors of the Company (for the purposes of this
clause (i), such other person will be deemed to beneficially own any Voting
Stock of a specified corporation held by a parent corporation, if such
other person 'beneficially owns' (as so defined), directly or indirectly,
more than 35% of the voting power of the Voting Stock of such parent
corporation and the Permitted Holders 'beneficially own' (as so defined),
directly or indirectly, in the aggregate a lesser percentage of the voting
power of the Voting Stock of such parent corporation and do not have the
right or ability by voting power, contract or otherwise to elect or
designate for election a majority of the Board of Directors of such parent
corporation); or
(ii) during any period of two consecutive years, individuals who at
the beginning of such period constituted the Board of Directors of the
Company (together with any new directors whose election by such Board of
Directors or whose nomination for election by the shareholders of the
Company was approved by a vote of 66-2/3% of the directors of the Company
then still in office who were either directors at the
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beginning of such period or whose election or nomination for election was
previously so approved) cease for any reason to constitute a majority of
the Board of Directors of the Company then in office;
provided that, prior to the mailing of the notice to holders of Notes provided
for in the following paragraph, but in any event within 30 days following any
Change of Control, if the terms of any then outstanding Bank Debt prohibit the
purchase of the Notes, the Company covenants to (i) repay in full all Bank Debt
or to offer to repay in full all Bank Debt and to repay the Bank Debt of each
lender who has accepted such offer or (ii) obtain the requisite consent under
the Bank Debt to permit the repurchase of the Notes as provided for below. The
Company will first comply with the covenant in the preceding sentence before it
will be required to purchase Notes in connection with a Change of Control.
Within 45 days following any Change of Control, the Company will mail a
notice to each holder stating (i) that a Change of Control has occurred and that
such holder has the right to require the Company to repurchase all or any part
of such holder's Notes at a repurchase price in cash equal to their Put Amount
as of the date of repurchase plus accrued and unpaid interest, if any, to the
date of repurchase (subject to the right of holders of record on the relevant
record date to receive interest on the relevant interest payment date); (ii) the
circumstances and relevant facts regarding such Change of Control; (iii) the
repurchase date (which will be no earlier than 30 days nor later than 60 days
from the date such notice is mailed); and (iv) the instructions, determined by
the Company consistent with the Indenture, that a holder must follow in order to
have its Notes repurchased.
The Company's ability to pay cash to holders of Notes upon a repurchase may
be limited by the Company's then existing financial resources. The Company will
comply with any tender offer rules under the Exchange Act which may then be
applicable, including Rule 14e-1, in connection with any offer required to be
made by the Company to repurchase the Notes as a result of a Change of Control.
Certain provisions relating to the Company's obligation to make an offer to
repurchase the Notes as a result of a Change of Control may not be waived or
modified without the written consent of the holders of all the Notes.
CERTAIN COVENANTS
Set forth below are certain covenants contained in the Indenture:
Limitation on Debt. (a) The Company will not, and will not permit any
Subsidiary of the Company to, issue, directly or indirectly, any Debt; provided,
however, that the Company and its Subsidiaries will be permitted to issue Debt
if, at the time of such issuance, the Consolidated EBITDA Coverage Ratio for the
period of the most recently completed four consecutive fiscal quarters ending at
least 45 days prior to the date such Debt is issued exceeds the ratio of 2.0 to
1.0.
(b) Notwithstanding the foregoing, from and after the Effective Date the
Company and its Subsidiaries may issue the following Debt:
(i) Debt issued pursuant to the New Credit Agreement, any
Refinancing thereof or any other credit agreement, indenture or other
agreement, in an aggregate principal amount not to exceed $350 million
outstanding at any one time;
(ii) the Notes and Debt issued by the Company in exchange for, or
the proceeds of which are used to Refinance, any Debt permitted by this
clause (ii); provided, however, that in the case of any Debt (other than
the Exchange Notes and the Private Exchange Notes) issued in connection
with a Refinancing, (x) the principal amount or, in the case of Debt issued
at a discount, the accreted value of the Debt so issued does not, as of the
Stated Maturity of the Debt being Refinanced, exceed the sum of (1) the
principal amount or, if the Debt being Refinanced was issued at a discount,
the accreted value of the Debt being Refinanced as of the Stated Maturity
of the Debt being Refinanced, and (2) any Refinancing Costs associated with
such Refinancing, (y) the Debt so issued will not provide for the payment
of principal or interest in cash prior to February 1, 2002, will not have a
Stated Maturity prior to the Stated Maturity of the Notes and will not, at
the time such Debt is issued, have an Average Life that is less than the
Average Life of the Debt being Refinanced and (z) the Debt so issued will
consist of Senior Subordinated Debt or Subordinated Obligations;
(iii) Debt (in addition to Debt described in clauses (i) and (ii)
above) issued for working capital and general corporate purposes in an
aggregate principal amount at the time of such issue which, when taken
together with the aggregate principal amount then outstanding of all other
Debt issued pursuant to this clause (iii), will not exceed the sum of (x)
50% of the book value of the inventory of the Company and its
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consolidated Subsidiaries and (y) 80% of the book value of the accounts
receivable of the Company and its consolidated Subsidiaries, in each case
as determined in accordance with GAAP;
(iv) Debt of the Company issued to and held by a Wholly Owned
Recourse Subsidiary and Debt of a Subsidiary of the Company issued to and
held by the Company or a Wholly Owned Recourse Subsidiary; provided,
however, that any subsequent issuance or transfer of any Capital Stock that
results in any such Wholly Owned Recourse Subsidiary ceasing to be a Wholly
Owned Recourse Subsidiary or any subsequent transfer of such Debt (other
than to the Company or a Wholly Owned Recourse Subsidiary) will be deemed,
in each case, to constitute the issuance of such Debt by the Company or of
such Debt by such Subsidiary;
(v) Debt (other than Debt described in clause (i), (ii), (iii) or
(iv) above) of Panavision or any of its Subsidiaries outstanding on the
Issue Date and Debt issued to Refinance any Debt (other than the Old Credit
Agreement) permitted by this clause (v), by clause (vi) below or by
paragraph (b) above; provided, however, that in the case of a Refinancing,
the principal amount of the Debt so issued will not exceed the principal
amount of the Debt being Refinanced plus any Refinancing Costs associated
with such Refinancing; and provided further, however, that to the extent
such Refinancing Debt is used directly or indirectly to Refinance Debt of a
Subsidiary described in clause (vi) below, the portion of such Refinancing
Debt so used will be issued only by such Subsidiary or any Subsidiary of
such Subsidiary;
(vi) Debt of a Subsidiary of the Company issued and outstanding on or
prior to the date on which such Subsidiary was acquired by the Company
(other than Debt issued as consideration in, or to provide all or any
portion of the funds or credit support utilized to consummate, the
transaction or series of related transactions pursuant to which such
Subsidiary became a Subsidiary of the Company or was acquired by the
Company);
(vii) Non-Recourse Debt of a Non-Recourse Subsidiary; provided,
however, that if any such Debt thereafter ceases to be Non-Recourse Debt of
a Non-Recourse Subsidiary, then such event will be deemed for the purposes
of this covenant to constitute the issuance of such Debt by the issuer
thereof; and
(viii) Debt (in addition to Debt issued pursuant to clauses (i)
through (vii) above and paragraph (b) above) in an aggregate principal
amount outstanding at any time not to exceed $50 million.
(c) The foregoing shall not prohibit the issuance of Redeemable Preferred
Stock of Panavision contemplated by the Stockholders Agreement, provided that
such Redeemable Preferred Stock is redeemed by Panavision in connection with the
Transactions.
(d) To the extent the Company or any Subsidiary of the Company guarantees
any Debt of the Company or of a Subsidiary of the Company, such guarantee and
such Debt will be deemed to be the same indebtedness and only the amount of the
Debt will be deemed to be outstanding. If the Company or a Subsidiary of the
Company guarantees any Debt of a person that, subsequent to the issuance of such
guarantee, becomes a Subsidiary, such guarantee and the Debt so guaranteed will
be deemed to be the same indebtedness, which will be deemed to have been issued
when the guarantee was issued and will be deemed to be permitted to the extent
the guarantee was permitted when issued.
Limitation on Other Senior Subordinated Debt and Secured Debt. (a) The
Company will not issue, directly or indirectly, any Debt which is subordinate or
junior in ranking in any respect to Senior Debt of the Company unless such Debt
is Senior Subordinated Debt or is expressly subordinated in right of payment to
the Notes.
(b) The Company will not issue any Secured Debt that is not Senior Debt of
the Company unless contemporaneously therewith effective provision is made to
secure the Notes equally and ratably with (or prior to) such Secured Debt with a
Lien on the same assets securing such Secured Debt for so long as such Secured
Debt is secured by such Lien.
Limitation on Restricted Payments.
(a) The Company will not, and will not permit any of its Subsidiaries,
directly or indirectly, to make any Restricted Payment if, at the time of the
making of such Restricted Payment:
(i) a Default has occurred and is continuing (or would result
therefrom); or
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(ii) the aggregate amount of such Restricted Payment and all other
Restricted Payments since the Issue Date would exceed the sum of:
(A) 50% of Consolidated Net Income (or, if such aggregate
Consolidated Net Income is a deficit, minus 100% of such deficit)
accrued during the period (treated as one accounting period) from
January 1, 1998, to the end of the most recent fiscal quarter ending at
least 45 days prior to the date of such Restricted Payment;
(B) the aggregate Net Cash Proceeds from sales of Capital Stock of
Panavision (other than Redeemable Stock or Exchangeable Stock) or cash
capital contributions made to Panavision on or after the Issue Date
(exclusive of any Net Cash Proceeds or cash capital contributions
received in connection with the Transactions, if any) (other than a sale
to or a contribution by a Subsidiary of Panavision or any employee stock
ownership plan established by Panavision or a Subsidiary of Panavision
for the benefit of its employees);
(C) the amount by which Debt of Panavision is reduced on
Panavision's consolidated balance sheet on or after the Issue Date upon
any conversion or exchange of Debt of Panavision into Capital Stock of
Panavision which is not Redeemable Stock or Exchangeable Stock;
(D) the aggregate Net Cash Proceeds received by Panavision from the
issue or sale of its Capital Stock (other than Redeemable Stock or
Exchangeable Stock) to an employee stock ownership plan subsequent to
the Issue Date; provided, however, that if such employee stock ownership
plan incurs any Debt, such aggregate amount of Net Cash Proceeds will be
limited to an amount equal to any increase in the Consolidated Net Worth
of Panavision resulting from principal repayments made by such employee
stock ownership plan with respect to Debt incurred by it to finance the
purchase of such Capital Stock; and
(E) to the extent that an Investment made by Panavision or a
Subsidiary subsequent to the Issue Date has theretofore been included in
the calculation of the amount of Restricted Payments, the aggregate cash
repayments to Panavision or a Subsidiary of such Investment to the
extent not included in Consolidated Net Income; provided, however, that
any such cash repayment will be excluded from the amount of aggregate
cash repayments described in this clause (E) to the extent that such
cash is attributable to the net proceeds of the issuance of Non-Recourse
Debt by a Non-Recourse Subsidiary and has been or is subsequently used
to make a dividend or distribution pursuant to clause (ix) of paragraph
(c) of this covenant.
(b) The foregoing paragraph (b) will not prohibit the following (none of
which will be included in the calculation of the amount of Restricted Payments,
except to the extent expressly provided in clause (vi) below):
(i) any purchase, repurchase, redemption, defeasance or other
acquisition or retirement for value of Capital Stock or Subordinated
Obligations of the Company made by exchange for, or out of the proceeds of
the substantially concurrent issue or sale of, Capital Stock of the Company
(other than Redeemable Stock or Exchangeable Stock and other than Capital
Stock issued or sold to a Subsidiary or an employee stock ownership plan)
or of a cash capital contribution; provided, however, that the Net Cash
Proceeds from such sale will be excluded from clauses (B) and (D) of
paragraph (b)(ii) of this covenant;
(ii) any purchase, repurchase, redemption, defeasance or other
acquisition or retirement for value of Subordinated Obligations of the
Company made by exchange for, or out of the proceeds of the substantially
concurrent sale of, Subordinated Obligations;
(iii) any purchase, repurchase, redemption, defeasance or other
acquisition or retirement for value of Subordinated Obligations from Net
Available Cash to the extent permitted as described under '--Limitation on
Sales of Assets and Subsidiary Stock' below;
(iv) any loan to a Permitted Affiliate entered into in the ordinary
course of business; provided, however, that such Permitted Affiliate holds,
directly or indirectly, no more than 10% of the outstanding Capital Stock
of the Company
(v) dividends or distributions made by a Subsidiary of the Company
to the Company or a Subsidiary of the Company and, if a Subsidiary of the
Company is not wholly owned, to its other stockholders pro rata to the
extent they are not Affiliates of the Company (other than (x) a Subsidiary
of the Company, (y) an Unrestricted Affiliate and (z) a Permitted
Affiliate);
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(vi) dividends paid within 60 days after the date of declaration
thereof, or Restricted Payments made within 60 days after the making of a
binding commitment in respect thereof, if at such date of declaration or of
such commitment such dividend or other Restricted Payment would have
complied with this covenant; provided, however, that at the time of payment
of such dividend or the making of such Restricted Payment, no other Default
has occurred and is continuing (or would result therefrom); provided
further, however, that such dividend or other Restricted Payment will be
included in the calculation of the amount of Restricted Payments;
(vii) purchases, redemptions, defeasances or acquisitions of
Non-Recourse Debt by a Non-Recourse Subsidiary;
(viii) dividends and distributions in respect of Redeemable Stock
issued by the Company or in respect of Preferred Stock issued by any
Subsidiary of the Company, in each case to the extent such issuance is
permitted as described under '--Limitation on Debt' above;
(ix) so long as no Default has occurred and is continuing or would
result from such transaction, dividends or distributions made by the
Company to the extent attributable to the net proceeds of the issuance of
Non-Recourse Debt by Non-Recourse Subsidiaries;
(x) Restricted Payments necessary to consummate the Transactions;
and
(xi) so long as no Default has occurred and is continuing, amounts
paid to Parent, to the extent necessary to enable Parent to pay actual
expenses, other than those paid to Affiliates of the Company, incidental to
being a publicly reporting, but non-operating, company.
(c) The Company or any Subsidiary of the Company may take actions to make a
Restricted Payment in anticipation of the occurrence of any of the events
described in paragraph (b) or (c) of this covenant; provided, however, that the
making of such Restricted Payment will be conditioned upon the occurrence of
such event.
Limitation on Sales of Assets and Subsidiary Stock. (a) The Company will
not, and will not permit any Subsidiary of the Company (other than a
Non-Recourse Subsidiary) to, make any Asset Disposition unless:
(i) the Company or such Subsidiary receives consideration at the
time of such Asset Disposition at least equal to the fair market value, as
determined in good faith by the Board of Directors of the Company, the
determination of which will be conclusive and evidenced by a resolution of
the Board of Directors of the Company (including as to the value of all
non-cash consideration), of the Capital Stock and assets subject to such
Asset Disposition;
(ii) at least 75% of the consideration consists of cash, cash
equivalents, readily marketable securities which the Company intends, in
good faith, to liquidate promptly after such Asset Disposition or the
assumption of liabilities (including, in the case of the sale of the
Capital Stock of a Subsidiary of the Company, liabilities of the Company or
such Subsidiary) (provided, however, that in respect of an Asset
Disposition, more than 25% of the consideration may consist of
consideration other than cash, cash equivalents, such readily marketable
securities or such assumed liabilities if (A) such Asset Disposition is
approved by a majority of those members of the Board of Directors of the
Company having no personal stake in such Asset Disposition and (B) if such
Asset Disposition involves aggregate consideration in excess of $10 million
(with the value of any non-cash consideration being determined by a
majority of those members of the Board of Directors of the Company having
no personal stake in such Asset Disposition), such Asset Disposition has
been determined, in the written opinion of a nationally recognized
investment banking firm, to be fair from a financial point of view to the
Company or such Subsidiary, as the case may be); and
(iii) an amount equal to 100% of the Net Available Cash from such
Asset Disposition is applied by the Company or such Subsidiary, as the case
may be:
(A) first, to the extent the Company is required by the terms of
any Senior Debt of the Company or Debt of a Subsidiary, to prepay, repay
or purchase Senior Debt of the Company or Debt of a Wholly Owned
Recourse Subsidiary or additionally, in the case of an Asset Disposition
by a Subsidiary that is not a Wholly Owned Recourse Subsidiary, Debt of
such Subsidiary (in each case other than Debt owed to the Company or an
Affiliate of the Company) in accordance with the terms of such Debt;
(B) second, to the extent of the balance of such Net Available Cash
after application in accordance with clause (A) above, at the Company's
election, to either (1) the prepayment, repayment or
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repurchase of Senior Debt of the Company or Debt of a Wholly Owned
Recourse Subsidiary or, additionally in the case of an Asset Disposition
by a Subsidiary that is not a Wholly Owned Recourse Subsidiary, Debt of
such Subsidiary (in each case other than Debt owed to the Company or an
Affiliate of the Company) which the Company is not required by the terms
thereof to prepay, repay or repurchase (whether or not the related loan
commitment is permanently reduced in connection therewith), or (2) the
investment by the Company or any Wholly Owned Recourse Subsidiary (or,
additionally in the case of an Asset Disposition by a Subsidiary that is
not a Wholly Owned Recourse Subsidiary, the investment by such
Subsidiary) in assets to replace the assets that were the subject of
such Asset Disposition or in assets that (as determined by the Board of
Directors of the Company, the determination of which will be conclusive
and evidenced by a resolution of such Board of Directors) will be used
in the businesses of Panavision and its Wholly Owned Recourse
Subsidiaries (or, additionally in the case of an Asset Disposition by a
Subsidiary that is not a Wholly Owned Recourse Subsidiary, the
businesses of such Subsidiary) existing on the Issue Date or in
businesses reasonably related thereto, in all cases, within the later of
one year from the date of such Asset Disposition or the receipt of such
Net Available Cash; and
(C) third, to the extent of the balance of such Net Available Cash
after application in accordance with clauses (A) and (B), to make an
offer pursuant to and subject to the terms of the Indenture to the
Holders and the holders of other Senior Subordinated Debt designated by
the Company (an 'Offer') to purchase Notes and such other Senior
Subordinated Debt at a purchase price of 100% of their Accreted Value or
principal amount, as applicable (without premium), plus accrued and
unpaid interest, if any, to the date of the purchase (or, in respect of
such other Senior Subordinated Debt, such lesser price, if any, as may
be provided for by the terms of such Senior Subordinated Debt);
provided, however, that in connection with an offer pursuant to clause (C)
above, if the principal amount and premium of such Notes and such Senior
Subordinated Debt, together with accrued and unpaid interest tendered for
acceptance pursuant to such offer exceeds the balance of Net Available Cash,
then the Company will accept for purchase the Notes and such Senior Subordinated
Debt of each such tendering holder on a pro rata basis in accordance with the
principal amount so tendered.
Notwithstanding the foregoing provisions of this paragraph (a), the Company
and its Subsidiaries will not be required to apply any Net Available Cash in
accordance with this paragraph (a) except to the extent that the aggregate Net
Available Cash from all Asset Dispositions which is not applied in accordance
with this paragraph (a) exceeds $10 million. Pending application of Net
Available Cash pursuant to this paragraph (a), such Net Available Cash will be
(x) invested in Temporary Cash Investments or (y) used to make an optional
prepayment under any revolving credit facility constituting Senior Debt of the
Company or Debt of a Wholly Owned Recourse Subsidiary (or, additionally in the
case of a Subsidiary that is not a Wholly Owned Recourse Subsidiary, Debt of
such Subsidiary), whether or not the related loan commitment is permanently
reduced in connection therewith.
(b) If (x) the aggregate purchase price of Notes and Senior Subordinated
Debt tendered pursuant to the Offer is less than the Net Available Cash allotted
to the purchase of the Notes and Senior Subordinated Debt, (y) the Company is
not obligated to make an Offer pursuant to the next sentence or (z) the Company
is unable to purchase Notes from Holders thereof in an Offer because of the
provisions of applicable law or of the Company's or its Subsidiaries' loan
agreements, indentures or other contracts governing Senior Debt of the Company
or Debt of Subsidiaries (in which case the Company need not make an Offer), the
Company will apply the remaining Net Available Cash to (i) invest in assets to
replace the assets that were the subject of the Asset Disposition or in assets
that (as determined by the Board of Directors of the Company, the determination
of which will be conclusive and evidenced by a resolution of such Board of
Directors) will be used in the businesses of Panavision and its Wholly Owned
Recourse Subsidiaries (or, additionally in the case of an Asset Disposition by a
Subsidiary that is not a Wholly Owned Recourse Subsidiary, the business of such
Subsidiary) existing on the Issue Date or in businesses reasonably related
thereto or (ii) in the case of clause (x) or (y), prepay, repay or repurchase
Debt of the Company or Debt of a Wholly Owned Recourse Subsidiary or,
additionally in the case of an Asset Disposition by a Subsidiary that is not a
Wholly Owned Recourse Subsidiary, Debt of such Subsidiary which the Company or
such Wholly Owned Recourse Subsidiary or Subsidiary is not required by the terms
thereof to prepay, repay, repurchase or redeem (in each case other than Debt
owed to the Company or an Affiliate of the Company), whether or not the related
loan commitment is permanently reduced in connection therewith. The
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Company will not be required to make an Offer for Notes and Senior Subordinated
Debt pursuant to this covenant if the Net Available Cash available therefor
(after application of the proceeds as provided in clause (A) and clause (B) of
paragraph (b)(iii) above) are less than $10 million for any particular Asset
Disposition (which lesser amounts will not be carried forward for purposes of
determining whether an Offer is required with respect to the Net Available Cash
from any subsequent Asset Disposition). The Company will comply, to the extent
applicable, with the requirements of Section 14(e) of the Exchange Act and any
other securities laws or regulations in connection with the repurchase of Notes
pursuant to this covenant. To the extent that the provisions of any securities
laws or regulations conflict with provisions of this covenant, the Company will
comply with the applicable securities laws and regulations and will not be
deemed to have breached its obligations under this covenant by virtue thereof.
Limitation on Transactions with Affiliates. (a) From and after the
Effective Date, the Company will not, and will not permit any of its
Subsidiaries (other than a Non-Recourse Subsidiary) to, conduct any business or
enter into any transaction or series of similar transactions (including the
purchase, sale, lease or exchange of any property or the rendering of any
service) with any Affiliate of the Company or any legal or beneficial owner of
10% or more of the voting power of the Voting Stock of the Company or with an
Affiliate of any such owner unless
(i) the terms of such business, transaction or series of
transactions are (A) set forth in writing and (B) at least as favorable to
the Company or such Subsidiary as terms that would be obtainable at the
time for a comparable transaction or series of similar transactions in
arm's-length dealings with an unrelated third person; and
(ii) to the extent that such business, transaction or series of
transactions is known by the Board of Directors of the Company or of such
Subsidiary to involve an Affiliate of the Company or a legal or beneficial
owner of 10% or more of the voting power of the Voting Stock of the Company
or an Affiliate of such owner, then
(A) with respect to a transaction or series of related
transactions, other than any purchase or sale of inventory, renting of
property or rendering of services in the ordinary course of business (an
'Exempt Transaction'), involving aggregate payments or other
consideration in excess of $5 million, such transaction or series of
related transactions has been approved (and the value of any noncash
consideration has been determined) by a majority of those members of the
Board of Directors of the Company having no personal stake in such
business, transaction or series of transactions; and
(B) with respect to a transaction or series of related
transactions, other than any Exempt Transaction, involving aggregate
payments or other consideration in excess of $10 million (with the value
of any noncash consideration being determined by a majority of those
members of the Board of Directors of the Company having no personal
stake in such business, transaction or series of transactions), such
transaction or series of related transactions has been determined, in
the written opinion of a nationally recognized investment banking firm
to be fair, from a financial point of view, to the Company or such
Subsidiary.
(b) The provisions of the preceding paragraph (a) will not prohibit:
(i) any Restricted Payment permitted to be paid pursuant to the
Indenture;
(ii) any transaction between the Company and any of its
Subsidiaries; provided, however, that no portion of any minority interest
in any such Subsidiary is owned by (A) any Affiliate (other than the
Company, a Wholly Owned Recourse Subsidiary of the Company, a Permitted
Affiliate or an Unrestricted Affiliate) of the Company or (B) any legal or
beneficial owner of 10% or more of the voting power of the Voting Stock of
the Company or any Affiliate of such owner (other than the Company, any
Wholly Owned Recourse Subsidiary of the Company or an Unrestricted
Affiliate);
(iii) any transaction between Subsidiaries of the Company; provided,
however, that no portion of any minority interest in any such Subsidiary is
owned by (A) any Affiliate (other than the Company, a Wholly Owned Recourse
Subsidiary of the Company, a Permitted Affiliate or an Unrestricted
Affiliate) of the Company or (y) any legal or beneficial owner of 10% or
more of the voting power of the Voting Stock of the Company or any
Affiliate of such owner (other than the Company any Wholly Owned Recourse
Subsidiary of the Company or an Unrestricted Affiliate);
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(iv) any transaction between the Company or a Subsidiary of the
Company and its own employee stock ownership plan;
(v) any transaction with a Permitted Affiliate entered into in the
ordinary course of business (including compensation or employee benefit
arrangements with any such officer or director); provided, however, that
such Permitted Affiliate holds, directly or indirectly, no more than 10% of
the outstanding Capital Stock of the Company;
(vi) any business or transaction with an Unrestricted Affiliate;
(vii) any transaction pursuant to which Mafco Holdings will provide
the Company and Panavision and its Subsidiaries at their request and at the
cost to Mafco Holdings with certain allocated services to be purchased from
third party providers, such as legal and accounting services, insurance
coverage and other services;
(viii) any transaction contemplated by a Tax Sharing Agreement; and
(ix) the Transactions.
Limitation on Restrictions on Distributions from Subsidiaries. The Company
will not, and will not permit any Subsidiary to, create or otherwise cause or
permit to exist or become effective any consensual encumbrance or restriction on
the ability of any Subsidiary to (a) pay dividends or make any other
distributions on its Capital Stock or pay any Debt owed to the Company, (b) make
any loans or advances to the Company or (c) transfer any of its property or
assets to the Company, except:
(i) any encumbrance or restriction pursuant to an agreement in
effect at or entered into on the Issue Date;
(ii) any encumbrance or restriction with respect to a Subsidiary
pursuant to an agreement relating to any Debt issued by such Subsidiary on
or prior to the date on which such Subsidiary was acquired by the Company
(other than Debt issued as consideration in, or to provide all or any
portion of the funds or credit support utilized to consummate, the
transaction or series of related transactions pursuant to which such
Subsidiary became a Subsidiary or was acquired by the Company) and
outstanding on such date;
(iii) any encumbrance or restriction pursuant to an agreement
effecting a Refinancing of any Debt (other than the Old Credit Agreement)
issued pursuant to an agreement referred to in clause (i) or (ii) above or
this clause (iii) or contained in any amendment to an agreement referred to
in clause (i) or (ii) above or this clause (iii); provided, however, that
any such encumbrance or restriction with respect to any Subsidiary is no
less favorable to the holders of Notes than the least favorable of the
encumbrances and restrictions with respect to such Subsidiary contained in
the agreements referred to in clause (i) or (ii) above, as determined in
good faith by the Board of Directors of the Company, the determination of
which will be evidenced by a resolution of such Board of Directors;
(iv) any such encumbrance or restriction consisting of customary
nonassignment provisions in leases governing leasehold interests to the
extent such provisions restrict the transfer of the lease;
(v) restrictions contained in security agreements securing Debt of
the Company or a Subsidiary of the Company, to the extent such restrictions
restrict the transfer of the collateral covered by such security agreements
or, upon default, restrict the payment of dividends or distributions on
Capital Stock, and restrictions contained in agreements relating to a
disposition of property or Capital Stock of a Subsidiary, to the extent
such restrictions restrict the transfer of the property or Capital Stock
subject to such agreements; and
(vi) any encumbrance or restriction relating to a Non-Recourse
Subsidiary.
Limitation on Issuances of Guarantees of Debt. (a) If any Subsidiary of
the Company guarantees any Debt of the Company other than Senior Debt of the
Company, the Company shall cause such Subsidiary to execute and deliver to the
Trustee a supplemental indenture pursuant to which such Subsidiary shall
guarantee the Notes, which guarantee shall be subordinated to Senior Debt of
such Subsidiary on the same basis as the Notes are subordinated to Senior Debt
of the Company (a 'Subsidiary Guarantee').
(b) If the Company guarantees any Debt of a Subsidiary of the Company
pursuant to a guarantee which does not constitute Senior Debt of the Company,
the Company shall cause such Subsidiary to execute and deliver to the Trustee a
Subsidiary Guarantee.
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(c) Any Subsidiary Guarantee provided by a Subsidiary pursuant to clause
(a) or (b) above shall automatically be released if either (i) the guarantee
referred to in such clause which gave rise to the requirement for such
Subsidiary Guarantee is released, (ii) all of the Capital Stock or all or
substantially all of the assets of such Subsidiary is sold or otherwise disposed
of to a person other than the Company or a Subsidiary of the Company or (iii)
the Indenture is discharged or defeased.
(d) From and after the date a Subsidiary provided a Subsidiary Guarantee
pursuant to clause (a) or (b) above until the date such Subsidiary Guarantee is
released pursuant to clause (c) above, the Company shall not permit such
Subsidiary to (x) issue, directly or indirectly, any Debt which is subordinated
in right of payment to Senior Debt of such Subsidiary unless such Debt is either
(i) expressly pari passu in right of payment with such Subsidiary Guarantee and
not subordinated in right of payment by its terms to any Debt of such Subsidiary
which is not Senior Debt or (ii) is expressly subordinated in right of payment
to such Subsidiary Guarantee or (y) issue any Secured Debt that is not Senior
Debt of such Subsidiary unless contemporaneously therewith effective provision
is made to secure such Subsidiary Guarantee equally and ratably with (or prior
to) such Secured Debt with a Lien on the same assets securing such Secured Debt
for so long as such Secured Debt is secured by such Lien.
SEC Reports. Notwithstanding that the Company may not be required to be
subject to the reporting requirements of Section 13 or 15(d) of the Exchange
Act, from and after the date (the 'reporting date') of effectiveness of an
Exchange Offer Registration Statement (as defined under 'Exchange Offer;
Registration Rights' below), the Company will file or cause to be filed with the
SEC and provide the Trustee and holders of the Notes with the information,
documents and other reports (or copies of such portions of any of the foregoing
as the SEC may by rules and regulations prescribe) specified in Sections 13 and
15(d) of the Exchange Act. Prior to the reporting date, the Company will provide
the Trustee and the holders of the Notes with information with respect to
Panavision that is substantially similar to that required to be provided to such
persons after the reporting date. The Company also will comply with the other
provisions of TIA Section314(a).
SUCCESSOR COMPANY
The Company may not consolidate with or merge with or into, or convey,
transfer or lease all or substantially all its assets to, any person, unless:
(i) the resulting, surviving or transferee person (the 'Successor Person') is
organized and existing under the laws of the United States of America, any State
thereof or the District of Columbia and such Successor Person (if not the
Company) expressly assumes by a supplemental indenture, executed and delivered
to the Trustee, in form satisfactory to the Trustee, all the obligations of the
Company under the Indenture and the Notes; (ii) immediately after giving effect
to such transaction (and treating any Debt which becomes an obligation of the
Successor Person or any of its Subsidiaries as a result of such transaction as
having been issued by such Successor Person or such Subsidiary at the time of
such transaction), no Default has occurred and is continuing; (iii) immediately
after giving effect to such transaction, the Successor Person has a Consolidated
Net Worth in an amount which is not less than the Consolidated Net Worth of the
Company immediately prior to such transaction; and (iv) the Company delivers to
the Trustee an Officers' Certificate and an Opinion of Counsel, each stating
that such consolidation, merger or transfer and such supplemental indenture (if
any) comply with the Indenture; provided that, nothing in this covenant will
prohibit a Wholly Owned Recourse Subsidiary from consolidating with or merging
with or into, or conveying, transferring or leasing all or substantially all its
assets to, the Company from and after the Effective Date. The Successor Person
will be the successor obligor under the Indenture and thereafter, except in the
case of a lease, the Company will be discharged from all obligations and
covenants under the Indenture and the Notes.
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DEFAULTS
An Event of Default is defined in the Indenture as (i) a default in the
payment of interest on the Notes when due, whether or not such payment is
prohibited by the provisions described under 'Subordination' above, continued
for 30 days, (ii) a default in the payment of principal of any Note when due at
its Stated Maturity, upon redemption, upon required purchase, upon declaration
or otherwise, whether or not such payment is prohibited by the provisions for
subordination in the Indenture, (iii) the failure by the Company to comply with
its obligations described under 'Successor Company' above, (iv) the failure by
the Company to comply for 30 days after notice with any of its obligations under
the covenants described under 'Change of Control' (other than a failure to
purchase Notes), 'Limitation on Debt,' 'Limitation on Other Senior Subordinated
Debt and Secured Debt,' 'Limitation on Restricted Payments,' 'Limitation on
Sales of Assets and Subsidiary Stock,' 'Limitation on Transactions with
Affiliates,' 'Limitations on Other Business Activities,' 'Limitations on
Restrictions on Distributions by Subsidiaries,' 'Limitation on Issuances of
Guarantees of Debt' or 'SEC Reports' above, (v) the failure by the Company to
comply for 60 days after notice with its other agreements contained in the
Indenture, the Escrow Agreement or the Notes (other than those referred to in
clauses (i), (ii), (iii) and (iv) of this paragraph), (vi) Debt of the Company
or any Significant Subsidiary is not paid within any applicable grace period
after final maturity or is accelerated by the holders thereof because of a
default and the total principal amount of the portion of such Debt that is
unpaid or accelerated exceeds $10 million or its foreign currency equivalent and
such default continues for 10 days after notice (the 'cross acceleration
provision'), (vii) certain events of bankruptcy, insolvency or reorganization of
the Company or a Significant Subsidiary (the 'bankruptcy provisions'), (viii)
any judgment or decree for the payment of money in excess of $10 million or its
foreign currency equivalent is entered against the Company or a Significant
Subsidiary and is not discharged and either (A) an enforcement proceeding has
been commenced by any creditor upon such judgment or decree or (B) there is a
period of 60 days following the entry of such judgment or decree during which
such judgment or decree is not discharged, waived or the execution thereof
stayed and, in the case of (B), such default continues for 10 days after the
notice specified in the next sentence (the 'judgment default provision') or (ix)
a Subsidiary Guarantee ceases to be in full force and effect (other than in
accordance with the terms of the Indenture) or a Subsidiary Guarantor denies or
disaffirms its obligations under its Subsidiary Guarantee (the 'Subsidiary
Guarantee default provision'). However, a default under clauses (iv), (v), (vi)
and (viii) (B) above will not constitute an Event of Default until the Trustee
or the holders of 25% in principal amount at maturity of the outstanding Notes
notify the Company of the default and the Company does not cure such default
within the time specified after receipt of such notice.
If an Event of Default (other than an Event of Default specified in clause
(vii) in the above paragraph with respect to the Company) occurs and is
continuing, the Trustee or the holders of at least 25% in principal amount at
maturity of the outstanding Notes, in each case by notice to the Company and to
the Representative of Bank Debt may declare the Accreted Value of and accrued
interest (if any) on all the Notes as of the date of such declaration
(collectively, the 'Default Amount') to be due and payable. Upon such a
declaration, such Default Amount will be due and payable immediately. If an
Event of Default relating to certain events of bankruptcy, insolvency or
reorganization of the Company occurs, the Default Amount on all the Notes as of
the date of such Event of Default will ipso facto become and be immediately due
and payable without any declaration or other act on the part of the Trustee or
any holders of the Notes. Under certain circumstances, the holders of a majority
in principal amount at maturity of the outstanding Notes may rescind any such
acceleration with respect to the Notes and its consequences.
Subject to the provisions of the Indenture relating to the duties of the
Trustee, in case an Event of Default occurs and is continuing, the Trustee will
be under no obligation to exercise any of the rights or powers under the
Indenture at the request or direction of any of the holders of the Notes unless
such holders have offered to the Trustee reasonable indemnity or security
against any loss, liability or expense. Except to enforce the right to receive
payment of principal or interest when due, no holder of a Note may pursue any
remedy with respect to the Indenture or the Notes unless (i) such holder has
previously given the Trustee notice that an Event of Default is continuing, (ii)
holders of at least 25% in principal amount at maturity of the outstanding Notes
have requested the Trustee to pursue the remedy, (iii) such holders have offered
the Trustee reasonable security or indemnity against any loss, liability or
expense, (iv) the Trustee has not complied with such request within 60 days
after the receipt thereof and the offer of security or indemnity and (v) the
holders of a majority in principal amount at maturity of the outstanding Notes
have not given the Trustee a direction inconsistent with such request within
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such 60-day period. Subject to certain restrictions, the holders of a majority
in principal amount at maturity of the outstanding Notes are given the right to
direct the time, method and place of conducting any proceeding for any remedy
available to the Trustee or of exercising any trust or power conferred on the
Trustee. The Trustee, however, may refuse to follow any direction that conflicts
with law or the Indenture or that the Trustee determines is unduly prejudicial
to the rights of any other holder of a Note or that would involve the Trustee in
personal liability.
The Indenture provides that if a Default occurs and is continuing and is
known to the Trustee, the Trustee must mail to each holder of the Notes notice
of the Default within 90 days after it occurs. Except in the case of a Default
in the payment of principal of or interest on any Note, the Trustee may withhold
notice if and so long as a committee of its Trust Officers in good faith
determines that withholding notice is in the interests of the holders of the
Notes. In addition, the Company is required to deliver to the Trustee, within
120 days after the end of each fiscal year, a certificate indicating whether the
signers thereof know of any Default that occurred during the previous year. The
Company also is required to deliver to the Trustee, within 30 days after the
occurrence thereof, written notice of any event which would constitute certain
Defaults, their status and what action the Company is taking or proposes to take
in respect thereof.
AMENDMENT
Subject to certain exceptions, the Indenture, the Notes and any Subsidiary
Guarantee may be amended with the consent of the holders of a majority in
principal amount at maturity of the Notes then outstanding and any past default
or noncompliance with any provisions may be waived with the consent of the
holders of a majority in principal amount at maturity of the Notes then
outstanding. However, without the consent of each holder of an outstanding Note
affected, no amendment may, among other things, (i) reduce the principal amount
at maturity of Notes whose holders must consent to an amendment, (ii) reduce the
rate of or extend the time for payment of interest on any Note, (iii) reduce the
principal of or extend the Stated Maturity of any Note or reduce the Accreted
Value, Put Amount or Default Amount of any Note, (iv) reduce the premium or
amount payable upon the redemption of any Note or change the time at which any
Note may be redeemed as described under '-- Optional Redemption' above, (v) make
any Note payable in money other than that stated in the Note, (vi) impair the
right of any holder of the Notes to receive payment of principal of and interest
(if any) on such holder's Notes on or after the due dates therefor or to
institute suit for the enforcement of any payment on or with respect to such
holder's Notes, (vii) make any change in the definition of Change of Control or
in the dates by which the Company must purchase, or in the obligation of the
Company to purchase, tendered Notes upon a Change of Control, (viii) make any
change in the provisions described under 'Subordination' above that adversely
affects the rights of such holder of a Note under such provisions, (ix) make any
change in the amendment provisions which require each holder's consent or in the
waiver provisions, (x) make any change to the paragraph of the Notes providing
for a Mandatory Redemption or (xi) except as provided in 'Limitation on
Issuances of Guarantees of Debt' or 'Defeasance,' release any Subsidiary
Guarantee, or change any Subsidiary Guarantee in any manner that adversely
affects the rights of such holder of a Note under such Subsidiary Guarantee in
any material respect.
Without the consent of or notice to any holder of the Notes, the Company
and the Trustee may amend the Indenture, the Notes or any Subsidiary Guarantee
to cure any ambiguity, omission, defect or inconsistency, to provide for the
assumption by a successor corporation of the obligations of the Company under
the Indenture if in compliance with the provisions described under '--Successor
Company' above, to provide for uncertificated Notes in addition to or in place
of certificated Notes (provided that the uncertificated Notes are issued in
registered form for purposes of Section 163(f) of the Code, or in a manner such
that the uncertificated Notes are described in Section 163(f)(2)(B) of the
Code), to add guarantees (including Subsidiary Guarantees) with respect to the
Notes or to secure the Notes, to add to the covenants of the Company for the
benefit of the holders of the Notes or to surrender any right or power conferred
upon the Company, to provide for issuance of the Exchange Notes or Private
Exchange Notes, which will have terms substantially identical in all material
respects to the Notes (except that the transfer restrictions contained in the
Notes will be modified or eliminated, as appropriate), and which will be
treated, together with any outstanding Notes, as a single issue of securities,
to make any change in the provisions described under '--Subordination' above,
that would limit or terminate the benefits available to any holder of Senior
Debt of the Company or any Subsidiary Guarantee (or Representatives therefor),
to make any change that does not adversely affect the rights of any holder of
the Notes or to comply
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with any requirement of the SEC in connection with the qualification of the
Indenture under the TIA or to otherwise comply with the TIA. However, no
amendment may be made to the subordination provisions of the Indenture that
adversely affects the rights of any holders of Senior Debt of the Company or any
Subsidiary Guarantee then outstanding unless the holders of such Senior Debt
(required pursuant to the terms of such Senior Debt) consent to such change.
The consent of the holders of the Notes is not necessary under the
Indenture to approve the particular form of any proposed amendment. It is
sufficient if such consent approves the substance of the proposed amendment.
After an amendment under the Indenture becomes effective, the Company is
required to mail to holders of the Notes a notice briefly describing such
amendment. However, the failure to give such notice to all holders of the Notes,
or any defect therein, will not impair or affect the validity of the amendment.
A consent to any amendment or waiver under the Indenture by any holder of
Notes given in connection with a tender of such holder's Notes will not be
rendered invalid by such tender.
TRANSFER
The Notes will be issued in registered form and will be transferable only
upon the surrender of the Notes being transferred for registration of transfer.
The Company may require payment of a sum sufficient to cover any tax, assessment
or other governmental charge payable in connection with certain transfers and
exchanges. See 'Book Entry, Delivery and Form.'
DEFEASANCE
The Company at any time may terminate all its obligations under the Notes
and the Indenture and all obligations of the Subsidiary Guarantors ('legal
defeasance'), except for certain obligations, including those with respect to
the defeasance trust and obligations to register the transfer or exchange of the
Notes, to replace mutilated, destroyed, lost or stolen Notes and to maintain a
registrar and paying agent in respect of the Notes. The Company at any time may
terminate its obligations under the covenants described under '--Certain
Covenants,' '--Change of Control' and the operation of the cross acceleration
provision, the bankruptcy provisions with respect to Significant Subsidiaries,
the judgment default provision and the Subsidiary Guarantee default provision
described under '--Defaults' above and the limitations contained in clause (iii)
described under '--Successor Company' above and all obligations of the
Subsidiary Guarantors ('covenant defeasance').
The Company may exercise its legal defeasance option notwithstanding its
prior exercise of its covenant defeasance option. If the Company exercises its
legal defeasance option, payment of the Notes may not be accelerated because of
an Event of Default with respect thereto. If the Company exercises its covenant
defeasance option, payment of the Notes may not be accelerated because of an
Event of Default specified in clause (iv) (vi), (vii) (with respect only to
Significant Subsidiaries) or (viii) under 'Defaults' above, because of the
failure of the Company to comply with clause (iii) described under 'Successor
Company' above or because of a Subsidiary Guarantor's failure to comply with the
provisions of its Subsidiary Guarantee.
In order to exercise either defeasance option, the Company must irrevocably
deposit in trust (the 'defeasance trust') with the Trustee money or U.S.
Government Obligations for the payment of principal and interest (if any) on the
Notes to redemption or maturity, as the case may be, and must comply with
certain other conditions, including (unless the Notes will mature or be redeemed
within 60 days) delivering to the Trustee an Opinion of Counsel to the effect
that holders of the Notes will not recognize income, gain or loss for federal
income tax purposes as a result of such deposit and defeasance and will be
subject to federal income tax on the same amount and in the same manner and at
the same times as would have been in the case if such deposit and defeasance had
not occurred (and, in the case of legal defeasance only, such Opinion of Counsel
must be based on a ruling of the Internal Revenue Service or other change in
applicable federal income tax law).
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CONCERNING THE TRUSTEE
The Bank of New York is to be the Trustee under the Indenture and has been
appointed by the Company as Registrar and Paying Agent with regard to the Notes.
GOVERNING LAW
The Indenture provides that it and the Notes will be governed by, and
construed in accordance with, the laws of the State of New York without giving
effect to applicable principles of conflicts of law to the extent that the
application of the law of another jurisdiction would be required thereby.
CERTAIN DEFINITIONS
The following are certain definitions used in the Indenture and applicable
to the description of the Indenture and the Notes set forth herein.
'Affiliate' of any specified person means (i) any other person which,
directly or indirectly, is in control of, is controlled by or is under common
control with such specified person or (ii) any other person who is a director or
officer (A) of such specified person, (B) of any subsidiary of such specified
person or (C) of any person described in clause (i) above. For purposes of this
definition, control of a person means the power, direct or indirect, to direct
or cause the direction of the management and policies of such person whether by
contract or otherwise; and the terms 'controlling' and 'controlled' have
meanings correlative to the foregoing.
'Asset Disposition' means any sale, lease, transfer or other disposition
(or series of related sales, leases, transfers or dispositions) of shares of
Capital Stock of a Subsidiary of the Company (other than directors' qualifying
shares and other than Capital Stock of a Non-Recourse Subsidiary), property or
other assets (each referred to for the purposes of this definition as a
'disposition') by the Company or any of its Subsidiaries (other than a
Non-Recourse Subsidiary) (including any disposition by means of a merger,
consolidation or similar transaction) other than (i) a disposition by a
Subsidiary of the Company to the Company or by the Company or a Subsidiary of
the Company to a Wholly Owned Recourse Subsidiary, (ii) a disposition of
property or assets by the Company or its Subsidiaries at fair market value in
the ordinary course of business, (iii) a disposition by the Company or its
Subsidiaries of obsolete assets or inventory in the ordinary course of business,
(iv) a disposition subject to or permitted by the provisions described under
'--Limitation on Restricted Payments' above, (v) an issuance of employee stock
options and (vi) a disposition by the Company or any of its Subsidiaries in
which the Company or its Subsidiaries receive as consideration Capital Stock of
(or similar interests in) a person engaged in, or assets that will be used in,
the businesses of Panavision and its Wholly Owned Recourse Subsidiaries, or
additionally, in the case of a disposition by a Subsidiary that is not a Wholly
Owned Recourse Subsidiary, the business of such Subsidiary, existing on the
Issue Date or in businesses reasonably related thereto, as determined by the
Board of Directors of the Company, the determination of which will be conclusive
and evidenced by a resolution of the Board of Directors of the Company.
'Average Life' means, with respect to any Debt, the quotient obtained by
dividing (i) the sum of the products of (a) the number of years from the date of
the transaction or event giving rise to the need to calculate the Average Life
of such Debt to the date, or dates, of each successive scheduled principal
payment of such Debt multiplied by (b) the amount of each such principal payment
by (ii) the sum of all such principal payments.
'Bank Debt' means any and all amounts payable by the Company or any of its
Subsidiaries under or in respect of the New Credit Agreement or any Refinancing
thereof, or any other agreements with lenders party to the foregoing, including
principal, premium (if any), interest (including interest accruing on or after
the filing of any petition in bankruptcy or for reorganization relating to the
Company), fees, charges, expenses, reimbursement obligations, guarantees and all
other amounts payable thereunder or in respect thereof; provided, however, that
nothing in this definition will permit the Company or any of its Subsidiaries to
issue any Debt that is not permitted pursuant to the provisions described under
'--Limitation on Debt,' above.
'Board of Directors' means, with respect to any person, the Board of
Directors of such person or any committee thereof duly authorized to act on
behalf of such Board.
'Business Day' means each day which is not a Legal Holiday.
'Capital Lease Obligation' of a person means any obligation which is
required to be classified and accounted for as a capital lease on the face of a
balance sheet of such person prepared in accordance with GAAP;
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the amount of such obligation will be the capitalized amount thereof, determined
in accordance with GAAP; and the Stated Maturity thereof will be the date of the
last payment of rent or any other amount due under such lease prior to the first
date upon which such lease may be terminated by the lessee without payment of a
penalty.
'Capital Stock' of any person means any and all shares, interests
(including partnership interests), rights to purchase, warrants, options,
participations or other equivalents of or interests in (however designated)
equity of such person, including any Preferred Stock, but excluding any debt
securities convertible into or exchangeable for such equity.
'Code' means the Internal Revenue Code of 1986, as amended.
'Consolidated EBITDA Coverage Ratio' means, for any period, the ratio of
(i) the aggregate amount of EBITDA for such period to (ii) Consolidated Interest
Expense for such period; provided, however, that
(1) if Panavision or any Subsidiary of Panavision has issued any Debt
since the beginning of such period that remains outstanding or if the
transaction giving rise to the need to calculate the Consolidated EBITDA
Coverage Ratio is an issuance of Debt, or both, EBITDA and Consolidated
Interest Expense for such period will be calculated after giving effect on
a pro forma basis to such Debt as if such Debt had been issued on the first
day of such period and the discharge of any other Debt Refinanced or
otherwise discharged with the proceeds of such new Debt as if such
discharge had occurred on the first day of such period;
(2) if since the beginning of such period Panavision or any Subsidiary
of Panavision has made any Asset Disposition, EBITDA for such period will
be reduced by an amount equal to the EBITDA (if positive) directly
attributable to the assets which are the subject of such Asset Disposition
for such period, or increased by an amount equal to the EBITDA (if
negative), directly attributable thereto for such period and Consolidated
Interest Expense for such period will be reduced by an amount equal to the
Consolidated Interest Expense directly attributable to any Debt of
Panavision or any Subsidiary of Panavision Refinanced or otherwise
discharged with respect to Panavision and its continuing Subsidiaries in
connection with such Asset Disposition for such period (or if the Capital
Stock of any Subsidiary of Panavision is sold, the Consolidated Interest
Expense for such period directly attributable to the Debt of such
Subsidiary to the extent Panavision and its continuing Subsidiaries are no
longer liable for such Debt after such sale); and
(3) if since the beginning of such period Panavision or any Subsidiary
of Panavision (by merger or otherwise) has made an Investment in any
Subsidiary of Panavision (or any person which becomes a Subsidiary of
Panavision) or an acquisition of assets which constitute all or
substantially all of an operating unit of a business, including any
Investment or acquisition of assets occurring in connection with a
transaction causing a calculation to be made hereunder, EBITDA and
Consolidated Interest Expense for such period will be calculated after
giving pro forma effect thereto, as if such Investment or acquisition
occurred on the first day of such period.
For purposes of this definition, whenever pro forma effect is to be given to an
acquisition of assets, an Investment in any person, an Asset Disposition, the
amount of income or earnings relating thereto, or the amount of Consolidated
Interest Expense associated with any Debt, the pro forma calculations will be
determined in good faith by a responsible financial or accounting Officer of the
Company. If any Debt bears a floating rate of interest and is being given pro
forma effect, the interest on such Debt will be calculated as if the rate in
effect on the date of determination had been the applicable rate for the entire
period.
'Consolidated Interest Expense' means, for any period, the sum of (a) the
interest expense of Panavision and its consolidated Subsidiaries (other than
Non-Recourse Subsidiaries) for such period as determined in accordance with GAAP
consistently applied, plus (b) Preferred Stock dividends in respect of Preferred
Stock of Panavision or any Subsidiary of Panavision (other than a Non-Recourse
Subsidiary) held by persons other than Panavision or a Wholly Owned Recourse
Subsidiary, plus (c) the cash contributions to an employee stock ownership plan
of Panavision and its Subsidiaries (other than Non-Recourse Subsidiaries) to the
extent such contributions are used by an employee stock ownership plan to pay
interest.
'Consolidated Net Income' means, for any period, the consolidated net
income (or loss) of Panavision and its consolidated Subsidiaries for such period
as determined in accordance with GAAP, adjusted to the extent included in
calculating such net income (or loss), by excluding
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(i) all extraordinary gains or losses;
(ii) the portion of net income (or loss) of Panavision and its
consolidated Subsidiaries attributable to minority interests in
unconsolidated persons except to the extent that, in the case of net
income, cash dividends or distributions have actually been received by
Panavision or one of its consolidated Subsidiaries (subject, in the case of
a dividend or distribution received by a Subsidiary of Panavision, to the
limitations contained in clause (v) below) and, in the case of net loss,
Panavision or any Subsidiary of Panavision has actually contributed, lent
or transferred cash to such unconsolidated person;
(iii) net income (or loss) of any other person attributable to any
period prior to the date of combination of such other person with
Panavision or any of its Subsidiaries on a 'pooling of interests' basis;
(iv) net gains or losses in respect of dispositions of assets by
Panavision or any of its Subsidiaries (including pursuant to a
sale-and-leaseback arrangement) other than in the ordinary course of
business;
(v) the net income of any Subsidiary of Panavision to the extent that
the declaration of dividends or distributions by that Subsidiary of that
income is not at the time permitted, directly or indirectly, by operation
of the terms of its charter or any agreement, instrument, judgment, decree,
order, statute, rule or governmental regulations applicable to that
Subsidiary or its shareholders;
(vi) any net income or loss of any Non-Recourse Subsidiary, except
that Panavision's equity in the net income of any such Non-Recourse
Subsidiary for such period will be included in such Consolidated Net Income
up to the aggregate amount of cash actually distributed by such
Non-Recourse Subsidiary during such period to Panavision as a dividend or
other distribution; and
(vii) the cumulative effect of a change in accounting principles;
provided, however, that in using Consolidated Net Income for purposes of
calculating the Consolidated EBITDA Coverage Ratio at any time, net income of a
Subsidiary of the type described in clause (v) of this definition will not be
excluded. Notwithstanding the foregoing, for the purposes of the covenant
described under '--Limitation on Restricted Payments' only, Consolidated Net
Income will be calculated after giving effect on a pro forma basis to, (a) to
the extent not already included in the calculation of consolidated net income of
Panavision in accordance with GAAP, interest expense on the Notes, amortization
of deferred financing charges on the Notes and interest income on Escrowed
Property accruing from the Issue Date to but excluding the Effective Date as if
Panavision had issued the Notes on the Issue Date and (b) to the extent
Transaction Charges have been charged to Consolidated Net Income in the fiscal
quarter during which such Transaction Charges were incurred, the Transaction
Charges as if they had not been charged to Consolidated Net Income in the fiscal
quarter during which such Transaction Charges were incurred but instead had been
capitalized on the consolidated balance sheet of Panavision in connection with
the Transactions and subsequently amortized over a 40-year period.
'Consolidated Net Worth' of any person means, at any date, all amounts
which would, in conformity with GAAP, be included under shareholders' equity on
a consolidated balance sheet of such person at such date, less any amounts
attributable to Redeemable Stock or Exchangeable Stock.
'Debt' of any person means, on any date of determination, without
duplication,
(i) the principal in respect of (A) indebtedness of such person for
money borrowed and (B) indebtedness evidenced by notes, debentures, bonds
or other similar instruments for the payment of which such person is
responsible or liable, including, in each case, any premium on such
indebtedness to the extent such premium has become due and payable;
(ii) all Capital Lease Obligations of such person;
(iii) all obligations of such person issued or assumed as the
deferred purchase price of property, all conditional sale obligations of
such person and all obligations of such person under any title retention
agreement (but excluding trade accounts payable and other accrued current
liabilities arising in the ordinary course of business);
(iv) all obligations of such person for the reimbursement of any
obligor on any letter of credit, banker's acceptance or similar credit
transaction (other than obligations with respect to letters of credit
securing obligations (other than obligations described in (i) through (iii)
above) entered into in the ordinary course of business of such person to
the extent such letters of credit are not drawn upon or, if and to the
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extent drawn upon, such drawing is reimbursed no later than the third
Business Day following receipt by such person of a demand for reimbursement
following payment on the letter of credit);
(v) the amount of all obligations of such person with respect to the
redemption, repayment (including liquidation preference) or other
repurchase of, in the case of a Subsidiary of the Company, any Preferred
Stock and, in the case of any other person, any Redeemable Stock (but
excluding in each case any accrued dividends);
(vi) all obligations of the type referred to in clauses (i) through
(v) of other persons and all dividends of other persons for the payment of
which, in either case, such person is responsible or liable, directly or
indirectly, as obligor, guarantor or otherwise, including guarantees of
such obligations and dividends; and
(vii) all obligations of the type referred to in clauses (i) through
(vi) of other persons secured by any Lien on any property or asset of such
person (whether or not such obligation is assumed by such person), the
amount of such obligation being deemed to be the lesser of the value of
such property or assets or the amount of the obligation so secured.
'Default' means any event which is, or after notice or passage of time or
both would be, an Event of Default.
'Designated Senior Debt' means, as of any date of determination, (i) the
Bank Debt and (ii) any other Senior Debt of the Company; provided that for
purposes of this clause (ii) the Senior Debt of the Company issued in any single
transaction will not be Designated Senior Debt unless the Senior Debt issued in
such transaction (including any commitments to lend), at the time of issuance,
had an aggregate principal amount outstanding (including any commitments to
lend) exceeding $25 million and is specifically designated in the instrument
evidencing such Senior Debt as 'Designated Senior Debt.'
'EBITDA' means, for any period, the Consolidated Net Income for such
period, plus the following to the extent included in calculating such
Consolidated Net Income: (i) income tax expense, (ii) Consolidated Interest
Expense, (iii) depreciation expense, (iv) amortization expense, (v) all other
noncash charges (excluding any noncash charge to the extent that it requires an
accrual of or a reserve for cash disbursements for any future period), (vi)
Transaction Charges and (vii) foreign currency gains or losses.
'Exchangeable Stock' means any Capital Stock of a person which by its terms
or otherwise is required to be exchanged or converted or is exchangeable or
convertible at the option of the holder into another security (other than
Capital Stock of such person which is neither Exchangeable Stock nor Redeemable
Stock).
'GAAP' means generally accepted accounting principles in the United States,
as in effect from time to time, except that for purposes of calculating the
Consolidated EBITDA Coverage Ratio, it means generally accepted accounting
principles in the United States as in effect on the Issue Date.
'guarantee' means any obligation, contingent or otherwise, of any person
directly or indirectly guaranteeing any Debt or other obligation of any other
person and any obligation, direct or indirect, contingent or otherwise, of such
person (i) to purchase or pay (or advance or supply funds for the purchase or
payment of) such Debt or other obligation of such other person (whether arising
by virtue of partnership arrangements, or by agreement to keep-well, to purchase
assets, goods, securities or services, to take-or-pay, or to maintain financial
statement conditions or otherwise) or (ii) entered into for purposes of assuring
in any other manner the obligee of such Debt or other obligation of the payment
thereof or to protect such obligee against loss in respect thereof (in whole or
in part); provided, however, that the term 'guarantee' does not include
endorsements for collection or deposit in the ordinary course of business. The
term 'guarantee' used as a verb has a corresponding meaning.
'Holder' or 'Noteholder' means the person in whose name a Note is
registered on the Registrar's books.
'Investment' in any person means any loan or advance to, any net payment on
a guarantee of, any acquisition of Capital Stock, equity interest, obligation or
other security of, or capital contribution or other investment in, such person.
Investments exclude advances to customers and suppliers in the ordinary course
of business. The term 'Invest' has a corresponding meaning. For purposes of the
definitions of 'Non-Recourse Subsidiary' and 'Restricted Payment' and for
purposes of the provisions described under '--Limitation on Restricted
Payments,' above, (i) 'Investment' includes a designation after the Issue Date
of a Subsidiary as a Non-Recourse Subsidiary, and such Investment will be valued
at an amount equal to the portion (proportionate to the Company's equity
interest in such Subsidiary) of the fair market value of the net assets of such
Subsidiary at
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the time that such Subsidiary is designated a Non-Recourse Subsidiary; and (ii)
any property transferred to or from a Non-Recourse Subsidiary will be valued at
its fair market value at the time of such transfer, in each case as determined
in good faith by the Board of Directors of the Company, and if such property so
transferred (including in a series of related transactions) has a fair market
value, as so determined by the Board of Directors, in excess of $10 million,
such determination will be confirmed by an independent appraiser.
'issue' means issue, assume, guarantee, incur or otherwise become liable
for; provided, however, that any Debt or Capital Stock of a person existing at
the time such person becomes a Subsidiary of another person (whether by merger,
consolidation, acquisition or otherwise) will be deemed to be issued by such
Subsidiary at the time it becomes a Subsidiary of such other person.
'Issue Date' means the date of original issue of the Notes.
'Legal Holiday' means a Saturday, a Sunday or a day on which banking
institutions are not required to be open in the State of New York or in the
state where the principal office of the Trustee is located.
'Lien' means any mortgage, pledge, security interest, conditional sale or
other title retention agreement or other similar lien.
'Net Available Cash' from an Asset Disposition means cash payments received
(including any cash payments received by way of deferred payment of principal
pursuant to a note or installment receivable or otherwise, but only as and when
received, but excluding any other consideration received in the form of
assumption by the acquiring person of Debt or other obligations relating to such
properties or assets or received in any other noncash form) therefrom, in each
case net of (i) all legal, title and recording tax expenses, commissions and
other fees and expenses incurred, and all Federal, state, provincial, foreign
and local taxes required or estimated in good faith to be required to be accrued
as a liability under GAAP, as a consequence of such Asset Disposition, (ii) all
payments made on any Debt which is secured by any assets subject to such Asset
Disposition, in accordance with the terms of any Lien upon or other security
agreement of any kind with respect to such assets, or which must by its terms,
or in order to obtain a necessary consent to such Asset Disposition, or by
applicable law be repaid out of the proceeds from or in connection with such
Asset Disposition and (iii) all distributions and other payments required to be
made to minority interest holders in Subsidiaries or joint ventures as a result
of such Asset Disposition; provided, however, that in connection with an Asset
Disposition to a Subsidiary of the Company (other than a Non-Recourse
Subsidiary), Net Available Cash will be deemed to be a percentage of Net
Available Cash (as calculated above) equal to (A) 100% minus (B) the Company's
percentage ownership in such Subsidiary.
'Net Cash Proceeds,' with respect to any issuance or sale of Capital Stock,
means the cash proceeds of such issuance or sale net of attorneys' fees,
accountants' fees, underwriters' or placement agents' fees, discounts or
commissions and brokerage, consultant and other fees actually incurred in
connection with such issuance or sale and net of taxes paid or estimated in good
faith to be payable as a result thereof.
'New Credit Agreement' means the Credit Agreement, dated as of June 4,
1998, among the Company, the several lenders signatory thereto, Chase Securities
Inc., as Advisor and Arranger and The Chase Manhattan Bank, as Administrative
Agent, as such agreement may be amended, supplemented, waived and otherwise
modified or Refinanced from time to time.
'Non-Convertible Capital Stock' means, with respect to any corporation, any
non-convertible Capital Stock of such corporation and any Capital Stock of such
corporation convertible solely into non-convertible common stock of such
corporation; provided, however, that Non-Convertible Capital Stock does not
include any Redeemable Stock or Exchangeable Stock.
'Non-Recourse Debt' means Debt or that portion of Debt (i) as to which
neither the Company nor its Subsidiaries (other than a Non-Recourse Subsidiary)
(A) provide credit support (including any undertaking, agreement or instrument
which would constitute Debt), (B) is directly or indirectly liable or (C)
constitute the lender and (ii) no default with respect to which (including any
rights which the holders thereof may have to take enforcement action against the
assets of a Non-Recourse Subsidiary) would permit (upon notice, lapse of time or
both) any holder of any other Debt of the Company or its Subsidiaries (other
than Non-Recourse Subsidiaries) to declare a default on such other Debt or cause
the payment thereof to be accelerated or payable prior to its Stated Maturity.
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'Non-Recourse Subsidiary' means a Subsidiary of the Company (i) which has
been designated as such by the Company, (ii) which has no Debt other than
Non-Recourse Debt and (iii) which is in the same line of business as Panavision
and its Wholly Owned Recourse Subsidiaries existing on the Issue Date or in
businesses reasonably related thereto.
'Officer' means the Chairman of the Board, the President, any Vice
President, the Treasurer, an Assistant Treasurer or the Secretary or an
Assistant Secretary of the Company.
'Officers' Certificate' means a certificate signed by the Chairman of the
Board, Vice Chairman, the President or a Vice President (regardless of Vice
Presidential designation), and by the Treasurer, an Assistant Treasurer,
Secretary or an Assistant Secretary, of the Company, and delivered to the
Trustee. One of the Officers signing an Officers' Certificate given pursuant to
the provisions described in the last paragraph under '--Defaults,' above, shall
be the principal executive, financial or accounting officer of the Company.
'Old Credit Agreement' means the Credit Agreement, dated as of June 5,
1997, among Panavision, the subsidiary guarantors, the lenders signatory thereto
and The Chase Manhattan Bank, as administrative agent, as in effect on the Issue
Date.
'Opinion of Counsel' means a written opinion from legal counsel who is
reasonably acceptable to the Trustee. Such counsel may be an employee of or
counsel to the Company (or its Parent or one of its Subsidiaries) or the
Trustee.
'Parent' means any person which acquires or owns directly or indirectly 80%
or more of the voting power of the Voting Stock of the Company.
'Paying Agent' means the office or agency where the Notes may be presented
for payment, and any additional or successor paying agent.
'Permitted Affiliate' means any individual that is a director or officer of
Panavision, of Parent, of a Subsidiary of Panavision or of an Unrestricted
Affiliate; provided, however, that such individual is not also a director or
officer of Mafco Holdings or any person that controls Mafco Holdings.
'Permitted Holders' means Ronald O. Perelman (or in the event of his
incompetence or death, his estate, heirs, executor, administrator, committee or
other personal representative (collectively, 'heirs')) or any person controlled,
directly or indirectly, by Ronald O. Perelman or his heirs.
'person' means any individual, corporation, limited liability company,
partnership, joint venture, association, joint-stock company, trust,
unincorporated organization, government or any agency or political subdivision
thereof or any other entity.
'Preferred Stock,' as applied to the Capital Stock of any person, means
Capital Stock of any class or classes (however designated) which is preferred as
to the payment of dividends, or as to the distribution of assets upon any
voluntary or involuntary liquidation or dissolution of such person, over shares
of Capital Stock of any other class of such person.
'principal' of a Note as of any date means the Accreted Value of the Note
as of such date plus, in the case of any redemption or an offer to repurchase
Notes pursuant to the provisions described under '--Limitation on Sales of
Assets and Subsidiary Stock' and '--Change of Control' above, the premium, if
any, payable on the Note which is due or overdue or is to become due on such
date.
'principal amount at maturity' of a Note means the amount specified as such
on the face of such Note.
'Private Exchange Notes' shall have the meaning assigned thereto in the
Registration Agreement. See 'Exchange Offer; Registration Rights.'
'Put Amount' as of any date means, with respect to each $1,000 principal
amount at maturity of Notes, 101% of the Accreted Value thereof as of the date
of repurchase.
'Redeemable Stock' means, with respect to any person, Capital Stock of such
person that by its terms or otherwise is required to be redeemed on or prior to
the first anniversary of the Stated Maturity of the Notes or is redeemable at
the option of the holder thereof at any time on or prior to the first
anniversary of the Stated Maturity of the Notes; provided, however, that any
Capital Stock that would not constitute Redeemable Stock but for provisions
thereof giving holders thereof the right to require such person to purchase or
redeem such Capital Stock upon the occurrence of an 'asset sale' or 'change of
control' occurring prior to the first anniversary of
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the Stated Maturity of the Notes will not constitute Redeemable Stock if (x) the
'asset sale' or 'change of control' provisions applicable to such Capital Stock
are not more favorable to the holders of such Capital Stock than the terms
applicable to the Notes described under '--Limitation on Sales of Assets and
Subsidiary Stock' and '--Change of Control' above, as determined in good faith
by the Board of Directors of the Company, the determination of which will be
evidenced by a resolution of such Board of Directors, and (y) any such
requirement only becomes operative after compliance with such covenants,
including the purchase of any Notes tendered pursuant thereto.
'Refinance' means, in respect of any Debt, to refinance, extend, renew,
refund, repay, prepay, redeem, defease or retire, or to issue Debt in exchange
or replacement for, such Debt. 'Refinanced' and 'Refinancing' have correlative
meanings.
'Refinancing Costs' means, with respect to any Debt being Refinanced, any
premium actually paid thereon and reasonable costs and expenses, including
underwriting discounts, in connection with such Refinancing; provided, that if
any Debt issued in connection with such a Refinancing is issued at a discount,
Refinancing Costs will be an amount equal to the accreted value (as of the
Stated Maturity of the Debt being Refinanced) of the portion of such Debt used
to pay such premium, costs and expenses.
'Representative' means the trustee, agent or representative (if any) for an
issue of Senior Debt.
'Restricted Payment' means, as to any person making a Restricted Payment,
(i) any dividend or any distribution on or in respect of the Capital
Stock of such person (including any payment in connection with any merger
or consolidation involving such person) or to the holders of the Capital
Stock of such person (except dividends or distributions payable solely in
the Non-Convertible Capital Stock of such person or in options, warrants or
other rights to purchase the Non-Convertible Capital Stock of such person);
(ii) any purchase, redemption or other acquisition or retirement for
value of any Capital Stock of the Company or of any direct or indirect
parent of the Company.
(iii) any purchase, repurchase, redemption, defeasance or other
acquisition or retirement for value, prior to scheduled maturity, scheduled
repayment or scheduled sinking fund payment, of any Subordinated Obligation
(other than the purchase, repurchase or other acquisition of Subordinated
Obligations purchased in anticipation of satisfying a sinking fund
obligation, principal installment or final maturity, in each case due
within one year of the date of acquisition);
(iv) any Investment in any Affiliate of the Company other than (x) a
Subsidiary of the Company, (y) an Affiliate of the Company which will
become a Subsidiary of the Company as a result of any such Investment and
(z) an Unrestricted Affiliate; or
(v) any Investment in a Non-Recourse Subsidiary.
'Secured Debt' means Debt that is secured by a Lien.
'Senior Subordinated Debt' means the Notes and any other indebtedness,
guarantee or obligation of the Company that specifically provides that such
indebtedness, guarantee or obligation is to rank pari passu in right of payment
with the Notes and is not subordinated in right of payment by its terms to any
indebtedness, guarantee or obligation of the Company which is not Senior Debt of
the Company.
'Significant Subsidiary' means (i) any Subsidiary (other than a
Non-Recourse Subsidiary) of the Company which at the time of determination
either (A) had assets which, as of the date of the Company's most recent
quarterly consolidated balance sheet, constituted at least 5% of the Company's
total assets on a consolidated basis as of such date, in each case determined in
accordance with GAAP, or (B) had revenues for the 12-month period ending on the
date of the Company's most recent quarterly consolidated statement of income
which constituted at least 5% of the Company's total revenues on a consolidated
basis for such period, or (ii) any Subsidiary of the Company (other than a
Non-Recourse Subsidiary) which, if merged with all Defaulting Subsidiaries (as
defined below) of the Company, would at the time of determination either (A)
have had assets which, as of the date of the Company's most recent quarterly
consolidated balance sheet, would have constituted at least 10% of the Company's
total assets on a consolidated basis as of such date or (B) have had revenues
for the 12-month period ending on the date of the Company's most recent
quarterly consolidated statement of income which would have constituted at least
10% of the Company's total revenues on a consolidated basis for such period
(each such
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determination being made in accordance with GAAP). 'Defaulting Subsidiary' means
any Subsidiary of the Company (other than a Non-Recourse Subsidiary) with
respect to which an event described under clause (vi), (vii) or (viii) of
'--Defaults' above has occurred and is continuing.
'Stated Maturity' means, with respect to any security, the date specified
in such security as the fixed date on which the principal of such security is
due and payable, including pursuant to any mandatory redemption provision (but
excluding any provision providing for the repurchase of such security at the
option of the holder thereof upon the happening of any contingency).
'Subordinated Obligation' means any Debt of the Company (whether
outstanding on the Issue Date or thereafter issued) which is subordinate or
junior in right of payment to the Notes.
'Subsidiary' means, with respect to any person, any corporation,
association, partnership or other business entity of which more than 50% of the
total voting power of shares of Capital Stock or other interests (including
partnership interests) entitled (without regard to the occurrence of any
contingency) to vote in the election of directors, managers or trustees thereof
is at the time owned, directly or indirectly, by (i) such person, (ii) such
person and one or more Subsidiaries of such person or (iii) one or more
Subsidiaries of such person.
'Tax Sharing Agreement' means any tax allocation agreement between the
Company or any of its Subsidiaries with the Company or any direct or indirect
shareholder of the Company with respect to consolidated or combined tax returns
including the Company or any of its Subsidiaries, but only to the extent that
amounts payable from time to time by the Company or any such Subsidiary under
any such agreement do not exceed the corresponding tax payments that the Company
or such Subsidiary would have been required to make to any relevant taxing
authority had the Company or such Subsidiary not joined in such consolidated or
combined returns, but instead had filed returns including only the Company or
its Subsidiaries (provided that any such agreement may provide that, if the
Company or any such Subsidiary ceases to be a member of the affiliated group of
corporations of which Mafco Holdings is the common parent for purposes of filing
a consolidated federal income tax return (such cessation, a 'Deconsolidation
Event'), then the Company or such Subsidiary shall indemnify such direct or
indirect shareholder with respect to any federal, state or local income,
franchise or other tax liability (including any related interest, additions or
penalties) imposed on such shareholder as the result of an audit or other
adjustment with respect to any period prior to such Deconsolidation Event that
is attributable to the Company, such Subsidiary or any predecessor business
thereof (computed as if the Company, such Subsidiary or such precedessor
business, as the case may be, were a stand-alone entity that filed separate tax
returns as an independent corporation), but only to the extent that any such tax
liability exceeds any liability for taxes recorded on the books of the Company
or such Subsidiary with respect to any such period).
'Temporary Cash Investments' means any of the following: (i) any investment
in direct obligations of the United States of America or any agency thereof or
obligations guaranteed by the United States of America or any agency thereof, in
each case, maturing within 360 days of the date of acquisition thereof, (ii)
investments in time deposit accounts, certificates of deposit and money market
deposits maturing within 180 days of the date of acquisition thereof issued by a
bank or trust company (including the Trustee) which is organized under the laws
of the United States of America, any state thereof or any foreign country
recognized by the United States of America having capital, surplus and undivided
profits aggregating in excess of $250 million and whose debt is rated 'A' (or
such similar equivalent rating) or higher by at least one nationally recognized
statistical rating organization (as defined in Rule 436 under the Securities
Act) or any money-market fund sponsored by any registered broker dealer or
mutual fund distributor, (iii) repurchase obligations with a term of not more
than 30 days for underlying securities of the types described in clause (i)
above entered into with a nationally recognized broker-dealer, (iv) investments
in commercial paper, maturing not more than 90 days after the date of
acquisition, issued by a corporation (other than an Affiliate or Subsidiary of
the Company) organized and in existence under the laws of the United States of
America or any foreign country recognized by the United States of America with a
rating at the time as of which any investment therein is made of 'P-2' (or
higher) according to Moody's Investors Service, Inc. or 'A-2' (or higher)
according to Standard and Poor's Corporation and (v) securities with maturities
of six months or less from the date of acquisition backed by standby or direct
pay letters of credit issued by any bank satisfying the requirements of clause
(ii) above.
'Transaction Charges' means nonrecurring charges related to or arising out
of the Transactions.
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'Transactions' means the transactions contemplated by the Recapitalization
Agreement, the Stockholders Agreement and the Escrow Agreement.
'Trust Officer' means any officer or assistant officer of the Trustee
assigned by the Trustee to administer its corporate trust matters.
'Unrestricted Affiliate' means a person (other than a Subsidiary of the
Company) controlled (as defined in the definition of an 'Affiliate') by the
Company, in which no Affiliate of the Company (other than (x) a Wholly Owned
Recourse Subsidiary of the Company, (y) a Permitted Affiliate and (z) another
Unrestricted Affiliate) has an Investment.
'U.S. Government Obligations' means direct obligations (or certificates
representing an ownership interest in such obligations) of the United States of
America (including any agency or instrumentality thereof) for the payment of
which the full faith and credit of the United States of America is pledged and
which are not callable at the issuer's option.
'Voting Stock' of a person means all classes of Capital Stock or other
interests (including partnership interests) of such person then outstanding and
normally entitled (without regard to the occurrence of any contingency) to vote
in the election of directors, managers or trustees thereof.
'Wholly Owned Recourse Subsidiary' means a Subsidiary of the Company (other
than a Non-Recourse Subsidiary) all the Capital Stock of which (other than
directors' qualifying shares) is owned by (i) the Company, (ii) the Company and
one or more Wholly Owned Recourse Subsidiaries or (iii) one or more Wholly Owned
Recourse Subsidiaries.
REGISTRATION RIGHTS
Holders of the New Notes are not entitled to any registration rights with
respect to the New Notes. PX Escrow and the Company entered into a registration
agreement (the 'Registration Agreement') with the Initial Purchasers for the
benefit of the holders of the Old Notes, pursuant to which PX Escrow and the
Company agreed that they would, at their cost, by November 2, 1998, use their
best efforts to cause a registration statement (the 'registration statement') to
be declared effective under the Securities Act relating to the exchange of Old
Notes for registered notes. The Registration Statement of which this Prospectus
is a part constitutes the registration statement for purposes of the
Registration Agreement. Upon the Registration Statement being declared
effective, the Company will offer the New Notes in exchange for surrender of the
Old Notes. The Company will keep the Exchange Offer open for not less than 30
days (or longer if required by applicable law) after the date notice of the
Exchange Offer is mailed to the holders of the Old Notes. For each Old Note
surrendered to the Company pursuant to the Exchange Offer, the holder of such
Old Note will receive a New Note having a principal amount equal to that of the
surrendered Old Note. Under existing Commission interpretations, the New Notes
would in general be freely transferable after the Exchange Offer without further
registration under the Securities Act; provided, however, that in the case of
broker-dealers, a prospectus meeting the requirements of the Securities Act be
delivered as required. The Company has agreed for a period of 180 days after
consummation of the Exchange Offer to make available a prospectus meeting the
requirements of the Securities Act to any broker-dealer for use in connection
with any resale of any such New Notes acquired as described below. A
broker-dealer which delivers such a prospectus to purchasers in connection with
such resales will be subject to certain of the civil liability provisions under
the Securities Act and will be bound by the provisions of the Registration
Agreement (including certain indemnification rights and obligations).
In the event that applicable interpretations of the staff of the Commission
do not permit the Company to effect such an Exchange Offer, or if for any other
reason the Exchange Offer is not consummated by December 1, 1998, the Company
will, at its cost, (a) as promptly as practicable, file a shelf registration
statement with respect to the resale of the Old Notes (the 'Shelf Registration
Statement') covering resales of the Old Notes, (b) use its best efforts to cause
the Shelf Registration Statement to be declared effective under the Securities
Act and (c) use its best efforts to keep effective the Shelf Registration
Statement until two years after its effective date. The Company will, in the
event of the Shelf Registration Statement, provide to each holder of the Old
Notes copies of the prospectus, which is a part of the Shelf Registration
Statement, notify each such holder when the Shelf Registration Statement for the
Old Notes has become effective and take certain other actions as are required to
permit unrestricted resales of the Old Notes. A holder of Old Notes who sells
such Old Notes pursuant to the Shelf Registration Statement generally would be
required to be named as a selling securityholder in the related prospectus and
to deliver a prospectus to purchasers, will be subject to certain of the civil
liability provisions
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under the Securities Act in connection with such sales and will be bound by the
provisions of the Registration Agreement which are applicable to such a holder
(including certain indemnification obligations).
If by December 1, 1998, neither (i) the Exchange Offer is consummated nor
(ii) the Shelf Registration Statement is declared effective, interest will
accrue (in addition to the accretion of Original Issue Discount) on the Notes
from and including such date, until but excluding the earlier of (i) the
consummation of the Exchange Offer and (ii) the effective date of a Shelf
Registration Statement. In each case, such interest will be payable in cash
semiannually in arrears on February 1 and August 1, commencing February 1, 1999,
at a rate per annum equal to .50% of the Accreted Value as of the August 1 and
February 1 immediately preceding such interest payment date.
The summary herein of certain provisions of the Registration Agreement does
not purport to be complete and is subject to, and is qualified in its entirety
by reference to, all the provisions of the Registration Agreement, a copy of
which is filed as an exhibit to the Registration Statement of which this
Prospectus constitutes a part.
BOOK-ENTRY, DELIVERY AND FORM
GENERAL
The Notes will be issued in the form of one or more fully registered Notes
in global form ('Global Notes'). The Global Notes will be deposited with, or on
behalf of, The Depository Trust Company (the 'Depositary') and registered in the
name of the Depositary or its nominee.
Upon issuance of the Global Notes, the Depositary or its nominee will
credit, on its book-entry registration and transfer system, the number of Notes
to the accounts of institutions that have accounts with the Depositary or its
nominee ('participants'). The accounts to be credited shall be designated by the
Initial Purchasers. Ownership of beneficial interests in the Global Notes will
be limited to participants or persons that may hold interests through
participants. Ownership of beneficial interest in such Global Notes will be
shown on, and the transfer of that ownership will be effected only through,
records maintained by the Depositary or its nominee (with respect to
participants' interests) for such Global Notes, or by participants or persons
that hold interests through participants (with respect to beneficial interests
of persons other than participants). The laws of some jurisdictions may require
that certain purchasers of securities take physical delivery of such securities
in definitive form. Such limits and laws may impair the ability to transfer or
pledge beneficial interests in the Global Notes.
So long as the Depositary, or its nominee, is the registered holder of any
Global Notes, the Depositary or such nominee, as the case may be, will be
considered the sole legal owner and holder of such Notes for all purposes under
the Indenture and the Notes. Except as set forth below, owners of beneficial
interests in Global Notes will not be entitled to have such Global Notes
registered in their names, will not receive or be entitled to receive physical
delivery in exchange therefor and will not be considered to be the owners or
holders of such Global Notes for any purpose under the Notes or the Indenture.
The Company understands that under existing industry practice, in the event an
owner of a beneficial interest in a Global Note desires to take any action that
the Depositary, as the holder of such Global Note, is entitled to take, the
Depositary would authorize the participants to take such action, and that the
participants would authorize beneficial owners owning through such participants
to take such action or would otherwise act upon the instructions of beneficial
owners owning through them.
Any payment of principal or interest due on the Notes on any interest
payment date or at maturity will be made available by the Company to the Trustee
by such date. As soon as possible thereafter, the Trustee will make such
payments to the Depositary or its nominee, as the case may be, as the registered
owner of the Global Notes representing such Notes in accordance with existing
arrangements between the Trustee and the Depositary.
The Company expects that the Depositary or its nominee, upon receipt of any
payment of principal or interest in respect of the Global Notes, will credit
immediately the accounts of the related participants with payments in amounts
proportionate to their respective beneficial interests in the principal amount
of such Global Note as shown on the records of the Depositary. The Company also
expects that payments by participants to owners of beneficial interests in the
Global Notes held through such participants will be governed by standing
instructions and customary practices, as is now the case with securities held
for the accounts of customers in bearer form or registered in 'street name,' and
will be the responsibility of such participants.
None of the Company, the Trustee, or any payment agent for the Global Notes
will have any responsibility or liability for any aspect of the records relating
to or payments made on account of beneficial ownership
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interests in any of the Global Notes or for maintaining, supervising or
reviewing any records relating to such beneficial ownership interests or for
other aspects of the relationship between the Depositary and its participants or
the relationship between such participants and the owners of beneficial
interests in the Global Notes owning through such participants.
As long as the Notes are represented by a Global Note, the Depositary's
nominee will be the holder of the Notes and therefore will be the only entity
that can exercise a right to repayment or repurchase of the Notes. See
'Description of the Notes--Change of Control' and '--Certain
Covenants--Limitation on Sales of Assets and Subsidiary Stock.' Notice by
participants or by owners of beneficial interests in a Global Note held through
such participants of the exercise of the option to elect repayment of beneficial
interests in Notes represented by a Global Note must be transmitted to the
Depositary in accordance with its procedures on a form required by the
Depositary and provided to participants. In order to ensure that the
Depositary's nominee will exercise on a timely basis a right to repayment with
respect to a particular Note, the beneficial owner of such Note must instruct
the broker or other participant to exercise a right to repayment. Different
firms have cut-off times for accepting instructions from their customers and,
accordingly, each beneficial owner should consult the broker or other
participant through which it holds an interest in a Note in order to ascertain
the cut-off time by which such an instruction must be given in order for timely
notice to be delivered to the Depositary. The Company will not be liable for any
delay in delivery of notices of the exercise of the option to elect repayment.
Unless and until exchanged in whole or in part for Notes in definitive form
in accordance with the terms of the Notes, the Global Notes may not be
transferred except as a whole by the Depositary to a nominee of the Depositary
or by a nominee of the Depositary to the Depositary or another nominee of the
Depositary or by the Depositary of any such nominee to a successor of the
Depositary or a nominee of each successor.
Although the Depositary has agreed to the foregoing procedures in order to
facilitate transfers of interests in the Global Notes among participants of the
Depositary, it is under no obligation to perform or continue to perform such
procedures, and such procedures may be discontinued at any time. Neither the
Trustee nor the Company will have any responsibility for the performance by the
Depositary or its participants or indirect participants of their respective
obligations under the rules and procedures governing their operations. The
Company and the Trustee may conclusively rely on, and shall be protected in
relying on, instructions from the Depositary for all purposes.
CERTIFICATED NOTES
The Global Notes shall be exchangeable for corresponding certificated Notes
registered in the name of persons other than the Depositary or its nominee only
if (A) the Depositary (i) notifies the Company that it is unwilling or unable to
continue as Depositary for any of the Global Notes or (ii) at any time ceases to
be a clearing agency registered under the Exchange Act, (B) there shall have
occurred and be continuing an Event of Default (as defined in the Indenture)
with respect to the applicable Notes or (C) the Company executes and delivers to
the Trustee, an order that the Global Notes shall be so exchangeable. Any
certificated Notes will be issued only in fully registered form, and shall be
issued without coupons in denominations of $1,000 and integral multiples
thereof. Any certificated Notes so issued will be registered in such names and
in such denominations as the Depositary shall request.
THE CLEARING SYSTEM
The Depositary has advised the Company as follows: The Depositary is a
limited-purpose trust company organized under the laws of the State of New York,
a member of the Federal Reserve System, a 'clearing corporation' within the
meaning of the New York Uniform Commercial Code, and 'a clearing agency'
registered pursuant to the provisions of Section 17A of the Exchange Act. The
Depositary was created to hold securities of institutions that have accounts
with the Depositary ('participants') and to facilitate the clearance and
settlement of securities transactions among its participants in such securities
through electronic book-entry changes in accounts of participants, thereby
eliminating the need for physical movement of securities certificates. The
Depositary's participants include securities brokers and dealers (which may
include the Initial Purchasers), banks, trust companies, clearing corporations
and certain other organizations. Access to the Depositary's book-entry system is
also available to others such as banks, brokers, dealers and trust companies
that clear through or maintain a custodial relationship with a participant,
whether directly or indirectly.
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DESCRIPTION OF OTHER INDEBTEDNESS
The following description of consolidated indebtedness of the Company and
its Subsidiaries to be incurred in connection with the Panavision
Recapitalization under the New Credit Agreement does not purport to be complete
and is subject to, and is qualified in its entirety by reference to, all of the
provisions of the New Credit Agreement, a copy of which is filed as an exhibit
to the Registration Statement of which this Prospectus constitutes a part.
NEW CREDIT AGREEMENT
In connection with the Panavision Recapitalization, the Company entered
into the New Credit Agreement. The New Credit Agreement consists of (x) a term
loan facility (the 'Term Facility') in an aggregate amount of $240.0 million
consisting of two tranches, one of which is a 6-year facility in an aggregate
principal amount equal to $90.0 million (the 'Tranche A Term Facility') and the
other of which is a 7-year facility in an aggregate principal amount equal to
$150.0 million (the 'Tranche B Term Facility'), and (y) a 6-year revolving
credit facility (the 'Revolving Facility') in an aggregate principal amount of
$100.0 million, of which up to $20.0 million is available for the issuance of
letters of credit. Borrowings under the Term Facility were used to finance, in
part, the Panavision Recapitalization, repay existing borrowings under the Old
Credit Agreement and to pay related fees and expenses. Borrowings under the
Revolving Facility will be used to finance the working capital and general
corporate needs of the Company and its subsidiaries in the ordinary course of
business.
The full amount of the Term Facility was drawn in a single drawing on June
4, 1998 (the 'Closing Date') and any amount repaid or prepaid under the Term
Facility may not be reborrowed. Loans and letters of credit under the Revolving
Facility will be available at any time prior to, in the case of loans, the final
maturity of the Revolving Facility and, in the case of letters of credit, the
fifth business day prior to the final maturity of the Revolving Facility.
Amounts repaid under the Revolving Facility may be reborrowed.
The Tranche A Term Facility is repayable in quarterly installments in an
aggregate principal amount for each year following the Closing Date (commencing
with the second year following the Closing Date) as follows: $5.0 million; $10.0
million; $20.0 million; $25.0 million; and $30.0 million, respectively. The
Tranche B Term Facility is repayable in quarterly installments in an aggregate
principal amount for each year following the Closing Date (commencing with the
second year following the Closing Date) as follows: $1.0 million for years 2
through 5; $21.0 million for year 6; and $125.0 million for year 7.
Borrowings under the New Credit Agreement bear interest at a rate per annum
equal to the Alternate Base Rate ('ABR Loans') or the Eurodollar Rate
('Eurodollar Loans') plus, in each case, a margin that will be based on the
performance of the Company at levels to be agreed. The initial margin on loans
under the Revolving Facility and loans under the Tranche A Term Facility is
2.25% for Eurodollar Loans and 1.25% for ABR Loans. The initial margin on loans
under the Tranche B Term Facility is 2.50% for Eurodollar Loans and 1.50% for
ABR Loans. The Company may select interest periods of one, two, three or six
months for Eurodollar Loans. At any time when the Company is in default in the
payment of any amount of principal due under the New Credit Agreement, such
amount shall bear interest at 2% above the rate otherwise applicable. Overdue
interest, fees and other amount shall bear interest at 2% above the rate
applicable to ABR Loans.
The Company is required to prepay the Term Facility and to permanently
reduce the Revolving Facility with: (i) 100% of the net proceeds of any sale or
issuance of equity or incurrence of certain indebtedness after the Closing Date
by the Company or any of its subsidiaries; (ii) 100% of the net proceeds of any
sale or other disposition (with customary casualty or condemnation reinvestment
provisions to be agreed) by the Company or any of its subsidiaries of any assets
(except for the sale of inventory in the ordinary course of business and certain
other dispositions to be agreed) and (iii) 75% of excess cash flow (definition
to be agreed) for each fiscal year of the Company (commencing with the fiscal
year in which the Closing Date occurs); provided that such percentage shall be
50% if the leverage ratio (definition to be agreed) at the end of the applicable
fiscal year is equal to or below a level to be agreed upon. All such prepayments
shall be applied, first, to the prepayment of the Term Loans and, second, to the
permanent reduction of the Revolving Facility. Each such prepayment of the Term
Loans shall be applied to the Tranche A Term Loans and the Tranche B Term Loans
ratably and to the installments thereof ratably in accordance with the then
oustanding amounts. If, however, any Tranche A Term Loans are oustanding, each
holder of Tranche B Term Loans shall have the right to refuse all or any portion
of
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such prepayment allocable to its Tranche B Term Loans, and the amount so refused
will be applied to prepay the Tranche A Term Loans.
Any loans under the New Credit Agreement may be prepaid without premium or
penalty (subject to reimbursement of customary breakfunding costs) and
commitments may be reduced by the Company in minimum amounts to be agreed.
Optional prepayments of the Term Loans shall be applied to the Tranche A Term
Loans and the Tranche B Term Loans ratably and to the installments thereof
ratably in accordance with the then oustanding amounts. If, however, any Tranche
A Term Loans are outstanding, each holder of Tranche B Term Loans shall have the
right to refuse all or any portion of such prepayment allocable to its Tranche B
Term Loans, and the amount so refused will be applied to prepay the Tranche A
Term Loans.
The obligations of the Company under the New Credit Agreement are
guaranteed by each of the Company's direct and indirect domestic subsidiaries
(collectively, the 'Guarantors'). The obligations of the Company and the
Guarantors in respect of the Credit Facilities are secured by a perfected first
priority security interest in all of such person's tangible and intangible
domestic assets (including, without limitation, intellectual property, real
property, and all of the capital stock of each of the Company's direct and
indirect domestic subsidiaries and 65% of the capital stock of first tier
foreign subsidiaries).
The New Credit Agreement contains customary representations and warranties
and affirmative covenants. Such documentation contains a number of covenants
that, among other things, limit indebtedness; liens; guarantee obligations;
mergers; sales of assets; leases; dividends and other payments in respect of
capital stock; capital expenditures; investments; optional payments and
modifications of subordinated and other debt instruments; transactions with
affiliates; sale leasebacks and negative pledge clauses. The New Credit
Agreement also contains financial covenants including, but not limited to,
minimum interest coverage and maximum leverage.
The New Credit Agreement contains customary events of default, including,
but not limited to, nonpayment of principal, interest or fees; material
inaccuracy of representations and warranties; violation of covenants; cross-
default; bankruptcy events; material judgments, ERISA; actual or asserted
invalidity of collateral documents; and a change of control (definition to be
agreed).
Certain fees are payable with respect to the New Credit Agreement,
including (i) a commitment fee equal to the rate of .50% on the average daily
unused portion of the Revolving Facility, payable quarterly in arrears; (ii) a
commission on all outstanding letters of credit at a per annum rate equal to the
margin then in effect with respect to Eurodollar Loans on the face amount of
each such letter of credit; (iii) a fronting fee equal to .25% per annum on the
face amount of each letter of credit, payable quarterly in arrears; (iv) an
annual administration fee and (v) arrangement and other similar fees that were
paid on or prior to the Closing Date.
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CERTAIN U.S. FEDERAL INCOME TAX CONSIDERATIONS
CERTAIN UNITED STATES FEDERAL INCOME TAX CONSIDERATIONS
The following is a summary of certain United States federal income tax
consequences associated with the exchange of Old Notes for New Notes and the
ownership and disposition of the New Notes applicable to initial holders of
Notes who are United States holders. The summary is based upon current laws,
regulations, rulings and judicial decisions all of which are subject to change
and such change could affect the continuing validity of this discussion. The
discussion below does not address all aspects of United States federal income
taxation that may be relevant to particular holders in the context of their
specific investment circumstances or certain types of holders subject to special
treatment under such laws (for example, financial institutions, tax-exempt
organizations, insurance companies, dealers in securities, foreign corporations,
individuals who are not citizens or residents of the United States, individuals
who hold Notes as a hedge against currency or interest rate risks or that are
part of a straddle or conversion transaction and persons having a functional
currency other than the U.S. dollar). In addition, the discussion does not
address any aspect of state, local, or foreign taxation and assumes that
purchasers of the Notes will hold them as 'capital assets' (generally, property
held for investment) within the meaning of Section 1221 of the Internal Revenue
Code of 1986, as amended (the 'Code').
For purposes of this discussion, a 'United States Holder' means a holder of
Notes who or which is (i) an individual who is a citizen or resident of the
United States for U.S. federal income tax purposes, (ii) a corporation,
partnership or other entity created or organized in the United States or under
the laws of the United States or any political subdivision thereof (including
the District of Columbia), (iii) an estate the income of which is includable in
gross income for United States federal income tax purposes regardless of its
source, or (iv) a trust if (a) a court within the United States is able to
exercise primary supervision over the administration of the trust and (b) one or
more United States persons have the authority to control all substantial
decisions of the trust.
EACH HOLDER SHOULD CONSULT ITS OWN TAX ADVISOR IN DETERMINING THE FEDERAL,
STATE, LOCAL AND ANY OTHER TAX CONSEQUENCES TO THE PARTICULAR HOLDER OF THE
EXCHANGE OF OLD NOTES FOR NEW NOTES AND THE OWNERSHIP AND DISPOSITION OF THE NEW
NOTES.
EXCHANGE OF NOTES
The exchange of the Old Notes for the New Notes pursuant to the Exchange
Offer will not be treated as an 'exchange' for federal income tax purposes
because the New Notes do not differ materially from the Old Notes, and because
the exchange will occur by operation of the terms of the Old Notes. Rather, the
New Notes received by a holder will be treated as a continuation of the Old
Notes in the hands of such holder. As a result, no gain or loss will be
recognized on the exchange of Old Notes for New Notes pursuant to the Exchange
Offer.
TAX TREATMENT OF THE NOTES
Original Issue Discount. The Notes were issued with an original issue
discount ('Original Issue Discount'), and holders of the Notes are required to
recognize such Original Issue Discount as ordinary income in advance of the
receipt of cash payments to which such income is attributable regardless of a
holder's regular method of accounting. The total amount of Original Issue
Discount with respect to a New Note equals the excess of its 'stated redemption
price at maturity' over its 'issue price.' The 'stated redemption price at
maturity' of a Note equals the sum of all payments on the Note, including
interest and principal. The 'issue price' of a Note generally equals the price
at which a substantial amount of the New Notes are sold for cash (other than to
bond houses, brokers or similar persons or organizations acting in the capacity
of underwriters, placement agents or wholesalers.)
Holders of Notes are required to include Original Issue Discount in income
as it accrues in accordance with a constant yield method based on compounding at
the end of each accrual period, employing accrual periods of no longer than one
year (regardless of a holder's regular method of accounting). In general, the
amount of Original Issue Discount that is includable in income is determined by
allocating to each day in an accrual period the ratable portion of Original
Issue Discount allocable to the accrual period. The amount of Original Issue
Discount that is allocable to an accrual period is generally an amount equal to
the product of the adjusted issue
91
<PAGE>
price of a Note at the beginning of such accrual period (the issue price of the
Notes determined as described above, generally increased by all prior accruals
of Original Issue Discount with respect to the Notes and reduced by any payment
actually made on such Notes and the yield to maturity (the discount rate, which
when applied to all payments under the Notes results in a present value equal to
the issue price).
Prior to February 1, 2002, no cash interest will accrue with respect to the
Notes. Consequently, purchasers of New Notes will be required to include amounts
in gross income for federal income tax purposes in advance of receipt of the
cash payments to which the income is attributable.
Holders of the New Notes will not be required to include any other amounts
in gross income with respect to payments on the Notes made after February 1,
2002.
Exchange Offer, Registration Rights. If interest accrues on the Notes
(other than Original Issue Discount) as described above in 'Exchange Offer;
Registration Rights,' such interest generally should be included in the holder's
gross income in accordance with the holder's regular method of accounting for
federal income tax purposes. It is possible, however, that the Internal Revenue
Service (the 'IRS') may take a different position, in which case a holder might
be required to include such income as it accrues or becomes fixed (regardless of
the holder's regular method of accounting) and might be required to recompute
the amounts of Original Issue Discount includable in income with respect to the
Notes.
Sale, Retirement or Other Taxable Disposition. A holder's basis in a New
Note (which initially will equal its cost to the holder) will be increased by
the amount of Original Issue Discount that is includable in such holder's income
and decreased by any payments received on the Note. Gain or loss upon a sale or
other disposition of a New Note will be measured by the difference between the
amount of cash, or the fair market value of property, received with respect to
such sale and the holder's adjusted basis in such Note. Such gain or loss
generally will be capital gain or loss, and will be long-term capital gain or
loss if the holder has held such Notes for more than one year.
Backup Withholding. Under certain circumstances, the failure of a holder
to provide sufficient information to establish that such holder is exempt from
the backup withholding provisions of the Code will subject such holder to backup
withholding at a rate of 31 percent. In general, backup withholding applies if a
holder fails to furnish a correct taxpayer identification number (such as a
Social Security number in the case of individuals), fails to report interest
income (including Original Issue Discount) in full, or fails to certify that
such holder has provided a correct taxpayer identification number and that the
holder is not subject to withholding.
Any amount withheld from a payment to a holder under the backup withholding
rules is allowable as a credit against such holder's U.S. federal income tax
liability, provided that the required information is furnished to the IRS.
Certain holders (including, among others, corporations and foreign individuals
who comply with certain certification requirements) are not subject to backup
withholding. Holders such consult their tax advisors as to their qualification
for exemption from backup withholding and the procedure for obtaining such an
exemption.
On October 6, 1997, the Department of the Treasury issued new regulations
(the 'New Regulations') which make certain modifications to the withholding,
backup withholding and information reporting requirements. The New Regulations
attempt to unify certification requirements and modify the reliance standards.
The New Regulations will generally be effective for payments made after December
31, 1999, subject to certain transition rules. Prospective investors are urged
to consult with their tax advisors regarding the New Regulations.
Reporting Requirements. Each Certificated Note will contain a legend
stating that it was issued with Original Issue Discount and setting forth the
issue date, the issue price, the amount of Original Issue Discount and the yield
to maturity. The Company will report annually to the IRS and to each holder the
amount of Original Issue Discount accrued with respect to such Note for that
calendar year.
92
<PAGE>
PLAN OF DISTRIBUTION
Each broker-dealer that receives New Notes for its own account pursuant to
the Exchange Offer must acknowledge that it will deliver a prospectus in
connection with any resale of such New Notes. This Prospectus, as it may be
amended or supplemented from time to time, may be used by a broker-dealer in
connection with resales of New Notes received in exchange for Old Notes where
such Old Notes were acquired as a result of market-making activities or other
trading activities. The Company has agreed that for a period of 180 days after
the Expiration Date, it will make this Prospectus, as amended or supplemented,
available to any broker-dealer for use in connection with any such resale.
The Company will not receive any proceeds from any sale of New Notes by
broker-dealers. New Notes received by broker-dealers for their own account
pursuant to the Exchange Offer may be sold from time to time in one or more
transactions in the over-the-counter market, in negotiated transactions, through
the writing of options on the New Notes or a combination of such methods of
resale, at market prices prevailing at the time of resale, at prices related to
such prevailing market prices or negotiated prices. Any such resale may be made
directly to purchasers or to or through brokers or dealers who may receive
compensation in the form of commissions or concessions from any such
broker-dealer and/or the purchasers of any such New Notes. Any broker-dealer
that resells New Notes that were received by it for its own account pursuant to
the Exchange Offer and any broker or dealer that participates in a distribution
of such New Notes may be deemed to be an 'underwriter' within the meaning of the
Securities Act and any profit on any such resale of New Notes and any
commissions or concessions received by any such persons may be deemed to be
underwriting compensation under the Securities Act. The Letter of Transmittal
states that by acknowledging that it will deliver and by delivering a
prospectus, a broker-dealer will not be deemed to admit that it is an
'underwriter' within the meaning of the Securities Act.
For a period of 180 days after the Expiration Date, the Company will
promptly send additional copies of the Prospectus and any amendment or
supplement to this Prospectus to any broker-dealer that requests such document
in the Letter of Transmittal. The Company has agreed to pay all expenses
incident to the Exchange Offer other than commissions or concessions of any
brokers or dealers and will indemnify the holders of the Notes (including any
broker-dealers) against certain liabilities, including liabilities under the
Securities Act.
Following consummation of the Exchange Offer, the Company may, in its sole
discretion, commence one or more additional exchange offers to holders of Old
Notes who did not exchange their Old Notes for New Notes in the Exchange Offer
on terms which may differ from those contained in the Registration Agreement.
This Prospectus, as it may be amended or supplemented from time to time, may be
used by the Company in connection with any such additional exchange offers. Such
additional exchange offers will take place from time to time until all
outstanding Old Notes have been exchanged for New Notes pursuant to the terms
and conditions contained herein.
LEGAL MATTERS
Certain legal matters with respect to the validity of the issuance of the
New Notes will be passed upon for the Company by Paul, Weiss, Rifkind, Wharton &
Garrison, New York, New York. Skadden, Arps, Slate, Meagher & Flom LLP has acted
as counsel for the Company in connection with the Exchange Offer. Skadden, Arps,
Slate, Meagher & Flom LLP and Paul, Weiss, Rifkind, Wharton & Garrison have from
time to time represented, and may continue to represent, MacAndrews & Forbes and
certain of its affiliates (including the Company and Revlon, Inc.) in connection
with certain legal matters.
EXPERTS
The consolidated financial statements of Panavision Inc. at December 31,
1997 and 1996, and for each of the three years in the period ended December 31,
1997, appearing in this Prospectus and Registration Statement have been audited
by Ernst & Young LLP, independent auditors, as set forth in their report
thereon appearing elsewhere herein, and are included in reliance upon such
report given upon the authority of such firm as experts in accounting and
auditing.
The combined financial statements of the Film Services Group at December
31, 1996 and for the year then ended, appearing in this Prospectus and
Registration Statement have been audited by Coopers & Lybrand, chartered
accountants, as set forth in their report thereon appearing elsewhere herein,
and are included in reliance upon such report given upon the authority of such
firm as experts in accounting and auditing.
93
<PAGE>
INDEX TO FINANCIAL STATEMENTS
<TABLE>
<CAPTION>
PAGE
-----
<S> <C>
PANAVISION INC.
DECEMBER 31, 1997
Report of Ernst & Young LLP, Independent Auditors.......................................................... F-2
Consolidated Statements of Income.......................................................................... F-3
Consolidated Balance Sheets................................................................................ F-4
Consolidated Statements of Stockholders' Equity............................................................ F-5
Consolidated Statements of Cash Flows...................................................................... F-6
Notes to Consolidated Financial Statements................................................................. F-7
MARCH 31, 1998
Unaudited Condensed Consolidated Statements of Income...................................................... F-22
Unaudited Condensed Consolidated Balance Sheets............................................................ F-23
Unaudited Condensed Consolidated Statements of Cash Flows.................................................. F-24
Notes to Unaudited Condensed Consolidated Financial Statements............................................. F-25
FILM SERVICES GROUP
DECEMBER 31, 1996
Report of Independent Auditors............................................................................. F-28
Combined Profit and Loss Account........................................................................... F-29
Combined Balance Sheet..................................................................................... F-30
Combined Statement of Cash Flows........................................................................... F-31
Notes to Combined Financial Statements..................................................................... F-32
</TABLE>
F-1
<PAGE>
REPORT OF ERNST & YOUNG LLP, INDEPENDENT AUDITORS
The Board of Directors and Stockholders
Panavision Inc.
We have audited the accompanying consolidated balance sheets of Panavision
Inc. as of December 31, 1997 and 1996, and the related consolidated statements
of income, stockholders' equity, and cash flows for each of the three years in
the period ended December 31, 1997. These financial statements are the
responsibility of the Company's management. Our responsibility is to express an
opinion on these financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the consolidated financial statements referred to above
present fairly, in all material respects, the consolidated financial position of
Panavision Inc. at December 31, 1997 and 1996, and the consolidated results of
its operations and its cash flows for each of the three years in the period
ended December 31, 1997, in conformity with generally accepted accounting
principles.
ERNST & YOUNG LLP
Los Angeles, California
February 13, 1998
F-2
<PAGE>
PANAVISION INC.
CONSOLIDATED STATEMENTS OF INCOME
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
-------------------------------
1997 1996 1995
-------- -------- -------
<S> <C> <C> <C>
Camera rental.................................................................. $117,028 $ 89,785 $75,083
Lighting rental................................................................ 30,562 14,917 4,121
Sales and other................................................................ 29,273 19,936 16,124
-------- -------- -------
Total rental revenue and sales................................................. 176,863 124,638 95,328
Cost of camera rental.......................................................... 51,271 37,276 32,721
Cost of lighting rental........................................................ 22,169 9,847 1,687
Cost of sales and other........................................................ 17,439 12,350 9,961
-------- -------- -------
Gross margin................................................................... 85,984 65,165 50,959
Selling, general and administrative expenses................................... 47,575 30,688 28,486
Research and development expenses.............................................. 4,494 4,310 2,986
-------- -------- -------
Operating income............................................................... 33,915 30,167 19,487
Interest income................................................................ 484 747 1,597
Interest expense............................................................... (6,869) (8,182) (7,213)
Foreign exchange gain (loss)................................................... (105) 368 (32)
Other, net..................................................................... 1,315 (1,793) 447
-------- -------- -------
Income before non-controlling partners' interest in PILP
and income taxes............................................................. 28,740 21,307 14,286
Non-controlling partners' interest in PILP..................................... -- (4,500) (7,348)
-------- -------- -------
Income before income taxes..................................................... 28,740 16,807 6,938
Income tax provision........................................................... (9,252) (3,536) (1,375)
-------- -------- -------
Net income..................................................................... $ 19,488 $ 13,271 $ 5,563
-------- -------- -------
-------- -------- -------
Basic earnings per share....................................................... $ 1.07 $ .94 $ .41
-------- -------- -------
-------- -------- -------
Diluted earnings per share..................................................... $ 1.03 $ .84 $ .36
-------- -------- -------
-------- -------- -------
Shares used in computation--Basic.............................................. 18,174 14,130 13,706
Shares used in computation--Diluted............................................ 19,012 15,733 15,277
</TABLE>
See accompanying notes.
F-3
<PAGE>
PANAVISION INC.
CONSOLIDATED BALANCE SHEETS
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
<TABLE>
<CAPTION>
DECEMBER 31,
--------------------------
1997 1996
----------- -----------
<S> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents............................................................... $ 11,020 $ 10,629
Accounts receivable (net of allowance of $3,959 in 1997 and $2,500 in 1996)............. 25,645 20,124
Inventories............................................................................. 8,540 5,182
Prepaid expenses........................................................................ 2,968 2,259
Notes receivable from officers and key employees........................................ 7,115 --
Income tax receivable................................................................... 3,423 --
Other current assets.................................................................... 2,566 337
----------- -----------
Total current assets...................................................................... 61,277 38,531
Property, plant and equipment, net........................................................ 199,038 130,441
Deferred tax assets....................................................................... 2,329 3,742
Goodwill.................................................................................. 9,859 --
Other..................................................................................... 9,434 4,032
----------- -----------
Total assets.............................................................................. $ 281,937 $ 176,746
----------- -----------
----------- -----------
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable........................................................................ $ 9,819 $ 6,168
Accrued liabilities..................................................................... 23,745 16,046
Deferred tax liabilities................................................................ 5,387 --
Current maturities of long-term debt.................................................... 5,383 5,000
----------- -----------
Total current liabilities................................................................. 44,334 27,214
Long-term debt............................................................................ 119,999 55,000
Deferred tax liabilities.................................................................. 6,217 549
Other liabilities......................................................................... 1,943 965
Commitments and contingencies
Stockholders' equity:
Preferred stock, $.01 par value; 2,000 shares authorized; no shares issued and
outstanding.......................................................................... -- --
Common stock, $.01 par value; 50,000 shares authorized; 18,929 shares issued and
outstanding at December 31, 1997, and 18,155 shares issued and outstanding at
December 31, 1996.................................................................... 189 181
Additional paid-in capital.............................................................. 77,053 76,109
Retained earnings....................................................................... 34,463 14,975
Foreign currency translation adjustment................................................. (2,261) 1,753
----------- -----------
Total stockholders' equity................................................................ 109,444 93,018
----------- -----------
Total liabilities and stockholders' equity................................................ $ 281,937 $ 176,746
----------- -----------
----------- -----------
</TABLE>
See accompanying notes.
F-4
<PAGE>
PANAVISION INC.
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
(IN THOUSANDS)
<TABLE>
<CAPTION>
COMMON STOCK CUMULATIVE
----------------------- RETAINED FOREIGN
SHARES ISSUED ADDITIONAL EARNINGS CURRENCY
AND PAID-IN (ACCUMULATED TRANSLATION STOCKHOLDERS'
OUTSTANDING AMOUNT CAPITAL DEFICIT) ADJUSTMENT EQUITY
------------- ------ ---------- ------------ ---------- -------------
<S> <C> <C> <C> <C> <C> <C>
Balance at January 1, 1995........... 13,706 $137 $ 4,863 $ (3,859) $ (219) $ 922
Net income......................... -- -- -- 5,563 -- 5,563
Foreign currency translation
adjustment...................... -- -- -- -- (29) (29)
------------- ------ ---------- ------------ ---------- -------------
Balance at December 31, 1995......... 13,706 137 4,863 1,704 (248) 6,456
Net income......................... -- -- -- 13,271 -- 13,271
Compensation recorded in connection
with shares issued to
officers........................ 424 4 891 -- -- 895
Net proceeds from initial public
offering........................ 4,025 40 61,585 -- -- 61,625
Contribution of Lee Lighting
assets.......................... -- -- 8,000 -- -- 8,000
Contribution from parent........... -- -- 770 -- -- 770
Foreign currency translation
adjustment...................... -- -- -- -- 2,001 2,001
------------- ------ ---------- ------------ ---------- -------------
Balance at December 31, 1996......... 18,155 181 76,109 14,975 1,753 93,018
Net income......................... -- -- -- 19,488 -- 19,488
Exercise of options................ 774 8 944 -- -- 952
Foreign currency translation
adjustment...................... -- -- -- -- (4,014) (4,014)
------------- ------ ---------- ------------ ---------- -------------
Balance at December 31, 1997......... 18,929 $189 $ 77,053 $ 34,463 $ (2,261) $ 109,444
------------- ------ ---------- ------------ ---------- -------------
------------- ------ ---------- ------------ ---------- -------------
</TABLE>
See accompanying notes.
F-5
<PAGE>
PANAVISION INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(IN THOUSANDS)
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
---------------------------------
1997 1996 1995
--------- -------- --------
<S> <C> <C> <C>
OPERATING ACTIVITIES:
Net income................................................................. $ 19,488 $ 13,271 $ 5,563
Adjustments to derive net cash provided by operating activities:
Depreciation and amortization......................................... 26,573 19,203 17,479
Deferred income taxes................................................. 6,701 (2,031) 620
(Gain) loss on sale of property and equipment......................... (947) (928) 597
(Gain) loss from disposition of investment............................ (328) -- --
Non-controlling partners' interest in PILP............................ -- 4,500 7,348
Stock compensation expense............................................ -- 895 --
Changes in operating assets and liabilities, net of the effect of
acquisitions:
Accounts receivable................................................... 7,305 (6,644) (1,498)
Inventories........................................................... (692) (147) (1,138)
Prepaid expenses and other current assets............................. (1,832) (377) 17
Accounts payable...................................................... (2,030) (4,004) 3,629
Accrued liabilities................................................... (4,539) 683 1,484
Other, net............................................................ 801 2,011 216
--------- -------- --------
Net cash provided by operating activities.................................... 50,500 26,432 34,317
INVESTING ACTIVITIES
Acquisition of non-controlling partners' interest in PILP.................. -- (8,126) --
Capital expenditures....................................................... (46,732) (27,816) (19,454)
Proceeds from dispositions of equipment.................................... 1,730 1,444 2,139
Proceeds from disposition of investment.................................... 1,253 -- --
Business acquisitions, net of cash acquired................................ (58,684) 1,026 1,616
Change in other assets..................................................... (5,073) -- --
--------- -------- --------
Net cash used in investing activities........................................ (107,506) (33,472) (15,699)
FINANCING ACTIVITIES
Deferred financing costs................................................... (865) (1,469) --
Distributions to non-controlling partners in PILP.......................... -- (1,523) (2,199)
Borrowings under notes payable............................................. 73,631 110,000 --
Repayments of notes payable................................................ (9,014) (176,166) (7,525)
Net proceeds from initial public offering.................................. -- 61,625 --
Proceeds from exercise of options.......................................... 952 -- --
Contribution from parent................................................... -- 770 --
Notes receivable from officers and key employees........................... (7,115) -- --
Notes payable to affiliates................................................ -- (7,533) --
--------- -------- --------
Net cash provided by (used in) financing activities.......................... 57,589 (14,296) (9,724)
Effect of exchange rate changes on cash...................................... (192) 280 57
--------- -------- --------
Net increase (decrease) in cash and cash equivalents......................... 391 (21,056) 8,951
Cash and cash equivalents at beginning of period............................. 10,629 31,685 22,734
--------- -------- --------
Cash and cash equivalents at end of period................................... $ 11,020 $ 10,629 $ 31,685
--------- -------- --------
--------- -------- --------
SUPPLEMENTAL CASH FLOW INFORMATION
Interest paid during the period............................................ $ 6,417 $ 8,670 $ 7,490
Income taxes paid during the period........................................ $ 2,874 $ 4,267 $ 1,075
</TABLE>
During 1996, Warburg, Pincus acquired substantially all of the assets of Lee
Lighting and contributed them in a non-cash transaction to the Company
(see Note 14).
See accompanying notes.
F-6
<PAGE>
PANAVISION INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1997
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Description of Business and Basis of Presentation
Panavision Inc. (Panavision or the Company), a majority owned subsidiary of
Warburg, Pincus Capital Company L.P. (Warburg, Pincus or parent), commenced
operations effective June 1, 1991. Prior to the May 1996 recapitalization
transaction described below, Panavision owned 100% of the general partnership
interests, 30% of the non-voting Class A limited partnership interests and 70%
of the voting Class B limited partnership interests in Panavision International,
L.P. (PILP), a Delaware limited partnership. PILP was formed effective June 1,
1991 to own and operate the camera rental and lighting filters business
previously owned by Lee International Inc. (LII), an affiliated company. This
transaction was recorded on a historical cost basis. All of the Company's
operations are conducted through PILP and its subsidiaries.
The consolidated financial statements include the accounts of Panavision,
PILP and PILP's majority-owned subsidiaries. All significant intercompany
amounts and transactions have been eliminated.
Certain amounts in previously issued financial statements have been
reclassified to conform to the 1997 presentation.
Panavision is a leading designer, manufacturer and supplier of
high-precision film camera systems, comprising cameras, lenses and accessories,
for the motion picture and television industries. The Company rents its products
through its owned and operated facilities in North America, Europe, and the Asia
Pacific region, as well as through a worldwide agent network. In addition to
manufacturing and renting camera systems, the Company also rents lighting,
lighting grip, power distribution, generation and related transportation
equipment and sells lighting filters and other color correction and diffusion
filters.
The 1996 Recapitalization
In May 1996, the Company effected a recapitalization (the 1996
Recapitalization), pursuant to which it acquired all of PILP's limited
partnership units it did not previously own and retired all of PILP's
outstanding debt securities, other than those owned by Warburg, Pincus, for a
total of $126.1 million in cash. As part of the 1996 Recapitalization, Warburg,
Pincus and senior management loaned the Company $12.5 million in the form of
subordinated debt, and the Company borrowed $110.0 million through a credit
arrangement with a group of banks (see Note 6). The balance of the funds
required came from the Company's cash on hand. As a result of the 1996
Recapitalization, the Company owns all of the general and limited partnership
units in PILP. During November 1996, Panavision Inc. completed an initial public
offering of its common stock. A portion of the offering proceeds were used to
retire the loans from Warburg, Pincus and senior management. The remainder was
contributed to PILP and used to pay down a portion of the Company's bank
borrowings.
Non-controlling Partners' Interest in PILP
The non-controlling partners' interest in PILP represents 70% of the
non-voting Class A limited partnership units and the 30% voting Class B limited
partnership units which Panavision did not own prior to the 1996
Recapitalization. The PILP partnership agreement included provisions for the
allocation of the partnership earnings and losses between Panavision and the
non-controlling partners. However, since the non-controlling partners had a
deficit in their partnership capital accounts as of the inception of PILP, such
deficit was allocated to Panavision, as were PILP's losses for 1991 and 1992.
Certain other distributions made by PILP in each year for tax payments, have all
been charged against Panavision's interest in PILP and as a reduction of income
in the accompanying consolidated financial statements. Accordingly, as required
under generally accepted accounting principles, the non-controlling partners'
share of PILP's income for 1993, 1994 and 1995 has been reduced to the extent of
such deficit, losses and distributions. As previously described, in connection
with the 1996 Recapitalization, Panavision has acquired the non-controlling
partners' equity in PILP.
F-7
<PAGE>
PANAVISION INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
DECEMBER 31, 1997
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES--(CONTINUED)
The Proposed Recapitalization
On December 18, 1997, the Company, PX Holding Corporation, (PX Holding) an
indirectly wholly owned subsidiary of Mafco Holdings, Inc. (Mafco) and PX Merger
Corporation, a wholly owned subsidiary of PX Holding, entered into an Agreement
of Recapitalization and Merger (the Recapitalization Agreement). Pursuant to the
terms of the Recapitalization Agreement and subject to the conditions set forth
therein, PX Merger Corporation will be merged with and into the Company (the
Merger).
Pursuant to the Recapitalization Agreement, stockholders of the Company
(other than Warburg, Pincus Capital Company, L.P. (Warburg, Pincus)) will, in
the aggregate, have the opportunity to elect to have their shares of Common
Stock converted into the right to receive $27.00 per share in cash. To the
extent that holders (other than Warburg, Pincus) of more than 88% of the shares
of Common Stock elect to have their shares converted into the right to receive
cash, the election is subject to proration.
Pursuant to a Voting and Stockholders Agreement, dated as of December 18,
1997, as amended by the First Amendment (the Stockholders Agreement, and
together with the Recapitalization Agreement and the transaction contemplated
thereby, the Proposed Recapitalization), by and among Warburg, Pincus, Mafco and
the Company, Warburg, Pincus has agreed to exchange 88% of its shares of Common
Stock for Series A redeemable preferred stock (Redeemable Preferred Stock) of
the Company redeemable immediately upon consummation of the Merger at a price
equivalent to $26.50 in cash per share of Common Stock. To the extent fewer than
88% of the shares of Common Stock held by stockholders (other than Warburg,
Pincus) are exchanged for cash, Warburg, Pincus will increase the number of
shares of Common Stock it exchanges for Redeemable Preferred Stock (or will sell
such shares to PX Holding), up to the remainder of its shares of Common Stock.
As a result of the Proposed Recapitalization, Mafco will acquire control of
the Company. Assuming stockholders (other than Warburg, Pincus) of at least 88%
of the shares of Common Stock elect to receive cash for their shares, Mafco will
beneficially own approximately 72% of the issued and outstanding Common Stock.
Funds required in connection with the transaction, including to acquire the
shares and outstanding stock options, to refinance existing indebtedness and to
pay related fees and expenses, will be obtained through a combination of bank
financing, the issuance of subordinated notes and the purchase by Mafco of
equity in the recapitalized Company. This transaction, which is subject to
certain conditions, including stockholder approval, is expected to be completed
in the second quarter of 1998.
In February of 1998, PX Escrow Corp., an indirect wholly owned subsidiary
of Mafco, issued 9 5/8% senior subordinated discount notes (the Notes) due in
2006 for gross proceeds of $150.0 million. Upon consummation of the Proposed
Recapitalization, the net proceeds from such offering will be transferred to the
Company and the obligations of PX Escrow Corp. under the Notes will be assumed
by Panavision. At that time, Panavision will also enter into a new credit
agreement with a group of banks. If the Proposed Recapitalization is not
completed, all obligations under the Notes will remain with PX Escrow Corp.
In connection with the Proposed Recapitalization, the Company will
recognize the following charges in the period in which the recapitalization
transaction closes: approximately $29.3 million relating to the cash settlement
of unexercised stock options, approximately $17.5 million relating to the
purchase by the Company of shares acquired through the exercise of certain stock
options, approximately $6.0 million relating to transaction expenses,
approximately $2.3 million related to the increase in the valuation allowance on
deferred tax assets and an extraordinary charge of approximately $1.8 million
relating to the write-off of deferred financing costs relating to the repayment
of borrowings under Panavision's existing credit agreement.
F-8
<PAGE>
PANAVISION INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
DECEMBER 31, 1997
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES--(CONTINUED)
Translation of Foreign Currencies
The functional currency for the Company's foreign subsidiaries is the local
currency. All assets and liabilities denominated in foreign functional
currencies are translated into U.S. dollars at rates of exchange in effect at
the balance sheet date. Income statement items are translated at the average
rate of exchange prevailing during the period. Translation gains and losses are
recorded as a separate component of stockholders' equity. Gains and losses
resulting from transactions in other than functional currencies are reflected in
net income.
Cash Equivalents
The Company considers all highly liquid debt instruments purchased with
original maturity dates of three months or less and investments in money market
funds to be cash equivalents. The carrying amount reported in the balance sheet
for cash and cash equivalents approximates fair value.
Inventories
Inventories are valued at the lower of cost or market value and are
determined principally under the first-in, first-out method.
Property, Plant and Equipment
Property, plant and equipment, including rental equipment, are stated at
cost. Maintenance and repairs are charged to expense as incurred. Additions,
improvements and replacements that extend asset life are capitalized.
Depreciation is provided on a straight-line basis over the estimated useful
lives of the assets. Leasehold improvements are amortized over the shorter of
the useful life of the related asset or the remaining lease term. Cost and
accumulated depreciation applicable to assets retired or otherwise disposed of
are eliminated from the accounts, and any gain or loss on such disposition is
reflected in income.
Depreciation is provided principally over the following useful lives:
<TABLE>
<S> <C>
Buildings and improvements............................................ 10-30 years
Rental assets......................................................... 5-20 years
Machinery and equipment............................................... 5-10 years
Furniture and fixtures................................................ 5-10 years
</TABLE>
Goodwill and Other Intangibles
Goodwill recognized in business combinations accounted for as purchases is
being amortized primarily over 30 years. As of December 31, 1997 goodwill is
$9.9 million net of accumulated amortization of $0.2 million. Goodwill
amortization expense amounted to $0.2 million for 1997. Goodwill is primarily
related to the FSG Acquisition on June 5, 1997.
Other intangibles such as patents and trademarks are included on the
balance sheet as a component of other assets and are being amortized on a
straight-line basis over their estimated useful lives ranging from 5 to 12
years. Amortization expense amounted to $0.2 million, $0.3 million and $0.6
million for 1997, 1996 and 1995, respectively. Accumulated amortization was $5.5
million and $5.3 million at December 31, 1997 and 1996, respectively.
Accounting for Long-Lived Assets
Effective January 1, 1996, the Company adopted Statement of Financial
Accounting Standard No. 121 'Accounting for the Impairment of Long-Lived Assets
and for Long-Lived Assets to be Disposed of' (SFAS 121). Long-lived assets, such
as buildings, equipment and intangibles, are reviewed for impairment whenever
F-9
<PAGE>
PANAVISION INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
DECEMBER 31, 1997
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES--(CONTINUED)
events or changes in circumstances indicate that the net book value of these
assets may not be recoverable. Prior to the adoption of SFAS 121, the Company
recorded an impairment loss of $1.7 million during 1995 with respect to certain
real property owned by its U.K. operation. With the exception of the impairment
loss recognized during 1995, current and prior period financial statements have
not been affected by the adoption of SFAS 121.
Income Taxes
Income taxes are accounted for using the liability method in accordance
with Statement of Financial Accounting Standard No. 109 'Accounting for Income
Taxes' (see Note 5). Under this method, deferred tax liabilities and assets are
recognized for the expected future tax consequences of temporary differences
between the carrying amounts and the tax bases of assets and liabilities. It is
the Company's policy not to provide U.S. federal income taxes on undistributed
earnings of foreign subsidiaries, as such earnings, if any, are intended to be
permanently reinvested in those operations. As of December 31, 1997, the
Company's accumulated foreign earnings were approximately $15,561,000.
Concentration of Credit Risk
Most of the Company's customers are in the entertainment industry. The
Company performs ongoing credit evaluations of its customers and maintains
allowances for potential credit losses. The Company does not generally require
collateral. Actual losses and allowances have been within management's
expectations.
Revenue Recognition
Rental revenue is recognized over the related equipment rental period.
Sales revenue is recognized upon shipment. Returns and allowances, which have
not been significant, are provided for in the period of sale.
Effects of Recent Accounting Pronouncements
In June 1997, Statement of Financial Accounting Standards No. 131,
'Disclosures About Segments of an Enterprise and Related Information' (SFAS 131)
was issued. SFAS 131 establishes standards for the way that public business
enterprises report information about operating segments in annual financial
statements and requires that those enterprises report selected information about
operating segments in interim financial reports issued to shareholders. It also
establishes standards for related disclosures about products and services,
geographic areas, and major customers. SFAS 131 is effective for financial
statements for fiscal years beginning after December 15, 1997.
Earnings Per Share
During the year ended December 31, 1997, the Company adopted SFAS No. 128.
'Earnings Per Share' (SFAS 128) which required a change in the method used to
compute earnings per share. Under this new standard, primary and fully diluted
earnings per share were replaced with 'Basic' and 'Diluted' earnings per share.
Basic earnings per share amounts exclude the dilutive effect of potential common
shares and are therefore higher than the primary earnings per share amounts
previously presented. For Panavision, diluted earnings per share amounts under
the new standard are the same as primary earnings per share amounts previously
presented. As required by SFAS 128, all prior period amounts have been restated
to conform to the new presentation.
Basic earnings per share is based upon the weighted-average number of
common shares outstanding. Diluted earnings per share is based upon the
weighted-average number of common shares and dilutive potential common shares
outstanding. Potential common shares are outstanding options under the Company's
stock option plan which are included under the treasury stock method.
F-10
<PAGE>
PANAVISION INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
DECEMBER 31, 1997
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES--(CONTINUED)
The following table sets forth the computation for basic and diluted
earnings per share (in thousands, except per share information):
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
-----------------------------
1997 1996 1995
------- ------- -------
<S> <C> <C> <C>
Numerator for basic and diluted earnings per share-net income.......... $19,488 $13,271 $ 5,563
------- ------- -------
Denominator:
Denominator for basic earnings per share-weighted-average shares..... 18,174 14,130 13,706
Effect of dilutive securities-employee stock options................. 838 1,603 1,571
------- ------- -------
Denominator for diluted earnings per share-adjusted weighted-average
shares............................................................ 19,012 15,733 15,277
Basic earnings per share............................................... $ 1.07 $ .94 $ .41
------- ------- -------
------- ------- -------
Diluted earnings per share............................................. $ 1.03 $ .84 $ .36
------- ------- -------
------- ------- -------
</TABLE>
Options to purchase 529,875 shares, which were outstanding during the years
ended December 31, 1997 and 1996, were excluded from the respective computations
of diluted earnings per share. These options were excluded from the computation
as they will only vest if the Company achieves EBDIT (as defined) of $62.0
million in its year ending December 31, 1998 or the lower amount of $65.0
million or a 10% increase of its actual 1998 EBDIT (as defined) in its year
ending December 31, 1999. For additional disclosures regarding the outstanding
stock options see Note 8.
Stock-Based Benefits
Statement of Financial Accounting Standards No. 123 'Accounting for
Stock-Based Compensation' (SFAS 123), recommends that stock awards granted
subsequent to January 1, 1995 be recognized as compensation expense based on
their fair value at the date of grant. Alternatively, a company may use APB 25
'Accounting for Stock Issued to Employees,' and disclose the pro forma income
amount which would have resulted from recognizing such awards at their fair
value. The Company will continue to account for stock-based compensation expense
under APB 25 and make the required pro forma disclosures for compensation.
Use of Estimates and Assumptions
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the amounts reported in the financial statements and
accompanying notes. Actual results could differ from such estimates.
F-11
<PAGE>
PANAVISION INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
DECEMBER 31, 1997
2. PROPERTY, PLANT AND EQUIPMENT
Property, plant and equipment consist of the following (in thousands):
<TABLE>
<CAPTION>
DECEMBER 31,
--------------------
1997 1996
-------- --------
<S> <C> <C>
Land............................................................................ $ 877 $ 856
Buildings and improvements...................................................... 11,771 9,015
Rental assets................................................................... 300,313 217,785
Machinery and equipment......................................................... 10,921 11,033
Furniture and fixtures.......................................................... 4,500 3,820
Other........................................................................... 1,294 1,214
-------- --------
329,676 243,723
Less accumulated depreciation and amortization.................................. 130,638 113,282
-------- --------
$199,038 $130,441
-------- --------
-------- --------
</TABLE>
3. INVENTORIES
Inventories consist of the following (in thousands):
<TABLE>
<CAPTION>
DECEMBER 31,
----------------
1997 1996
------ ------
<S> <C> <C>
Finished goods....................................................................... $3,983 $2,008
Work-in-process...................................................................... 153 99
Component parts...................................................................... 1,607 1,586
Supplies............................................................................. 2,797 1,489
------ ------
$8,540 $5,182
------ ------
------ ------
</TABLE>
4. ACCRUED LIABILITIES
Accrued liabilities consist of the following (in thousands):
<TABLE>
<CAPTION>
DECEMBER 31,
------------------
1997 1996
------- -------
<S> <C> <C>
Interest payable.................................................................. $ 653 $ 294
Professional fees................................................................. 1,754 2,015
Taxes other than income taxes..................................................... 2,199 555
Payroll and related costs......................................................... 6,425 6,974
Leases, severance and other FSG Acquisition related costs......................... 4,139 --
Accrued marketing and other....................................................... 8,575 6,208
------- -------
$23,745 $16,046
------- -------
------- -------
</TABLE>
F-12
<PAGE>
PANAVISION INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
DECEMBER 31, 1997
5. INCOME TAXES
The provision for income taxes includes the following (in thousands):
<TABLE>
<CAPTION>
DECEMBER 31,
--------------------------
1997 1996 1995
------ ------ ------
<S> <C> <C> <C>
Current provision:
Federal.................................................................. $ 76 $3,559 $ 515
State.................................................................... 180 727 154
Foreign.................................................................. 2,295 1,281 86
------ ------ ------
Total current provision.................................................... 2,551 5,567 755
------ ------ ------
Deferred provision:
Federal.................................................................. 5,039 (1,372) 537
State.................................................................... 138 (730) 83
Foreign.................................................................. 1,524 71 --
------ ------ ------
Total deferred provision................................................... 6,701 (2,031) 620
------ ------ ------
$9,252 $3,536 $1,375
------ ------ ------
------ ------ ------
</TABLE>
For financial statement purposes, income before income taxes includes the
following components (in thousands):
<TABLE>
<CAPTION>
DECEMBER 31,
----------------------------
1997 1996 1995
------- ------- ------
<S> <C> <C> <C>
Income before income taxes:
Domestic.............................................................. $16,546 $12,206 $4,219
Foreign............................................................... 12,194 4,601 2,719
------- ------- ------
$28,740 $16,807 $6,938
------- ------- ------
------- ------- ------
</TABLE>
A reconciliation from the provision for income taxes based on the federal
statutory rate of 35% to the actual rate follows:
<TABLE>
<CAPTION>
DECEMBER 31,
--------------------------
1997 1996 1995
---- ----- -----
<S> <C> <C> <C>
Statutory rate applied to income before income taxes......................... 35.0% 35.0% 35.0%
State income taxes, net of federal income tax benefit........................ 3.1 4.3 2.2
Reduction of valuation allowance............................................. (8.8) (27.0) (3.7)
Non-deductible (non-taxable) differences in allocation of earnings to non-
controlling partners....................................................... -- 9.0 (14.9)
Foreign income taxed at varying rates........................................ .7 -- --
Other, net................................................................... 2.2 (.3) 1.2
---- ----- -----
32.2% 21.0% 19.8%
---- ----- -----
---- ----- -----
</TABLE>
Deferred income taxes reflect the net tax effects of net operating loss
carryforwards, credits, and temporary differences between the carrying amounts
of assets and liabilities for financial reporting purposes and the
F-13
<PAGE>
PANAVISION INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
DECEMBER 31, 1997
5. INCOME TAXES--(CONTINUED)
amounts used for income tax purposes. Significant components of the Company's
deferred tax assets and liabilities as of December 31, 1997 and 1996 are as
follows (in thousands):
<TABLE>
<CAPTION>
DECEMBER 31,
-------------------
1997 1996
-------- -------
<S> <C> <C>
Deferred tax assets:
Domestic net operating loss carryforwards...................................... $ 4,470 $ 2,736
Foreign net operating loss carryforwards....................................... 1,219 1,359
Tax credit carryforwards (primarily alternative minimum tax credits)........... 10,387 9,503
Expense accruals............................................................... 4,847 1,911
State income taxes............................................................. 425 --
Other.......................................................................... 172 172
-------- -------
Total deferred tax assets........................................................ 21,520 15,681
Valuation allowance.............................................................. (4,023) (6,557)
-------- -------
Net deferred tax assets.......................................................... 17,497 9,124
Deferred tax liabilities:
Fixed assets................................................................... (16,990) (5,874)
Stock based compensation....................................................... (8,272) --
State income taxes............................................................. -- (57)
-------- -------
Total deferred tax liabilities................................................... (25,262) (5,931)
-------- -------
Net deferred tax (liabilities) assets............................................ $ (7,765) $ 3,193
-------- -------
-------- -------
Balance Sheet Classifications:
Current deferred tax assets (included in other current assets)................. $ 1,510 $ --
Non-current deferred tax assets................................................ 2,329 3,742
Non-current deferred tax liability............................................. (6,217) (549)
Current deferred tax liability................................................. (5,387) --
-------- -------
$ (7,765) $ 3,193
-------- -------
-------- -------
</TABLE>
Federal net operating loss (NOL) carryforwards of $11,826,000, which expire
from 2006 to 2012, alternative minimum tax (AMT) credit carryforwards of
$6,693,000, which may be used indefinitely, and foreign tax credit (FTC)
carryforwards of $2,013,000, which expire from 1998 to 2002, are available to
the Company. Certain tax attributes are subject to annual limitations under
Internal Revenue Code (the Code) Section 382.
In connection with the purchase of the Film Services Group of Visual Action
Holdings plc, additional deferred tax liabilities of $2,503,000 were
established.
The Company has assessed the realizability of all of its tax attributes and
has accordingly adjusted the valuation allowance as of December 31, 1997. The
Company's assessment took into account the limitations on the deductibility of
tax attributes under Section 382 and the alternative minimum tax provisions of
the Code, as well as the uncertainty of realizing taxable income in certain
foreign jurisdictions. In 1997, there was a net decrease in the valuation
allowance of $2,534,000. The net decrease is a result of current realization of
previously unbenefitted NOLs and credits. In 1996, there was a net increase in
the valuation reserve of $2,086,000.
6. LONG-TERM DEBT
In conjunction with the purchase of the Film Services Group of Visual
Action Holdings plc on June 5, 1997 (the FSG Acquisition) (see Note 14), the
Company entered into a new credit agreement (Credit Agreement) with Chase
Manhattan Bank for a maximum aggregate amount of $150.0 million. The Credit
Agreement provides for
F-14
<PAGE>
PANAVISION INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
DECEMBER 31, 1997
6. LONG-TERM DEBT--(CONTINUED)
a term loan in the amount of $60.0 million and a revolving credit commitment of
up to $90.0 million. Borrowings under this agreement were used to fund the FSG
Acquisition, refinance loans outstanding under the previous credit agreement and
provide funds for general corporate purposes. At December 31, 1997, borrowings
under the Credit Agreement were $60.0 million and $65.0 million for the term
loan and the revolving facility, respectively.
Principal repayments under the Credit Agreement are due quarterly beginning
March 1998 through June 2004. Interest is payable at rates equal to the prime
rate or a margin in excess of LIBOR or PIBOR, which fluctuates directly with the
Company's total debt ratio, as defined in the Credit Agreement. The LIBOR/PIBOR
rate margins range between 0.625% and 1.25%. Of the $65.0 million outstanding
under the revolving facility, $35.6 million is outstanding (using the exchange
rate at December 31, 1997) as a sterling-based loan. The Company drew down a
portion of the facility as a sterling-based loan in order to provide a natural
currency hedge against fluctuations in the U.K. pound as the FSG Acquisition
significantly increased the Company's U.K. based net assets. The Company has
designated the sterling denominated borrowings as an economic hedge of its
investments in its U.K. based subsidiaries and accordingly unrealized gains and
losses resulting from changes in the exchange rates are included in translation
adjustment.
Under the Credit Agreement, the Company entered into an interest rate
protection agreement to protect the Company from LIBOR increases. The agreement
covers a notional amount of $50.0 million which expires on June 10, 1998 and
protects the Company from LIBOR increases above 7.37%. Since the floor for this
agreement is 5.50%, in the event of a LIBOR reduction below this floor, there
would be no benefit to the Company. At December 31, 1997 the interest rate under
the Credit Agreement was 7.25% The Company believes the carrying value of its
amounts payable under this agreement approximate fair value based upon current
yields for debt issues of similar quality and terms.
The Company's obligations under the Credit Agreement are secured by
substantially all of the Company's assets. As of December 31, 1997, the Company
had approximately $24 million available under the revolving facility. The Credit
Agreement requires that the Company meet certain financial tests and other
restrictive covenants including maintaining certain total debt, fixed charge and
interest coverage ratio levels. As of December 31, 1997, the Company was in
compliance with all financial covenants of the Credit Agreement. The Company's
ability to pay dividends to its stockholders is restricted by this agreement.
The following sets forth the aggregate principal maturities of the
Company's debt during the twelve month periods ending December 31st (in
thousands):
<TABLE>
<S> <C>
1998.................................................................... $ 5,383
1999.................................................................... 10,000
2000.................................................................... 10,000
2001.................................................................... 14,600
2002.................................................................... 30,250
Thereafter.............................................................. 55,149
--------
$125,382
--------
--------
</TABLE>
7. COMMON STOCK
The Board of Directors, in May and November of 1996, declared a 90:1 stock
split and a 1413:1 stock split, respectively, of the Company's common stock. All
applicable share and per share amounts have been adjusted for the stock splits.
F-15
<PAGE>
PANAVISION INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
DECEMBER 31, 1997
8. STOCK OPTION PLAN
In connection with the 1996 Recapitalization, the Board of Directors
adopted a stock option plan (the Plan) which is open to participation by
directors, officers, consultants, and other key employees of the Company or of
its subsidiaries and certain other key persons. The Plan provides for the
issuance of incentive and nonqualified stock options under the Code. An
aggregate of 3,000,000 shares of common stock are reserved for issuance under
the Plan. The options were granted for a term of ten years, five years in the
case of incentive options. If an incentive stock option is granted to an
individual owning more than 10% of the total combined voting power of all stock,
the exercise price of the option may not be less than 110% of the fair market
value of the underlying shares on the date of grant and the term of the option
may not exceed five years. The Plan also provides that the aggregate fair market
value (determined as of the time the option is granted) of the common stock with
respect to which incentive stock options are exercisable for the first time by
an optionee during any calendar year shall not exceed $100,000. As of December
31, 1997, the Company had options for 865,950 shares of common stock available
for future grant under the Plan.
In connection with the 1996 Recapitalization, certain members of management
were granted nonqualified options for an aggregate of 1,766,250 shares of common
stock exercisable at $1.22 per share. Options for 1,236,375 shares will vest at
the end of eight years from the date of grant and could vest sooner if certain
performance targets are met as described below:
o Options for 353,250 shares vested upon the successful completion of
the initial public offering of common stock in November 1996.
o Options for 300,263 shares vested upon achievement by the Company of
EBDIT (as defined) in excess of $46.2 million for the year ended
December 31, 1996.
o Options for 300,262 shares vested upon achievement by the Company of
EBDIT (as defined) in excess of $50.4 million for the year ended
December 31, 1997.
o Options for 282,600 shares will vest if the Company achieves EBDIT
(as defined) of $55.2 million, or Free Cash Flow (as defined) of
$34.0 million during its year ending December 31, 1998,
respectively.
The exercise price of these options was less than the deemed fair market
value of the Company's common stock on the date of grant and accordingly the
Company recorded an aggregate non-cash compensation charge of $280,000 for the
year ended December 31, 1996.
Options for the remaining 529,875 shares will only vest if the Company
achieves EBDIT (as defined) of $62.0 million in its year ending December 31,
1998 or the lower amount of $65.0 million or a 10% increase of its actual 1998
EBDIT (as defined) in its year ending December 31, 1999. These options are being
accounted for as variable options, and the Company will record additional
non-cash compensation charges in 1998 or 1999 if the achievement of these
performance targets becomes probable. The per share compensation charge will be
equal to the difference between the option exercise price of $1.22 and the
quoted market value of the common stock in the future when the targets are
achieved.
In connection with the successful completion of the Company's initial
public offering, certain members of management and key employees were granted
options to purchase an aggregate of 369,000 shares of common stock. The exercise
price of these options is equal to the initial public offering price of $17.00
per share. The options vest over a period of five years at 20% per year
beginning on the first anniversary of the initial public offering, November 20,
1997.
F-16
<PAGE>
PANAVISION INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
DECEMBER 31, 1997
8. STOCK OPTION PLAN--(CONTINUED)
Option information with respect to the Company's stock option plan is as
follows:
<TABLE>
<CAPTION>
EXERCISE PRICE
-----------------------------
WEIGHTED
SHARES RANGE AVERAGE PRICE
--------- ------------ -------------
<S> <C> <C> <C>
Options outstanding at December 31, 1995.................... 0 -- --
Grants.................................................... 2,135,250 $1.22-$17.00 $ 3.95
Exercises................................................. 0 -- --
Cancellations............................................. 0 -- --
--------- ------------ -------------
Options outstanding at December 31, 1996.................... 2,135,250 1.22-17.00 3.95
Grants.................................................... 12,000 17.50 17.50
6,000 17.25 17.25
Exercises................................................. (773,500) 1.22 1.22
Cancellations............................................. (19,200) 17.00 17.00
--------- ------------ -------------
Options outstanding at December 31, 1997.................... 1,360,550 $1.22-$17.50 $ 5.49
--------- ------------ -------------
--------- ------------ -------------
</TABLE>
Information regarding stock options outstanding and exercisable as of
December 31, 1997 is as follows:
<TABLE>
<CAPTION>
PRICE RANGE
-------------------------
$1.22 $17.00-17.50
--------- ------------
<S> <C> <C>
Options outstanding at December 31, 1997:
Number....................................................................... 992,750 367,800
Weighted average exercise price.............................................. $1.22 $17.02
Weighted average remaining contractual life.................................. 6.9 years 3.9 years
</TABLE>
<TABLE>
<CAPTION>
DECEMBER 31,
------------------
1997 1996
------- -------
<S> <C> <C>
Options exercisable:
Number.......................................................................... 281,597 653,513
Weighted average exercise price................................................. $ 5.36 $ 1.22
</TABLE>
If the Company recognized employee stock option-related compensation
expense in accordance with SFAS 123 and used the Black-Scholes option valuation
model for determining the weighted average fair value of options granted during
1997, its pro forma net income and pro forma diluted earnings per share would
have been $19,419,000 and $1.02, respectively. During 1996, pro forma net income
and pro forma diluted earnings per share would have been $13,258,000 and $.84,
respectively. For purposes of the pro forma expense, the weighted average fair
value of the options is amortized over the vesting period. The pro forma effect
on net income for 1997 and 1996 may not be representative of future years'
impact. The weighted average fair value of $7.45 for 1997 and $1.35 for 1996 for
stock option grants was estimated at the date of grant using the following
assumptions and the Black-Scholes option valuation model:
<TABLE>
<CAPTION>
1997 1996
------- -------
<S> <C> <C>
Risk-free interest rate................................................... 6.00% 6.19%
Expected life............................................................. 5 years 5 years
Expected volatility....................................................... .38 .17
Expected dividend yield................................................... 0.00% 0.00%
</TABLE>
The Black-Scholes option valuation model was developed for use in
estimating the fair value of traded options. The Company's stock options have
characteristics significantly different from those of traded options such as
vesting restrictions and non-transferability of options. In addition, the
assumptions used in option
F-17
<PAGE>
PANAVISION INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
DECEMBER 31, 1997
8. STOCK OPTION PLAN--(CONTINUED)
valuation models are subjective, particularly the expected stock price
volatility for the underlying stock. Because changes in these subjective input
assumptions can materially affect the fair value estimate, in management's
opinion, the existing model does not provide a reliable single measure of the
fair value of its employee stock options.
In connection with the 1996 Recapitalization (see Note 1), the Company
issued 423,900 shares of common stock to certain members of management. The
Company has recorded compensation expense in the amount of $615,000 during the
twelve months ended December 31, 1996. The compensation expense represents the
Company's best estimate of the fair market value of the stock as of the date of
issuance, based in part on value attributed to the equity securities of PILP
which were acquired in the 1996 Recapitalization, in an arms-length transaction.
9. EMPLOYEE BENEFIT PLANS
The Company sponsors a defined contribution 401(k) plan covering a majority
of its domestic employees. Eligible employees may contribute from 1% to 16% of
their base compensation. The Company makes matching contributions equal to 75%
of employee before-tax contributions from 1% to 6%. For the years ended December
31, 1997, 1996 and 1995, the Company recorded expense of $820,000, $590,000 and
$503,000, respectively, related to the 401(k) plan.
In addition, the Company sponsors a defined contribution retirement plan,
which covers certain foreign employees. Participating employees contribute from
5% to 15% of their base compensation. The Company contributes 13.4% of base
compensation for participating employees regardless of their level of
contribution. For the years ended December 31, 1997, 1996 and 1995, the Company
expensed $824,000, $440,000 and $189,000, respectively, representing the
Company's contributions.
10. GEOGRAPHICAL INFORMATION
Information as to the Company's operations in different geographical areas
is as follows (in thousands):
<TABLE>
<CAPTION>
UNITED UNITED
STATES KINGDOM OTHER(1) ELIMINATIONS TOTAL
-------- ------- -------- ------------ --------
<S> <C> <C> <C> <C> <C>
December 31, 1997
Revenue................................... $108,126 $67,034 $ 33,596 $(31,893) $176,863
Operating income.......................... $ 39,623 $11,051 $ 9,761 $(26,520) $ 33,915
Identifiable assets....................... $195,684 $75,287 $ 42,650 $(31,684) $281,937
December 31, 1996
Revenue................................... $ 86,435 $38,267 $ 14,768 $(14,832) $124,638
Operating income.......................... $ 28,514 $ 6,191 $ 6,291 $(10,829) $ 30,167
Identifiable assets....................... $144,566 $31,991 $ 10,342 $(10,153) $176,746
December 31, 1995
Revenue................................... $ 68,102 $23,004 $ 14,227 $(10,005) $ 95,328
Operating income.......................... $ 17,996 $ 3,492 $ 5,877 $ (7,878) $ 19,487
Identifiable assets....................... $145,300 $17,708 $ 10,420 $ (7,677) $165,751
</TABLE>
- ------------------
(1) For the year ended December 31, 1997, Other is comprised of the Company's
85% owned subsidiary in Canada, the Company's French operations and the
Company's Far East operations. For the years ended December 31, 1996 and
1995, Other is principally comprised of the Company's 85% owned subsidiary
in Canada which was acquired in January 1995.
F-18
<PAGE>
PANAVISION INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
DECEMBER 31, 1997
11. COMMITMENTS AND CONTINGENCIES
The Company leases real estate, equipment, and vehicles under noncancelable
operating leases. Future minimum payments under noncancelable operating leases
with initial or remaining terms of one year or more are presented below (in
thousands):
<TABLE>
<S> <C>
1998..................................................................... $ 5,634
1999..................................................................... 4,402
2000..................................................................... 3,347
2001..................................................................... 3,207
2002..................................................................... 2,988
Thereafter............................................................... 24,998
-------
$44,576
-------
-------
</TABLE>
In June 1995, the Company entered into a 16-year lease for its principal
operating facility in Woodland Hills, California; the Company relocated to this
facility during June 1996. In connection with this lease, the Company negotiated
a settlement for its existing leases covering its prior operating facility and
recorded a $1,800,000 charge during 1995 representing the cost of the
settlement.
During the years ended December 31, 1997, 1996 and 1995, rental expense
under operating leases was $6,054,000, $3,190,000 and $2,274,000, respectively.
The Company and its subsidiaries are defendants in actions for matters
arising out of normal business operations. The Company does not believe that any
such proceedings currently pending will have a materially adverse effect on its
consolidated financial position, results of operations, or cash flows.
12. RELATED PARTY TRANSACTIONS
In December 1997, in order to facilitate the payment of taxes related to
the exercise of options, which were issued pursuant to the Panavision Inc. Stock
Option Plan, the Company made advances to certain officers and key employees in
the form of notes. Notes were issued by Messrs. Scott, Farrand and Marcketta,
the Company's Chief Executive Officer, President and Chief Financial Officer,
respectively, in the amount of $2,152,503, $3,698,800 and $924,700,
respectively. The balance of the notes were issued to other key employees. The
notes mature on the earlier of December 24, 2000 or the date of consummation of
the Proposed Recapitalization. The Company expects that the notes will be repaid
during 1998 even if the Proposed Recapitalization is not completed. Interest on
the notes is compounded semiannually at the applicable federal rate in effect on
the date the notes were issued. These amounts are reflected on the Company's
consolidated balance sheet as notes receivable from officers and key employees
as of December 31, 1997.
Mr. Farrand, an executive officer of Panavision, is the obligor in respect
of a promissory demand note issued to the Company in January 1987. The principal
amount of and accrued interest on this note were $540,000 and $38,681,
respectively, as of December 31, 1997. The note accrues interest at a rate of
7.04% per annum, and, as of December 31, 1997, no payments of principal had been
made. This note was originally issued in connection with Mr. Farrand's purchase
of a residence and is secured by a portion of Mr. Farrand's common stock and
options in Panavision.
Included in other assets at December 31, 1997, 1996 and 1995, is a loan
receivable of $450,000 due in 2003 from Pany Rental, Inc. (dba Panavision New
York), an agent in which the Company acquired a one-third interest during 1994.
In accordance with an agreement, certain administrative services have been
provided by the Company to LII. The amount received by the Company from LII was
$510,000 and $687,000 for the years ended December 31, 1996 and 1995,
respectively. The amounts received have been offset against selling, general and
administrative
F-19
<PAGE>
PANAVISION INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
DECEMBER 31, 1997
12. RELATED PARTY TRANSACTIONS--(CONTINUED)
expenses in the accompanying consolidated statements of income. The agreement
with LII expired on September 30, 1996.
13. QUARTERLY OPERATING DATA (UNAUDITED)
The following is a summary of unaudited quarterly results of operations (in
thousands, except per share data):
<TABLE>
<CAPTION>
QUARTER
---------------------------------------------
FIRST SECOND(1) THIRD(2) FOURTH(3)
------- --------- -------- ---------
<S> <C> <C> <C> <C>
Year ended December 31, 1997
Net sales................................................ $31,156 $37,688 $ 55,840 $52,179
Gross margin............................................. 15,327 17,079 28,547 25,031
Net income............................................... 3,518 2,866 7,577 5,527
Basic earnings per share(4).............................. $ .19 $ .16 $ .42 $ .30
------- --------- -------- ---------
------- --------- -------- ---------
Diluted earnings per share(4)............................ $ .18 $ .15 $ .39 $ .29
------- --------- -------- ---------
------- --------- -------- ---------
Year ended December 31, 1996
Net sales................................................ $25,165 $24,095 $ 35,790 $39,588
Gross margin............................................. 13,569 12,356 19,046 20,194
Net income............................................... 1,196 1,231 5,671 5,173
Basic earnings per share(4).............................. $ .09 $ .09 $ .40 $ .32
------- --------- -------- ---------
------- --------- -------- ---------
Diluted earnings per share(4)............................ $ .08 $ .09 $ .37 $ .30
------- --------- -------- ---------
------- --------- -------- ---------
</TABLE>
- ------------------
(1) The second quarter of 1997 includes the operating results of the FSG
companies since June 5, 1997, the date of acquisition.
(2) The third quarter of 1996 includes the operating results of Lee Lighting
since its acquisition effective July 1, 1996 (see Note 14).
(3) The fourth quarter of 1997 includes three unusual items totaling
approximately $1.1 million: a foreign exchange loss of approximately
$520,000 due to the decline in the Australia dollar; additional SG&A costs
of approximately $300,000 for legal fees related to the Proposed
Recapitalization; and approximately $279,000 in additional payroll tax
expenses associated with the exercise by management of certain stock
options. In connection with the refinancing in 1996 of the Company's debt,
the Company wrote off $1.8 million of deferred financing costs in the fourth
quarter of 1996.
(4) Earnings per share for the first three quarters of 1997 and all of 1996 were
restated to Basic and Diluted earnings per share reflecting the adoption of
SFAS 128.
14. BUSINESS COMBINATIONS
On June 5, 1997, the Company completed its acquisition of the Film Services
Group (FSG) from Visual Action Holdings plc. FSG includes camera rental
operations which rent primarily non-Panavision manufactured equipment in the
United Kingdom, France, Australia and two U.S. cities, Chicago and Dallas, as
well as smaller rental operations in New Zealand, Malaysia and Indonesia. The
majority of the equipment acquired as a result of these transactions included
film cameras, lenses and complementary product accessories which rent to the
filmed production community. The purchase price was approximately $61.0 million
and was reduced by the amount of certain debt assumed by the Company.
F-20
<PAGE>
PANAVISION INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
DECEMBER 31, 1997
14. BUSINESS COMBINATIONS--(CONTINUED)
The acquisition has been recorded under the purchase method of accounting
and FSG's operating results have been included in the Company's consolidated
financial statements since the acquisition date of June 5, 1997. The purchase
price and direct acquisition costs have been allocated to the acquired assets
and assumed liabilities based on their relative fair values. The Company also
provided approximately $6.3 million to cover the estimated transaction costs,
lease cancellations and severance pay related to the FSG Acquisition. Goodwill
of approximately $9.7 million was recognized as part of the transaction and is
being amortized over 30 years.
Unaudited pro forma revenue would have increased by $25.9 million for the
twelve months ended December 31, 1997 and by $59.1 million for the twelve months
ended December 31, 1996, and unaudited pro forma net income and diluted earnings
per share would have decreased by $0.3 million and $0.02, respectively, for the
twelve months ended December 31, 1997 and would have increased by $1.7 million
and $0.11, respectively, for the twelve months ended December 31, 1996 had the
acquisition occurred at the beginning of each respective period.
Effective July 1, 1996, Warburg, Pincus acquired substantially all of the
assets of Lee Lighting and contributed them to Panavision. The purchase price of
$8 million approximated the net book value of the assets acquired. Lee Lighting
rents lighting equipment, mobile generators and distribution and sells lighting
consumables for the production of feature films, television programs and other
filmed entertainment.
The acquisition of Lee Lighting has been recorded under the purchase method
of accounting and its operating results have been included in the Company's
consolidated financial statements since the acquisition date of July 1, 1996.
Unaudited pro forma revenue, net income and diluted earnings per share for
the Company would have increased by $10,400,000, $605,000, and $.04,
respectively, for 1996 and by $19,749,000, $1,204,000 and $.08, respectively,
for 1995 had the Lee Lighting acquisition occurred at the beginning of each
respective period.
F-21
<PAGE>
PANAVISION INC.
CONDENSED CONSOLIDATED STATEMENTS OF INCOME
(UNAUDITED)
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
<TABLE>
<CAPTION>
QUARTER ENDED
MARCH 31,
------------------
1998 1997
------- -------
<S> <C> <C>
Camera rental............................................................................... $30,280 $20,926
Lighting rental............................................................................. 4,998 5,125
Sales and other............................................................................. 7,876 5,105
------- -------
Total rental revenue and sales.............................................................. 43,154 31,156
Cost of camera rental....................................................................... 14,260 8,958
Cost of lighting rental..................................................................... 4,601 4,142
Cost of sales and other..................................................................... 5,232 2,729
------- -------
Gross margin................................................................................ 19,061 15,327
Selling, general and administrative expenses................................................ 13,512 8,126
Research and development expenses........................................................... 1,057 1,315
------- -------
Operating income............................................................................ 4,492 5,886
Interest income............................................................................. 166 79
Interest expense............................................................................ (2,294) (956)
Foreign exchange gain (loss)................................................................ 277 (96)
Other, net.................................................................................. 994 260
------- -------
Income before income taxes.................................................................. 3,635 5,173
Income tax provision........................................................................ (1,163) (1,655)
------- -------
Net income.................................................................................. $ 2,472 $ 3,518
------- -------
------- -------
Basic earnings per share.................................................................... $ .13 $ .19
------- -------
------- -------
Diluted earnings per share.................................................................. $ .13 $ .18
------- -------
------- -------
Shares used in computation--Basic........................................................... 18,929 18,155
Shares used in computation--Diluted......................................................... 19,354 19,351
</TABLE>
See accompanying notes.
F-22
<PAGE>
PANAVISION INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
(IN THOUSANDS EXCEPT PAR VALUE DATA)
<TABLE>
<CAPTION>
MARCH 31, 1998 DECEMBER 31, 1997
-------------- -----------------
(UNAUDITED)
<S> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents................................................... $ 5,835 $ 11,020
Accounts receivable (net of allowance of $3,585 and $3,959)................. 25,932 25,645
Inventories................................................................. 8,510 8,540
Prepaid expenses............................................................ 5,555 2,968
Notes receivable from officers and key employees............................ 7,218 7,115
Income tax receivable....................................................... 3,423 3,423
Other current assets........................................................ 3,469 2,566
-------------- -----------------
Total current assets.......................................................... 59,942 61,277
Property, plant and equipment, net............................................ 205,102 199,038
Deferred tax assets........................................................... 2,329 2,329
Goodwill...................................................................... 9,866 9,859
Other......................................................................... 7,085 9,434
-------------- -----------------
Total assets.................................................................. $284,324 $ 281,937
-------------- -----------------
-------------- -----------------
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable............................................................ $ 9,810 $ 9,819
Accrued liabilities......................................................... 22,777 23,745
Deferred tax liabilities.................................................... 5,387 5,387
Current maturities of long-term debt........................................ 3,685 5,383
-------------- -----------------
Total current liabilities..................................................... 41,659 44,334
Long-term debt................................................................ 118,516 119,999
Deferred tax liabilities...................................................... 6,380 6,217
Other liabilities............................................................. 2,461 1,943
Commitments and Contingencies
Stockholders' equity:
Preferred stock, $.01 par value; 2,000 shares authorized; no shares issued
and outstanding.......................................................... -- --
Common stock, $.01 par value; 50,000 shares authorized; 18,929 shares issued
and outstanding.......................................................... 189 189
Additional paid-in capital.................................................. 80,094 77,053
Retained earnings........................................................... 36,935 34,463
Foreign currency translation adjustment..................................... (1,910) (2,261)
-------------- -----------------
Total stockholders' equity............................................... 115,308 109,444
-------------- -----------------
Total liabilities and stockholders' equity.................................... $284,324 $ 281,937
-------------- -----------------
-------------- -----------------
</TABLE>
See accompanying notes.
F-23
<PAGE>
PANAVISION INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
(IN THOUSANDS)
<TABLE>
<CAPTION>
QUARTER ENDED
MARCH 1,
-------------------
1998 1997
------- --------
<S> <C> <C>
OPERATING ACTIVITIES
Net income................................................................................. $ 2,472 $ 3,518
Adjustments to derive net cash provided by operating activities:
Depreciation and amortization............................................................ 7,549 5,151
Gain on sale of property and equipment................................................... (1,021) (308)
Changes in operating assets and liabilities net of the effect of acquisitions:
Accounts receivable................................................................... (287) 2,114
Inventories........................................................................... 30 (198)
Prepaid expenses and other current assets............................................. (3,490) 500
Accounts payable...................................................................... (9) 1,578
Accrued liabilities................................................................... (968) (2,024)
Other, net............................................................................... 2,892 (802)
------- --------
Net cash provided by operating activities.................................................. 7,168 9,529
INVESTING ACTIVITIES
Capital expenditures....................................................................... (15,627) (12,227)
Proceeds from dispositions of fixed assets................................................. 4,187 367
------- --------
Net cash used in investing activities...................................................... (11,440) (11,860)
FINANCING ACTIVITIES
Borrowings under notes payable............................................................. -- --
Repayments of notes payable................................................................ (3,869) (6,500)
Notes receivable from officers and key employees........................................... (103) --
Contribution from Warburg, Pincus.......................................................... 3,041 --
------- --------
Net cash used in financing activities...................................................... (931) (6,500)
Effect of exchange rate changes on cash.................................................... 18 (111)
------- --------
Net decrease in cash and cash equivalents.................................................. (5,185) (8,942)
Cash and cash equivalents at beginning of period........................................... 11,020 10,629
------- --------
Cash and cash equivalents at end of period................................................. $ 5,835 $ 1,687
------- --------
------- --------
SUPPLEMENTAL CASH FLOW INFORMATION
Interest paid during the period............................................................ $ 2,316 $ 1,089
Income taxes paid during the period........................................................ $ 226 $ 234
</TABLE>
See accompanying notes.
F-24
<PAGE>
PANAVISION INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
1. BASIS OF PREPARATION
The accompanying condensed consolidated financial statements have been
prepared in accordance with generally accepted accounting principles for interim
financial information and with the instructions for Form 10-Q and Rule 10-01 of
Regulation S-X. Accordingly, they do not include all of the information and
footnotes required by generally accepted accounting principles for complete
financial statements.
In the opinion of management, all adjustments (consisting of normal
recurring adjustments) considered necessary for a fair presentation have been
included. The results of operations for interim periods are not necessarily
indicative of the results that may be expected for the fiscal year.
The condensed consolidated financial statements include the accounts of
Panavision, Panavision International, L.P. (PILP) and PILP's majority-owned
subsidiaries. All significant intercompany amounts and transactions have been
eliminated.
Certain amounts in previously issued financial statements have been
reclassified to conform to 1998 presentation.
For further information, refer to the consolidated financial statements and
accompanying notes included in the Company's Annual Report on Form 10-K for the
year ended December 31, 1997.
2. INVENTORIES
Inventories consist of the following (in thousands):
<TABLE>
<CAPTION>
MARCH 31, 1998 DECEMBER 31, 1997
-------------- -----------------
<S> <C> <C>
Finished goods..................................................... $4,321 $ 3,983
Work-in-process.................................................... 219 153
Component parts.................................................... 1,311 1,607
Supplies........................................................... 2,659 2,797
------- -------
$8,510 $ 8,540
------- -------
------- -------
</TABLE>
3. LONG-TERM DEBT
Long-term debt consists of the following (in thousands):
<TABLE>
<CAPTION>
MARCH 31, 1998 DECEMBER 31, 1997
-------------- -----------------
<S> <C> <C>
Current maturities of long-term debt............................... $ 3,685 $ 5,383
Long-term debt..................................................... 118,516 119,999
-------------- -----------------
$122,201 $ 125,382
-------------- -----------------
-------------- -----------------
</TABLE>
Long-term debt above represents borrowings under the Company's Credit
Agreement. Principal repayments under the Credit Agreement are due quarterly
beginning March 1998 through June 2004. The interest rate under the Credit
Agreement was 7.05% and 7.25% at March 31, 1998 and December 31, 1997,
respectively. The Company believes the carrying value of its amounts payable
under the Credit Agreement approximate fair value based upon current yields for
debt issues of similar quality and terms.
The Company's obligations under the Credit Agreement are secured by
substantially all of the Company's assets. The Credit Agreement requires that
the Company meet certain financial tests and other restrictive covenants
including maintaining certain total debt, fixed charge and interest coverage
ratio levels. The Company was in compliance with all such covenants as of March
31, 1998.
4. USE OF ESTIMATES AND OTHER UNCERTAINTIES
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the amounts reported in the financial statements and
accompanying notes. Actual results could differ from such estimates.
The Company's future results could be adversely affected by a number of
factors, including without limitation, (a) a significant reduction in the number
of feature films produced; (b) competitive pressures arising
F-25
<PAGE>
PANAVISION INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(UNAUDITED)
4. USE OF ESTIMATES AND OTHER UNCERTAINTIES (CONTINUED)
from changes in technology, customer requirements and industry standards; (c) an
increase in expenses related to new product initiatives and product development
efforts; (d) unfavorable foreign currency fluctuations; and (e) significant
increases in interest rates.
5. EARNINGS PER SHARE
During the year ended December 31, 1997, the Company adopted Statement of
Financial Accounting Standards No. 128, 'Earnings Per Share' (SFAS 128) which
required a change in the method used to compute earnings per share. Under this
new standard, primary and fully diluted earnings per share were replaced with
'Basic' and 'Diluted' earnings per share. Basic earnings per share amounts
exclude the dilutive effect of potential common shares and are therefore higher
than the primary earnings per share amounts previously presented. For
Panavision, diluted earnings per share amounts under the new standard are the
same as primary earnings per share amounts previously presented. As required by
SFAS 128, all prior period amounts have been restated to conform to the new
presentation.
Basic earnings per share is based upon the weighted-average number of
common shares outstanding. Diluted earnings per share is based upon the
weighted-average number of common shares and dilutive potential common shares
outstanding. Potential common shares are outstanding options under the Company's
stock option plan which are included under the treasury stock method.
The following table sets forth the computation for basic and diluted
earnings per share (in thousands, except per share information):
<TABLE>
<CAPTION>
QUARTER ENDED
MARCH 31,
-------------------
1998 1997
------- -------
<S> <C> <C>
Numerator for basic and diluted earnings per share-net income.................... $ 2,472 $ 3,518
------- -------
Denominator:
Denominator for basic earnings per share-weighted-average shares............... 18,929 18,155
Effect of dilutive securities-employee stock options........................... 425 1,196
------- -------
Denominator for diluted earnings per share-adjusted weighted-average shares.... 19,354 19,351
Basic earnings per share......................................................... $ .13 $ .19
------- -------
------- -------
Diluted earnings per share....................................................... $ .13 $ .18
------- -------
------- -------
</TABLE>
6. COMPREHENSIVE INCOME
As of January 1, 1998, the Company adopted Statement of Financial
Accounting Standards No. 130, 'Reporting Comprehensive Income' (SFAS 130). SFAS
130 establishes new rules for the reporting and display of comprehensive income
and its components; however, the adoption of SFAS 130 had no impact on the
Company's net income or stockholders' equity. SFAS 130 requires unrealized gains
or losses on available-for-sale securities and foreign currency translation
adjustments, which prior to adoption were reported seperately in stockholders'
equity to be included in other comprehensive income.
During the first quarter of 1998 and 1997, total comprehensive income
amounted to $2,823,000 and $2,564,000, respectively. The difference between net
income and comprehensive income in both periods relates to the Company's change
in foreign currency translation adjustments.
7. EFFECTS OF RECENT ACCOUNTING PRONOUNCEMENTS
In June 1997, Statement of Financial Accounting Standards No. 131,
'Disclosures About Segments of an Enterprise and Related Information' (SFAS 131)
was issued. SFAS 131 establishes standards for the way that public business
enterprises report information about operating segments in annual financial
statements and requires that those enterprises report selected information about
operating segments in interim financial reports issued to shareholders. It also
establishes standards for related disclosures about products and services,
F-26
<PAGE>
PANAVISION INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(UNAUDITED)
7. EFFECTS OF RECENT ACCOUNTING PRONOUNCEMENTS (CONTINUED)
geographic areas, and major customers. SFAS 131 is effective for financial
statements for fiscal years beginning after December 15, 1997. This statement
need not be applied to Interim Financial Statements in the initial year of
application. The Company will be adopting the disclosures required by this
standard for the year ending December 31, 1998.
8. BUSINESS COMBINATIONS
On June 5, 1997, the Company completed its acquisition of the Film Services
Group (FSG) from Visual Action Holdings plc. FSG includes camera rental
operations which rent primarily non-Panavision manufactured equipment in the
United Kingdom, France, Australia and two U.S. cities, Chicago and Dallas, as
well as smaller rental operations in New Zealand, Malaysia and Indonesia. The
majority of the equipment acquired as a result of these transactions included
film cameras, lenses and complementary product accessories which rent to the
filmed production community. The purchase price was approximately $61.0 million
and was reduced by the amount of certain debt assumed by the Company.
The acquisition has been recorded under the purchase method of accounting
and FSG's operating results have been included in the Company's consolidated
financial statements since the acquisition date of June 5, 1997. The purchase
price and direct acquisition costs have been allocated to the acquired assets
and assumed liabilities based on their relative fair values. The Company also
provided approximately $6.3 million to cover the estimated transaction costs,
lease cancellations and severance pay related to the FSG acquisition. Goodwill
of approximately $9.7 million was recognized as part of the transaction and is
being amortized over 30 years.
Unaudited pro forma revenue, assuming the acquisition of FSG had been
consummated on January 1, 1997, would have increased by $14.0 million for the
three months ended March 31, 1997 and unaudited pro forma net income and diluted
earnings per share would have decreased by $0.3 million and $0.01, respectively
for the three months ended March 31, 1997, had the acquisition occurred at the
beginning of 1997. The pro forma financial data does not purport to represent
the results of operation of the Company that actually would have occurred had
the acquisition of FSG occurred on January 1, 1997.
F-27
<PAGE>
REPORT OF THE INDEPENDENT AUDITORS
Panavision Inc
Film Services Group
We have audited the accompanying combined balance sheet of the Film
Services Group of Visual Action Holdings plc acquired by Panavision Inc
(hereafter referred to as Film Services Group) as at 31 December 1996 and the
related combined profit and loss account and combined statement of cash flows
for the year then ended and the notes thereto. These combined financial
statements, which have been prepared as set out in note 1, are the
responsibility of the directors of Panavision Inc. Our responsibility is to
express an opinion on these combined financial statements based on our audit.
Our audits were performed whilst the companies which now constitute the
Film Services Group were subsidiaries of Visual Action Holdings plc. Full scope
audits were performed in respect of each subsidiary and unqualified opinions
were given thereon in February 1997. No further audit work has been undertaken.
We conducted our audit in accordance with United Kingdom auditing standards
which do not differ in any significant respect from United States generally
accepted auditing standards. Those standards require that we plan and perform
the audit to obtain reasonable assurances about whether the financial statements
are free of material misstatement. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the financial statements. An
audit also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audit provides a reasonable basis
for our opinion.
In our opinion, the combined financial statements referred to above have
been properly extracted from the audited accounts of the relevant subsidiaries
of Visual Action Holdings plc to present the combined financial position of the
Film Services Group as at 31 December 1996 and the combined results of its
operations and its combined cash flows for the year then ended in conformity
with accounting principles generally accepted in the United Kingdom, on the
basis described in note 1 to the financial statements, which differ in certain
respects from those followed in the United States. The results to, and financial
position at, 31 March 1996 and 1997 have not been audited and accordingly we
express no opinion thereon.
COOPERS & LYBRAND
Chartered Accountants
London, United Kingdom
7 August 1997
F-28
<PAGE>
PANAVISION INC
FILM SERVICES GROUP
COMBINED PROFIT AND LOSS ACCOUNT
<TABLE>
<CAPTION>
THREE MONTHS ENDED
31 MARCH
YEAR ENDED (UNAUDITED)
31 DECEMBER ----------------------
1996 1996 1997
pounds '000 pounds '000 pounds '000
------------ ------------ ------
<S> <C> <C> <C>
Turnover................................................................... 41,450 8,670 9,094
Cost of sales.............................................................. (19,701) (3,624) (3,064)
------------ ------------ ------
Gross profit............................................................... 21,749 5,046 6,030
Operating expenses......................................................... (19,184) (5,051) (5,934)
------------ ------------ ------
Operating profit........................................................... 2,565 (5) 96
Income from interests in associated undertakings........................... -- (3) (24)
Interest receivable and similar income..................................... 125 48 29
Interest payable and similar charges....................................... (562) (93) (127)
------------ ------------ ------
Profit/(loss) on ordinary activities before taxation....................... 2,128 (53) (26)
Tax on profit/(loss) on ordinary activities................................ (390) (10) 5
------------ ------------ ------
Profit/(loss) on ordinary activities after taxation........................ 1,738 (63) (21)
Dividends payable to Visual Action Holdings plc............................ (4,374) (200) --
------------ ------------ ------
Retained loss.............................................................. (2,636) (263) (21)
------------ ------------ ------
</TABLE>
STATEMENT OF TOTAL RECOGNISED GAINS AND LOSSES
<TABLE>
<CAPTION>
pounds '000
------
<S> <C>
Retained loss for the year ended 31 December 1996........................................................ (2,636)
Currency translation adjustments on aggregation of overseas subsidiaries................................. (526)
------
Total losses recognised in the year ended 31 December 1996............................................... (3,162)
------
</TABLE>
F-29
<PAGE>
PANAVISION INC
FILM SERVICES GROUP
COMBINED BALANCE SHEET
<TABLE>
<CAPTION>
31 MARCH
31 DECEMBER 1997
1996 (UNAUDITED)
pounds '000 pounds '000
----------- -----------
<S> <C> <C>
FIXED ASSETS
Tangible assets........................................................................ 24,492 24,282
Investments............................................................................ 226 212
----------- -----------
24,718 24,494
CURRENT ASSETS
Stock.................................................................................. 1,850 1,602
Debtors................................................................................ 8,900 9,674
Cash at bank and in hand............................................................... 1,443 1,368
----------- -----------
12,193 12,644
CREDITORS: amounts falling due within one year......................................... (16,134) (17,726)
----------- -----------
NET CURRENT LIABILITIES................................................................ (3,941) (5,082)
CREDITORS: amounts falling due after more than one year................................ (3,917) (2,356)
PROVISIONS FOR LIABILITIES AND CHARGES................................................. (615) (566)
----------- -----------
NET ASSETS............................................................................. 16,245 16,490
----------- -----------
</TABLE>
F-30
<PAGE>
PANAVISION INC
FILM SERVICES GROUP
COMBINED STATEMENT OF CASH FLOWS
<TABLE>
<CAPTION>
THREE MONTHS ENDED
31 MARCH
YEAR ENDED (UNAUDITED)
31 DECEMBER ------------------
1996 1996 1997
pounds '000 pounds '000 pounds '000
----------- ------- -------
<S> <C> <C> <C>
NET CASH INFLOW FROM OPERATING ACTIVITIES...................................... 9,496 2,269 915
----------- ------- -------
RETURNS FROM INVESTMENTS AND SERVICING OF FINANCE
Interest received.............................................................. 125 48 29
Interest paid.................................................................. (562) (96) (151)
Dividends paid................................................................. (626) -- (76)
----------- ------- -------
NET CASH OUTFLOW FROM RETURNS ON INVESTMENTS AND SERVICING OF FINANCE.......... (1,063) (48) (198)
----------- ------- -------
TAXATION
Corporation tax................................................................ (949) (206) 4
----------- ------- -------
INVESTING ACTIVITIES
Payments to acquire tangible fixed assets...................................... (9,989) (1,820) (1,299)
Receipts from sales of tangible fixed assets................................... 950 143 110
----------- ------- -------
NET CASH OUTFLOW FROM INVESTING ACTIVITIES..................................... (9,039) (1,677) (1,189)
----------- ------- -------
NET CASH (OUTFLOW)/INFLOW BEFORE FINANCING ACTIVITIES.......................... (1,555) 338 (468)
----------- ------- -------
NET CASH OUTFLOW FROM FINANCING ACTIVITIES..................................... (378) (24) (87)
----------- ------- -------
(DECREASE)/INCREASE IN CASH AND CASH EQUIVALENTS............................... (1,933) 314 (555)
----------- ------- -------
RECONCILIATION OF OPERATING PROFIT TO NET CASH INFLOW FROM OPERATING ACTIVITIES
Operating profit............................................................... 2,565 (5) 96
Depreciation charge............................................................ 6,227 1,469 1,732
Profit on sale of tangible fixed assets........................................ (327) (131) (53)
Decrease/(increase) in debtors................................................. 226 1,088 (774)
Increase/(decrease) in creditors............................................... 626 (212) (334)
Decrease in stock.............................................................. 179 60 248
----------- ------- -------
NET CASH INFLOW FROM OPERATING ACTIVITIES...................................... 9,496 2,269 915
----------- ------- -------
</TABLE>
F-31
<PAGE>
PANAVISION INC.
FILM SERVICES GROUP
NOTES TO THE COMBINED FINANCIAL STATEMENTS
(INFORMATION FOR THE PERIOD ENDED 31 MARCH 1996 AND
SUBSEQUENT TO 31 DECEMBER 1996 IS UNAUDITED)
1. PRINCIPAL ACCOUNTING POLICIES
The combined financial statements have been prepared in accordance with
applicable Accounting Standards in the United Kingdom. A summary of the more
important Film Services Group accounting policies is set out below.
BASIS OF ACCOUNTING
The combined financial statements have been prepared in accordance with the
historical cost convention.
BASIS OF COMBINATION
Following the acquisition by Panavision Inc of the film services operations
of Visual Action Holdings plc, Panavision Inc is required to file a Form 8-K
with the SEC. These combined financial statements have been prepared to reflect
the combined film services operations of Visual Action Holdings plc. The
combined film services operations of Visual Action Holdings plc did not
constitute a separate group for accounting or taxation purposes. These combined
financial statements are based on an aggregation of the audited financial
statements of the companies listed below, adjusted to eliminate transactions,
balances and investments between these companies. The combined financial
statements have also been adjusted to eliminate the activities, assets and
liabilities of Cine Holdings Limited and Samuelson Group Limited. Further
adjustments have also been made to eliminate the audio visual business of Victor
Duncan Inc. which has not been acquired by Panavision Inc.
COMPANIES REGISTERED IN ENGLAND AND WALES
Cine-Europe Limited
Cine Holdings Limited
Samuelson Film Service London Limited
Samuelson Group Limited
Grip House Limited
235 Research Plc
COMPANIES INCORPORATED IN AUSTRALIA
John Barry Group Pty Limited
Samuelson Cases Australia Pty Limited
Samuelson Film Service (Australia) Limited
Samuelson Group Pty Limited
COMPANIES INCORPORATED IN FRANCE
Samuelson Alga Cinema SA
Cinecam SARL
COMPANIES INCORPORATED IN THE UNITED STATES OF AMERICA
Victor Duncan Inc
COMPANIES INCORPORATED IN SINGAPORE
Samuelson Film Service Pte Limited
COMPANIES INCORPORATED IN NEW ZEALAND
Film Facilities Limited
Visual Action Holdings NZ Limited
F-32
<PAGE>
PANAVISION INC.
FILM SERVICES GROUP
NOTES TO THE COMBINED FINANCIAL STATEMENTS (CONTINUED)
(INFORMATION FOR THE PERIOD ENDED 31 MARCH 1996 AND
SUBSEQUENT TO 31 DECEMBER 1996 IS UNAUDITED)
1. PRINCIPAL ACCOUNTING POLICIES (CONTINUED)
DEPRECIATION
Depreciation is calculated to write off the cost less estimated residual
value of tangible fixed assets by equal annual instalments over their expected
useful economic lives as follows:
<TABLE>
<S> <C>
Freehold buildings............................................. 2.5%
Short leasehold land and buildings............................. Over the period of the lease
Plant and hire equipment....................................... 15-33%
Office equipment, fixtures and fittings........................ 10%
Vehicles....................................................... 20%
</TABLE>
Freehold land is not depreciated.
Profits or losses on the disposal of hire equipment which reflect normal
adjustments to depreciation previously charged are included in operating profit
as part of the normal depreciation charge.
DEFERRED TAXATION
Deferred taxation is provided using the liability method in respect of the
taxation effect of all material timing differences to the extent that it is
considered probable that liabilities will crystallise in the foreseeable future.
FINANCE AND OPERATING LEASES
Costs in respect of operating leases are charged on a straight line basis
over the lease term. Leasing agreements which transfer to the Film Services
Group substantially all the benefits and risks of ownership of an asset are
treated as if the asset had been purchased outright. The assets are included in
fixed assets and the capital element of the leasing commitments is shown as
obligations under finance leases. The lease rentals are treated as consisting of
capital and interest elements. The capital element is applied to reduce the
outstanding obligations and the interest element is charged against profit so as
to give a constant periodic rate of charge on the remaining balance outstanding
at each accounting period. Assets held under finance leases are depreciated over
the shorter of the lease terms and the useful lives of equivalent owned assets.
FOREIGN CURRENCIES
Assets and liabilities of subsidiaries in foreign currencies are translated
into sterling at rates of exchange ruling at the end of the financial year and
the results of foreign subsidiaries are translated at the average rate of
exchange for the year. Differences on exchange arising from the retranslation of
the opening net investment in subsidiary companies, and from the translation of
the results of those companies at average rate, are taken to reserves and are
reported in the statement of total recognised gains and losses. All other
foreign exchange differences are taken to the profit and loss account in the
year in which they arise.
INVESTMENTS
Shares in associated undertakings are stated at cost less provision for any
permanent diminution in the value of the investment.
STOCKS AND WORK-IN-PROGRESS
Stocks and work-in-progress are stated at the lower of cost and net
realisable value. Cost comprises purchase cost of goods, direct labour and those
overheads related to manufacture and distribution based on normal activity
levels. Where necessary provision is made for obsolete, slow moving and
defective stocks.
F-33
<PAGE>
PANAVISION INC.
FILM SERVICES GROUP
NOTES TO THE COMBINED FINANCIAL STATEMENTS (CONTINUED)
(INFORMATION FOR THE PERIOD ENDED 31 MARCH 1996 AND
SUBSEQUENT TO 31 DECEMBER 1996 IS UNAUDITED)
1. PRINCIPAL ACCOUNTING POLICIES (CONTINUED)
PENSION SCHEMES
The Film Services Group employees and ex-employees benefit from two pension
schemes operated by Visual Action Holdings plc.
DEFINED BENEFIT SCHEME
The regular cost of providing retirement pensions is charged to the profit
and loss account over the employees' service lives on the basis of a constant
percentage of earnings. Variations from regular cost, arising from periodic
actuarial valuations, are allocated over the expected remaining service lives of
current employees on the basis of a constant percentage of current and estimated
future earnings. The difference between the charge to the profit and loss
account and the contributions payable is shown as an asset or as a liability in
the balance sheet.
DEFINED CONTRIBUTION SCHEME
Contributions are charged to the profit and loss account on a payable
basis.
TURNOVER
Turnover comprises sales of goods and services to external customers
excluding value added tax.
COST OF SALES
Cost of sales represent directly attributable cost of sales.
NET OPERATING EXPENSES
Net operating expenses represent the cost of operations and administration,
including depreciation and profits and losses on disposal of hire equipment.
UNAUDITED INTERIM COMBINED FINANCIAL STATEMENTS
The accompanying unaudited combined financial statements at 31 March 1997
and unaudited combined financial statements for the three month periods ended 31
March 1996 and 31 March 1997 have been prepared on the same basis as the audited
combined financial statements and, in the opinion of management, include all
adjustments (consisting only of normal and recurring accruals) necessary to
present fairly the financial information set forth therein, in accordance with
accounting principles generally accepted in the United Kingdom which differ in
certain respects from those followed in the United States. The results of
operations for the three month period ended 31 March 1997 are not necessarily
indicative of the results to be expected for the entire fiscal year.
F-34
<PAGE>
PANAVISION INC.
FILM SERVICES GROUP
NOTES TO THE COMBINED FINANCIAL STATEMENTS (CONTINUED)
(INFORMATION FOR THE PERIOD ENDED 31 MARCH 1996 AND
SUBSEQUENT TO 31 DECEMBER 1996 IS UNAUDITED)
2. TURNOVER
Turnover represents amounts invoiced to third parties in respect of the
provision of services and equipment to the film, television and allied
industries. An analysis of turnover by geographical market is given below:
<TABLE>
<CAPTION>
YEAR ENDED
31 DECEMBER
1996
pounds '000
-----------
<S> <C>
UK.............................................................................. 12,612
All other....................................................................... 28,838
-----------
41,450
-----------
</TABLE>
An analysis of turnover by product is given below:
<TABLE>
<CAPTION>
YEAR ENDED
31 DECEMBER
1996
pounds '000
-----------
<S> <C>
Camera rental................................................................... 26,363
Lighting rental................................................................. 2,870
Sales and other................................................................. 12,217
-----------
Total rental revenue and sales.................................................. 41,450
-----------
</TABLE>
3. OPERATING PROFIT
Operating profit is stated after charging/(crediting):
<TABLE>
<CAPTION>
YEAR ENDED
31 DECEMBER
1996
pounds '000
-----------
<S> <C>
Profit on disposal of tangible fixed assets..................................... (327)
Depreciation:
Tangible owned fixed assets................................................... 5,728
Tangible fixed assets held under finance leases............................... 499
Operating lease rentals:
Plant and hire equipment...................................................... 2,919
Other......................................................................... 1,569
Auditors' remuneration:
Audit services................................................................ 120
Other services................................................................ 41
-----------
</TABLE>
F-35
<PAGE>
PANAVISION INC.
FILM SERVICES GROUP
NOTES TO THE COMBINED FINANCIAL STATEMENTS (CONTINUED)
(INFORMATION FOR THE PERIOD ENDED 31 MARCH 1996 AND
SUBSEQUENT TO 31 DECEMBER 1996 IS UNAUDITED)
4. DIRECTORS' REMUNERATION
<TABLE>
<CAPTION>
YEAR ENDED
31 DECEMBER
1996
pounds '000
-----------
<S> <C>
Other emoluments, including pension contributions, of persons who were directors
of any of the companies within the Film Services Group during the financial
year.......................................................................... 1,576
-----------
</TABLE>
The emoluments of the chairman, excluding pension contributions, were
pounds nil. The emoluments of the highest paid director, excluding pension
contributions, were pounds 270,000. Directors' emoluments excluding pensions
contributions fell within the following ranges:
<TABLE>
<CAPTION>
YEAR ENDED
31 DECEMBER
1996
-----------
<S> <C>
pounds 25,001 to pounds 30,000.................................................. 1
pounds 30,001 to pounds 35,000.................................................. 2
pounds 35,001 to pounds 40,000.................................................. 1
pounds 45,001 to pounds 50,000.................................................. 2
pounds 50,001 to pounds 55,000.................................................. 2
pounds 60,001 to pounds 65,000.................................................. 1
pounds 65,001 to pounds 70,000.................................................. 1
pounds 85,001 to pounds 90,000.................................................. 2
pounds 90,001 to pounds 95,000.................................................. 1
pounds 95,001 to pounds 100,000................................................. 1
pounds 140,001 to pounds 145,000................................................ 2
pounds 145,001 to pounds 150,000................................................ 1
pounds 265,001 to pounds 270,000................................................ 1
</TABLE>
5. STAFF COSTS
<TABLE>
<CAPTION>
YEAR ENDED
31 DECEMBER
1996
pounds '000
-----------
<S> <C>
Wages and salaries.............................................................. 9,205
Social security costs........................................................... 1,380
Other pension costs............................................................. 181
-----------
10,766
-----------
</TABLE>
The Film Services Group contributes to a number of defined contribution
pension schemes on behalf of its employees. The assets of the schemes are held
separately from those of the Film Services Group in independently administered
funds. The pension cost charge represents contributions payable by the Film
Services Group to the funds and amounted to pounds 308,000.
F-36
<PAGE>
PANAVISION INC.
FILM SERVICES GROUP
NOTES TO THE COMBINED FINANCIAL STATEMENTS (CONTINUED)
(INFORMATION FOR THE PERIOD ENDED 31 MARCH 1996 AND
SUBSEQUENT TO 31 DECEMBER 1996 IS UNAUDITED)
5. STAFF COSTS (CONTINUED)
The average weekly number of employees during the year was made up as
follows:
<TABLE>
<CAPTION>
YEAR ENDED
31 DECEMBER
1996
-----------
<S> <C>
Maintenance and support......................................................... 125
Selling and distribution........................................................ 157
Administration.................................................................. 101
---
383
---
</TABLE>
6. INTEREST RECEIVABLE AND SIMILAR INCOME
<TABLE>
<CAPTION>
YEAR ENDED
31 DECEMBER
1996
pounds '000
-----------
<S> <C>
Bank interest................................................................... 62
Other........................................................................... 63
---
125
---
</TABLE>
7. INTEREST PAYABLE AND SIMILAR CHARGES
<TABLE>
<CAPTION>
YEAR ENDED
31 DECEMBER
1996
pounds '000
-----------
<S> <C>
On bank loans and overdraft..................................................... 388
On other loans.................................................................. 152
Finance lease charges........................................................... 22
---
562
---
</TABLE>
8. TAX ON PROFIT ON ORDINARY ACTIVITIES
<TABLE>
<CAPTION>
YEAR ENDED
31 DECEMBER
1996
pounds '000
-----------
<S> <C>
Based on the profit for the year:
Overseas taxation
Current....................................................................... 405
Deferred...................................................................... 61
Share of associated undertakings' taxation...................................... 18
Prior year adjustment........................................................... (94)
---
390
---
</TABLE>
F-37
<PAGE>
PANAVISION INC.
FILM SERVICES GROUP
NOTES TO THE COMBINED FINANCIAL STATEMENTS (CONTINUED)
(INFORMATION FOR THE PERIOD ENDED 31 MARCH 1996 AND
SUBSEQUENT TO 31 DECEMBER 1996 IS UNAUDITED)
9. TANGIBLE FIXED ASSETS
The analysis of tangible fixed assets is as follows:
<TABLE>
<CAPTION>
PLANT AND FIXTURES
LAND AND HIRE AND
BUILDINGS EQUIPMENT FITTINGS TOTAL
pounds '000 pounds '000 pounds '000 pounds '000
-------- --------- -------- ------
<S> <C> <C> <C> <C>
COST OR VALUATION:
At 1 January 1996..................................................... 10,121 47,441 5,714 63,276
Additions............................................................. 1,790 7,414 785 9,989
Disposals............................................................. (799) (1,131) (293) (2,223)
Exchange movement..................................................... (790) (2,550) (382) (3,722)
Other movements....................................................... -- 191 (307) (116)
-------- --------- -------- ------
AT 31 DECEMBER 1996................................................... 10,322 51,365 5,517 67,204
-------- --------- -------- ------
DEPRECIATION:
AT 1 JANUARY 1996..................................................... 5,753 31,530 3,441 40,724
Charge for the year................................................... 888 4,515 824 6,227
Disposals............................................................. (396) (913) (291) (1,600)
Exchange movement..................................................... (554) (1,726) (243) (2,523)
Other movements....................................................... -- 184 (300) (116)
-------- --------- -------- ------
AT 31 DECEMBER 1996................................................... 5,691 33,590 3,431 42,712
-------- --------- -------- ------
NET BOOK VALUE
AT 31 DECEMBER 1996................................................... 4,631 17,775 2,086 24,492
-------- --------- -------- ------
At 31 December 1995................................................... 4,368 15,911 2,273 22,552
-------- --------- -------- ------
</TABLE>
The net book value of tangible fixed assets includes an amount of
pounds 1,259,000 in respect of assets under finance leases.
10. STOCKS
<TABLE>
<CAPTION>
31 DECEMBER 31 MARCH
1996 1997
pounds '000 pounds '000
----------- --------
<S> <C> <C>
Materials and consumables...................................................... 1,850 1,602
----------- --------
</TABLE>
11. DEBTORS
<TABLE>
<CAPTION>
31 DECEMBER 31 MARCH
1996 1997
pounds '000 pounds '000
----------- --------
<S> <C> <C>
AMOUNTS FALLING DUE WITHIN ONE YEAR:
Trade debtors.................................................................. 6,913 7,964
Other debtors.................................................................. 1,114 565
Prepayments and accrued income................................................. 873 1,145
----------- --------
8,900 9,674
----------- --------
</TABLE>
F-38
<PAGE>
PANAVISION INC.
FILM SERVICES GROUP
NOTES TO THE COMBINED FINANCIAL STATEMENTS (CONTINUED)
(INFORMATION FOR THE PERIOD ENDED 31 MARCH 1996 AND
SUBSEQUENT TO 31 DECEMBER 1996 IS UNAUDITED)
12. CREDITORS
<TABLE>
<CAPTION>
31 DECEMBER 31 MARCH
1996 1997
pounds '000 pounds '000
----------- --------
<S> <C> <C>
Amounts falling due within one year were as follows:
Bank loans and overdrafts...................................................... 2,220 2,700
Trade creditors................................................................ 10,571 10,710
Bills of exchange payable...................................................... 156 273
Corporation tax................................................................ 43 42
Other creditors (including other taxes and social security).................... 1,391 2,259
Accruals and deferred income................................................... 1,290 1,567
Amounts payable under finance leases........................................... 387 175
Dividends payable.............................................................. 76 --
----------- --------
16,134 17,726
----------- --------
</TABLE>
13. OBLIGATIONS UNDER OPERATING LEASES
The annual commitments under non-cancellable operating leases are as
follows:
<TABLE>
<CAPTION>
31 DECEMBER
1996
pounds '000
-----------
<S> <C>
Operating leases which expire:
Within one year................................................................. 228
Within two to five years........................................................ 1,189
After five years................................................................ 521
-----------
1,938
-----------
</TABLE>
14. DEFERRED TAXATION
Deferred taxation provided in the accounts and the amounts not provided are
as follows:
<TABLE>
<CAPTION>
PROVIDED NOT PROVIDED
31 DECEMBER 31 DECEMBER
1996 1996
pounds '000 pounds '000
----------- ------------
<S> <C> <C>
Accelerated capital allowances and other timing differences................. 594 741
--- ---
</TABLE>
15. ACQUISITIONS
On 17 May 1996 the Film Services Group acquired the 70% it did not already
own of Film Facilities Limited for a total cash consideration of
pounds 3,197,000. The acquisition expenses amounted to pounds 115,000.
The Film Services Group has used acquisition accounting for the above
purchases. Goodwill arising on the above acquisition during the year has been
written off immediately against reserves.
F-39
<PAGE>
PANAVISION INC.
FILM SERVICES GROUP
NOTES TO THE COMBINED FINANCIAL STATEMENTS (CONTINUED)
(INFORMATION FOR THE PERIOD ENDED 31 MARCH 1996 AND
SUBSEQUENT TO 31 DECEMBER 1996 IS UNAUDITED)
15. ACQUISITIONS (CONTINUED)
The net assets of Film Facilities Limited at the date of acquisition are
set out below:
<TABLE>
<CAPTION>
BOOK AND
FAIR VALUE
pounds '000
----------
<S> <C>
TANGIBLE FIXED ASSETS............................................................. 1,593
CURRENT ASSETS
Stocks............................................................................ 371
Debtors........................................................................... 405
Cash at bank and in hand.......................................................... 50
----------
TOTAL ASSETS...................................................................... 2,419
LIABILITIES
Short term creditors.............................................................. 353
Bank overdraft.................................................................... 52
Long term creditors and provisions................................................ 221
----------
NET ASSETS........................................................................ 1,793
Post acquisition profits previously included in Film Services Group accounts...... (231)
Goodwill written off in the financial statements of Visual Action Holdings plc.... 1,853
----------
3,415
----------
SATISFIED BY
Cash.............................................................................. 3,197
Acquisition expenses.............................................................. 115
----------
3,312
----------
Original investment in company.................................................... 103
----------
3,415
----------
</TABLE>
F-40
<PAGE>
PANAVISION INC.
FILM SERVICES GROUP
NOTES TO THE COMBINED FINANCIAL STATEMENTS (CONTINUED)
(INFORMATION FOR THE PERIOD ENDED 31 MARCH 1996 AND
SUBSEQUENT TO 31 DECEMBER 1996 IS UNAUDITED)
15. ACQUISITIONS (CONTINUED)
The summarised profit and loss account for the above acquisition for the period
from the beginning of its financial year up to the date of acquisition is as
follows:
PROFIT AND LOSS ACCOUNT
<TABLE>
<CAPTION>
FILM
FACILITIES
LIMITED
1 APRIL 1996
TO
31 MAY 1996
pounds '000
------------
<S> <C>
Turnover......................................................................... 497
---
Operating profit................................................................. 17
Profit on sale of fixed assets................................................... 1
---
Profit before tax................................................................ 18
Taxation......................................................................... (8)
---
Profit after tax................................................................. 10
Minority interests............................................................... --
---
PROFIT AFTER TAX AND MINORITY INTERESTS.......................................... 10
---
</TABLE>
The financial statements of Film Facilities Limited for the year ended 31
March 1996 showed profit after taxation and minority interests of
pounds 183,000.
16. CASH FLOW STATEMENT
(a) Analysis of changes in cash equivalents during the year:
<TABLE>
<CAPTION>
31 DECEMBER
1996
pounds '000
-----------
<S> <C>
Balance at 1 January............................................................ 1,156
Net cash outflow................................................................ (1,933)
-----------
Balance at 31 December.......................................................... (777)
-----------
</TABLE>
(b) Analysis of cash and short term deposits as shown in the balance sheet:
<TABLE>
<CAPTION>
31 DECEMBER
1996
pounds '000
-----------
<S> <C>
Cash at bank and in hand........................................................ (777)
-----
</TABLE>
F-41
<PAGE>
PANAVISION INC.
FILM SERVICES GROUP
NOTES TO THE COMBINED FINANCIAL STATEMENTS (CONTINUED)
(INFORMATION FOR THE PERIOD ENDED 31 MARCH 1996 AND
SUBSEQUENT TO 31 DECEMBER 1996 IS UNAUDITED)
16. CASH FLOW STATEMENT (CONTINUED)
(c) Analysis of changes in financing during the year:
<TABLE>
<CAPTION>
LOANS AND FINANCE
LEASE OBLIGATIONS
pounds '000
-----------------
<S> <C>
Balance at 1 January 1996.................................................. 2,977
Net cash outflows from financing........................................... (378)
------
Balance at 31 December 1996................................................ 2,599
------
</TABLE>
17. CAPITAL COMMITMENTS
Amounts contracted for but not provided in the financial statements
amounted to pounds 507,000.
18. EVENTS SINCE THE BALANCE SHEET DATE
The statutory accounts, from which these combined financial statements have
been prepared, were approved by the directors in February 1997. No amendments
have been made to reflect events subsequent to that approval except as set out
in note 1 above.
F-42
<PAGE>
PANAVISION INC
FILM SERVICES GROUP
DIFFERENCES BETWEEN ACCOUNTING PRINCIPLES GENERALLY ACCEPTED
IN THE UNITED KINGDOM AND THE UNITED STATES
The combined financial statements are prepared under accounting principles
generally accepted in the United Kingdom (UK GAAP) which differ in certain
respects from United States generally accepted accounting principles (US GAAP).
Differences estimated to have a significant effect on net income and net assets
of the Film Services Group are set out below.
GOODWILL
Goodwill arising on the acquisition of subsidiaries and associates is
written off immediately against reserves. In US GAAP, as set out in Accounting
Principle Board Opinion 16 and 17, goodwill arising on a purchase should be
capitalised and amortised over the useful life of the goodwill.
DEFERRED TAXATION
Provision is made for deferred taxation using the liability method on all
material timing differences to the extent that it is probable that the
liabilities will crystallise in the foreseeable future. With respect to timing
differences giving rise to a deferred taxation asset (which is the case with
Film Services Group), under UK GAAP the asset is not recognised unless recovery
within the immediate term is certain. Under US GAAP, as set out in Statements of
Financial Accounting Standards No. 109 'Accounting for Income Taxes', deferred
taxation is generally provided on a full liability basis on all temporary
differences and a deferred taxation asset would be recognised in full.
The following is a summary of the effect of the above differences on the
reported amounts:
<TABLE>
<CAPTION>
THREE
YEAR ENDED MONTHS ENDED
31 DECEMBER 31 MARCH
1996 1997
pounds '000 pounds '000
----------- ------------
<S> <C> <C>
NET INCOME
Profit/(loss) on ordinary activities after taxation........................ 1,738 (21)
ADJUSTMENTS
Goodwill amortisation arising on acquisition of Film Facilities Limited by
Visual Action Holdings plc............................................... (43) (19)
Deferred taxation.......................................................... (435) (109)
----------- ------------
Net income as adjusted to accord with US GAAP.............................. 1,260 (149)
----------- ------------
NET ASSETS
Net assets as reported..................................................... 16,245 16,490
ADJUSTMENTS
Goodwill arising on acquisition of Film Facilities Limited by Visual Action
Holdings plc............................................................. 1,810 1,791
Deferred taxation.......................................................... 741 632
----------- ------------
Net assets as adjusted to accord with US GAAP.............................. 18,796 18,913
----------- ------------
</TABLE>
STATEMENTS OF CASH FLOWS
The statements of cash flows prepared in accordance with UK GAAP present
substantially the same information as that required under US GAAP. UK and US
GAAP differ, however, with regard to the classification of items within the
statements and as regards the definition of cash and cash equivalents.
Under UK GAAP, cash flows are presented separately for operating
activities, returns on investments and servicing of finance, taxation, investing
activities and financing activities. US GAAP, however, requires only three
categories of cash flow activity to be reported: operating, investing and
financing. Cash flows from taxation
F-43
<PAGE>
PANAVISION INC
FILM SERVICES GROUP
DIFFERENCES BETWEEN ACCOUNTING PRINCIPLES GENERALLY ACCEPTED
IN THE UNITED KINGDOM AND THE UNITED STATES -- (CONTINUED)
and returns on investments and servicing of finance shown under UK GAAP would be
included as operating activities under US GAAP.
Under US GAAP, cash and cash equivalents would not include bank overdrafts
and borrowings with initial maturities of less than three months.
The categories of cash flow activity under US GAAP can be summarised as
follows:
<TABLE>
<CAPTION>
THREE
YEAR ENDED MONTHS ENDED
31 DECEMBER 31 MARCH
1996 1997
pounds '000 pounds '000
----------- ------------
<S> <C> <C>
Cash inflow from operating activities...................................... 7,484 721
Cash outflow on investing activities....................................... (9,039) (1,189)
Cash inflow from financing activities...................................... 1,545 393
----------- ------------
(Decrease) in cash and cash equivalents.................................... (10) (75)
Cash and cash equivalents at 1 January..................................... 1,453 1,443
----------- ------------
Cash and cash equivalents at 31 December/31 March.......................... 1,443 1,368
----------- ------------
</TABLE>
F-44
<PAGE>
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
NO PERSON HAS BEEN AUTHORIZED TO GIVE ANY INFORMATION OR TO MAKE ANY
REPRESENTATIONS NOT CONTAINED IN THIS PROSPECTUS AND, IF GIVEN OR MADE, SUCH
INFORMATION OR REPRESENTATIONS MUST NOT BE RELIED UPON AS HAVING BEEN
AUTHORIZED. THIS PROSPECTUS DOES NOT CONSTITUTE AN OFFER TO SELL, OR A
SOLICITATION OF AN OFFER TO BUY, ANY SECURITY OTHER THAN THE SECURITIES TO WHICH
IT RELATES, NOR DOES IT CONSTITUTE AN OFFER TO SELL OR A SOLICITATION OF AN
OFFER TO BUY SUCH SECURITIES TO ANYONE OR BY ANYONE IN ANY JURISDICTION WHERE,
OR TO ANY PERSON TO WHOM, IT IS UNLAWFUL TO MAKE SUCH OFFER OR SOLICITATION.
NEITHER THE DELIVERY OF THIS PROSPECTUS NOR ANY SALE MADE HEREUNDER SHALL, UNDER
ANY CIRCUMSTANCES, CREATE AN IMPLICATION THAT THERE HAS BEEN NO CHANGE IN THE
AFFAIRS OF THE ISSUER SINCE THE DATE HEREOF OR THAT THE INFORMATION CONTAINED
HEREIN IS CORRECT AS OF ANY TIME SUBSEQUENT TO ITS DATE.
- ------------------------
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
----
<S> <C>
Available Information........................... iii
Prospectus Summary.............................. 1
Risk Factors.................................... 13
The Panavision Recapitalization................. 18
Use of Proceeds................................. 18
Capitalization.................................. 19
Unaudited Pro Forma Financial Data.............. 20
Selected Historical Financial Data.............. 27
Management's Discussion and Analysis of
Financial Condition and Results of
Operations.................................... 28
The Exchange Offer.............................. 37
Business........................................ 44
Management...................................... 56
Ownership of Common Stock....................... 61
Certain Transactions............................ 61
Description of the Notes........................ 62
Book-Entry, Delivery and Form................... 87
Description of Other Indebtedness............... 89
Certain U.S. Federal Income Tax
Considerations................................ 91
Plan of Distribution............................ 93
Legal Matters................................... 93
Experts......................................... 93
Index to Financial Statements................... F-1
</TABLE>
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
[LOGO]
PANAVISION INC.
$217,903,000
9 5/8% SENIOR SUBORDINATED
DISCOUNT EXCHANGE
NOTES DUE 2006
------------------------
PROSPECTUS
------------------------
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
<PAGE>
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 13. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION
Set forth below is a table of the Commission registration fee and estimates
of all other expenses to be incurred in connection with the issuance and
distribution of the secuities described in this Registration Statement:
<TABLE>
<S> <C>
Commission registration fee................................... $44,250.00
Printing and engraving expenses............................... $ *
Legal fees and expenses....................................... $ *
Accounting fees and expenses.................................. $ *
Miscellaneous................................................. $ *
----------
Total.................................................... $ *
----------
----------
</TABLE>
- ------------------
* To be provided by amendment.
ITEM 14. INDEMNIFICATION OF DIRECTORS AND OFFICERS
The Company's Restated Certificate of Incorporation (the 'Restated
Certificate') provides that the Company shall indemnify each person who is or
was a director, officer or employee of the Company to the fullest extent
permitted under Section 145 of the Delaware General Corporation Law. Section 145
of the Delaware General Corporation Law empowers a Delaware corporation to
indemnify any person who was or is a party or is threatened to be made a party
to any threatened, pending or completed action, suit or proceeding, whether
civil, criminal, administrative or investigative (other than an action by or in
the right of such corporation) by reason of the fact that such person is or was
a director, officer, employee or agent of such corporation, or is or was serving
at the request of such corporation as a director, officer, employee or agent of
another corporation or enterprise. A corporation may indemnify such person
against expenses (including attorneys' fees), judgments, fines and amounts paid
in settlement actually and reasonably incurred by such person in connection with
such action, suit or proceeding if he acted in good faith and in a manner he
reasonably believed to be in or not opposed to the best interests of the
corporation, and, with respect to any criminal action or proceeding, had no
reasonable cause to believe his conduct was unlawful. A corporation may, in
advance of the final disposition of any civil, criminal, administrative or
investigative action, suit or proceeding, pay the expenses (including attorneys'
fees) incurred by any officer or director in defending such action, provided
that the director or officer undertakes to repay such amount if it shall
ultimately be determined that he is not entitled to be indemnified by the
corporation.
A Delaware corporation may indemnify officers and directors in an action by
or in the right of the corporation to procure a judgment in its favor under the
same conditions, except that no indemnification is permitted without judicial
approval if the officer or director is adjudged to be liable to the corporation.
Where an officer or director is successful on the merits or otherwise in the
defense of any action referred to above, the corporation must indemnify him
against the expenses (including attorneys' fees) which he actually and
reasonably incurred in connection therewith. The indemnification provided is not
deemed to be exclusive of any other rights to which an officer or director may
be entitled under any corporation's bylaw, agreement, vote or otherwise.
The Restated Certificate provides that a director of the Company will not
be personally liable to the Company or its stockholders for monetary damages for
breach of fiduciary duty as a director, except for liability (i) for any breach
of the director's duty of loyalty to the Company or its stockholders, (ii) for
acts or omissions not in good faith or which involve intentional misconduct or a
knowing violation of law, (iii) under Section 174 of the Delaware General
Corporation Law, which concerns unlawful payments of dividends, stock purchases
or redemption, or (iv) for any transaction from which the director derived an
improper personal benefit.
While the Restated Certificate provides directors with protection from
awards for monetary damages for breaches of their duty of care, it does not
eliminate such duty. Accordingly, the Restated Certificate will have no effect
on the availability of equitable remedies such as an injunction or rescission
based on a director's breach of his or her duty of care. The provisions of the
Restated Certificate described above apply to an officer of the
II-1
<PAGE>
Company only if he or she is a director of the Company and is acting in his or
her capacity as director, and do not apply to officers of the Company who are
not directors.
Reference is made to the Employment Agreement of William C. Scott (Exhibit
10.3) which provides for indemnification of Mr. Scott in his capacity as Chief
Executive Officer of the Company.
ITEM 15. RECENT SALES OF UNREGISTERED SECURITIES
On February 11, 1998, the PX Escrow sold $217,903,000 aggregate principal
amount at maturity of the Old Notes to Credit Suisse First Boston Corporation
and Schroder & Co. Inc. (collectively, the 'Initial Purchasers') less an
aggregate discount to the Initial Purchasers of $4,500,000. Such transactions
were exempt from the registration requirements of the Securities Act of 1933, as
amended (the 'Securities Act') in reliance on section 4(2) of such Act on the
basis that such transactions did not involve a public offering. In accordance
with the agreement pursuant to which the Initial Purchasers purchased the Old
Notes, such Initial Purchasers agreed to offer and sell such notes only to
'qualified institutional buyers' (as defined in Rule 144A under the Securities
Act) and to certain persons in offshore transactions in reliance on Regulation S
under the Securities Act. Except for the transactions described above there have
not been any recent sales of unregistered securities
The Registrant assumed PX Escrow's obligations under the Old Notes prior to
the commencement of the Exchange Offer.
ITEM 16. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES
<TABLE>
<CAPTION>
EXHIBIT NO. DESCRIPTION
- ----------- -------------------------------------------------------------------------------------------------------
<S> <C> <C>
3. -- CERTIFICATE OF INCORPORATION AND BY-LAWS.
*3.1 -- Restated Certificate of Incorporation of the Company.
*3.2 -- Restated By-Laws of the Company.
4. -- INSTRUMENTS DEFINING THE RIGHTS OF SECURITY HOLDERS, INCLUDING INDENTURES.
4.1 -- Indenture, dated as of February 11, 1998, between PX Escrow and The Bank of New York, as Trustee,
relating to the Company's 9 5/8% Senior Subordinated Discount Notes Due 2006 (the 'Indenture').
4.2 -- First Supplemental Indenture dated June 4, 1998, among PX Escrow, the Company and the Trustee,
amending the Indenture.
5. -- OPINIONS.
+5.1 -- Opinion of Paul, Weiss, Rifkind, Wharton & Garrison, special counsel to the Company.
10. -- MATERIAL CONTRACTS.
*10.1 -- Amended and Restated Stockholders Agreement, dated as of June 12, 1996.
*10.2 -- 1996 Stock Option Plan.
*10.3 -- Employment Agreement, dated as of June 12, 1996, between the Company and William C. Scott.
*10.4 -- Lease, dated June 13, 1995, between the Company and Trizec Warner Inc.
*10.5 -- Executive Incentive Compensation Plan.
10.6 -- First Amended and Restated Stock Option Plan (incorporated by reference to Exhibit 10.6 to the
Company's Annual Report on Form 10-K for the fiscal year ended December 31, 1996.)
10.7 -- Agreement, dated May 18, 1997, among Visual Action Holdings plc, Panavision Europe Limited and
the Company (incorporated herein by reference to Exhibit 2.1 to the Company's Current Report on
Form 8-K/A Amendment No. 1 to Form 8-K dated June 5, 1997).
10.8 -- Agreement, dated May 18, 1997, between Visual Action Holdings plc and the Company (incorporated
herein by reference to Exhibit 2.2 to the Company's Current Report on Form 8-K/A Amendment No. 1
to Form 8-K dated June 5, 1997).
10.9 -- Stock Purchase Agreement, dated May 18, 1997, among Visual Action Holdings, Inc., Visual Action
Holdings plc and the Company (incorporated herein by reference to Exhibit 2.3 to the Company's
Current Report on Form 8-K/A Amendment No. 1 to Form 8-K dated June 5, 1997).
</TABLE>
II-2
<PAGE>
<TABLE>
<CAPTION>
EXHIBIT NO. DESCRIPTION
- ----------- -------------------------------------------------------------------------------------------------------
<S> <C> <C>
10.10 -- Credit Agreement, dated June 5, 1997, among Panavision International, L.P., the subsidiary
guarantors and the lenders listed therein, and The Chase Manhattan Bank, as Administrative Agent
(incorporated herein by reference to Exhibit 10.1 to the Company's Quarterly Report on Form 10-Q
for the quarter ended June 30, 1997).
10.11 -- Agreement of Recapitalization and Merger, dated as of December 18, 1997, by and among PX Holding
Corporation, PX Merger Corporation and the Company (incorporated herein by reference to Exhibit
10.1 to the Company's Current Report on Form 8-K dated December 18, 1997).
10.12 -- Voting and Stockholders Agreement, dated as of December 18, 1997, by and among Warburg Pincus
Capital Company, L.P., the Company and Mafco Holdings Inc. (incorporated by reference to Exhibit
10.2 to the Company's Current Report on Form 8-K dated December 18, 1997).
10.13 -- Registration Agreement dated as of February 11, 1998 by and among PX Escrow and Credit Suisse
First Boston Corporation and Schroder & Co. Inc.
12. -- RATIO OF EARNINGS TO FIXED CHARGES.
12.1 -- Statement regarding the computation of ratio of earnings to fixed charges for the Company.
21. -- SUBSIDIARIES.
21.1 -- Subsidiaries of the Company. (incorporated by reference to Exhibit 21 to the Annual Report on
Form 10-K for the year ended December 31, 1997 of the Company).
23 -- CONSENTS.
23.1 -- Consent of Ernst & Young LLP.
23.2 -- Consent of Coopers & Lybrand.
+23.3 -- Consent of Paul, Weiss, Rifkind, Wharton & Garrison, special counsel to the Company (included in
Exhibit 5.1).
24. -- POWERS OF ATTORNEY.
24.1 -- Power of Attorney executed by Howard Gittis.
24.2 -- Power of Attorney executed by Joseph P. Page.
24.3 -- Power of Attorney executed by Kenneth Ziffren.
24.4 -- Power of Attorney executed by William C. Scott.
24.5 -- Power of Attorney executed by John S. Farrand.
24.6 -- Power of Attorney executed by Jeffrey J. Marcketta.
24.7 -- Power of Attorney executed by Christopher M.R. Phillips.
25. -- FORM T-1.
25.1 -- Statement of Eligibility and Qualification on Form T-1 of The Bank of New York, as Trustee under
the Indenture relating to the Company 9 5/8% Senior Subordinated Discount Notes due 2006.
99. -- MISCELLANEOUS.
99.1 -- Form of Letter of Transmittal.
99.2 -- Form of Notice of Guaranteed Delivery.
99.3 -- Form of Letter to Brokers, Dealers, Commercial Banks, Trust Companies and Other Nominees.
99.4 -- Form of Letter to Clients.
</TABLE>
- ------------------
+ To be filed by amendment.
* Incorporated herein by reference to the identically numbered exhibit to the
Company's Registration Statement on Form S-1, Registration No. 333-12235.
II-3
<PAGE>
ITEM 17. UNDERTAKINGS
(a) The undersigned Registrant hereby undertakes:
(1) To file, during any period in which offers or sales are being
made, a post-effective amendment to this registration statement:
(i) To include any prospectus required by Section 10(a)(3) of the
Securities Act of 1933;
(ii) To reflect in the prospectus any facts or events arising after
the effective date of the registration statement (or the most recent
post-effective amendment thereof) which, individually or in the
aggregate, represent a fundamental change in the information set forth
in the registration statement. Notwithstanding the foregoing, any
increase or decrease in volume of securities offered (if the total
dollar value of securities offered would not exceed that which was
registered) and any deviation from the low or high end of the estimated
maximum offering range may be reflected in the form of prospectus filed
with the Commission pursuant to Rule 424(b) if, in the aggregate, the
changes in volume and price represent no more than 20 percent change in
the maximum aggregate offering price set forth in the 'Calculation of
Registration Fee' table in the effective registration statement.
(iii) To include any material information with respect to the plan
of distribution not previously disclosed in the registration statement
or any material change to such information in the registration
statement,
(2) That, for the purpose of determining any liability under the
Securities Act of 1933, each such post-effective amendment shall be deemed
to be a new registration statement relating to the securities offered
therein, and the offering of such securities at that time shall be deemed
to be the initial bona fide offering thereof.
(3) To remove from registration by means of a post-effective amendment
any of the securities being registered which remain unsold at the
termination of the offering.
(b) The undersigned Registrant hereby undertakes:
Insofar as indemnification for liabilities arising under the
Securities Act may be permitted to directors, officers and controlling
persons of the Registrant pursuant to the foregoing provisions, or
otherwise, the Registrant has been advised that in the opinion of the
Securities and Exchange Commission such indemnification is against public
policy as expressed in the Securities Act and is, therefore, unenforceable.
In the event that a claim for indemnification against such liabilities
(other than the payment by the Registrant of expenses incurred or paid by a
director, officer or controlling person of the Registrant in the successful
defense of any action, suit or proceeding) is asserted by such director,
officer or controlling person in connection with the securities being
registered, the Registrant will, unless in the opinion of its counsel the
matter has been settled by controlling precedent, submit to a court of
appropriate jurisdiction the question whether such indemnification by it is
against public policy as expressed in the Securities Act and will be
governed by the final adjudication of such issue.
II-4
<PAGE>
SIGNATURES
PURSUANT TO THE REQUIREMENTS OF THE SECURITIES ACT OF 1933, THE REGISTRANT
HAS DULY CAUSED THIS REGISTRATION STATEMENT TO BE SIGNED ON ITS BEHALF BY THE
UNDERSIGNED, THEREUNTO DULY AUTHORIZED, IN THE CITY OF NEW YORK, STATE OF NEW
YORK, ON JULY 17, 1998.
PANAVISION INC.
By: /s/ William C. Scott
-------------------------
William C. Scott
PURSUANT TO THE REQUIREMENTS OF THE SECURITIES ACT OF 1933, THIS
REGISTRATION STATEMENT HAS BEEN SIGNED BY THE FOLLOWING PERSONS IN THE
CAPACITIES AND ON THE DATES INDICATED.
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
- ------------------------------------------ ------------------------------------------- -------------------
<S> <C> <C>
/s/ William C. Scott Chairman of the Board and Chief Executive July 17, 1998
- ------------------------------------------ Officer (Principal Executive Officer)
William C. Scott
/s/ John S. Farrand President, Chief Operating Officer and July 17, 1998
- ------------------------------------------ Director
John S. Farrand
/s/ Jeffrey J. Marcketta Executive Vice President and Chief July 17, 1998
- ------------------------------------------ Financial Officer (Principal Financial
Jeffrey J. Marcketta Officer)
/s/ Christopher M. R. Phillips Controller and Secretary (Principal July 17, 1998
- ------------------------------------------ Accounting Officer)
Christopher M. R. Phillips
* Director July 17, 1998
- ------------------------------------------
Howard Gittis
* Director July 17, 1998
- ------------------------------------------
Joseph P. Page
</TABLE>
II-5
<PAGE>
<TABLE>
<S> <C> <C>
* Director July 17, 1998
- ------------------------------------------
Kenneth Ziffren
</TABLE>
* Christopher M. R. Phillips, by signing his name hereto, does hereby
execute this Registration Statement on behalf of the directors and officers of
the Registrant indicated above by asterisks, pursuant to powers of attorney
duly executed by such directors and officers and filed as exhibits to the
Registration Statement.
By: /s/ Christopher M. R. Phillips
-------------------------------
Christopher M. R. Phillips
Attorney-in-fact
II-6
<PAGE>
EXHIBIT INDEX
<TABLE>
<CAPTION>
EXHIBIT NO. DESCRIPTION
- ----------- -------------------------------------------------------------------------------------------------------
<S> <C> <C>
3. -- CERTIFICATE OF INCORPORATION AND BY-LAWS.
*3.1 -- Restated Certificate of Incorporation of the Company.
*3.2 -- Restated By-Laws of the Company.
4. -- INSTRUMENTS DEFINING THE RIGHTS OF SECURITY HOLDERS, INCLUDING INDENTURES.
4.1 -- Indenture, dated as of February 11, 1998, between PX Escrow and The Bank of New York, as Trustee,
relating to the Company's 9 5/8% Senior Subordinated Discount Notes Due 2006 (the 'Indenture').
4.2 -- First Supplemental Indenture dated June 4, 1998, among PX Escrow, the Company and the Trustee,
amending the Indenture.
5. -- OPINIONS.
+5.1 -- Opinion of Paul, Weiss, Rifkind, Wharton & Garrison, special counsel to the Company.
10. -- MATERIAL CONTRACTS.
*10.1 -- Amended and Restated Stockholders Agreement, dated as of June 12, 1996.
*10.2 -- 1996 Stock Option Plan.
*10.3 -- Employment Agreement, dated as of June 12, 1996, between the Company and William C. Scott.
*10.4 -- Lease, dated June 13, 1995, between the Company and Trizec Warner Inc.
*10.5 -- Executive Incentive Compensation Plan.
10.6 -- First Amended and Restated Stock Option Plan (incorporated by reference to Exhibit 10.6 to the
Company's Annual Report on Form 10-K for the fiscal year ended December 31, 1996.)
10.7 -- Agreement, dated May 18, 1997, among Visual Action Holdings plc, Panavision Europe Limited and
the Company (incorporated herein by reference to Exhibit 2.1 to the Company's Current Report on
Form 8-K/A Amendment No. 1 to Form 8-K dated June 5, 1997).
10.8 -- Agreement, dated May 18, 1997, between Visual Action Holdings plc and the Company (incorporated
herein by reference to Exhibit 2.2 to the Company's Current Report on Form 8-K/A Amendment No. 1
to Form 8-K dated June 5, 1997).
10.9 -- Stock Purchase Agreement, dated May 18, 1997, among Visual Action Holdings, Inc., Visual Action
Holdings plc and the Company (incorporated herein by reference to Exhibit 2.3 to the Company's
Current Report on Form 8-K/A Amendment No. 1 to Form 8-K dated June 5, 1997).
10.10 -- Credit Agreement, dated June 5, 1997, among Panavision International, L.P., the subsidiary
guarantors and the lenders listed therein, and The Chase Manhattan Bank, as Administrative Agent
(incorporated herein by reference to Exhibit 10.1 to the Company's Quarterly Report on Form 10-Q
for the quarter ended June 30, 1997).
10.11 -- Agreement of Recapitalization and Merger, dated as of December 18, 1997, by and among PX Holding
Corporation, PX Merger Corporation and the Company (incorporated herein by reference to Exhibit
10.1 to the Company's Current Report on Form 8-K dated December 18, 1997).
10.12 -- Voting and Stockholders Agreement, dated as of December 18, 1997, by and among Warburg Pincus
Capital Company, L.P., the Company and Mafco Holdings Inc. (incorporated by reference to Exhibit
10.2 to the Company's Current Report on Form 8-K dated December 18, 1997).
10.13 -- Registration Agreement dated as of February 11, 1998 by and among PX Escrow and Credit Suisse
First Boston Corporation and Schroder & Co. Inc.
12. -- RATIO OF EARNINGS TO FIXED CHARGES.
12.1 -- Statement regarding the computation of ratio of earnings to fixed charges for the Company.
21. -- SUBSIDIARIES.
21.1 -- Subsidiaries of the Company. (incorporated by reference to Exhibit 21 to the Annual Report on
Form 10-K for the year ended December 31, 1997 of the Company).
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
EXHIBIT NO. DESCRIPTION
- ----------- -------------------------------------------------------------------------------------------------------
<S> <C> <C>
23 -- CONSENTS.
23.1 -- Consent of Ernst & Young LLP.
23.2 -- Consent of Coopers & Lybrand.
+23.3 -- Consent of Paul, Weiss, Rifkind, Wharton & Garrison, special counsel to the Company (included in
Exhibit 5.1).
24. -- POWERS OF ATTORNEY.
24.1 -- Power of Attorney executed by Howard Gittis.
24.2 -- Power of Attorney executed by Joseph P. Page.
24.3 -- Power of Attorney executed by Kenneth Ziffren.
24.4 -- Power of Attorney executed by William C. Scott.
24.5 -- Power of Attorney executed by John S. Farrand.
24.6 -- Power of Attorney executed by Jeffrey J. Marcketta.
24.7 -- Power of Attorney executed by Christopher M.R. Phillips.
25. -- FORM T-1.
25.1 -- Statement of Eligibility and Qualification on Form T-1 of The Bank of New York, as Trustee under
the Indenture relating to the Company 9 5/8% Senior Subordinated Discount Notes due 2006.
99. -- MISCELLANEOUS.
99.1 -- Form of Letter of Transmittal.
99.2 -- Form of Notice of Guaranteed Delivery.
99.3 -- Form of Letter to Brokers, Dealers, Commercial Banks, Trust Companies and Other Nominees.
99.4 -- Form of Letter to Clients.
</TABLE>
- ------------------
+ To be filed by amendment.
* Incorporated herein by reference to the identically numbered exhibit to the
Company's Registration Statement on Form S-1, Registration No. 333-12235.
<PAGE>
================================================================================
PX ESCROW CORP.
to be assumed by
PANAVISION INC.
9 5/8% Senior Subordinated Discount Notes Due 2006
and
9 5/8% Senior Subordinated Discount Exchange Notes Due 2006
----------
INDENTURE
Dated as of February 11, 1998
----------
THE BANK OF NEW YORK
Trustee
================================================================================
<PAGE>
TABLE OF CONTENTS
Page
----
ARTICLE I
Definitions and Incorporation by Reference
SECTION 1.01. Definitions................................................1
SECTION 1.02. Other Definitions.........................................21
SECTION 1.03. Incorporation by Reference of Trust Indenture Act.........22
SECTION 1.04. Rules of Construction.....................................23
ARTICLE II
The Securities
SECTION 2.01. Form and Dating...........................................24
SECTION 2.02. Execution and Authentication..............................24
SECTION 2.03. Registrar and Paying Agent................................25
SECTION 2.04. Paying Agent To Hold Money in Trust.......................25
SECTION 2.05. Securityholder Lists......................................26
SECTION 2.06. Transfer and Exchange.....................................26
SECTION 2.07. Replacement Securities....................................27
SECTION 2.08. Outstanding Securities....................................27
SECTION 2.09. Temporary Securities......................................27
SECTION 2.10. Cancellation..............................................27
SECTION 2.11. Defaulted Interest........................................28
SECTION 2.12. CUSIP Numbers.............................................28
ARTICLE III
Redemption
SECTION 3.01. Notices to Trustee........................................28
SECTION 3.02. Selection of Securities To Be Redeemed....................29
SECTION 3.03. Notice of Redemption......................................29
SECTION 3.04. Effect of Notice of Redemption............................30
SECTION 3.05. Deposit of Redemption Price...............................30
SECTION 3.06. Securities Redeemed in Part...............................31
i
<PAGE>
Page
----
ARTICLE IV
Covenants
SECTION 4.01. Payment of Securities.....................................31
SECTION 4.02. SEC Reports...............................................31
SECTION 4.03. Limitation on Debt of the Company and its Subsidiaries....32
SECTION 4.04. Limitation on Other Senior Subordinated Debt and
Secured Debt..............................................34
SECTION 4.05. Limitation on Restricted Payments.........................34
SECTION 4.06. Limitation on Sales of Assets and Subsidiary Stock........37
SECTION 4.07. Limitation on Transactions with Affiliates................42
SECTION 4.08. Change of Control.........................................45
SECTION 4.09. Limitation on Other Business Activities...................46
SECTION 4.10. Limitation on Restrictions on Distributions
from Subsidiaries.........................................46
SECTION 4.11. Limitation on Issuances of Guarantees of Debt.............47
SECTION 4.12. Compliance Certificate....................................48
SECTION 4.13. Further Instruments and Acts..............................48
ARTICLE V
Successor Company
SECTION 5.01. When Company May Merge or Transfer Assets.................48
ARTICLE VI
Defaults and Remedies
SECTION 6.01. Events of Default.........................................50
SECTION 6.02. Acceleration..............................................52
SECTION 6.03. Other Remedies............................................52
SECTION 6.04. Waiver of Past Defaults...................................53
SECTION 6.05. Control by Majority.......................................53
SECTION 6.06. Limitation on Suits.......................................53
SECTION 6.07. Rights of Holders To Receive Payment......................54
SECTION 6.08. Collection Suit by Trustee................................54
SECTION 6.09. Trustee May File Proofs of Claim..........................54
SECTION 6.10. Priorities................................................54
SECTION 6.11. Undertaking for Costs.....................................55
SECTION 6.12. Waiver of Stay or Extension Laws..........................55
ii
<PAGE>
Page
----
ARTICLE VII
Trustee
SECTION 7.01. Duties of Trustee.........................................55
SECTION 7.02. Rights of Trustee.........................................57
SECTION 7.03. Individual Rights of Trustee..............................57
SECTION 7.04. Trustee's Disclaimer......................................58
SECTION 7.05. Notice of Defaults........................................58
SECTION 7.06. Reports by Trustee to Holders.............................58
SECTION 7.07. Compensation and Indemnity................................58
SECTION 7.08. Replacement of Trustee....................................59
SECTION 7.09. Successor Trustee by Merger...............................60
SECTION 7.10. Eligibility; Disqualification.............................60
SECTION 7.11. Preferential Collection of Claims Against Company.........61
ARTICLE VIII
Discharge of Indenture; Defeasance
SECTION 8.01. Discharge of Liability on Securities; Defeasance..........61
SECTION 8.02. Conditions to Defeasance..................................62
SECTION 8.03. Application of Trust Money................................63
SECTION 8.04. Repayment to Company......................................63
SECTION 8.05. Indemnity for Government Obligations......................64
SECTION 8.06. Reinstatement.............................................64
ARTICLE IX
Amendments
SECTION 9.01. Without Consent of Holders................................64
SECTION 9.02. With Consent of Holders...................................65
SECTION 9.03. Compliance with Trust Indenture Act.......................66
SECTION 9.04. Revocation and Effect of Consents and Waivers.............66
SECTION 9.05. Notation on or Exchange of Securities.....................67
SECTION 9.06. Trustee To Sign Amendments................................67
SECTION 9.07. Payment for Consent.......................................67
iii
<PAGE>
Page
----
ARTICLE X
Subsidiary Guarantees
SECTION 10.01. Subsidiary Guarantees....................................68
SECTION 10.02. Guaranty Absolute........................................69
SECTION 10.03. Limitation on Liability..................................70
SECTION 10.04. Waivers..................................................70
SECTION 10.05. Waiver of Subrogation and Contribution...................71
SECTION 10.06. No Waiver; Cumulative Remedies...........................71
SECTION 10.07. Successors and Assigns...................................72
SECTION 10.08. Severability.............................................72
ARTICLE XI
Subordination
SECTION 11.01. Agreement To Subordinate.................................72
SECTION 11.02. Liquidation, Dissolution, Bankruptcy.....................72
SECTION 11.03. Default on Senior Debt...................................73
SECTION 11.04. Acceleration of Payment of Securities....................74
SECTION 11.05. When Distribution Must Be Paid Over......................74
SECTION 11.06. Subrogation..............................................74
SECTION 11.07. Relative Rights..........................................74
SECTION 11.08. Subordination May Not Be Impaired by Company.............74
SECTION 11.09. Rights of Trustee and Paying Agent.......................74
SECTION 11.10. Distribution or Notice to Representative.................75
SECTION 11.11. Article XI Not To Prevent Events of Default or
Limit Right To Accelerate................................75
SECTION 11.12. Trust Moneys Not Subordinated............................75
SECTION 11.13. Trustee Entitled To Rely.................................75
SECTION 11.14. Trustee To Effectuate Subordination......................76
SECTION 11.15. Trustee Not Fiduciary for Holders of Senior Debt.........76
SECTION 11.16. Reliance by Holders of Senior Debt on
Subordination Provisions.................................76
ARTICLE XII
Miscellaneous
SECTION 12.01. Trust Indenture Act Controls.............................77
SECTION 12.02. Notices..................................................77
SECTION 12.03. Communication by Holders with Other Holders..............78
iv
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Page
----
SECTION 12.04. Certificate and Opinion as to Conditions Precedent.......78
SECTION 12.05. Statements Required in Certificate or Opinion............78
SECTION 12.06. When Securities Disregarded..............................79
SECTION 12.07. Rules by Trustee, Paying Agent and Registrar.............79
SECTION 12.08. Legal Holidays...........................................79
SECTION 12.09. Governing Law............................................79
SECTION 12.10. No Recourse Against Others...............................79
SECTION 12.11. Successors...............................................79
SECTION 12.12. Multiple Originals.......................................79
SECTION 12.13. Table of Contents; Headings..............................80
Rule 144A / Regulation S Appendix
Exhibit A -- Form of Initial Note
Exhibit B -- Form of Exchange Note
Exhibit C -- Form of Subsidiary Supplemental Indenture
v
<PAGE>
INDENTURE, dated as of February 11, 1998, between PX ESCROW CORP., a
Delaware corporation ("PX Escrow"), and THE BANK OF NEW YORK, a New York banking
corporation, as trustee (the "Trustee").
Each party agrees as follows for the benefit of the other party and for the
equal and ratable benefit of the Holders of the Securities:
ARTICLE I
Definitions and Incorporation by Reference
SECTION 1.01. Definitions.
"Accreted Value" as of any date (the "Specified Date") means, with respect
to each $1,000 Principal Amount at Maturity of Securities:
(i) if the Specified Date is one of the following dates (each a
"Semi-Annual Accrual Date"), the amount set forth opposite such date below:
Semi-Annual
Accrual Date Accreted Value
------------ --------------
February 11, 1998 $ 688.38
August 1, 1998 719.63
February 1, 1999 754.26
August 1, 1999 790.56
February 1, 2000 828.61
August 1, 2000 868.48
February 1, 2001 910.28
August 1, 2001 954.08
February 1, 2002 $1,000.00
(ii) if the Specified Date occurs between two Semi-Annual Accrual
Dates, the sum of (A) the Accreted Value for the Semi-Annual Accrual Date
immediately preceding the Specified Date and (B) an amount equal to the
product of (i) the Accreted Value for the immediately following Semi-Annual
Accrual Date less
<PAGE>
2
the Accreted Value for the immediately preceding Semi-Annual Accrual Date
and (ii) a fraction, the numerator of which is the number of days from the
immediately preceding Semi-Annual Accrual Date to the Specified Date, using
a 360-day year of twelve 30-day months, and the denominator of which is 180
(or, if the Semi-Annual Accrual Date immediately preceding the Specified
Date is February 11, 1998, the denominator of which is 170; and
(iii) if the Specified Date occurs after February 1, 2002, $1,000.00.
Whenever the redemption price or Put Amount is paid in connection with the
redemption, purchase or repurchase of a portion of a Security, the Accreted
Value of such Security is reduced by the Accreted Value of the portion of the
Security so redeemed, purchased or repurchased.
"Affiliate" of any specified Person means (i) any other Person which,
directly or indirectly, is in control of, is controlled by or is under common
control with such specified Person or (ii) any other Person who is a director or
officer (A) of such specified Person, (B) of any subsidiary of such specified
Person or (C) of any Person described in clause (i) above. For purposes of this
definition, control of a Person means the power, direct or indirect, to direct
or cause the direction of the management and policies of such Person whether by
contract or otherwise; and the terms "controlling" and "controlled" have
meanings correlative to the foregoing.
"Applicable Premium" means, with respect to a Security at any time, the
greater of (i) 1.0% of the Accreted Value of such Security at such time and (ii)
the excess of (A) the present value at such time of the Principal Amount at
Maturity plus any required interest payments due on such Security, computed
using a discount rate equal to the Treasury Rate plus 100 basis points, over (B)
the Accreted Value of such Security at such time.
"Asset Disposition" means any sale, lease, transfer or other disposition
(or series of related sales, leases, transfers or dispositions) of shares of
Capital Stock of a Subsidiary of the Company (other than directors' qualifying
shares and other than Capital Stock of a Non-Recourse Subsidiary), property or
other assets (each referred to for the purposes of this definition as a
"disposition") by the Company or any of its Subsidiaries (other than a
Non-Recourse Subsidiary) (including any disposition by means of a merger,
consolidation or similar transaction) other than (i) a disposition by a
Subsidiary of the Company to the Company or by the Company or a Subsidiary of
the Company to a Wholly Owned Recourse Subsidiary, (ii) a disposition of
property or assets by the Company or its Subsidiaries at fair market value in
the ordinary course of business, (iii) a disposition by the Company or its
Subsidiaries of obsolete assets or inventory in the ordinary course of business,
(iv) a disposition subject to or permitted
<PAGE>
3
by Section 4.05, (v) an issuance of employee stock options and (vi) a
disposition by the Company or any of its Subsidiaries in which the Company or
its Subsidiaries receive as consideration Capital Stock of (or similar interests
in) a Person engaged in, or assets that will be used in, the businesses of
Panavision and its Wholly Owned Recourse Subsidiaries, or additionally, in the
case of a disposition by a Subsidiary that is not a Wholly Owned Recourse
Subsidiary, the business of such Subsidiary, existing on the Issue Date or in
businesses reasonably related thereto, as determined by the Board of Directors
of the Company, the determination of which shall be conclusive and evidenced by
a resolution of the Board of Directors of the Company.
"Assumption" means the assumption by Panavision of the obligations of PX
Escrow under this Indenture, the Securities, the Registration Agreement, the
Purchase Agreement and the Escrow Agreement pursuant to the terms of the Escrow
Agreement.
"Average Life" means, with respect to any Debt, the quotient obtained by
dividing (i) the sum of the products of (a) the number of years from the date of
the transaction or event giving rise to the need to calculate the Average Life
of such Debt to the date, or dates, of each successive scheduled principal
payment of such Debt multiplied by (b) the amount of each such principal payment
by (ii) the sum of all such principal payments.
"Bank Debt" means any and all amounts payable by the Company or any of its
Subsidiaries under or in respect of the Credit Agreement or any Refinancing
thereof, or any other agreements with lenders party to the foregoing, including
principal, premium (if any), interest (including interest accruing on or after
the filing of any petition in bankruptcy or for reorganization relating to the
Company), fees, charges, expenses, reimbursement obligations, Guarantees and all
other amounts payable thereunder or in respect thereof; provided, however, that
nothing in this definition shall permit the Company or any of its Subsidiaries
to Issue any Debt that is not permitted pursuant to Section 4.03.
"Board of Directors" means, with respect to any Person, the Board of
Directors of such Person or any committee thereof duly authorized to act on
behalf of such Board.
"Business Day" means each day which is not a Legal Holiday.
"Capital Lease Obligation" of a Person means any obligation which is
required to be classified and accounted for as a capital lease on the face of a
balance sheet of such Person prepared in accordance with GAAP; the amount of
such obligation shall be the capitalized amount thereof, determined in
accordance with GAAP; and the Stated Maturity thereof shall be the date of the
last payment of rent or any other amount
<PAGE>
4
due under such lease prior to the first date upon which such lease may be
terminated by the lessee without payment of a penalty.
"Capital Stock" of any Person means any and all shares, interests
(including partnership interests), rights to purchase, warrants, options,
participations or other equivalents of or interests in (however designated)
equity of such Person, including any Preferred Stock, but excluding any debt
securities convertible into or exchangeable for such equity.
"Change of Control" means the occurrence of any of the following events on
or after the Issue Date:
(i) any "Person" (as such term is used in Sections 13(d) and 14(d) of
the Exchange Act), other than one or more Permitted Holders, is or becomes
the beneficial owner (as defined in Rules 13d-3 and 13d-5 under the
Exchange Act, except that a Person shall be deemed to have "beneficial
ownership" of all shares that any such Person has the right to acquire,
whether such right is exercisable immediately or only after the passage of
time), directly or indirectly, of more than 35% of the total voting power
of the Voting Stock of the Company; provided, however, that the Permitted
Holders "beneficially own" (as so defined), directly or indirectly, in the
aggregate a lesser percentage of the total voting power of the Voting Stock
of the Company than such other Person and do not have the right or ability
by voting power, contract or otherwise to elect or designate for election a
majority of the Board of Directors of the Company (for the purposes of this
clause (i), such other Person shall be deemed to beneficially own any
Voting Stock of a specified corporation held by a parent corporation, if
such other Person "beneficially owns" (as so defined), directly or
indirectly, more than 35% of the voting power of the Voting Stock of such
parent corporation and the Permitted Holders "beneficially own" (as so
defined), directly or indirectly, in the aggregate a lesser percentage of
the voting power of the Voting Stock of such parent corporation and do not
have the right or ability by voting power, contract or otherwise to elect
or designate for election a majority of the Board of Directors of such
parent corporation); or
(ii) during any period of two consecutive years, individuals who at
the beginning of such period constituted the Board of Directors of the
Company (together with any new directors whose election by such Board of
Directors or whose nomination for election by the shareholders of the
Company was approved by a vote of 66-2/3% of the directors of the Company
then still in office who were either directors at the beginning of such
period or whose election or nomination for election was previously so
approved) cease for any reason to constitute a majority of the Board of
Directors of the Company then in office.
<PAGE>
5
"Code" means the Internal Revenue Code of 1986, as amended.
"Company" means (i) prior to the Effective Date, PX Escrow, and (ii) from
and after the Effective Date, Panavision until a successor replaces it and,
thereafter, means the successor and, for purposes of any provision contained
herein and required by the TIA, each other obligor on the indenture securities.
"Consolidated EBITDA Coverage Ratio" means, for any period, the ratio of
(i) the aggregate amount of EBITDA for such period to (ii) Consolidated Interest
Expense for such period; provided, however, that:
(1) if Panavision or any Subsidiary of Panavision has Issued any Debt
since the beginning of such period that remains outstanding or if the
transaction giving rise to the need to calculate the Consolidated EBITDA
Coverage Ratio is an Issuance of Debt, or both, EBITDA and Consolidated
Interest Expense for such period shall be calculated after giving effect on
a pro forma basis to such Debt as if such Debt had been Issued on the first
day of such period and the discharge of any other Debt Refinanced or
otherwise discharged with the proceeds of such new Debt as if such
discharge had occurred on the first day of such period;
(2) if since the beginning of such period Panavision or any Subsidiary
of Panavision shall have made any Asset Disposition, EBITDA for such period
shall be reduced by an amount equal to the EBITDA (if positive) directly
attributable to the assets which are the subject of such Asset Disposition
for such period, or increased by an amount equal to the EBITDA (if
negative), directly attributable thereto for such period and Consolidated
Interest Expense for such period shall be reduced by an amount equal to the
Consolidated Interest Expense directly attributable to any Debt of
Panavision or any Subsidiary of Panavision Refinanced or otherwise
discharged with respect to Panavision and its continuing Subsidiaries in
connection with such Asset Disposition for such period (or if the Capital
Stock of any Subsidiary of Panavision is sold, the Consolidated Interest
Expense for such period directly attributable to the Debt of such
Subsidiary to the extent Panavision and its continuing Subsidiaries are no
longer liable for such Debt after such sale); and
(3) if since the beginning of such period Panavision or any Subsidiary
of Panavision (by merger or otherwise) shall have made an Investment in any
Subsidiary of Panavision (or any Person which becomes a Subsidiary of
Panavision) or an acquisition of assets which constitute all or
substantially all of an operating unit of a business, including any
Investment or acquisition of assets occurring in connection with a
transaction causing a calculation to be made hereunder, EBITDA and
Consolidated Interest Expense for such period shall be calculated after
giving pro forma effect thereto, as if such Investment or acquisition
occurred on the first day of such period.
<PAGE>
6
For purposes of this definition, whenever pro forma effect is to be given to an
acquisition of assets, an Investment in any Person, an Asset Disposition, the
amount of income or earnings relating thereto, or the amount of Consolidated
Interest Expense associated with any Debt, the pro forma calculations shall be
determined in good faith by a responsible financial or accounting Officer of the
Company. If any Debt bears a floating rate of interest and is being given pro
forma effect, the interest on such Debt shall be calculated as if the rate in
effect on the date of determination had been the applicable rate for the entire
period.
"Consolidated Interest Expense" means, for any period, the sum of (a) the
interest expense of Panavision and its consolidated Subsidiaries (other than
Non-Recourse Subsidiaries) for such period as determined in accordance with GAAP
consistently applied, plus (b) Preferred Stock dividends in respect of Preferred
Stock of Panavision or any Subsidiary of Panavision (other than a Non-Recourse
Subsidiary) held by Persons other than Panavision or a Wholly Owned Recourse
Subsidiary, plus (c) the cash contributions to an employee stock ownership plan
of Panavision and its Subsidiaries (other than Non-Recourse Subsidiaries) to the
extent such contributions are used by an employee stock ownership plan to pay
interest.
"Consolidated Net Income" means, for any period, the consolidated net
income (or loss) of Panavision and its consolidated Subsidiaries for such period
as determined in accordance with GAAP, adjusted to the extent included in
calculating such net income (or loss), by excluding
(i) all extraordinary gains or losses;
(ii) the portion of net income (or loss) of Panavision and its
consolidated Subsidiaries attributable to minority interests in
unconsolidated Persons except to the extent that, in the case of net
income, cash dividends or distributions have actually been received by
Panavision or one of its consolidated Subsidiaries (subject, in the case of
a dividend or distribution received by a Subsidiary of Panavision, to the
limitations contained in clause (v) below) and, in the case of net loss,
Panavision or any Subsidiary of Panavision has actually contributed, lent
or transferred cash to such unconsolidated Person;
(iii) net income (or loss) of any other Person attributable to any
period prior to the date of combination of such other Person with
Panavision or any of its Subsidiaries on a "pooling of interests" basis;
(iv) net gains or losses in respect of dispositions of assets by
Panavision or any of its Subsidiaries (including pursuant to a
sale-and-leaseback arrangement) other than in the ordinary course of
business;
<PAGE>
7
(v) the net income of any Subsidiary of Panavision to the extent that
the declaration of dividends or distributions by that Subsidiary of that
income is not at the time permitted, directly or indirectly, by operation
of the terms of its charter or any agreement, instrument, judgment, decree,
order, statute, rule or governmental regulations applicable to that
Subsidiary or its shareholders;
(vi) any net income or loss of any Non-Recourse Subsidiary, except
that Panavision's equity in the net income of any such Non-Recourse
Subsidiary for such period shall be included in such Consolidated Net
Income up to the aggregate amount of cash actually distributed by such
Non-Recourse Subsidiary during such period to Panavision as a dividend or
other distribution; and
(vii) the cumulative effect of a change in accounting principles;
provided, however, that in using Consolidated Net Income for purposes of
calculating the Consolidated EBITDA Coverage Ratio at any time, net income of a
Subsidiary of the type described in clause (v) of this definition shall not be
excluded. Notwithstanding the foregoing, for the purposes of Section 4.05 only,
Consolidated Net Income shall be calculated after giving effect on a pro forma
basis to, (a) to the extent not already included in the calculation of
consolidated net income of Panavision in accordance with GAAP, interest expense
on the Securities, amortization of deferred financing charges on the Securities
and interest income on Escrowed Property accruing from the Issue Date to but
excluding the Effective Date as if Panavision had issued the Securities on the
Issue Date and (b) to the extent Transaction Charges have been charged to
Consolidated Net Income in the fiscal quarter during which such Transaction
Charges were incurred, the Transaction Charges as if they had not been charged
to Consolidated Net Income in the fiscal quarter in which such Transaction
Charges were incurred but instead had been capitalized on the consolidated
balance sheet of Panavision in connection with the Transactions and subsequently
amortized over a 40- year period.
"Consolidated Net Worth" of any Person means, at any date, all amounts
which would, in conformity with GAAP, be included under shareholders' equity on
a consolidated balance sheet of such Person at such date, less any amounts
attributable to Redeemable Stock or Exchangeable Stock.
"Credit Agreement" means the credit facilities to be provided to the
Company pursuant to a Commitment Letter dated January 23, 1998 from The Chase
Manhattan Bank, as such facilities may be amended, supplemented, waived and
otherwise modified or Refinanced from time to time.
<PAGE>
8
"Debt" of any Person means, on any date of determination, without
duplication,
(i) the principal in respect of (A) indebtedness of such Person for
money borrowed and (B) indebtedness evidenced by notes, debentures, bonds
or other similar instruments for the payment of which such Person is
responsible or liable, including, in each case, any premium on such
indebtedness to the extent such premium has become due and payable;
(ii) all Capital Lease Obligations of such Person;
(iii) all obligations of such Person issued or assumed as the deferred
purchase price of property, all conditional sale obligations of such Person
and all obligations of such Person under any title retention agreement (but
excluding trade accounts payable and other accrued current liabilities
arising in the ordinary course of business);
(iv) all obligations of such Person for the reimbursement of any
obligor on any letter of credit, banker's acceptance or similar credit
transaction (other than obligations with respect to letters of credit
securing obligations (other than obligations described in (i) through (iii)
above) entered into in the ordinary course of business of such Person to
the extent such letters of credit are not drawn upon or, if and to the
extent drawn upon, such drawing is reimbursed no later than the third
Business Day following receipt by such Person of a demand for reimburse
ment following payment on the letter of credit);
(v) the amount of all obligations of such Person with respect to the
redemption, repayment (including liquidation preference) or other
repurchase of, in the case of a Subsidiary of the Company, any Preferred
Stock and, in the case of any other Person, any Redeemable Stock (but
excluding in each case any accrued dividends);
(vi) all obligations of the type referred to in clauses (i) through
(v) of other Persons and all dividends of other Persons for the payment of
which, in either case, such Person is responsible or liable, directly or
indirectly, as obligor, guarantor or otherwise, including Guarantees of
such obligations and dividends; and
(vii) all obligations of the type referred to in clauses (i) through
(vi) of other Persons secured by any Lien on any property or asset of such
Person (whether or not such obligation is assumed by such Person), the
amount of such obligation being deemed to be the lesser of the value of
such property or assets or the amount of the obligation so secured.
<PAGE>
9
"Default" means any event which is, or after notice or passage of time or
both would be, an Event of Default.
"Designated Senior Debt" means, as of any date of determination, (i) the
Bank Debt and (ii) any other Senior Debt of the Company; provided that for
purposes of this clause (ii) the Senior Debt of the Company Issued in any single
transaction shall not be Designated Senior Debt unless the Senior Debt Issued in
such transaction (including any commitments to lend), at the time of Issuance,
had an aggregate principal amount outstanding (including any commitments to
lend) exceeding $25,000,000 and is specifically designated in the instrument
evidencing such Senior Debt as "Designated Senior Debt."
"EBITDA" means, for any period, the Consolidated Net Income for such
period, plus the following to the extent included in calculating such
Consolidated Net Income: (i) income tax expense, (ii) Consolidated Interest
Expense, (iii) depreciation expense, (iv) amortization expense, (v) all other
noncash charges (excluding any noncash charge to the extent that it requires an
accrual of or a reserve for cash disbursements for any future period), (vi)
Transaction Charges and (vii) foreign currency gains or losses.
"Effective Date" means the effective date of the Assumption.
"Escrow Agent" means the Escrow Agent from time to time under the Escrow
Agreement.
"Escrow Agreement" means the Escrow Agreement dated as of February 11,
1998, between the Company and The Bank of New York, as escrow agent thereunder,
as amended from time to time.
"Escrowed Property" has the meaning ascribed thereto in the Escrow
Agreement.
"Exchange Act" means the Securities Exchange Act of 1934.
"Exchange Notes" means the 9 5/8% Senior Subordinated Discount Exchange
Notes Due 2006 of the Company, if and when issued pursuant to a Registered
Exchange Offer for Initial Notes.
"Exchangeable Stock" means any Capital Stock of a Person which by its terms
or otherwise is required to be exchanged or converted or is exchangeable or
convertible at the option of the holder into another security (other than
Capital Stock of such Person which is neither Exchangeable Stock nor Redeemable
Stock).
<PAGE>
10
"Existing Credit Agreement" means the Credit Agreement, dated as of June 5,
1997, among Panavision, the subsidiary guarantors and lenders signatory thereto
and The Chase Manhattan Bank, as administrative agent, as in effect on the Issue
Date.
"GAAP" means generally accepted accounting principles in the United States,
as in effect from time to time, except that for purposes of calculating the
Consolidated EBITDA Coverage Ratio, it shall mean generally accepted accounting
principles in the United States as in effect on the Issue Date.
"Guarantee" means any obligation, contingent or otherwise, of any Person
directly or indirectly guaranteeing any Debt or other obligation of any other
Person and any obligation, direct or indirect, contingent or otherwise, of such
Person (i) to purchase or pay (or advance or supply funds for the purchase or
payment of) such Debt or other obligation of such other Person (whether arising
by virtue of partnership arrangements, or by agreement to keep-well, to purchase
assets, goods, securities or services, to take-or-pay, or to maintain financial
statement conditions or otherwise) or (ii) entered into for purposes of assuring
in any other manner the obligee of such Debt or other obligation of the payment
thereof or to protect such obligee against loss in respect thereof (in whole or
in part); provided, however, that the term "Guarantee" shall not include
endorsements for collection or deposit in the ordinary course of business. The
term "Guarantee" used as a verb has a corresponding meaning.
"Holder" or "Securityholder" means the Person in whose name a Security is
registered on the Registrar's books.
"Indenture" means this Indenture, as amended or supplemented from time to
time.
"Initial Notes" means the 9 5/8% Senior Subordinated Discount Notes Due
2006 of the Company.
"Investment" in any Person means any loan or advance to, any net payment on
a Guarantee of, any acquisition of Capital Stock, equity interest, obligation or
other security of, or capital contribution or other investment in, such Person.
Investments shall exclude advances to customers and suppliers in the ordinary
course of business. The term "Invest" has a corresponding meaning. For purposes
of the definitions of "Non-Recourse Subsidiary" and "Restricted Payment" and for
purposes of Section 4.05, (i) "Investment" shall include a designation after the
Issue Date of a Subsidiary as a Non-Recourse Subsidiary, and such Investment
shall be valued at an amount equal to the portion (proportionate to the
Company's equity interest in such Subsidiary) of the fair market value of the
net assets of such Subsidiary at the time that such Subsidiary is designated a
Non-Recourse Subsidiary; and (ii) any property
<PAGE>
11
transferred to or from a Non-Recourse Subsidiary shall be valued at its fair
market value at the time of such transfer, in each case as determined in good
faith by the Board of Directors of the Company, and if such property so
transferred (including in a series of related transactions) has a fair market
value, as so determined by the Board of Directors, in excess of $10,000,000,
such determination shall be confirmed by an independent appraiser.
"Issue" means issue, assume, Guarantee, incur or otherwise become liable
for; provided, however, that any Debt or Capital Stock of a Person existing at
the time such Person becomes a Subsidiary of another Person (whether by merger,
consolidation, acquisition or otherwise) shall be deemed to be issued by such
Subsidiary at the time it becomes a Subsidiary of such other Person.
"Issue Date" means the date of original issue of the Initial Notes.
"Legal Holiday" means a Saturday, a Sunday or a day on which banking
institutions are not required to be open in the State of New York or in the
state where the principal office of the Trustee is located.
"Lien" means any mortgage, pledge, security interest, conditional sale or
other title retention agreement or other similar lien.
"Mafco Holdings" means Mafco Holdings Inc., a Delaware corporation, and its
successors.
"Net Available Cash" from an Asset Disposition means cash payments received
(including any cash payments received by way of deferred payment of principal
pursuant to a note or installment receivable or otherwise, but only as and when
received, but excluding any other consideration received in the form of
assumption by the acquiring Person of Debt or other obligations relating to such
properties or assets or received in any other noncash form) therefrom, in each
case net of (i) all legal, title and recording tax expenses, commissions and
other fees and expenses incurred, and all Federal, state, provincial, foreign
and local taxes required or estimated in good faith to be required to be accrued
as a liability under GAAP, as a consequence of such Asset Disposition, (ii) all
payments made on any Debt which is secured by any assets subject to such Asset
Disposition, in accordance with the terms of any Lien upon or other security
agreement of any kind with respect to such assets, or which must by its terms,
or in order to obtain a necessary consent to such Asset Disposition, or by
applicable law be repaid out of the proceeds from or in connection with such
Asset Disposition and (iii) all distributions and other payments required to be
made to minority interest holders in Subsidiaries or joint ventures as a result
of such Asset Disposition; provided, however, that in connection with an Asset
Disposition to a Subsidiary of the Company (other than a Non-Recourse
Subsidiary), Net Available
<PAGE>
12
Cash will be deemed to be a percentage of Net Available Cash (as calculated
above) equal to (A) 100% minus (B) the Company's percentage ownership in such
Subsidiary.
"Net Cash Proceeds," with respect to any issuance or sale of Capital Stock,
means the cash proceeds of such issuance or sale net of attorneys' fees,
accountants' fees, underwriters' or placement agents' fees, discounts or
commissions and brokerage, consultant and other fees actually incurred in
connection with such issuance or sale and net of taxes paid or estimated in good
faith to be payable as a result thereof.
"Non-Convertible Capital Stock" means, with respect to any corporation, any
non-convertible Capital Stock of such corporation and any Capital Stock of such
corporation convertible solely into non-convertible common stock of such
corporation; provided, however, that Non-Convertible Capital Stock shall not
include any Redeemable Stock or Exchangeable Stock.
"Non-Recourse Debt" means Debt or that portion of Debt (i) as to which
neither the Company nor its Subsidiaries (other than a Non-Recourse Subsidiary)
(A) provide credit support (including any undertaking, agreement or instrument
which would constitute Debt), (B) is directly or indirectly liable or (C)
constitute the lender and (ii) no default with respect to which (including any
rights which the holders thereof may have to take enforcement action against the
assets of a Non-Recourse Subsidiary) would permit (upon notice, lapse of time or
both) any holder of any other Debt of the Company or its Subsidiaries (other
than Non-Recourse Subsidiaries) to declare a default on such other Debt or cause
the payment thereof to be accelerated or payable prior to its Stated Maturity.
"Non-Recourse Subsidiary" means a Subsidiary of the Company (i) which has
been designated as such by the Company, (ii) which has no Debt other than
Non-Recourse Debt and (iii) which is in the same line of business as Panavision
and its Wholly Owned Recourse Subsidiaries existing on the Issue Date or in
businesses reasonably related thereto.
"Obligations" means (a) the full and punctual payment of Principal of and
interest, if any, on the Securities when due, whether at maturity, by
acceleration, by redemption or otherwise, and all other monetary obligations of
the Company under this Indenture and the Securities and (b) the full and
punctual performance of all other obligations of the Company under this
Indenture and the Securities.
"Officer" means the Chairman of the Board, the President, any Vice
President, the Treasurer, an Assistant Treasurer or the Secretary or an
Assistant Secretary of the Company.
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13
"Officers' Certificate" means a certificate signed by the Chairman of the
Board, Vice Chairman, the President or a Vice President (regardless of Vice
Presidential designation), and by the Treasurer, an Assistant Treasurer,
Secretary or an Assistant Secretary, of the Company, and delivered to the
Trustee. One of the Officers signing an Officers' Certificate given pursuant to
Section 4.12 shall be the principal executive, financial or accounting officer
of the Company.
"Opinion of Counsel" means a written opinion from legal counsel who is
reasonably acceptable to the Trustee. Such counsel may be an employee of or
counsel to the Company (or its Parent or one of its Subsidiaries) or the
Trustee.
"Panavision" means Panavision Inc., a Delaware corporation, and its
successors.
"Parent" means any Person which acquires or owns directly or indirectly 80%
or more of the voting power of the Voting Stock of the Company.
"Permitted Affiliate" means any individual that is a director or officer of
Panavision, of Parent, of a Subsidiary of Panavision or of an Unrestricted
Affiliate; provided, however, that such individual is not also a director or
officer of Mafco Holdings or any Person that controls Mafco Holdings.
"Permitted Holders" means Ronald O. Perelman (or in the event of his
incompetence or death, his estate, heirs, executor, administrator, committee or
other personal representative (collectively, "heirs")) or any Person controlled,
directly or indirectly, by Ronald O. Perelman or his heirs.
"Person" means any individual, corporation, limited liability company,
partnership, joint venture, association, joint-stock company, trust,
unincorporated organization, government or any agency or political subdivision
thereof or any other entity.
"Preferred Stock," as applied to the Capital Stock of any Person, means
Capital Stock of any class or classes (however designated) which is preferred as
to the payment of dividends, or as to the distribution of assets upon any
voluntary or involuntary liquidation or dissolution of such Person, over shares
of Capital Stock of any other class of such Person.
"Principal" of a Security as of any date means the Accreted Value of the
Security as of such date plus, in the case of any redemption or an offer to
repurchase Securities pursuant to Section 4.06 or 4.08, the premium, if any,
payable on the Secu rity which is due or overdue or is to become due on such
date.
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14
"Principal Amount at Maturity" of a Security means the amount specified as
such on the face of such Security.
"Private Exchange Notes" means the 9 5/8% Senior Subordinated Discount
Exchange Notes Due 2006 of the Company, if and when issued pursuant to a Private
Exchange for Initial Notes.
"Put Amount" as of any date means, with respect to each $1,000 Principal
Amount at Maturity of Securities, 101% of the Accreted Value thereof as of the
date of repurchase.
"PX Holding" means PX Holding Corporation, a Delaware corporation, and its
successors.
"PX Merger" means PX Merger Corporation, a Delaware corporation, and its
successors.
"Recapitalization Agreement" means the Agreement of Recapitalization and
Merger, dated as of December 18, 1997, by and among PX Holding, PX Merger and
Panavision, as amended from time to time.
"Redeemable Stock" means, with respect to any Person, Capital Stock of such
Person that by its terms or otherwise is required to be redeemed on or prior to
the first anniversary of the Stated Maturity of the Securities or is redeemable
at the option of the holder thereof at any time on or prior to the first
anniversary of the Stated Maturity of the Securities; provided, however, that
any Capital Stock that would not constitute Redeemable Stock but for provisions
thereof giving holders thereof the right to require such Person to purchase or
redeem such Capital Stock upon the occurrence of an "asset sale" or "change of
control" occurring prior to the first anniversary of the Stated Maturity of the
Securities shall not constitute Redeemable Stock if (x) the "asset sale" or
"change of control" provisions applicable to such Capital Stock are not more
favorable to the holders of such Capital Stock than the terms applicable to the
Securities in Sections 4.06 and 4.08, as determined in good faith by the Board
of Directors of the Company, the determination of which shall be evidenced by a
resolution of such Board of Directors, and (y) any such requirement only becomes
operative after compliance with such Sections, including the purchase of any
Securities tendered pursuant thereto.
"Refinance" means, in respect of any Debt, to refinance, extend, renew,
refund, repay, prepay, redeem, defease or retire, or to Issue Debt in exchange
or replacement for, such Debt. "Refinanced" and "Refinancing" shall have
correlative meanings.
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15
"Refinancing Costs" means, with respect to any Debt being Refinanced, any
premium actually paid thereon and reasonable costs and expenses, including
underwriting discounts, in connection with such Refinancing; provided, that if
any Debt Issued in connection with such a Refinancing is Issued at a discount,
Refinancing Costs shall be an amount equal to the accreted value (as of the
Stated Maturity of the Debt being Refinanced) of the portion of such Debt used
to pay such premium, costs and expenses.
"Representative" means the trustee, agent or representative (if any) for an
issue of Senior Debt.
"Restricted Payment" means, as to any Person making a Restricted Payment,
(i) any dividend or any distribution on or in respect of the Capital
Stock of such Person (including any payment in connection with any merger
or consolidation involving such Person) or to the holders of the Capital
Stock of such Person (except dividends or distributions payable solely in
the Non-Convertible Capital Stock of such Person or in options, warrants or
other rights to purchase the Non-Convertible Capital Stock of such Person);
(ii) any purchase, redemption or other acquisition or retirement for
value of any Capital Stock of the Company or of any direct or indirect
parent of the Company;
(iii) any purchase, repurchase, redemption, defeasance or other
acquisition or retirement for value, prior to scheduled maturity, scheduled
repayment or scheduled sinking fund payment, of any Subordinated Obligation
(other than the purchase, repurchase or other acquisition of Subordinated
Obligations purchased in anticipation of satisfying a sinking fund
obligation, principal installment or final maturity, in each case due
within one year of the date of acquisition);
(iv) any Investment in any Affiliate of the Company other than (x) a
Subsidiary of the Company, (y) an Affiliate of the Company which will
become a Subsidiary of the Company as a result of any such Investment and
(z) an Unrestricted Affiliate; or
(v) any Investment in a Non-Recourse Subsidiary.
"Rule 144A" means Rule 144A under the Securities Act.
"SEC" means the Securities and Exchange Commission.
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16
"Secured Debt" means Debt that is secured by a Lien.
"Securities" means the Initial Notes, the Exchange Notes and the Private
Exchange Notes, treated as a single class of securities.
"Securities Act" means the Securities Act of 1933.
"Semi-Annual Accrual Date" has the meaning set forth in the definition of
Accreted Value.
"Senior Debt" means, with respect to any Person, the following obligations,
whether outstanding on the Issue Date or thereafter created, incurred or
assumed, and whether at any time owing actually or contingent:
(i) all obligations of such Person consisting of the Bank Debt;
(ii) all obligations of such Person consisting of the principal of and
premium (if any) and accrued and unpaid interest (including interest
accruing on or after the filing of any petition in bankruptcy or for
reorganization relating to such Person), and all fees, expenses and other
amounts in respect of (A) indebtedness of such Person for money borrowed
and (B) indebtedness evidenced by notes, debentures, bonds or other similar
instruments for the payment of which such Person is responsible or liable;
(iii) all Capital Lease Obligations of such Person;
(iv) all obligations of such Person (A) for the reimbursement of any
obligor on any letter of credit, banker's acceptance or similar credit
transaction, (B) under interest rate swaps, caps, collars, options and
similar arrangements and foreign currency hedges entered into in respect of
any obligations described in clauses (i), (ii) and (iii) or (C) Issued or
assumed as the deferred purchase price of property and all conditional sale
obligations of such Person and all obligations of such Person under any
title retention agreement;
(v) all obligations of other Persons of the type referred to in
clauses (ii), (iii) and (iv) and all dividends of other persons for the
payment of which, in either case, such Person is responsible or liable as
obligor, guarantor or otherwise, including by means of any agreement which
has the economic effect of a Guarantee; and
(vi) all obligations of such Person consisting of Refinancings of any
obligation described in clauses (i), (ii), (iii), (iv) or (v);
<PAGE>
17
unless, in the case of any particular obligation, in the instrument creating or
evidencing the same or pursuant to which the same is outstanding, it is provided
that such obligations are not superior in right of payment to the Securities, if
such Person is the Company, or to the Subsidiary Guarantee of such Person, if
such Person is a Subsidiary of the Company. However, Senior Debt of such Person
will not include (1) any obligation of such Person to the Company or to any
Subsidiary of the Company, (2) any liability for Federal, state, local or other
taxes owed or owing by such Person, (3) any accounts payable or other liability
to trade creditors arising in the ordinary course of business (including
Guarantees thereof or instruments evidencing such liabilities), (4) any
indebtedness, Guarantee or obligation of such Person that is subordinate or
junior in any respect to any other indebtedness, Guarantee or obligation of such
Person, (5) that portion of any Debt which at the time of Issuance is issued in
violation of this Indenture; provided, however, that in the case of this clause
(5), (A) any Debt Issued to any person who had no actual knowledge that the
Issuance of such Debt was not permitted under this Indenture and who received on
the date of Issuance thereof a certificate from an officer of the Company or a
Subsidiary of the Company to the effect that the Issuance of such Debt would not
violate the Indenture shall constitute Senior Debt and (B) any Debt arising from
the honoring by a bank or other financial institution of a check, draft or
similar instrument inadvertently (except in the case of daylight overdrafts)
drawn against insufficient funds in the ordinary course of business shall
constitute Senior Debt provided that such Debt would normally be extinguished
within three Business Days of Issuance or (6) the Initial Notes, the Exchange
Notes or the Private Exchange Notes.
"Senior Subordinated Debt" means the Securities and any other indebtedness,
Guarantee or obligation of the Company that specifically provides that such
indebtedness, Guarantee or obligation is to rank pari passu in right of payment
with the Securities and is not subordinated in right of payment by its terms to
any indebtedness, Guarantee or obligation of the Company which is not Senior
Debt of the Company.
"Significant Subsidiary" means (i) any Subsidiary (other than a Non-
Recourse Subsidiary) of the Company which at the time of determination either
(A) had assets which, as of the date of the Company's most recent quarterly
consolidated balance sheet, constituted at least 5% of the Company's total
assets on a consolidated basis as of such date, in each case determined in
accordance with GAAP, or (B) had revenues for the 12-month period ending on the
date of the Company's most recent quarterly consolidated statement of income
which constituted at least 5% of the Company's total revenues on a consolidated
basis for such period, or (ii) any Subsidiary of the Company (other than a
Non-Recourse Subsidiary) which, if merged with all Defaulting Subsidiaries (as
defined below) of the Company, would at the time of determination either (A)
have had assets which, as of the date of the Company's most recent quarterly
consolidated balance sheet, would have constituted at least 10% of the
<PAGE>
18
Company's total assets on a consolidated basis as of such date or (B) have had
revenues for the 12-month period ending on the date of the Company's most recent
quarterly consolidated statement of income which would have constituted at least
10% of the Company's total revenues on a consolidated basis for such period
(each such determination being made in accordance with GAAP). "Defaulting
Subsidiary" means any Subsidiary of the Company (other than a Non-Recourse
Subsidiary) with respect to which an event described under Section 6.01(6),
6.01(7), 6.01(8) or 6.01(9) has occurred and is continuing.
"Stated Maturity" means, with respect to any security, the date specified
in such security as the fixed date on which the principal of such security is
due and payable, including pursuant to any mandatory redemption provision (but
excluding any provision providing for the repurchase of such security at the
option of the holder thereof upon the happening of any contingency).
"Stockholders Agreement" means the Voting and Stockholders Agreement, dated
as of December 18, 1997, by and among Panavision, Mafco Holdings and Warburg
Pincus Capital Company, L.P., as amended from time to time.
"Subordinated Obligation" means any Debt of the Company (whether
outstanding on the date hereof or hereafter Issued) which is subordinate or
junior in right of payment to the Securities.
"Subsidiary" means, with respect to any Person, any corporation,
association, partnership or other business entity of which more than 50% of the
total voting power of shares of Capital Stock or other interests (including
partnership interests) entitled (without regard to the occurrence of any
contingency) to vote in the election of directors, managers or trustees thereof
is at the time owned, directly or indirectly, by (i) such Person, (ii) such
Person and one or more Subsidiaries of such Person or (iii) one or more
Subsidiaries of such Person.
"Tax Sharing Agreement" means any tax allocation agreement between the
Company or any of its Subsidiaries with the Company or any direct or indirect
shareholder of the Company with respect to consolidated or combined tax returns
including the Company or any of its Subsidiaries but only to the extent that
amounts payable from time to time by the Company or any such Subsidiary under
any such agreement do not exceed the corresponding tax payments that the Company
or such Subsidiary would have been required to make to any relevant taxing
authority had the Company or such Subsidiary not joined in such consolidated or
combined returns, but instead had filed returns including only the Company or
its Subsidiaries (provided that any such agreement may provide that, if the
Company or any such Subsidiary ceases to be a member of the affiliated group of
corporations of which Mafco Holdings is the common parent for purposes of filing
a consolidated federal income tax return (such cessation, a
<PAGE>
19
"Deconsolidation Event"), then the Company or such Subsidiary shall indemnify
such direct or indirect shareholder with respect to any federal, state or local
income, franchise or other tax liability (including any related interest,
additions or penalties) imposed on such shareholder as the result of an audit or
other adjustment with respect to any period prior to such Deconsolidation Event
that is attributable to the Company, such Subsidiary or any predecessor business
thereof (computed as if the Company, such Subsidiary or such predecessor
business, as the case may be, were a stand-alone entity that filed separate tax
returns as an independent corporation), but only to the extent that any such tax
liability exceeds any liability for taxes recorded on the books of the Company
or such Subsidiary with respect to any such period).
"Temporary Cash Investments" means any of the following: (i) any investment
in direct obligations of the United States of America or any agency thereof or
obligations Guaranteed by the United States of America or any agency thereof, in
each case, maturing within 360 days of the date of acquisition thereof, (ii)
investments in time deposit accounts, certificates of deposit and money market
deposits maturing within 180 days of the date of acquisition thereof issued by a
bank or trust company (including the Trustee) which is organized under the laws
of the United States of America, any state thereof or any foreign country
recognized by the United States of America having capital, surplus and undivided
profits aggregating in excess of $250,000,000 and whose debt is rated "A" (or
such similar equivalent rating) or higher by at least one nationally recognized
statistical rating organization (as defined in Rule 436 under the Securities
Act) or any money-market fund sponsored by any registered broker dealer or
mutual fund distributor, (iii) repurchase obligations with a term of not more
than 30 days for underlying securities of the types described in clause (i)
above entered into with a nationally recognized broker-dealer, (iv) investments
in commercial paper, maturing not more than 90 days after the date of
acquisition, issued by a corporation (other than an Affiliate or Subsidiary of
the Company) organized and in existence under the laws of the United States of
America or any foreign country recognized by the United States of America with a
rating at the time as of which any investment therein is made of "P-2" (or
higher) according to Moody's Investors Service, Inc. or "A-2" (or higher)
according to Standard and Poor's Corporation and (v) securities with maturities
of six months or less from the date of acquisition backed by standby or direct
pay letters of credit issued by any bank satisfying the requirements of clause
(ii) above.
"TIA" means the Trust Indenture Act of 1939 (15 U.S.C. ss.ss. 77aaa-
77bbbb) as in effect on the Issue Date.
"Transaction Charges" means nonrecurring charges related to or arising out
of the Transactions.
<PAGE>
20
"Transactions" means the transactions contemplated by the Recapitalization
Agreement, the Stockholders Agreement and the Escrow Agreement.
"Treasury Rate" means the yield to maturity at the time of computation of
United States Treasury securities with a constant maturity (as compiled and
published in the most recent Federal Reserve Statistical Release H.15(519) which
has become publicly available at least two Business Days prior to the date fixed
for repayment or, in the case of defeasance, prior to the date of deposit (or,
if such Statistical Release is no longer published, any publicly available
source of similar market data)) most nearly equal to the then remaining average
life to Stated Maturity of the Securities; provided, however, that if the
average life to Stated Maturity of the Securities is not equal to the constant
maturity of a United States Treasury security for which a weekly average yield
is given, the Treasury Rate shall be obtained by linear interpolation
(calculated to the nearest one-twelfth of a year) from the weekly average yields
of United States Treasury securities for which such yields are given, except
that if the average life to Stated Maturity of the Securities is less than one
year, the weekly average yield on actually traded United States Treasury
securities adjusted to a constant maturity of one year shall be used.
"Trustee" means the party named as such in this Indenture until a successor
replaces it and, thereafter, means the successor.
"Trust Officer" means any officer or assistant officer of the Trustee
assigned by the Trustee to administer its corporate trust matters.
"Uniform Commercial Code" means the New York Uniform Commercial Code as in
effect from time to time.
"Unrestricted Affiliate" means a Person (other than a Subsidiary of the
Company) controlled (as defined in the definition of an "Affiliate") by the
Company, in which no Affiliate of the Company (other than (x) a Wholly Owned
Recourse Subsidiary of the Company, (y) a Permitted Affiliate and (z) another
Unrestricted Affiliate) has an Investment.
"U.S. Government Obligations" means direct obligations (or certificates
representing an ownership interest in such obligations) of the United States of
America (including any agency or instrumentality thereof) for the payment of
which the full faith and credit of the United States of America is pledged and
which are not callable at the issuer's option.
"Voting Stock" of a Person means all classes of Capital Stock or other
interests (including partnership interests) of such Person then outstanding and
normally
<PAGE>
21
entitled (without regard to the occurrence of any contingency) to vote in the
election of directors, managers or trustees thereof.
"Wholly Owned Recourse Subsidiary" means a Subsidiary of the Company (other
than a Non-Recourse Subsidiary) all the Capital Stock of which (other than
directors' qualifying shares) is owned by (i) the Company, (ii) the Company and
one or more Wholly Owned Recourse Subsidiaries or (iii) one or more Wholly Owned
Recourse Subsidiaries.
SECTION 1.02. Other Definitions.
Term Defined in Section
---- ------------------
"Agent Members"............................. 2.12
"Appendix".................................. 2.01
"Bankruptcy Law"............................ 6.01
"covenant defeasance option"................ 8.01(b)
"CUSIP"..................................... 2.11
"Custodian"................................. 6.01
"Default Amount"............................ 6.02
"DTC"....................................... 4.10
"Event of Default".......................... 6.01
"Exempt Transaction"........................ 4.07(b)
"Global Security"........................... App.
"Guaranteed Obligations".................... 10.01
"Guaranty".................................. 10.01
"indemnitee"................................ 7.07
"Initial Payment Blockage Notice"........... 11.03
"legal defeasance option"................... 8.01(b)
"Notice of Default"......................... 6.01
"Offer"..................................... 4.06(c)
"Offer Amount".............................. 4.06(d)(2)
"Offer Period".............................. 4.06(d)(2)
"pay the Securities"........................ 11.03
"Paying Agent".............................. 2.03
"Payment Blockage Notice"................... 11.03
"Payment Blockage Period"................... 11.03
"Private Exchange".......................... App.
"Purchase Agreement"........................ App.
"Purchase Date"............................. 4.06(d)(1)
"Registrar"................................. 2.03
"Registered Exchange Offer"................. App.
"Registration Agreement".................... App.
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22
Term Defined in Section
---- ------------------
"reporting date"............................ 4.02
"Shelf Registration Statement".............. App.
"Subsidiary Guarantee"...................... 10.01
"Subsidiary Guarantor"...................... 10.01
"Subsidiary Supplemental Indenture"......... 4.11(a)
"Successor Person".......................... 5.01(a)
SECTION 1.03. Incorporation by Reference of Trust Indenture Act. Whenever
this Indenture refers to a provision of the TIA, the provision is incorporated
by reference in and made a part of this Indenture. The following TIA terms used
in this Indenture have the following meanings:
"Commission" means the SEC.
"indenture securities" means the Securities.
"indenture security holder" means a Securityholder.
"indenture to be qualified" means this Indenture.
"indenture trustee" or "institutional trustee" means the Trustee.
"obligor" on the indenture securities means the Company and any other
obligor on the indenture securities.
All other TIA terms used in this Indenture that are defined by the TIA,
defined by TIA reference to another statute or defined by SEC rule have the
meanings assigned to them by such definitions.
SECTION 1.04. Rules of Construction. Unless the context otherwise requires:
(1) a term has the meaning assigned to it;
(2) an accounting term not otherwise defined has the meaning assigned
to it in accordance with GAAP and all accounting calculations will be
determined in accordance with such principles;
(3) "or" is not exclusive;
(4) "including" means including without limitation;
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23
(5) words in the singular include the plural and words in the plural
include the singular;
(6) unsecured debt shall not be deemed to be subordinate or junior to
secured debt merely by virtue of its nature as unsecured debt;
(7) the principal amount of any noninterest bearing or other discount
security at any date of Issuance shall be the principal amount thereof that
would be shown on a balance sheet of the issuer dated such date prepared in
accordance with GAAP and accretion of principal on such security shall be
deemed to be the Issuance of Debt; provided, however, that the accretion of
principal on such security shall not be deemed to be the Issuance of Debt
if the issuer elects, at the time of original Issuance of such security, to
treat such accretion as if, on such date of original Issuance, there were
an additional Issuance of Debt in an aggregate principal amount equal to
the excess of the principal amount at maturity of such security over the
principal amount thereof that would be shown on a balance sheet of the
issuer dated such date prepared in accordance with GAAP (except to the
extent otherwise provided in Section 4.03(c)(2)), and, unless repaid or
redeemed, the amount of such additional Issuance of Debt shall be treated
as being outstanding for all purposes under this Indenture until such
security is paid in full;
(8) the principal amount of any Preferred Stock shall be (i) the
maximum liquidation value of such Preferred Stock or (ii) the maximum
mandatory redemption or mandatory repurchase price with respect to such
Preferred Stock, whichever is greater; and
(9) whenever in this Indenture or the Securities it is provided that
the Accreted Value, the Put Amount or the Principal Amount at Maturity with
respect to a Security shall be paid, such provision shall be deemed to
require (whether or not so expressly stated) the simultaneous payment of
any accrued and unpaid interest to the date of payment on such Security
payable pursuant to paragraph 1 of the Securities.
ARTICLE II
The Securities
SECTION 2.01. Form and Dating. Provisions relating to the Initial Notes,
the Private Exchange Notes and the Exchange Notes are set forth in the Rule
144A/Regulation S Appendix attached hereto (the "Appendix") which is hereby
incorporated in and expressly made part of this Indenture. The Initial Notes and
the Trustee's certificate of authentication shall be substantially in the form
of Exhibit A,
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24
which is hereby incorporated in and expressly made a part of this Indenture. The
Exchange Notes, the Private Exchange Notes and the Trustee's certificate of
authentication shall be substantially in the form of Exhibit B, which is hereby
incorporated in and expressly made a part of this Indenture. The Securities may
have notations, legends or endorsements required by law, stock exchange rule,
agreements to which the Company is subject, if any, or usage (provided that any
such notation, legend or endorsement is in a form acceptable to the Company).
Each Security shall be dated the date of its authentication. The terms of the
Securities set forth in the Appendix and Exhibits A and B are part of the terms
of this Indenture.
SECTION 2.02. Execution and Authentication. Two Officers shall sign the
Securities for the Company by manual or facsimile signature. If an Officer whose
signature is on a Security no longer holds that office at the time the Trustee
authenti cates the Security, the Security shall be valid nevertheless.
A Security shall not be valid until an authorized signatory of the Trustee
manually signs the certificate of authentication on the Security. The signature
shall be conclusive evidence that the Security has been authenticated under this
Indenture.
The Trustee shall authenticate and deliver (i) Initial Notes for original
issue in an aggregate Principal Amount at Maturity of $217,903,000 and (ii)
Exchange Notes or Private Exchange Notes for issue only in a Registered Exchange
Offer or a Private Exchange, respectively, pursuant to the Registration
Agreement or otherwise, in exchange for a like Principal Amount at Maturity of
Initial Notes, in each case upon a written order of the Company signed by two
Officers or by an Officer and either an Assistant Treasurer or an Assistant
Secretary of the Company. Such order shall specify the amount of the Securities
to be authenticated, the date on which the original issue of Securities is to be
authenticated and, if such order is being delivered other than on the Issue
Date, whether the Securities are to be Initial Notes, Exchange Notes or Private
Exchange Notes. The aggregate Principal Amount at Maturity of Securities
outstanding at any time may not exceed the amount specified in clause (i) of
this paragraph except as provided in Section 2.07.
The Trustee may appoint an authenticating agent reasonably acceptable to
the Company to authenticate the Securities. Unless limited by the terms of such
appointment, an authenticating agent may authenticate Securities whenever the
Trustee may do so. Each reference in this Indenture to authentication by the
Trustee includes authentication by such agent. An authenticating agent has the
same rights as any Registrar, Paying Agent or agent for service of notices and
demands.
SECTION 2.03. Registrar and Paying Agent. The Company shall maintain an
office or agency where Securities may be presented for registration of transfer
or for exchange (the "Registrar") and an office or agency where Securities may
<PAGE>
25
be presented for payment (the "Paying Agent"). The Registrar shall keep a
register of the Securities and of their transfer and exchange. The Company may
have one or more co-registrars and one or more additional paying agents. The
term "Paying Agent" includes any additional paying agent.
The Company shall enter into an appropriate agency agreement with any
Registrar, Paying Agent or co-registrar not a party to this Indenture, which
shall incorporate the terms of the TIA. The agreement shall implement the
provisions of this Indenture that relate to such agent. The Company shall notify
the Trustee of the name and address of any such agent. If the Company fails to
maintain a Registrar or Paying Agent, the Trustee shall act as such and shall be
entitled to appropriate compensation therefor pursuant to Section 7.07. The
Company or any of its domestically incorporated Wholly Owned Recourse
Subsidiaries may act as Paying Agent, Registrar, co-registrar or transfer agent.
The Company initially appoints the Trustee as Registrar and Paying Agent in
connection with the Securities.
SECTION 2.04. Paying Agent To Hold Money in Trust. On or prior to each due
date of the Principal and interest on any Security, the Company shall deposit
with the Paying Agent a sum sufficient to pay such Principal and interest when
so becoming due. The Company shall require each Paying Agent (other than the
Trustee) to agree in writing that the Paying Agent shall hold in trust for the
benefit of Security holders or the Trustee all money held by the Paying Agent
for the payment of Principal of or interest on the Securities and shall notify
the Trustee of any default by the Company in making any such payment. If the
Company or a Subsidiary acts as Paying Agent, it shall segregate the money held
by it as Paying Agent and hold it as a separate trust fund. The Company at any
time may require a Paying Agent to pay all money held by it to the Trustee and
to account for any funds disbursed by the Paying Agent. Upon complying with this
Section, the Paying Agent shall have no further liability for the money
delivered to the Trustee.
SECTION 2.05. Securityholder Lists. The Trustee shall preserve in as
current a form as is reasonably practicable the most recent list available to it
of the names and addresses of Securityholders. If the Trustee is not the
Registrar, the Company shall furnish to the Trustee, in writing at least five
Business Days before each interest payment date and at such other times as the
Trustee may request in writing, a list in such form and as of such date as the
Trustee may reasonably require of the names and addresses of Securityholders.
SECTION 2.06. Transfer and Exchange. The Securities shall be issued in
registered form and shall be transferable only upon the surrender of a Security
for registration of transfer and in accordance with the provisions of the
Appendix. When a
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Security is presented to the Registrar or a co-registrar with a request to
register a transfer, the Registrar shall register the transfer as requested if
the requirements of Section 8-401(1) of the Uniform Commercial Code and the
Appendix are met. When Securities are presented to the Registrar or a
co-registrar with a request to exchange them for an equal Principal Amount at
Maturity of Securities of other denominations, the Registrar shall make the
exchange as requested if the same requirements are met. To permit registration
of transfers and exchanges, the Company shall execute and the Trustee shall
authenticate Securities at the Registrar's or co-registrar's request. The
Company may require payment of a sum sufficient to pay all taxes, assessments or
other governmental charges in connection with any transfer or exchange pursuant
to this Section. The Company shall not be required to make and the Registrar
need not register transfers or exchanges of Securities selected for redemption
(except, in the case of Securities to be redeemed in part, the portion thereof
not to be redeemed) or any Securities for a period of 15 days before a selection
of Securities to be redeemed or 15 days before an interest payment date.
Prior to the due presentation for registration of transfer of any Security,
the Company, the Trustee, the Paying Agent, the Registrar or any co-registrar
may deem and treat the Person in whose name a Security is registered as the
absolute owner of such Security for the purpose of receiving payment of
Principal of and interest, if any, on such Security and for all other purposes
whatsoever, whether or not such Security is overdue, and none of the Company,
the Trustee, the Paying Agent, the Registrar or any co-registrar shall be
affected by notice to the contrary.
All Securities issued upon any transfer or exchange pursuant to the terms
of this Indenture will evidence the same debt and will be entitled to the same
benefits under this Indenture as the Securities surrendered upon such transfer
or exchange.
SECTION 2.07. Replacement Securities. If a mutilated Security is
surrendered to the Registrar or if the Holder of a Security claims that the
Security has been lost, destroyed or wrongfully taken, the Company shall issue
and the Trustee shall authenticate a replacement Security if the requirements of
Section 8-405 of the Uniform Commercial Code are met and the Holder satisfies
any other reasonable requirements of the Trustee. If required by the Trustee or
the Company, such Holder shall furnish an indemnity bond sufficient in the
judgment of the Company and the Trustee to protect the Company, the Trustee, the
Paying Agent, the Registrar and any co-registrar from any loss which any of them
may suffer if a Security is replaced. The Company and the Trustee may charge the
Holder for their expenses in replacing a Security.
Every replacement Security is an additional obligation of the Company.
SECTION 2.08. Outstanding Securities. Securities outstanding
("Outstanding") at any time are all Securities authenticated and delivered by
the Trustee
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except for those canceled by it, those delivered to it for cancellation and
those described in this Section as not Outstanding. A Security does not cease to
be Outstanding because the Company or an Affiliate of the Company holds the
Security.
If a Security is paid or replaced pursuant to Section 2.07, it ceases to be
Outstanding unless the Trustee and the Company receive proof satisfactory to
them that the replaced Security is held by a bona fide purchaser.
If the Paying Agent segregates and holds in trust, in accordance with this
Indenture, on a redemption date or maturity date money sufficient to pay all
Principal and interest, if any, payable on that date with respect to the
Securities (or portions thereof) to be redeemed or maturing, as the case may be,
and the Paying Agent is not prohibited from paying such money to the
Securityholders on that date pursuant to the terms of this Indenture, then on
and after that date such Securities (or portions thereof) cease to be
Outstanding, the Accreted Value of such Securities ceases to increase and
interest, if any, on them ceases to accrue.
SECTION 2.09. Temporary Securities. Until definitive Securities are ready
for delivery, the Company may prepare and the Trustee shall authenticate tempo
rary Securities. Temporary Securities shall be substantially in the form of
definitive Securities but may have variations that the Company considers
appropriate for temporary Securities. Without unreasonable delay, the Company
shall prepare and the Trustee shall authenticate definitive Securities and
deliver them in exchange for temporary Securities upon surrender of such
temporary Securities at the office or agency of the Company, without charge to
the Holder.
SECTION 2.10. Cancellation. The Company at any time may deliver Securities
to the Trustee for cancellation. The Registrar and the Paying Agent shall
forward to the Trustee any Securities surrendered to them for registration of
transfer, exchange or payment. The Trustee and no one else shall cancel
Securities surrendered for registration of transfer, exchange, payment or
cancellation and deliver such canceled Securities to the Company upon the
Company's written request. The Company may not issue new Securities to replace
Securities it has redeemed, paid or delivered to the Trustee for cancellation.
SECTION 2.11. Defaulted Interest. If the Company defaults in a payment of
interest on the Securities, the Company shall pay defaulted interest (plus
interest on such defaulted interest to the extent lawful) in any lawful manner.
The Company may pay the defaulted interest to the persons who are
Securityholders on a subsequent special record date. The Company shall fix or
cause to be fixed any such special record date and payment date to the
reasonable satisfaction of the Trustee and shall promptly mail to each
Securityholder a notice that states the special record date, the payment date
and the amount of defaulted interest to be paid.
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SECTION 2.12. CUSIP Numbers. The Company in issuing the Securities may use
"CUSIP" numbers (if then generally in use) and, if so, the Trustee shall use
"CUSIP" numbers in notices of redemption as a convenience to Holders; provided,
however, that any such notice may state that no representation is made as to the
correctness of such numbers either as printed on the Securities or as contained
in any notice of a redemption and that reliance may be placed only on the other
identification numbers printed on the Securities, and any such redemption shall
not be affected by any defect in or omission of such numbers.
ARTICLE III
Redemption
SECTION 3.01. Notices to Trustee. If the Company elects to redeem
Securities pursuant to paragraph 5 of the Securities or is required to redeem
Securities pursuant to paragraph 6 of the Securities, it shall notify the
Trustee in writing of the redemption date, the paragraph of the Securities
pursuant to which the redemption will occur, and the Principal Amount at
Maturity of Securities to be redeemed. If the Company is required to redeem the
Securities pursuant to paragraph 6 of the Securities the Company shall also so
notify the Escrow Agent concurrently with its notification to the Trustee.
In the case of a redemption pursuant to paragraph 5 of the Securities, the
Company shall give each notice to the Trustee provided for in this Section at
least 60 days before the redemption date unless the Trustee consents to a
shorter period. In the case of a redemption pursuant to paragraph 6 of the
Securities, the Company shall give such notices to the Trustee and the Escrow
Agent provided for in this Section promptly after the occurrence of the event
triggering the requirement to redeem the Securities. Any notice delivered
pursuant to paragraph 5 of the Securities shall be accompanied by an Officers'
Certificate to the effect that such redemption will comply with the conditions
herein. If fewer than all the Securities are to be redeemed, the record date
relating to such redemption for determining the Holders to whom notice of
redemption will be sent pursuant to Section 3.03 shall be selected by the
Company and given to the Trustee, which record date shall be not less than 15
days after the date of notice to the Trustee unless the Trustee consents to a
shorter period.
SECTION 3.02. Selection of Securities To Be Redeemed. If fewer than all the
Securities are to be redeemed, the Trustee in its discretion shall select the
Securities to be redeemed either on a pro rata basis or by lot or by a method
that complies with applicable legal and securities exchange requirements, if
any, and that the Trustee considers fair and appropriate. The Trustee shall make
the selection from Outstanding Securities not previously called for redemption.
The Trustee may select
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for redemption portions of the Principal Amount at Maturity of Securities that
have denominations larger than $1,000. Securities and portions of them the
Trustee selects shall be in amounts of Principal Amount at Maturity of $1,000 or
a whole multiple of $1,000. Provisions of this Indenture that apply to
Securities called for redemption also apply to portions of Securities called for
redemption. The Trustee shall notify the Company promptly of the Securities or
portions of Securities to be redeemed.
SECTION 3.03. Notice of Redemption. In the case of a redemption pursuant to
paragraph 5 of the Securities, at least 30 days but not more than 60 days before
a date for redemption of Securities, the Company shall mail a notice of
redemption by first-class mail to each Holder of Securities to be redeemed. In
the case of a redemption pursuant to paragraph 6 of the Securities, the Company
shall mail a notice of redemption by first-class mail to each Holder of
Securities on the date it delivers the notice to the Trustee pursuant to Section
3.01.
Any notice delivered pursuant to this Section 3.03 shall identify the
Securities to be redeemed and shall state:
(a) the redemption date;
(b) the redemption price;
(c) the name and address of the Paying Agent;
(d) that Securities called for redemption must be surrendered to the
Paying Agent to collect the redemption price;
(e) if fewer than all the Outstanding Securities are to be redeemed,
the identification of the particular Securities to be redeemed as well as
the aggregate Principal Amount at Maturity of Securities to be redeemed and
if any Security is being redeemed in part, the portion of the Principal
Amount at Maturity of such Security to be redeemed and that after the
redemption date and upon surrender of such Security a new Security or
Securities will be issued having a Principal Amount at Maturity equal to
the Principal Amount at Maturity of the Security surrendered less the
Principal Amount at Maturity of the portion of the Security redeemed;
(f) that, unless the Company defaults in making such redemption
payment or the Paying Agent is prohibited from making such payment pursuant
to the terms of this Indenture, the Accreted Value on Securities (or
portion thereof) called for redemption ceases to increase and interest, if
any, thereon ceases to accrue on and after the redemption date;
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(g) the paragraph of the Securities pursuant to which the Securities
called for redemption are being redeemed;
(h) the CUSIP number printed on the Securities being redeemed; and
(i) that no representation is made as to the correctness or accuracy
of the CUSIP number, if any, listed in such notice or printed on the
Securities.
At the Company's request, the Trustee shall give the notice of redemption
in the Company's name and at the Company's expense. In such event, the Company
shall provide the Trustee with the information required by this Section.
SECTION 3.04. Effect of Notice of Redemption. Once notice of redemption is
mailed, Securities called for redemption become due and payable on the
redemption date and at the redemption price stated in the notice. Upon surrender
to the Paying Agent, such Securities shall be paid at the redemption price
stated in the notice, plus accrued interest, if any, to the redemption date
(subject to the right of Holders of record on the relevant record date to
receive interest due on the related interest payment date). Failure to give
notice or any defect in the notice to any Holder shall not affect the validity
of the notice to any other Holder.
SECTION 3.05. Deposit of Redemption Price. On or prior to the redemption
date, the Company shall deposit with the Paying Agent (or, if the Company or a
Subsidiary is the Paying Agent, shall segregate and hold in trust) money
sufficient to pay the redemption price of and accrued interest, if any, on all
Securities to be redeemed on that date other than Securities or portions of
Securities called for redemption which have been delivered by the Company to the
Trustee for cancellation.
SECTION 3.06. Securities Redeemed in Part. Upon surrender of a Security
that is redeemed in part, the Company shall execute and the Trustee shall
authenticate for the Holder (at the Company's expense) a new Security having a
Principal Amount at Maturity equal to the Principal Amount at Maturity of the
Security surrendered less the Principal Amount at Maturity of the portion of the
Security so redeemed.
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ARTICLE IV
Covenants
SECTION 4.01. Payment of Securities. The Company shall promptly pay the
Principal of and interest, if any, on the Securities on the dates and in the
manner provided in the Securities and in this Indenture. Principal and interest
shall be considered paid on the date due if on such date the Trustee or the
Paying Agent holds in accordance with this Indenture money sufficient to pay all
Principal and interest then due and the Trustee or the Paying Agent, as the case
may be, is not prohibited from paying such money to the Securityholders on that
date pursuant to the terms of this Indenture. The Company shall pay interest on
overdue Principal at the rate specified therefor in the Securities, and it shall
pay interest on overdue installments of interest at the same rate to the extent
lawful.
SECTION 4.02. SEC Reports. Notwithstanding that the Company may not be
required to be subject to the reporting requirements of Section 13 or 15(d) of
the Exchange Act, from and after the date (the "reporting date") of
effectiveness of an Exchange Offer Registration Statement (as defined in the
Registration Agreement), the Company shall file or cause to be filed with the
SEC and provide the Trustee and Holders with the information, documents and
other reports (or copies of such portions of any of the foregoing as the SEC may
by rules and regulations prescribe) specified in Sections 13 and 15(d) of the
Exchange Act. Prior to the reporting date, the Company shall provide the Trustee
and Holders with information with respect to Panavision that is substantially
similar to that required to be provided to such Persons after the reporting
date. The Company also shall comply with the other provisions of TIA ss. 314(a).
SECTION 4.03. Limitation on Debt of the Company and its Subsidiaries. (a)
Prior to the Effective Date, the Company shall not Issue any Debt, except the
following:
(1) the Securities; and
(2) Debt of the Company that is not secured by a Lien on any assets,
property or Capital Stock owned by the Company or any of its Subsidiaries,
the proceeds of which Debt are used solely for deposit (or the purchase of
U.S. Government Obligations to be deposited) with the Escrow Agent in an
amount not to exceed the amount necessary, together with the net proceeds
to the Company of the Issuance of the Securities, to enable the Company to
make the Initial Deposit (as defined in the Escrow Agreement).
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(b) From and after the Effective Date, the Company shall not, and shall not
permit any Subsidiary of the Company to, Issue, directly or indirectly, any
Debt; provided, however, that the Company and its Subsidiaries will be permitted
to Issue Debt if, at the time of such Issuance, the Consolidated EBITDA Coverage
Ratio for the period of the most recently completed four consecutive fiscal
quarters ending at least 45 days prior to the date such Debt is Issued exceeds
the ratio of 2.0 to 1.0.
(c) Notwithstanding the foregoing, from and after the Effective Date the
Company and its Subsidiaries may Issue the following Debt:
(1) Debt Issued pursuant to the Credit Agreement, any Refinancing
thereof or any other credit agreement, indenture or other agreement, in an
aggregate principal amount not to exceed $350 million outstanding at any
one time;
(2) the Securities and Debt Issued by the Company in exchange for, or
the proceeds of which are used to Refinance, any Debt permitted by this
clause (2); provided, however, that in the case of any Debt (other than the
Exchange Notes and the Private Exchange Notes) Issued in connection with a
Refinancing, (x) the principal amount or, in the case of Debt Issued at a
discount, the accreted value of the Debt so Issued shall, as of the Stated
Maturity of the Debt being Refinanced, not exceed the sum of (i) the
principal amount or, if the Debt being Refinanced was Issued at a discount,
the accreted value of the Debt being Refinanced as of the Stated Maturity
of the Debt being Refinanced, and (ii) any Refinancing Costs associated
with such Refinancing, (y) the Debt so Issued shall not provide for the
payment of principal or interest in cash prior to February 1, 2002, shall
not have a Stated Maturity prior to the Stated Maturity of the Securities
and shall not, at the time such Debt is Issued, have an Average Life that
is less than the Average Life of the Debt being Refinanced and (z) the Debt
so Issued shall consist of Senior Subordinated Debt or Subordinated
Obligations;
(3) Debt (in addition to Debt described in clauses (1) and (2) above)
Issued for working capital and general corporate purposes in an aggregate
principal amount at the time of such Issue which, when taken together with
the aggregate principal amount then outstanding of all other Debt Issued
pursuant to this clause (3), shall not exceed the sum of (i) 50% of the
book value of the inventory of the Company and its consolidated
Subsidiaries and (ii) 80% of the book value of the accounts receivable of
the Company and its consolidated Subsidiaries, in each case as determined
in accordance with GAAP;
(4) Debt of the Company Issued to and held by a Wholly Owned Recourse
Subsidiary and Debt of a Subsidiary of the Company Issued to and held by
the Company or a Wholly Owned Recourse Subsidiary; provided, however, that
any subsequent Issuance or transfer of any Capital Stock that results in
any such Wholly
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33
Owned Recourse Subsidiary ceasing to be a Wholly Owned Recourse Subsidiary
or any subsequent transfer of such Debt (other than to the Company or a
Wholly Owned Recourse Subsidiary) shall be deemed, in each case, to
constitute the Issuance of such Debt by the Company or of such Debt by such
Subsidiary;
(5) Debt (other than Debt described in clause (1), (2), (3) or (4)
above) of Panavision or any of its Subsidiaries outstanding on the Issue
Date and Debt Issued to Refinance any Debt (other than the Existing Credit
Agreement) permitted by this clause (5), by clause (6) below or by Section
4.03(b); provided, however, that in the case of a Refinancing, the
principal amount of the Debt so Issued shall not exceed the principal
amount of the Debt being Refinanced plus any Refinancing Costs associated
with such Refinancing; and provided further, however, that to the extent
such Refinancing Debt is used directly or indirectly to Refinance Debt of a
Subsidiary described in clause (6) below, the portion of such Refinancing
Debt so used shall be Issued only by such Subsidiary or any Subsidiary of
such Subsidiary;
(6) Debt of a Subsidiary of the Company Issued and outstanding on or
prior to the date on which such Subsidiary was acquired by the Company
(other than Debt Issued as consideration in, or to provide all or any
portion of the funds or credit support utilized to consummate, the
transaction or series of related transactions pursuant to which such
Subsidiary became a Subsidiary of the Company or was acquired by the
Company);
(7) Non-Recourse Debt of a Non-Recourse Subsidiary; provided, however,
that if any such Debt thereafter ceases to be Non-Recourse Debt of a
Non-Recourse Subsidiary, then such event shall be deemed for the purposes
of this Section 4.03 to constitute the Issuance of such Debt by the issuer
thereof; and
(8) Debt (in addition to Debt Issued pursuant to clauses (1) through
(7) above and Section 4.03(b)) in an aggregate principal amount outstanding
at any time not to exceed $50 million.
(d) The foregoing shall not prohibit the Issuance of Redeemable Stock of
Panavision contemplated by the Stockholders Agreement, provided that such
Redeemable Stock is redeemed by Panavision in connection with the Transactions.
(e) To the extent the Company or any Subsidiary of the Company Guarantees
any Debt of the Company or of a Subsidiary of the Company, such Guarantee and
such Debt will be deemed to be the same indebtedness and only the amount of the
Debt will be deemed to be outstanding. If the Company or a Subsidiary of the
Company Guarantees any Debt of a Person that, subsequent to the Issuance of such
Guarantee, becomes a Subsidiary, such Guarantee and the Debt so Guaranteed shall
be deemed to be the same indebtedness, which shall be deemed to have been
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Issued when the Guarantee was Issued and shall be deemed to be permitted to the
extent the Guarantee was permitted when Issued.
SECTION 4.04. Limitation on Other Senior Subordinated Debt and Secured
Debt. (a) The Company shall not Issue, directly or indirectly, any Debt which is
subordinate or junior in ranking in any respect to Senior Debt of the Company
unless such Debt is Senior Subordinated Debt or is expressly subordinated in
right of payment to the Securities.
(b) The Company will not issue any Secured Debt that is not Senior Debt of
the Company unless contemporaneously therewith effective provision is made to
secure the Securities equally and ratably with (or prior to) such Secured Debt
with a Lien on the same assets securing such Secured Debt for so long as such
Secured Debt is secured by such Lien.
SECTION 4.05. Limitation on Restricted Payments. (a) Prior to the Effective
Date, the Company shall not make any Restricted Payment except to the extent
necessary to consummate the Transactions.
(b) From and after the Effective Date, the Company shall not, and shall not
permit any of its Subsidiaries, directly or indirectly, to make any Restricted
Payment if, at the time of the making of such Restricted Payment:
(1) a Default shall have occurred and be continuing (or would result
therefrom); or
(2) the aggregate amount of such Restricted Payment and all other
Restricted Payments since the Issue Date would exceed the sum of:
(i) 50% of Consolidated Net Income (or, if such aggregate
Consolidated Net Income is a deficit, minus 100% of such deficit)
accrued during the period (treated as one accounting period) from
January 1, 1998, to the end of the most recent fiscal quarter ending
at least 45 days prior to the date of such Restricted Payment;
(ii) the aggregate Net Cash Proceeds from sales of Capital Stock
of Panavision (other than Redeemable Stock or Exchangeable Stock) or
cash capital contributions made to Panavision on or after the Issue
Date (exclusive of any Net Cash Proceeds or cash capital contributions
received in connection with the Transactions, if any) (other than a
sale to or a contribution by a Subsidiary of Panavision or any
employee stock ownership plan established by Panavision or a
Subsidiary of Panavision for the benefit of its employees);
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(iii) the amount by which Debt of Panavision is reduced on
Panavision's consolidated balance sheet on or after the Issue Date
upon any conversion or exchange of Debt of Panavision into Capital
Stock of Panavision which is not Redeemable Stock or Exchangeable
Stock;
(iv) the aggregate Net Cash Proceeds received by Panavision from
the Issue or sale of its Capital Stock (other than Redeemable Stock or
Exchangeable Stock) to an employee stock ownership plan subsequent to
the Issue Date; provided, however, that if such employee stock
ownership plan incurs any Debt, such aggregate amount of Net Cash
Proceeds shall be limited to an amount equal to any increase in the
Consolidated Net Worth of Panavision resulting from principal
repayments made by such employee stock ownership plan with respect to
Debt incurred by it to finance the purchase of such Capital Stock; and
(v) to the extent that an Investment made by Panavision or a
Subsidiary subsequent to the Issue Date has theretofore been included
in the calculation of the amount of Restricted Payments, the aggregate
cash repayments to Panavision or a Subsidiary of such Investment to
the extent not included in Consolidated Net Income; provided, however,
that any such cash repayment shall be excluded from the amount of
aggregate cash repayments described in this clause (v) to the extent
that such cash is attributable to the net proceeds of the Issuance of
Non-Recourse Debt by a Non-Recourse Subsidiary and has been or is
subsequently used to make a dividend or distribution pursuant to
Section 4.05(c)(ix).
(c) Section 4.05(b) shall not prohibit the following (none of which shall
be included in the calculation of the amount of Restricted Payments, except to
the extent expressly provided in clause (vi) below):
(i) any purchase, repurchase, redemption, defeasance or other
acquisition or retirement for value of Capital Stock or Subordinated
Obligations of the Company made by exchange for, or out of the proceeds of
the substantially concurrent Issue or sale of, Capital Stock of the Company
(other than Redeemable Stock or Exchangeable Stock and other than Capital
Stock issued or sold to a Subsidiary or an employee stock ownership plan)
or of a cash capital contribution; provided, however, that the Net Cash
Proceeds from such sale shall be excluded from clauses (ii) and (iv) of
Section 4.05(b)(2);
(ii) any purchase, repurchase, redemption, defeasance or other
acquisition or retirement for value of Subordinated Obligations of the
Company made by exchange for, or out of the proceeds of the substantially
concurrent sale of, Subordinated Obligations;
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(iii) any purchase, repurchase, redemption, defeasance or other
acquisition or retirement for value of Subordinated Obligations from Net
Available Cash to the extent permitted by Section 4.06;
(iv) any loan to a Permitted Affiliate entered into in the ordinary
course of business; provided, however, that such Permitted Affiliate holds,
directly or indirectly, no more than 10% of the outstanding Capital Stock
of the Company;
(v) dividends or distributions made by a Subsidiary of the Company to
the Company or a Subsidiary of the Company and, if a Subsidiary of the
Company is not wholly owned, to its other stockholders pro rata to the
extent they are not Affiliates of the Company (other than (x) a Subsidiary
of the Company, (y) an Unrestricted Affiliate and (z) a Permitted
Affiliate);
(vi) dividends paid within 60 days after the date of declaration
thereof, or Restricted Payments made within 60 days after the making of a
binding commitment in respect thereof, if at such date of declaration or of
such commitment such dividend or other Restricted Payment would have
complied with this Section; provided, however, that at the time of payment
of such dividend or the making of such Restricted Payment, no other Default
shall have occurred and be continuing (or would result therefrom); provided
further, however, that such dividend or other Restricted Payment shall be
included in the calculation of the amount of Restricted Payments;
(vii) purchases, redemptions, defeasances or acquisitions of Non-
Recourse Debt by a Non-Recourse Subsidiary;
(viii) dividends and distributions in respect of Redeemable Stock
Issued by the Company or in respect of Preferred Stock Issued by any
Subsidiary of the Company, in each case to the extent such Issuance is
permitted by Section 4.03;
(ix) so long as no Default has occurred and is continuing or would
result from such transaction, dividends or distributions made by the
Company to the extent attributable to the net proceeds of the Issuance of
Non-Recourse Debt by Non-Recourse Subsidiaries;
(x) Restricted Payments necessary to consummate the Transactions or
which are repaid in connection with the Transactions; and
(xi) so long as no Default shall have occurred and be continuing,
amounts paid to Parent, to the extent necessary to enable Parent to pay
actual expenses, other than those paid to Affiliates of the Company,
incidental to being a publicly reporting, but non-operating, company.
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(d) The Company or any Subsidiary of the Company may take actions to make a
Restricted Payment in anticipation of the occurrence of any of the events
described in Sections 4.05(b) or 4.05(c); provided, however, that the making of
such Restricted Payment shall be conditioned upon the occurrence of such event.
SECTION 4.06. Limitation on Sales of Assets and Subsidiary Stock. (a) Prior
to the Effective Date, the Company shall not make any Asset Disposition except
to the extent necessary to consummate the Transactions.
(b) From and after the Effective Date, the Company shall not, and shall not
permit any Subsidiary of the Company (other than a Non-Recourse Subsidiary) to,
make any Asset Disposition unless:
(i) the Company or such Subsidiary receives consideration at the time
of such Asset Disposition at least equal to the fair market value, as
determined in good faith by the Board of Directors of the Company, the
determination of which shall be conclusive and evidenced by a resolution of
the Board of Directors of the Company (including as to the value of all
non-cash consideration), of the Capital Stock and assets subject to such
Asset Disposition;
(ii) at least 75% of the consideration consists of cash, cash
equivalents, readily marketable securities which the Company intends, in
good faith, to liquidate promptly after such Asset Disposition or the
assumption of liabilities (including, in the case of the sale of the
Capital Stock of a Subsidiary of the Company, liabilities of the Company or
such Subsidiary) (provided, however, that in respect of an Asset
Disposition, more than 25% of the consideration may consist of
consideration other than cash, cash equivalents, such readily marketable
securities or such assumed liabilities if (x) such Asset Disposition is
approved by a majority of those members of the Board of Directors of the
Company having no personal stake in such Asset Disposition and (y) if such
Asset Disposition involves aggregate consideration in excess of $10,000,000
(with the value of any non-cash consideration being determined by a
majority of those members of the Board of Directors of the Company having
no personal stake in such Asset Disposition), such Asset Disposition has
been determined, in the written opinion of a nationally recognized
investment banking firm, to be fair from a financial point of view to the
Company or such Subsidiary, as the case may be); and
(iii) an amount equal to 100% of the Net Available Cash from such
Asset Disposition is applied by the Company or such Subsidiary, as the case
may be:
(A) first, to the extent the Company is required by the terms of
any Senior Debt of the Company or Debt of a Subsidiary to prepay,
repay or purchase Senior Debt of the Company or Debt of a
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Wholly Owned Recourse Subsidiary or additionally, in the case of an
Asset Disposition by a Subsidiary that is not a Wholly Owned Recourse
Subsidiary, Debt of such Subsidiary (in each case other than Debt owed
to the Company or an Affiliate of the Company) in accordance with the
terms of such Debt;
(B) second, to the extent of the balance of such Net Available
Cash after application in accordance with clause (A), at the Company's
election, to either (1) the prepayment, repayment or repurchase of
Senior Debt of the Company or Debt of a Wholly Owned Recourse
Subsidiary or, additionally in the case of an Asset Disposition by a
Subsidiary that is not a Wholly Owned Recourse Subsidiary, Debt of
such Subsidiary (in each case other than Debt owed to the Company or
an Affiliate of the Company) which the Company is not required by the
terms thereof to prepay, repay or repurchase (whether or not the
related loan commitment is permanently reduced in connection
therewith), or (2) the investment by the Company or any Wholly Owned
Recourse Subsidiary (or, additionally in the case of an Asset
Disposition by a Subsidiary that is not a Wholly Owned Recourse
Subsidiary, the investment by such Subsidiary) in assets to replace
the assets that were the subject of such Asset Disposition or in
assets that (as determined by the Board of Directors of the Company,
the determination of which shall be conclusive and evidenced by a
resolution of such Board of Directors) will be used in the businesses
of Panavision and its Wholly Owned Recourse Subsidiaries (or,
additionally in the case of an Asset Disposition by a Subsidiary that
is not a Wholly Owned Recourse Subsidiary, the businesses of such
Subsidiary) existing on the Issue Date or in businesses reasonably
related thereto, in all cases, within the later of one year from the
date of such Asset Disposition or the receipt of such Net Available
Cash; and
(C) third, to the extent of the balance of such Net Available
Cash after application in accordance with clauses (A) and (B), to make
an offer to purchase Securities and other Senior Subordinated Debt
designated by the Company pursuant to and subject to the conditions of
Section 4.06(c);
provided, however, that in connection with an offer pursuant to clause (C)
above, if the principal amount and premium of such Securities and such Senior
Subordinated Debt, together with accrued and unpaid interest tendered for
acceptance pursuant to such offer exceeds the balance of Net Available Cash,
then the Company will accept for purchase the Securities and such Senior
Subordinated Debt of each such tendering holder on a pro rata basis in
accordance with the principal amount so tendered.
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39
Notwithstanding the foregoing provisions of this Section 4.06(b), the
Company and the Subsidiaries shall not be required to apply any Net Available
Cash in accordance with this Section 4.06(b) except to the extent that the
aggregate Net Available Cash from all Asset Dispositions which is not applied in
accordance with this Section 4.06(b) exceeds $10,000,000. Pending application of
Net Available Cash pursuant to this Section 4.06(b), such Net Available Cash
shall be (i) invested in Temporary Cash Investments or (ii) used to make an
optional prepayment under any revolving credit facility constituting Senior Debt
of the Company or Debt of a Wholly Owned Recourse Subsidiary (or, additionally
in the case of a Subsidiary that is not a Wholly Owned Recourse Subsidiary, Debt
of such Subsidiary), whether or not the related loan commitment is permanently
reduced in connection therewith.
(c) In the event of an Asset Disposition that requires the purchase of
Securities pursuant to Section 4.06(b)(iii)(C), the Company will be required to
purchase Securities and Senior Subordinated Debt designated by the Company
tendered pursuant to an offer by the Company for the Securities and such Senior
Subordinated Debt (the "Offer") at a purchase price of 100% of their Accreted
Value or principal amount, as applicable, without premium, plus accrued interest
to the Purchase Date (or in respect of other Senior Subordinated Debt such
lesser price, if any, as may be provided for by the terms of such Senior
Subordinated Debt) in accordance with the procedures (including prorationing in
the event of oversubscription) set forth in Section 4.06(d), provided that the
procedures for making an offer to holders of other Senior Subordinated Debt will
be as provided for by the terms of such Senior Subordinated Debt. If (x) the
aggregate purchase price of Securities and Senior Subordinated Debt tendered
pursuant to the Offer is less than the Net Available Cash allotted to the
purchase of the Securities and Senior Subordinated Debt, (y) the Company shall
not be obligated to make an Offer pursuant to the last sentence of this
paragraph or (z) the Company shall be unable to purchase Securities from Holders
thereof in an Offer because of the provisions of applicable law or of the
Company's or its Subsidiaries' loan agreements, indentures or other contracts
governing Senior Debt of the Company or Debt of Subsidiaries (in which case the
Company need not make an Offer), the Company shall apply the remaining Net
Available Cash to (i) invest in assets to replace the assets that were the
subject of the Asset Disposition or in assets that (as determined by the Board
of Directors of the Company, the determination of which shall be conclusive and
evidenced by a resolution of such Board of Directors) will be used in the
businesses of Panavision and its Wholly Owned Recourse Subsidiaries (or,
additionally in the case of an Asset Disposition by a Subsidiary that is not a
Wholly Owned Recourse Subsidiary, the business of such Subsidiary) existing on
the Issue Date or in businesses reasonably related thereto or (ii) in the case
of clause (x) or (y), prepay, repay or repurchase Debt of the Company or Debt of
a Wholly Owned Recourse Subsidiary or, additionally in the case of an Asset
Disposition by a Subsidiary that is not a Wholly Owned Recourse Subsidiary, Debt
of such Subsidiary which the Company or such Wholly Owned Recourse Subsidiary or
Subsidiary is not required by the terms
<PAGE>
40
thereof to prepay, repay, repurchase or redeem (in each case other than Debt
owed to the Company or an Affiliate of the Company), whether or not the related
loan commitment is permanently reduced in connection therewith. The Company
shall not be required to make an Offer for Securities and Senior Subordinated
Debt pursuant to this Section if the Net Available Cash available therefor
(after application of the proceeds as provided in clause (A) and clause (B) of
Section 4.06(b)(iii)) are less than $10,000,000 for any particular Asset
Disposition (which lesser amounts shall not be carried forward for purposes of
determining whether an Offer is required with respect to the Net Available Cash
from any subsequent Asset Disposition).
(d)(1) Promptly, and in any event within five days after the last date
by which the Company must have applied Net Available Cash pursuant to
Section 4.06(b)(iii)(B), the Company shall be obligated to deliver to the
Trustee and send, by first-class mail to each Holder, a written notice
stating that the Holder may elect to have his Securities purchased by the
Company either in whole or in part (subject to prorationing as hereinafter
described in the event the Offer is oversubscribed) in integral multiples
of $1,000 of Principal Amount at Maturity, at the applicable purchase
price. The notice shall specify a purchase date not less than 30 days nor
more than 60 days after the date of such notice (the "Purchase Date") and
shall contain information concerning the business of the Company which the
Company in good faith believes will enable such Holders to make an informed
decision (which at a minimum will include (i) the most recently filed
Annual Report on Form 10-K (including audited consolidated financial
statements) of the Company, the most recent subsequently filed Quarterly
Report on Form 10-Q and any Current Report on Form 8-K of the Company filed
subsequent to such Quarterly Report, other than Current Reports describing
Asset Dispositions otherwise described in the offering materials (or
corresponding successor reports), and (ii) if material, appropriate pro
forma financial information) and all instructions and materials necessary
to tender Securities pursuant to the Offer, together with the information
contained in clause (2).
(2) Not later than the date upon which written notice of an Offer is
delivered to the Trustee as provided above, the Company shall deliver to
the Trustee an Officers' Certificate as to (i) the amount of the Offer (the
"Offer Amount"), (ii) the allocation of the Net Available Cash from the
Asset Dispositions pursuant to which such Offer is being made and (iii) the
compliance of such allocation with the provisions of Section 4.06(b). On
such date, the Company shall also irrevocably deposit with the Trustee or
with a paying agent (or, if the Company is acting as its own paying agent,
segregate and hold in trust) in immediately available funds an amount equal
to the Offer Amount to be held for payment in accordance with the
provisions of this Section. The amount so deposited, at the option of, and
pursuant to the specific written direction of, the Company, may be invested
in Temporary Cash Investments the maturity date of which is not later than
the Purchase Date. The
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41
Company shall be entitled to any interest or dividends accrued, earned or
paid on such Temporary Cash Investments. Upon the expiration of the period
for which the Offer remains open (the "Offer Period"), the Company shall
deliver to the Trustee for cancellation the Securities or portions thereof
which have been properly tendered to and are to be accepted by the Company.
The Trustee shall, on the Purchase Date, mail or deliver payment to each
tendering Holder in the amount of the purchase price. In the event that the
aggregate purchase price of the Securities and Senior Subordinated Debt
delivered by the Company to the Trustee is less than the Offer Amount, the
Trustee shall deliver the excess to the Company promptly after the
expiration of the Offer Period.
(3) Holders electing to have a Security purchased will be required to
surrender the Security, with an appropriate form duly completed, to the
Company at the address specified in the notice at least three Business Days
prior to the Purchase Date. Holders will be entitled to withdraw their
election if the Trustee or the Company receives not later than three
Business Days prior to the Purchase Date, a facsimile transmission or
letter setting forth the name of the Holder, the Principal Amount at
Maturity of the Security which was delivered for purchase by the Holder and
a statement that such Holder is withdrawing his election to have such
Security purchased. If at the expiration of the Offer Period the purchase
price for the aggregate Principal Amount at Maturity of Securities
surrendered by Holders (and other Senior Subordinated Debt) exceeds the
Offer Amount, the Company shall select the Securities (and other Senior
Subordinated Debt) to be purchased on a pro rata basis (with such
adjustments as may be deemed appropriate by the Company so that only
Securities having a Principal Amount at Maturity of $1,000, or integral
multiples thereof, shall be purchased). Holders whose Securities are
purchased only in part will be Issued new Securities equal in Principal
amount to the unpurchased portion of the Securities surrendered.
(4) At the time the Company delivers Securities to the Trustee which
are to be accepted for purchase, the Company will also deliver an Officers'
Certificate stating that such Securities are to be accepted by the Company
pursuant to and in accordance with the terms of this Section. A Security
shall be deemed to have been accepted for purchase at the time the Trustee,
directly or through an agent, mails or delivers payment therefor to the
surrendering Holder.
(e) The Company shall comply, to the extent applicable, with the
requirements of Section 14(e) of the Exchange Act and any other securities laws
or regulations in connection with the repurchase of Securities pursuant to this
Section. To the extent that the provisions of any securities laws or regulations
conflict with provisions of this Section, the Company shall comply with the
applicable securities laws and regulations and shall not be deemed to have
breached its obligations under this Section by virtue thereof.
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42
SECTION 4.07. Limitation on Transactions with Affiliates. (a) Prior to the
Effective Date, the Company shall not conduct any business or enter into any
transaction or series of similar transactions (including the purchase, sale,
lease or exchange of any property or the rendering of any service) with any
Affiliate of the Company or any legal or beneficial owner of 10% or more of the
voting power of the Voting Stock of the Company or with an Affiliate of any such
owner other than to the extent necessary to consummate the Transactions.
(b) From and after the Effective Date, the Company shall not, and shall not
permit any of its Subsidiaries (other than a Non-Recourse Subsidiary) to,
conduct any business or enter into any transaction or series of similar
transactions (including the purchase, sale, lease or exchange of any property or
the rendering of any service) with any Affiliate of the Company or any legal or
beneficial owner of 10% or more of the voting power of the Voting Stock of the
Company or with an Affiliate of any such owner unless:
(i) the terms of such business, transaction or series of transactions
are (A) set forth in writing and (B) at least as favorable to the Company
or such Subsidiary as terms that would be obtainable at the time for a
comparable transaction or series of similar transactions in arm's-length
dealings with an unrelated third Person; and
(ii) to the extent that such business, transaction or series of
transactions is known by the Board of Directors of the Company or of such
Subsidiary to involve an Affiliate of the Company or a legal or beneficial
owner of 10% or more of the voting power of the Voting Stock of the Company
or an Affiliate of such owner, then:
(A) with respect to a transaction or series of related
transactions, other than any purchase or sale of inventory, renting of
property or rendering of services in the ordinary course of business
(an "Exempt Transaction"), involving aggregate payments or other
consideration in excess of $5,000,000, such transaction or series of
related transactions has been approved (and the value of any noncash
consideration has been determined) by a majority of those members of
the Board of Directors of the Company having no personal stake in such
business, transaction or series of transactions; and
(B) with respect to a transaction or series of related
transactions, other than any Exempt Transaction, involving aggregate
payments or other consideration in excess of $10,000,000 (with the
value of any noncash consideration being determined by a majority of
those members of the Board of Directors of the Company having no
personal
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43
stake in such business, transaction or series of transactions), such
transaction or series of related transactions has been determined, in
the written opinion of a nationally recognized investment banking firm
to be fair, from a financial point of view, to the Company or such
Subsidiary.
(c) The provisions of Section 4.07(b) shall not prohibit:
(i) any Restricted Payment permitted to be paid pursuant to Section
4.05;
(ii) any transaction between the Company and any of its Subsidiaries;
provided, however, that no portion of any minority interest in any such
Subsidiary is owned by (x) any Affiliate (other than the Company, a Wholly
Owned Recourse Subsidiary of the Company, a Permitted Affiliate or an
Unrestricted Affiliate) of the Company or (y) any legal or beneficial owner
of 10% or more of the voting power of the Voting Stock of the Company or
any Affiliate of such owner (other than the Company, any Wholly Owned
Recourse Subsidiary of the Company or an Unrestricted Affiliate);
(iii) any transaction between Subsidiaries of the Company; provided,
however, that no portion of any minority interest in any such Subsidiary is
owned by (x) any Affiliate (other than the Company, a Wholly Owned Recourse
Subsidiary of the Company, a Permitted Affiliate or an Unrestricted
Affiliate) of the Company or (y) any legal or beneficial owner of 10% or
more of the voting power of the Voting Stock of the Company or any
Affiliate of such owner (other than the Company, any Wholly Owned Recourse
Subsidiary of the Company or an Unrestricted Affiliate);
(iv) any transaction between the Company or a Subsidiary of the
Company and its own employee stock ownership plan;
(v) any transaction with a Permitted Affiliate entered into in the
ordinary course of business (including compensation or employee benefit
arrangements with any such officer or director); provided, however, that
such Permitted Affiliate holds, directly or indirectly, no more than 10% of
the outstanding Capital Stock of the Company;
(vi) any business or transaction with an Unrestricted Affiliate;
(vii) any transaction pursuant to which Mafco Holdings will provide
the Company and Panavision and its Subsidiaries at their request and at the
cost to Mafco Holdings with certain allocated services to be purchased from
third
<PAGE>
44
party providers, such as legal and accounting services, insurance coverage
and other services;
(viii) any transaction contemplated by a Tax Sharing Agreement; and
(ix) the Transactions.
SECTION 4.08. Change of Control. (a) Upon a Change of Control, each Holder
shall have the right to require the Company to repurchase all or any part of
such Holder's Securities at a repurchase price in cash equal to their Put Amount
as of the date of repurchase, plus accrued and unpaid interest, if any, to the
date of repurchase in accordance with the terms contemplated in Section 4.08(b).
Prior to the mailing of the notice to Holders provided for in Section 4.08(b)
but in any event within 30 days following any Change of Control, if the terms of
any then outstanding Bank Debt prohibit the purchase of the Securities, the
Company covenants to (i) repay in full all Bank Debt or to offer to repay in
full all Bank Debt and to repay the Bank Debt of each lender who has accepted
such offer or (ii) obtain the requisite consent under the Bank Debt to permit
the repurchase of the Securities as provided for in Section 4.08(b). The Company
shall first comply with the covenant in the preceding sentence before it shall
be required to purchase Securities pursuant to this Section 4.08.
(b) Within 45 days following any Change of Control, the Company shall mail
a notice to each Holder with a copy to the Trustee stating:
(1) that a Change of Control has occurred and that such Holder has the
right to require the Company to repurchase all or any part of such Holder's
Securities at a repurchase price in cash equal to their Put Amount as of
the date of repurchase plus accrued and unpaid interest, if any, to the
date of repurchase (subject to the right of Holders of record on the
relevant record date to receive interest on the relevant interest payment
date);
(2) the circumstances and relevant facts regarding such Change of
Control;
(3) the repurchase date (which shall be no earlier than 30 days nor
later than 60 days from the date such notice is mailed); and
(4) the instructions determined by the Company, consistent with this
Section, that a Holder must follow in order to have its Securities
repurchased.
(c) Holders electing to have a Security repurchased will be required to
surrender the Security, with an appropriate form duly completed, to the Company
at the
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45
address specified in the notice at least three Business Days prior to the
repurchase date. Holders will be entitled to withdraw their election if the
Trustee or the Company receives not later than three Business Days prior to the
repurchase date, a facsimile transmission or letter setting forth the name of
the Holder, the Principal Amount at Maturity of the Security which was delivered
for purchase by the Holder and a statement that such Holder is withdrawing his
election to have such Security purchased.
(d) On the repurchase date, all Securities repurchased by the Company under
this Section shall be delivered to the Trustee for cancellation, and the Company
shall pay the repurchase price to the Holders entitled thereto. Upon surrender
of a Security that is repurchased under this Section in part, the Company shall
execute and the Trustee shall authenticate for the Holder thereof (at the
Company's expense) a new Security having a Principal Amount at Maturity equal to
the Principal Amount at Maturity of the Security surrendered less the portion of
the Principal Amount at Maturity of the Security repurchased.
(e) The Company shall comply, to the extent applicable, with the
requirements of Section 14(e) of the Exchange Act and any other securities laws
or regulations in connection with the repurchase of Securities pursuant to this
Section. To the extent that the provisions of any securities laws or regulations
conflict with provisions of this Section, the Company shall comply with the
applicable securities laws and regulations and shall not be deemed to have
breached its obligations under this Sec tion by virtue thereof.
SECTION 4.09. Limitation on Other Business Activities. Prior to the
Effective Date, the Company shall not engage in any business operations other
than those in connection with the Issuance of the Securities and the
Transactions.
SECTION 4.10. Limitation on Restrictions on Distributions from
Subsidiaries. From and after the Effective Date, the Company shall not, and
shall not permit any Subsidiary to, create or otherwise cause or permit to exist
or become effective any consensual encumbrance or restriction on the ability of
any Subsidiary to (i) pay dividends or make any other distributions on its
Capital Stock or pay any Debt owed to the Company, (ii) make any loans or
advances to the Company or (iii) transfer any of its property or assets to the
Company, except:
(1) any encumbrance or restriction pursuant to an agreement in effect
at or entered into on the Issue Date;
(2) any encumbrance or restriction with respect to a Subsidiary
pursuant to an agreement relating to any Debt Issued by such Subsidiary on
or prior to the date on which such Subsidiary was acquired by the Company
(other than Debt Issued as consideration in, or to provide all or any
portion of the funds or credit support
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46
utilized to consummate, the transaction or series of related transactions
pursuant to which such Subsidiary became a Subsidiary or was acquired by
the Company) and outstanding on such date;
(3) any encumbrance or restriction pursuant to an agreement effecting
a Refinancing of any Debt (other than the Existing Credit Agreement) Issued
pursuant to an agreement referred to in clause (1) or (2) above or this
clause (3) or contained in any amendment to an agreement referred to in
clause (1) or (2) above or this clause (3); provided, however, that any
such encumbrance or restriction with respect to any Subsidiary is no less
favorable to the Securityholders than the least favorable of the
encumbrances and restrictions with respect to such Subsidiary contained in
the agreements referred to in clause (1) or (2) above, as determined in
good faith by the Board of Directors of the Company, the determination of
which shall be evidenced by a resolution of such Board of Directors;
(4) any such encumbrance or restriction consisting of customary
nonassignment provisions in leases governing leasehold interests to the
extent such provisions restrict the transfer of the lease;
(5) restrictions contained in security agreements securing Debt of the
Company or a Subsidiary of the Company, to the extent such restrictions
restrict the transfer of the collateral covered by such security agreements
or, upon default, restrict the payment of dividends or distributions on
Capital Stock, and restrictions contained in agreements relating to a
disposition of property or Capital Stock of a Subsidiary, to the extent
such restrictions restrict the transfer of the property or Capital Stock
subject to such agreements; and
(6) any encumbrance or restriction relating to a Non-Recourse
Subsidiary.
SECTION 4.11. Limitation on Issuances of Guarantees of Debt. (a) From and
after the Effective Date, if any Subsidiary of the Company Guarantees any Debt
of the Company other than Senior Debt of the Company, the Company shall cause
such Subsidiary to execute and deliver to the Trustee a supplemental indenture,
substantially in the form of Exhibit C (a "Subsidiary Supplemental Indenture"),
pursuant to which such Subsidiary shall provide a Subsidiary Guarantee as set
forth in Article X.
(b) From and after the Effective Date, if the Company Guarantees any Debt
of a Subsidiary of the Company pursuant to a Guarantee which does not constitute
Senior Debt of the Company, the Company shall cause such Subsidiary to execute
and deliver to the Trustee a Subsidiary Supplemental Indenture, pursuant to
which such Subsidiary shall provide a Subsidiary Guarantee as set forth in
Article X.
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47
(c) Any Subsidiary Guarantee provided by a Subsidiary pursuant to clause
(a) or (b) above shall automatically be released, without any action required on
the part of the Trustee or any Holder, if either (i) the Guarantee referred to
in such clause which gave rise to the requirement for such Subsidiary Guarantee
is released, (ii) all of the Capital Stock or all or substantially all of the
assets of such Subsidiary is sold or otherwise disposed of to a Person other
than the Company or a Subsidiary of the Company or (iii) this Indenture is
discharged or defeased. At the request of the Company, the Trustee shall execute
and deliver an instrument evidencing such release.
(d) From and after the date a Subsidiary provides a Subsidiary Guarantee
pursuant to clause (a) or (b) above until the date such Subsidiary Guarantee is
released pursuant to clause (c) above, the Company shall not permit such
Subsidiary to (x) Issue, directly or indirectly, any Debt which is subordinated
in right of payment to Senior Debt of such Subsidiary unless such Debt is either
(i) expressly pari passu in right of payment with such Subsidiary Guarantee and
not subordinated in right of payment by its terms to any Debt of such Subsidiary
which is not Senior Debt or (ii) is expressly subordinated in right of payment
to such Subsidiary Guarantee or (y) Issue any Secured Debt that is not Senior
Debt of such Subsidiary unless contemporaneously therewith effective provision
is made to secure such Subsidiary Guarantee equally and ratably with (or prior
to) such Secured Debt with a Lien on the same assets securing such Secured Debt
for so long as such Secured Debt is secured by such Lien.
SECTION 4.12. Compliance Certificate. The Company shall deliver to the
Trustee within 120 days after the end of each fiscal year of the Company an
Officers' Certificate stating that in the course of the performance by the
signers of their duties as Officers of the Company they would normally have
knowledge of any Default by the Company and whether or not the signers know of
any Default that occurred during such period. If they do, the certificate shall
describe the Default, its status and what action the Company is taking or
proposes to take with respect thereto. The Company also shall comply with TIA
ss. 314(a)(4). The Trustee shall have no responsibility or obligation to monitor
the Company's compliance with its obligations set forth in Sections 4.03, 4.04,
4.05, 4.06, 4.07, 4.08(a), (b), (c), (d) (only with respect to the Company's
obligation to pay the purchase price to the Holders entitled thereto) and (e),
4.09, 4.10 and 4.11 or whether a Change of Control has occurred.
SECTION 4.13. Further Instruments and Acts. Upon request of the Trustee,
the Company will execute and deliver such further instruments and do such
further acts as may be reasonably necessary or proper to carry out more
effectively the purpose of this Indenture.
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48
ARTICLE V
Successor Company
SECTION 5.01. When Company May Merge or Transfer Assets. (a) The Company
shall not consolidate with or merge with or into, or convey, transfer or lease
all or substantially all its assets to, any Person, unless:
(i) the resulting, surviving or transferee Person (the "Successor
Person") shall be a Person organized and existing under the laws of the
United States of America, any State thereof or the District of Columbia and
such Successor Person (if not the Company) shall expressly assume, by an
indenture supplemental hereto, executed and delivered to the Trustee, in
form satisfactory to the Trustee, all the obligations of the Company under
the Securities and this Indenture;
(ii) immediately after giving effect to such transaction (and treating
any Debt which becomes an obligation of the Successor Person or any of its
Subsidiaries as a result of such transaction as having been Issued by such
Successor Person or such Subsidiary at the time of such transaction), no
Default shall have occurred and be continuing;
(iii) except in the case of the Transactions, immediately after giving
effect to such transaction, the Successor Person shall have a Consolidated
Net Worth in an amount which is not less than the Consolidated Net Worth of
the Company immediately prior to such transaction; and
(iv) the Company shall have delivered to the Trustee an Officers'
Certificate and an Opinion of Counsel, each stating that such
consolidation, merger or transfer and such supplemental indenture (if any)
comply with this Indenture;
provided that this Section 5.01 shall not prohibit a Wholly Owned Recourse
Subsidiary from consolidating with or merging with or into, or conveying,
transferring or leasing all or substantially all its assets to, the Company from
and after the Effective Date.
(b) The Successor Person shall be the successor Company and shall succeed
to, and be substituted for, and may exercise every right and power of, the
Company under this Indenture, and thereafter, except in the case of a lease, the
Company shall be discharged from all obligations and covenants under the
Indenture and the Securities.
(c) Upon the execution and delivery by Panavision to the Trustee of a
supplemental indenture substantially in the form of Exhibit A to the Escrow
Agreement, pursuant to which Panavision assumes the predecessor Company's
obligations under the
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Indenture and the Securities, Panavision shall be the successor Company under
this Indenture and the Securities and shall succeed to, and be substituted for,
and may exercise every right and power of, the predecessor Company hereunder and
thereunder and the predecessor Company shall be discharged from all obligations
and covenants under this Indenture and the Securities.
ARTICLE VI
Defaults and Remedies
SECTION 6.01. Events of Default. An "Event of Default" occurs if:
(1) the Company defaults in any payment of interest on any Security
when the same becomes due and payable, whether or not such payment shall be
prohibited by Article XI, and such default continues for a period of 30
days;
(2) the Company (i) defaults in the payment of the Principal of any
Security when the same becomes due and payable at its Stated Maturity, upon
redemption, upon declaration or otherwise, whether or not such payment
shall be prohibited by Article XI, or (ii) fails to redeem or purchase
Securities when required pursuant to this Indenture or the Securities,
whether or not such redemption or purchase shall be prohibited by Article
XI;
(3) the Company fails to comply with Section 5.01;
(4) the Company fails to comply with Section 4.02, 4.03, 4.04, 4.05,
4.06, 4.07, 4.08 (other than a failure to purchase Securities), 4.09, 4.10
or 4.11 and such failure continues for 30 days after the notice specified
below;
(5) the Company fails to comply with any of its agreements in the
Securities or this Indenture or the Escrow Agreement (other than those
referred to in (1), (2), (3) or (4) above) and such failure continues for
60 days after the notice specified below;
(6) Debt of the Company or any Significant Subsidiary is not paid
within any applicable grace period after final maturity or is accelerated
by the holders thereof because of a default, the total principal amount of
the portion of such Debt that is unpaid or accelerated exceeds $10,000,000
or its foreign currency equivalent and such default continues for 10 days
after the notice specified below;
(7) the Company or any Significant Subsidiary pursuant to or within
the meaning of any Bankruptcy Law:
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(A) commences a voluntary case;
(B) consents to the entry of an order for relief against it in an
involuntary case;
(C) consents to the appointment of a Custodian of it or for any
substantial part of its property; or
(D) makes a general assignment for the benefit of its creditors;
or takes any comparable action under any foreign laws relating to
insolvency;
(8) a court of competent jurisdiction enters an order or decree under
any Bankruptcy Law that:
(A) is for relief against the Company or any Significant
Subsidiary in an involuntary case;
(B) appoints a Custodian of the Company or any Significant
Subsidiary or for any substantial part of its property; or
(C) orders the winding up or liquidation of the Company or any
Significant Subsidiary;
or any similar relief is granted under any foreign laws and the order or
decree remains unstayed and in effect for 60 days;
(9) any judgment or decree for the payment of money in excess of
$10,000,000 (or its foreign currency equivalent) is entered against the
Company or any Significant Subsidiary and is not discharged and either (A)
an enforcement proceeding has been commenced by any creditor upon such
judgment or decree or (B) there is a period of 60 days following the entry
of such judgment or decree during which such judgment or decree is not
discharged, waived or the execution thereof stayed and, in the case of (B),
such default continues for 10 days after the notice specified below; or
(10) a Subsidiary Guarantee ceases to be in full force and effect
(other than in accordance with the terms of this Indenture) or a Subsidiary
Guarantor denies or disaffirms its obligations under its Subsidiary
Guarantee.
The foregoing will constitute Events of Default whatever the reason for any
such Event of Default and whether it is voluntary or involuntary or is effected
by operation of law or pursuant to any judgment, decree or order of any court or
any order, rule or regulation of any administrative or governmental body.
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51
The term "Bankruptcy Law" means title 11 of the United States Code, or any
similar Federal or state law for the relief of debtors. The term "Custodian"
means any receiver, trustee, assignee, liquidator, custodian or similar official
under any Bankruptcy Law.
A Default under clause (4), (5), (6) or (9)(B) is not an Event of Default
until the Trustee or the Holders of at least 25% in Principal Amount at Maturity
of the Outstanding Securities notify the Company of the Default and the Company
does not cure such Default within the time specified after receipt of such
Notice. Such Notice must specify the Default, demand that it be remedied and
state that such notice is a "Notice of Default".
The Company shall deliver to the Trustee, within 30 days after the
occurrence thereof, written notice in the form of an Officers' Certificate of
any event which with the giving of notice and the lapse of time would become an
Event of Default under clause (4), (5), (6) or (9)(B), its status and what
action the Company is taking or proposes to take with respect thereto.
SECTION 6.02. Acceleration. If an Event of Default (other than an Event of
Default specified in Section 6.01(7) or (8) with respect to the Company) occurs
and is continuing, the Trustee by notice to the Company and to the
Representative of Bank Debt, or the Holders of at least 25% in Principal Amount
at Maturity of the Securities by notice to the Company and the Trustee and to
the Representative of Bank Debt, may declare the Accreted Value of and accrued
interest (if any) on all the Securities as of the date of such declaration
(collectively, the "Default Amount") to be due and payable immediately. If an
Event of Default specified in Section 6.01(7) or (8) with respect to the Company
occurs, the Default Amount on all the Securities as of the date of such Event of
Default shall ipso facto become and be immediately due and payable without any
declaration or other act on the part of the Trustee or any Securityholders. The
Holders of a majority in Principal Amount at Maturity of the Securities by
notice to the Trustee may rescind an acceleration and its consequences if the
rescission would not conflict with any judgment or decree and if all existing
Events of Default have been cured or waived except nonpayment of Principal or
interest that has become due solely because of acceleration. No such rescission
shall affect any subsequent Default or impair any right consequent thereto.
SECTION 6.03. Other Remedies. If an Event of Default occurs and is
continuing, the Trustee may pursue any available remedy to collect the payment
of Principal of or interest on the Securities or to enforce the performance of
any provision of the Securities or this Indenture.
The Trustee may maintain a proceeding even if it does not possess any of
the Securities or does not produce any of them in the proceeding. A delay or
omission
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52
by the Trustee or any Securityholder in exercising any right or remedy accruing
upon an Event of Default shall not impair the right or remedy or constitute a
waiver of or acquiescence in the Event of Default. No remedy is exclusive of any
other remedy. All available remedies are cumulative.
SECTION 6.04. Waiver of Past Defaults. The Holders of a majority in
Principal Amount at Maturity of the Securities by notice to the Trustee and the
Company may waive an existing Default and its consequences except (i) a Default
in the payment of the Principal of or interest on a Security, (ii) a Default
arising from the failure to redeem or purchase any Security when required
pursuant to this Indenture or (iii) a Default in respect of a provision that
under Section 9.02 cannot be amended without the consent of each Securityholder
affected. When a Default is waived, it is deemed cured, but no such waiver shall
extend to any subsequent or other Default or impair any consequent right.
SECTION 6.05. Control by Majority. The Holders of a majority in Principal
Amount at Maturity of the Securities may direct the time, method and place of
conducting any proceeding for any remedy available to the Trustee or of
exercising any trust or power conferred on the Trustee under this Indenture.
However, the Trustee may refuse to follow any direction that conflicts with law
or this Indenture or, subject to Section 7.01, that the Trustee determines is
unduly prejudicial to the rights of other Securityholders or would involve the
Trustee in personal liability; provided, however, that the Trustee may take any
other action deemed proper by the Trustee that is not inconsistent with such
direction. Prior to taking any action hereunder, the Trustee shall be entitled
to indemnification satisfactory to it in its sole discretion against all losses
and expenses caused by taking or not taking such action.
SECTION 6.06. Limitation on Suits. Except to enforce the right to receive
payment of principal or interest when due, no Securityholder may pursue any
remedy with respect to this Indenture or the Securities unless:
(1) the Holder gives to the Trustee written notice stating that an
Event of Default is continuing;
(2) the Holders of at least 25% in Principal Amount at Maturity of the
Outstanding Securities make a written request to the Trustee to pursue the
remedy;
(3) such Holder or Holders offer to the Trustee reasonable security or
indemnity against any loss, liability or expense;
(4) the Trustee does not comply with the request within 60 days after
receipt of the request and the offer of security or indemnity; and
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53
(5) the Holders of a majority in Principal Amount at Maturity of the
Securities do not give the Trustee a direction inconsistent with the
request during such 60-day period.
A Securityholder may not use this Indenture to prejudice the rights of
another Securityholder or to obtain a preference or priority over another
Securityholder.
SECTION 6.07. Rights of Holders To Receive Payment. Notwithstand ing any
other provision of this Indenture, the right of any Holder to receive payment of
Principal of and interest, if any, on the Securities held by such Holder, on or
after the respective due dates expressed in the Securities, or to bring suit for
the enforcement of any such payment on or after such respective dates, shall not
be impaired or affected without the consent of such Holder.
SECTION 6.08. Collection Suit by Trustee. If an Event of Default in payment
of interest or Principal specified in Section 6.01(1) or (2) occurs and is
continuing, the Trustee may recover judgment in its own name and as trustee of
an express trust against the Company for the whole amount of Principal and
interest, if any, remaining unpaid (together with interest on such unpaid
interest to the extent lawful) and the amounts provided for in Section 7.07.
SECTION 6.09. Trustee May File Proofs of Claim. The Trustee may, but shall
have no obligation to, file such proofs of claim and other papers or documents
as may be necessary or advisable in order to have the claims of the Trustee and
the Securityholders allowed in any judicial proceedings relative to the Company,
its creditors or its property and, unless prohibited by law or applicable
regulations, may, but shall have no obligation to, vote on behalf of the Holders
in any election of a trustee in bankruptcy or other Person performing similar
functions, and any Custodian in any such judicial proceeding is hereby
authorized by each Holder to make payments to the Trustee and, in the event that
the Trustee shall consent to the making of such payments directly to the
Holders, to pay to the Trustee any amount due it for the reasonable
compensation, expenses, disbursements and advances of the Trustee, its agents
and its counsel, and any other amounts due the Trustee under Section 7.07.
SECTION 6.10. Priorities. If the Trustee collects any money or property
pursuant to this Article VI, it shall pay out the money or property in the
following order:
FIRST: to the Trustee for amounts due under Section 7.07;
SECOND: to holders of Senior Debt to the extent required by Article
XI;
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54
THIRD: to Holders of Securities for amounts due and unpaid thereon for
Principal and interest, if any, ratably, without preference or priority of
any kind, according to the amounts due and payable on such Securities for
Principal and interest, if any, respectively; and
FOURTH: to the Company.
The Trustee may fix a record date and payment date for any payment to
Securityholders pursuant to this Section. At least 15 days before such record
date, the Company shall mail to each Securityholder and the Trustee a notice
that states the record date, the payment date (which shall be not less than one
Business Day following the record date) and amount to be paid.
SECTION 6.11. Undertaking for Costs. In any suit for the enforcement of any
right or remedy under this Indenture or in any suit against the Trustee for any
action taken or omitted by it as Trustee, a court in its discretion may require
the filing by any party litigant in the suit of an undertaking to pay the costs
of the suit, and the court in its discretion may assess reasonable costs,
including reasonable attorneys' fees, against any party litigant in the suit,
having due regard to the merits and good faith of the claims or defenses made by
the party litigant. This Section does not apply to a suit by the Trustee, a suit
by a Holder for the enforcement of the payment of the Principal of, or interest
(if any) on, any Security on or after the respective due dates expressed in such
Security or a suit by Holders of more than 10% in Principal Amount at Maturity
of the Securities.
SECTION 6.12. Waiver of Stay or Extension Laws. The Company (to the extent
it may lawfully do so) shall not at any time insist upon, or plead, or in any
manner whatsoever claim or take the benefit or advantage of, any stay or
extension law wherever enacted, now or at any time hereafter in force, which may
affect the covenants or the performance of this Indenture; and the Company (to
the extent that it may lawfully do so) hereby expressly waives all benefit or
advantage of any such law, and shall not hinder, delay or impede the execution
of any power herein granted to the Trustee, but shall suffer and permit the
execution of every such power as though no such law had been enacted.
ARTICLE VII
Trustee
SECTION 7.01. Duties of Trustee. (a) If an Event of Default has occurred
and is continuing, the Trustee shall exercise the rights and powers vested in it
by this Indenture and use the same degree of care and skill in its exercise as a
prudent
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55
person would exercise or use under the circumstances in the conduct of such
person's own affairs.
(b) Except during the continuance of an Event of Default:
(1) the Trustee undertakes to perform such duties and only such duties
as are specifically set forth in this Indenture or are contemplated to be
performed by the Trustee in the Escrow Agreement and no implied covenants
or obligations shall be read into this Indenture or the Escrow Agreement
against the Trustee; and
(2) in the absence of bad faith on its part, the Trustee may
conclusively rely, as to the truth of the statements and the correctness of
the opinions expressed therein, upon certificates or opinions furnished to
the Trustee and conforming to the requirements of this Indenture. However,
in the case of any such opinions or certificates which by any provision
hereof are specifically required to be furnished to the Trustee, the
Trustee shall examine the certificates and opinions to determine whether or
not they conform to the requirements of this Indenture.
(c) No provision of this Indenture shall be construed to relieve the
Trustee from liability for its own negligent action, its own negligent failure
to act or its own wilful misconduct, except that:
(1) this paragraph does not limit the effect of paragraph (b) of this
Section;
(2) the Trustee shall not be liable for any error of judgment made in
good faith by a Trust Officer unless it is proved that the Trustee was
negligent in ascertaining the pertinent facts; and
(3) the Trustee shall not be liable with respect to any action it
takes or omits to take in good faith in accordance with a direction
received by it pursuant to Section 6.05.
(d) The Trustee shall not be liable for interest on any money received by
it except as the Trustee may agree in writing with the Company.
(e) Money held in trust by the Trustee need not be segregated from other
funds except to the extent required by law.
(f) No provision of this Indenture shall require the Trustee to expend or
risk its own funds or otherwise incur financial liability in the performance of
any of its duties hereunder or in the exercise of any of its rights or powers,
if it shall have
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56
reasonable grounds to believe that repayment of such funds or adequate indemnity
against such risk or liability is not reasonably assured to it.
(g) Every provision of this Indenture relating in any way to the Trustee or
its conduct or affecting the liability of or affording protection to the Trustee
shall be subject to the provisions of each paragraph of this Section and Section
7.02 (unless expressly not applicable) and to the provisions of the TIA.
SECTION 7.02. Rights of Trustee. (a) The Trustee may rely on and shall be
protected in acting or refraining from acting on any document believed by it to
be genuine and to have been signed or presented by the proper Person. The
Trustee need not investigate any fact or matter stated in the document.
(b) Before the Trustee acts or refrains from acting, it may require an
Officers' Certificate or an Opinion of Counsel. The Trustee shall not be liable
for any action it takes or omits to take in good faith in reliance on the
Officers' Certificate or Opinion of Counsel.
(c) The Trustee may act through agents and shall not be responsible for the
misconduct or negligence of any agent appointed with due care.
(d) The Trustee shall not be liable for any action it takes or omits to
take in good faith which it believes to be authorized or within its rights or
powers; provided, however, that the Trustee's conduct does not constitute wilful
misconduct, negligence or bad faith.
(e) The Trustee may consult with counsel of its selection, and the advice
or opinion of counsel with respect to legal matters relating to this Indenture
and the Securities shall be full and complete authorization and protection from
liability in respect to any action taken, omitted or suffered by it hereunder in
good faith and in accordance with the advice or opinion of such counsel.
(f) The Trustee shall be under no obligation to exercise any of the rights
or powers vested in it by this Indenture at the request or direction of any of
the Holders pursuant to this Indenture, unless such Holders shall have offered
to the Trustee reasonable security or indemnity against the costs, expenses and
liabilities which might be incurred by it in compliance with such request or
direction.
SECTION 7.03. Individual Rights of Trustee. The Trustee in its individual
or any other capacity may become the owner or pledgee of Securities and may
otherwise deal with the Company or its affiliates with the same rights it would
have if it were not Trustee. Any Paying Agent, Registrar, co-registrar or
co-paying
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57
agent may do the same with like rights. However, the Trustee must comply with
Sections 7.10 and 7.11.
SECTION 7.04. Trustee's Disclaimer. The Trustee shall not be responsible
for and makes no representation as to the validity or adequacy of this Indenture
or the Securities, it shall not be accountable for the Company's use of the
Securities or of the proceeds from the Securities, and it shall not be
responsible for any statement in this Indenture or in any document Issued in
connection with the sale of the Securities or in the Securities other than the
Trustee's certificate of authentication.
SECTION 7.05. Notice of Defaults. If a Default occurs and is continuing and
if it is known to the Trustee, the Trustee shall mail to each Securityholder
notice of the Default within 90 days after it occurs and, if the Escrowed
Property has not yet been released, shall mail to the Escrow Agent notice of the
Default within one Business Day after the Trustee has knowledge of such Default.
Except in the case of a Default in payment of Principal of or interest, if any,
on any Security, the Trustee may withhold the notice if and so long as a
committee of its Trust Officers in good faith determines that withholding the
notice is in the interests of Securityholders.
SECTION 7.06. Reports by Trustee to Holders. The Trustee shall transmit to
Holders such reports concerning the Trustee and its actions under this Indenture
as may be required pursuant to the TIA at the times and in the manner provided
pursuant thereto. To the extent that any such report is required by the TIA with
respect to any 12-month period, such report shall cover the 12-month period
ending each December 31 and shall be transmitted by the next succeeding each
March 31. The Trustee also shall comply with TIA ss. 313(b).
A copy of each report at the time of its mailing to Securityholders shall
be filed with the SEC and each stock exchange (if any) on which the Securities
are listed. The Company agrees to notify promptly the Trustee whenever the
Securities become listed on any stock exchange and of any delisting thereof.
SECTION 7.07. Compensation and Indemnity. The Company shall pay to the
Trustee from time to time such compensation as shall be agreed to in writing
from time to time by the Company and the Trustee for its services. The Trustee's
compensation shall not be limited by any law on compensation of a trustee of an
express trust. The Company shall reimburse the Trustee upon request for all
reasonable out-of-pocket expenses incurred or made by it, including costs of
collection, in addition to the compensation for its services. Such expenses
shall include the reasonable compensation and expenses, disbursements and
advances of the Trustee's agents, counsel, accountants and experts. The Company
shall indemnify the Trustee and each of the Trustee's agents, officers,
directors, employees and stockholders (each an "indemnitee") against any and all
loss, liability, damage, claim or expense (including
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58
attorneys' fees and expenses) incurred by each indemnitee in connection with the
acceptance or administration of this trust and the performance of its duties
hereunder. Each indemnitee shall notify the Company promptly of any claim for
which it may seek indemnity. Failure by the Trustee to so notify the Company
shall not relieve the Company of its obligations hereunder. The Company shall
defend the claim and any or all indemnitees may have separate counsel and the
Company shall pay the fees and expenses of any such counsel. The Company need
not reimburse any expense or indemnify against any loss, liability or expense
incurred by any indemnitee through its own wilful misconduct, negligence or bad
faith.
To secure the Company's payment obligations in this Section, the Trustee
shall have a lien prior to the Securities on all money or property held or
collected by the Trustee other than money or property held in trust to pay
Principal of and interest, if any, on particular Securities.
The Company's payment obligations pursuant to this Section shall survive
the discharge of this Indenture. When the Trustee incurs expenses after the
occurrence of a Default specified in Section 6.01(7) or (8) with respect to the
Company, the expenses are intended to constitute expenses of administration
under the Bankruptcy Law.
SECTION 7.08. Replacement of Trustee. The Trustee may resign at any time by
so notifying the Company. The Holders of a majority in Principal Amount at
Maturity of the Securities may remove the Trustee by so notifying the Trustee
and may appoint a successor Trustee. The Company shall remove the Trustee if:
(1) the Trustee fails to comply with Section 7.10;
(2) the Trustee is adjudged bankrupt or insolvent;
(3) a receiver or other public officer takes charge of the Trustee or
its property; or
(4) the Trustee otherwise becomes incapable of acting.
If the Trustee resigns, is removed by the Company, is removed by Holders of
a majority in Principal Amount at Maturity of the Securities and they do not
promptly appoint a successor Trustee, or if a vacancy exists in the office of
Trustee for any reason (the Trustee in such event being referred to herein as
the retiring Trustee), the Company shall promptly appoint a successor Trustee.
A successor Trustee shall deliver a written acceptance of its appointment
to the retiring Trustee and to the Company. Thereupon the resignation or removal
of
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59
the retiring Trustee shall become effective, and the successor Trustee shall
have all the rights, powers and duties of the Trustee under this Indenture. The
successor Trustee shall mail a notice of its succession to Securityholders. The
retiring Trustee shall promptly transfer all property held by it as Trustee to
the successor Trustee, subject to the lien provided for in Section 7.07.
If a successor Trustee does not accept appointment within 60 days after the
retiring Trustee tenders its resignation or is removed, the retiring Trustee,
the Company or the Holders of a majority in Principal Amount at Maturity of the
Securities may petition any court of competent jurisdiction for the appointment
of a successor Trustee.
If the Trustee fails to comply with Section 7.10, any Securityholder may
petition any court of competent jurisdiction for the removal of the Trustee and
the appointment of a successor Trustee.
Notwithstanding the replacement of the Trustee pursuant to this Section,
the Company's obligations under Section 7.07 shall continue for the benefit of
the retiring Trustee.
SECTION 7.09. Successor Trustee by Merger. If the Trustee consolidates
with, merges or converts into, or transfers all or substantially all its
corporate trust business or assets to, another corporation or banking
association, the resulting, surviving or transferee corporation without any
further act shall be the successor Trustee.
In case at the time such successor or successors by merger, conversion or
consolidation to the Trustee shall succeed to the trusts created by this
Indenture any of the Securities shall have been authenticated but not delivered,
any such successor to the Trustee may adopt the certificate of authentication of
any predecessor trustee, and deliver such Securities so authenticated; and in
case at that time any of the Securities shall not have been authenticated, any
successor to the Trustee may authenticate such Securities either in the name of
any predecessor hereunder or in the name of the successor to the Trustee; and in
all such cases such certificates shall have the full force which it is anywhere
in the Securities or in this Indenture provided that the certificate of the
Trustee shall have.
SECTION 7.10. Eligibility; Disqualification. The Trustee shall at all times
satisfy the requirements of TIA ss. 310(a). The Trustee shall have a combined
capital and surplus of at least $50,000,000 as set forth in its most recent
published annual report of condition. The Trustee shall comply with TIA ss.
310(b); provided, however, that there shall be excluded from the operation of
TIA ss. 310(b)(1) any indenture or indentures under which other securities or
certificates of interest or
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60
participation in other securities of the Company are outstanding if the
requirements for such exclusion set forth in TIA ss. 310(b)(1) are met.
SECTION 7.11. Preferential Collection of Claims Against Company. The
Trustee shall comply with TIA ss. 311(a), excluding any creditor relationship
listed in TIA ss. 311(b). A Trustee who has resigned or been removed shall be
subject to TIA ss. 311(a) to the extent indicated therein.
ARTICLE VIII
Discharge of Indenture; Defeasance
SECTION 8.01. Discharge of Liability on Securities; Defeasance. (a) When
(i) the Company delivers to the Trustee all Outstanding Securities (other than
Securities replaced pursuant to Section 2.07) for cancellation or (ii) all
Outstanding Securities have become due and payable, whether at maturity or as a
result of the giving of a notice of redemption pursuant to Article III hereof or
otherwise, and the Company irrevocably deposits with the Trustee funds
sufficient to pay when due all Outstanding Securities, including interest
thereon to such due date, if any (other than Securities replaced pursuant to
Section 2.07), and if in either case the Company pays all other sums payable
hereunder by the Company, then this Indenture shall, subject to Sections 8.01(c)
and 8.06, cease to be of further effect. The Trustee shall acknowledge
satisfaction and discharge of this Indenture on demand of the Company
accompanied by an Officers' Certificate and an Opinion of Counsel as to the
satisfaction of all conditions to such satisfaction and discharge of this
Indenture and at the cost and expense of the Company.
(b) Subject to Sections 8.01(c), 8.02 and 8.06, the Company at any time may
terminate (i) all its obligations under the Securities and this Indenture and
all obligations of the Subsidiary Guarantors under Article X ("legal defeasance
option") or (ii) its obligations under Sections 4.02, 4.03, 4.04, 4.05, 4.06,
4.07, 4.08, 4.09, 4.10, 4.11, 4.12, 5.01(a)(iii) and the Subsidiary Guarantors'
obligations under Article X and the operation of Section 6.01(4), 6.01(6),
6.01(7) (with respect to Significant Subsidiaries only), 6.01(8) (with respect
to Significant Subsidiaries only), 6.01(9) and 6.01(10) ("covenant defeasance
option"). The Company may exercise its legal defeasance option notwithstanding
its prior exercise of its covenant defeasance option.
If the Company exercises its legal defeasance option, payment of the
Securities may not be accelerated because of an Event of Default. If the Company
exercises its covenant defeasance option, payment of the Securities may not be
accelerated because of an Event of Default specified in Section 6.01(4),
6.01(6), 6.01(7) (with respect to Significant Subsidiaries only), 6.01(8) (with
respect to Significant Subsidiaries only), 6.01(9) and 6.01(10) or because of
the failure of the Company to comply with clause (iii) of Section 5.01 or
because of a Subsidiary Guarantor's failure to comply with Article X.
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61
Upon satisfaction of the conditions set forth herein and upon request of
the Company, the Trustee shall acknowledge in writing the discharge of those
obligations that the Company terminates.
(c) Notwithstanding clauses (a) and (b) above, the Company's obligations in
Sections 2.03, 2.04, 2.05, 2.06, 2.07, 2.08, 7.07, 7.08, 8.04, 8.05 and 8.06
shall survive until the Securities have been paid in full. Thereafter, the
Company's obligations in Sections 7.07, 8.04 and 8.05 shall survive.
SECTION 8.02. Conditions to Defeasance. The Company may exercise its legal
defeasance option or its covenant defeasance option only if:
(1) the Company irrevocably deposits in trust with the Trustee money
or U.S. Government Obligations for the payment of Principal and interest,
if any, on the Securities to maturity or redemption, as the case may be;
(2) the Company delivers to the Trustee a certificate from a
nationally recognized firm of independent accountants expressing their
opinion that the pay ments of principal and interest when due and without
reinvestment on the deposited U.S. Government Obligations plus any
deposited money without investment will provide cash at such times and in
such amounts as will be sufficient to pay Principal and interest, if any,
when due on all the Securities to maturity or redemption, as the case may
be;
(3) 123 days pass after the deposit is made and during the 123-day
period no Default specified in Section 6.01(7) or (8) with respect to the
Company occurs which is continuing at the end of the period;
(4) the deposit does not constitute a default under any other
agreement binding on the Company and is not prohibited by Article XI;
(5) the Company delivers to the Trustee an Opinion of Counsel to the
effect that the trust resulting from the deposit does not constitute, or is
qualified as, a regulated investment company under the Investment Company
Act of 1940;
(6) in the case of the legal defeasance option, the Company shall have
delivered to the Trustee an Opinion of Counsel stating that (i) the Company
has received from, or there has been published by, the Internal Revenue
Service a ruling, or (ii) since the date of this Indenture there has been a
change in the applicable Federal income tax law, in either case to the
effect that, and based thereon such Opinion of Counsel shall confirm that,
the Securityholders will not recognize income, gain or loss for Federal
income tax purposes as a result of such defeasance and will be subject to
Federal income tax on the same amounts, in the same manner and at the same
times as would have been the case if such defeasance had not occurred;
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62
(7) in the case of the covenant defeasance option, the Company shall
have delivered to the Trustee an Opinion of Counsel to the effect that the
Securityholders will not recognize income, gain or loss for Federal income
tax purposes as a result of such covenant defeasance and will be subject to
Federal income tax on the same amounts, in the same manner and at the same
times as would have been the case if such covenant defeasance had not
occurred; and
(8) the Company delivers to the Trustee an Officers' Certificate and
an Opinion of Counsel, each stating that all conditions precedent to the
defeasance and discharge of the Securities as contemplated by this Article
VIII have been complied with.
Notwithstanding the foregoing provisions of this Section, the conditions
set forth in the foregoing paragraphs (2), (3), (4), (5), (6) and (7) need not
be satisfied so long as, at the time the Company makes the deposit described in
paragraph (1), (i) no Default under Section 6.01(1), 6.01(2), 6.01(7) or 6.01(8)
has occurred and is continuing on the date of such deposit and after giving
effect thereto and (ii) either (x) a notice of redemption has been mailed
pursuant to Section 3.03 providing for redemption of all the Securities not more
than 60 days after such mailing and the provisions of Section 3.01 with respect
to such redemption shall have been complied with or (y) the Stated Maturity of
the Securities will occur within 60 days. If the conditions in the preceding
sentence are satisfied, the Company shall be deemed to have exercised its
covenant defeasance option.
Before or after a deposit, the Company may make arrangements satisfactory
to the Trustee for the redemption of Securities at a future date in accordance
with Article III.
SECTION 8.03. Application of Trust Money. The Trustee shall hold in trust
money or U.S. Government Obligations deposited with it pursuant to this Article
VIII. It shall apply the deposited money and the money from U.S. Government
Obligations through the Paying Agent and in accordance with this Indenture to
the payment of Principal of and interest, if any, on the Securities. Money and
securities so held in trust are not subject to Article XI.
SECTION 8.04. Repayment to Company. The Trustee and the Paying Agent shall
promptly turn over to the Company upon request any excess money or securities
held by them at any time.
Subject to any applicable abandoned property law, the Trustee and the
Paying Agent shall pay to the Company upon request any money held by them for
the payment of Principal or interest, if any, that remains unclaimed for two
years, and, thereafter, Securityholders entitled to the money must look to the
Company for payment as general creditors.
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SECTION 8.05. Indemnity for Government Obligations. The Company shall pay
and shall indemnify the Trustee against any tax, fee or other charge imposed on
or assessed against deposited U.S. Government Obligations or the Principal and
interest received on such U.S. Government Obligations.
SECTION 8.06. Reinstatement. If the Trustee or Paying Agent is unable to
apply any money or U.S. Government Obligations in accordance with this Article
VIII by reason of any legal proceeding or by reason of any order or judgment of
any court or governmental authority enjoining, restraining or otherwise
prohibiting such application, the Company's obligations under this Indenture and
the Securities shall be revived and reinstated as though no deposit had occurred
pursuant to this Article VIII until such time as the Trustee or Paying Agent is
permitted to apply all such money or U.S. Government Obligations in accordance
with this Article VIII; provided, however, that, if the Company has made any
payment of interest, if any, on or Principal of any Securities because of the
reinstatement of its obligations, the Company shall be subrogated to the rights
of the Holders of such Securities to receive such payment from the money or U.S.
Government Obligations held by the Trustee or Paying Agent.
ARTICLE IX
Amendments
SECTION 9.01. Without Consent of Holders. The Company, any Subsidiary
Guarantor and the Trustee, as applicable, may amend this Indenture, the
Securities and any Subsidiary Guarantee without notice to or consent of any
Security holder:
(1) to cure any ambiguity, omission, defect or inconsistency;
(2) to comply with Article V;
(3) to provide for uncertificated Securities in addition to or in
place of certificated Securities; provided, however, that the
uncertificated Securities are Issued in registered form for purposes of
Section 163(f) of the Code or in a manner such that the uncertificated
Securities are described in Section 163(f)(2)(B) of the Code;
(4) to add Guarantees (including Subsidiary Guarantees) with respect
to the Securities or to secure the Securities;
(5) to add to the covenants of the Company for the benefit of the
Holders or to surrender any right or power herein conferred upon the
Company;
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(6) to provide for issuance of the Exchange Notes or Private Exchange
Notes, which will have terms substantially identical in all material
respects to the Initial Notes (except that the transfer restrictions
contained in the Initial Notes will be modified or eliminated, as
appropriate), and which will be treated together with any Outstanding
Initial Notes, as a single issue of securities;
(7) to comply with any requirements of the SEC in connection with
qualifying, or maintaining the qualification of, this Indenture under the
TIA or to otherwise comply with the TIA;
(8) to make any change in Article XI that would limit or terminate the
benefits available to any holder of Senior Debt of the Company or any
Subsidiary Guarantor (or Representatives therefor); or
(9) to make any change that does not adversely affect the rights of
any Securityholder.
An amendment under this Section may not make any change that adversely
affects the rights under Article XI of any holder of Senior Debt of the Company
or any Subsidiary Guarantor then outstanding unless the holders of such Senior
Debt (or any group or representative thereof authorized to give a consent)
consent to such change.
After an amendment under this Section becomes effective, the Company shall
mail to Securityholders a notice briefly describing such amendment. The failure
to give such notice to all Securityholders, or any defect therein, shall not
impair or affect the validity of an amendment under this Section.
SECTION 9.02. With Consent of Holders. The Company, any Subsidiary
Guarantor and the Trustee, as applicable, may amend this Indenture, the
Securities and any Subsidiary Guarantees without notice to any Securityholder
but with the written consent of the Holders of at least a majority in Principal
Amount at Maturity of the Outstanding Securities. However, without the consent
of each Securityholder affected, an amendment may not:
(1) reduce the Principal Amount at Maturity of Securities whose
Holders must consent to an amendment;
(2) reduce the rate of or extend the time for payment of interest on
any Security;
(3) reduce the Principal of or extend the Stated Maturity of any
Security or reduce the Accreted Value, Put Amount or Default Amount of any
Security;
(4) reduce the premium or amount payable upon the redemption of any
Security or change the time at which any Security may be redeemed in
accordance with Article III;
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(5) make any Security payable in money other than that stated in the
Security;
(6) make any change in Article XI that adversely affects the rights of
any such Securityholder under Article XI;
(7) make any change in Section 4.08 relating to the date by which the
Company must purchase, or in the obligation of the Company to purchase,
tendered shares, the definition of Change of Control, Section 6.04 or 6.07
or the second sentence of this Section;
(8) make any change to paragraph 6 of the Securities; or
(9) except pursuant to Section 4.11(c) or Article VIII, release any
Subsidiary Guarantor from its obligation under its Subsidiary Guarantee, or
change any Subsidiary Guarantee in any manner that adversely affects the
rights of any Securityholder under such Subsidiary Guarantee in any
material respect.
It shall not be necessary for the consent of the Holders under this Section
to approve the particular form of any proposed amendment, but it shall be
sufficient if such consent approves the substance thereof.
An amendment under this Section may not make any change that adversely
affects the rights under Article XI of any holder of Senior Debt of the Company
or any Subsidiary Guarantor then outstanding unless the holders of such Senior
Debt (or any group or representative thereof authorized to give a consent)
consent to such change.
After an amendment under this Section becomes effective, the Company shall
mail to Securityholders a notice briefly describing such amendment. The failure
to give such notice to all Securityholders, or any defect therein, shall not
impair or affect the validity of an amendment under this Section.
SECTION 9.03. Compliance with Trust Indenture Act. Every amend ment to this
Indenture or the Securities shall comply with the TIA as then in effect.
SECTION 9.04. Revocation and Effect of Consents and Waivers. Any amendment
to this Indenture or the Securities shall become effective in accordance with
its terms when executed and delivered by the Company and the Trustee provided
that the Company has received the requisite consents prior thereto. The Company
shall not be obligated to execute any such amendment regardless of whether such
consents have been received. Any waiver shall become effective when the
requisite consents have been received or such later time as the Company may
elect by notice to the Trustee. A consent to an amendment or a waiver by a
Holder of a Security shall bind the Holder and every subsequent Holder of that
Security or portion of the Security that evidences the same debt as the
consenting Holder's Security, even if notation of the consent or waiver is not
made on the Security. However, any such Holder or subsequent Holder
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may revoke the consent or waiver as to such Holder's Security or portion of the
Security if the Trustee receives the notice of revocation prior to the time that
the Company receives the requisite number of consents to such proposed amendment
or waiver. After an amendment or waiver becomes effective, it shall bind every
Security holder. A consent to any amendment or waiver hereunder by any Holder
given in connection with a tender of such Holder's Securities shall not be
rendered invalid by such tender.
The Company may, but shall not be obligated to, fix a record date for the
purpose of determining the Securityholders entitled to give their consent or
take any other action described above or required or permitted to be taken
pursuant to this Indenture. If a record date is fixed, then notwithstanding the
immediately preceding paragraph, those Persons who were Securityholders at such
record date (or their duly designated proxies), and only those Persons, shall be
entitled to give such consent or to revoke any consent previously given or to
take any such action, whether or not such Persons continue to be Holders after
such record date. No such consent shall be valid or effective for more than 120
days after such record date.
SECTION 9.05. Notation on or Exchange of Securities. If an amendment
changes the terms of a Security, the Trustee may require the Holder of the
Security to deliver it to the Trustee. The Trustee may place an appropriate
notation on the Security regarding the changed terms and return it to the
Holder. Alternatively, if the Company or the Trustee so determines, the Company
in exchange for the Security shall Issue and the Trustee shall authenticate a
new Security that reflects the changed terms. Failure to make the appropriate
notation or to Issue a new Security shall not affect the validity of such
amendment.
SECTION 9.06. Trustee To Sign Amendments. The Trustee shall sign any
amendment authorized pursuant to this Article IX if the amendment does not
adversely affect the rights, duties, liabilities or immunities of the Trustee.
If it does, the Trustee may but need not sign it. In signing such amendment the
Trustee shall be entitled to receive indemnity reasonably satisfactory to it and
to receive, and (subject to Section 7.01) shall be fully protected in relying
upon, an Officers' Certificate and an Opinion of Counsel stating that such
amendment is authorized or permitted by this Indenture.
SECTION 9.07. Payment for Consent. Neither the Company, any Affiliate of
the Company nor any Subsidiary shall, directly or indirectly, pay or cause to be
paid any consideration, whether by way of interest, fee or otherwise, to any
Holder for or as an inducement to any consent, waiver or amendment of any of the
terms or provisions of this Indenture or the Securities unless such
consideration is offered to be paid or agreed to be paid to all Holders which so
consent, waive or agree to amend in the time frame set forth in solicitation
documents relating to such consent, waiver or amendment.
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ARTICLE X
Subsidiary Guarantees
SECTION 10.01. Subsidiary Guarantees. The Obligations of the Company under
the Securities and the Indenture shall be jointly and severally Guaranteed
pursuant to this Article X by any Subsidiary (a "Subsidiary Guarantor") which is
required to execute and deliver a Subsidiary Supplemental Indenture pursuant to
Section 4.11. Subject to the provisions of this Article X, any such Subsidiary
Guarantor, as primary obligor and not merely as surety, shall, jointly and
severally, irrevocably and unconditionally guarantee the punctual payment when
due, whether at Stated Maturity, by acceleration or otherwise, of all
Obligations of the Company under the Securities and this Indenture whether for
Principal of or interest (if any) on the Securities, expenses, indemnification
or otherwise (all such Obligations guaranteed hereby by such Subsidiary
Guarantor being the "Guaranteed Obligations"). The guaranty of any Subsidiary
Guarantor under this Article X is herein referred to as this "Subsidiary
Guarantee".
Each Subsidiary Guarantor agrees to pay, in addition to the amount stated
above, any and all expenses (including reasonable counsel fees and expenses)
incurred by the Trustee or the Holders in enforcing any rights under this
Article X.
Without limiting the generality of the foregoing, this Subsidiary Guarantee
guarantees, jointly and severally, to the extent provided herein, the payment of
all amounts which constitute part of the Guaranteed Obligations and would be
owed by the Company under this Indenture or the Securities but for the fact that
they are unenforceable or not allowable due to the existence of a bankruptcy,
reorganization or similar proceeding involving the Company.
Each Subsidiary Guarantor agrees, and each Securityholder by accepting a
Security agrees, that the obligations of such Subsidiary Guarantor under its
Subsidiary Guarantee under this Article X shall be subordinated in right of
payment to the prior payment of all Senior Debt of such Subsidiary Guarantor on
the same basis and to the same extent that the Securities are subordinated in
right of payment to the prior payment of Senior Debt of the Company and that
such subordination is for the benefit of and enforceable by the holders of
Senior Debt of such Subsidiary Guarantor. For the purpose of the foregoing
sentence, the Trustee and the Holders shall have the right to receive and/or
retain payments by any Subsidiary Guarantor only at such times as they may
receive and/or retain payments in respect of the Securities pursuant to this
Indenture, including Article XI hereof. In the event that the Trustee or any
Holder shall have received any Subsidiary Guarantor payment that is prohibited
by the foregoing sentence, such Subsidiary Guarantor payment shall be paid over
and delivered to the holders of the Senior Debt of such Subsidiary Guarantor
remaining unpaid, to the extent necessary to pay in full all Senior Debt of such
Subsidiary Guarantor.
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SECTION 10.02. Guaranty Absolute. This Subsidiary Guarantee is irrevocable,
absolute, present and unconditional. Each Subsidiary Guarantor guarantees that
the Guaranteed Obligations will be paid strictly in accordance with the terms of
this Indenture, regardless of any law, regulation or order now or hereafter in
effect in any jurisdiction affecting any of such terms or the rights of the
Trustee or the Holders with respect thereto. Each Subsidiary Guarantor further
agrees that its Subsidiary Guarantee herein constitutes a Guarantee of payment,
performance and compliance (and not a Guarantee of collection). The obligations
of each Subsidiary Guarantor under its Subsidiary Guarantee herein are
independent of the Guaranteed Obligations, and a separate action or actions may
be brought and prosecuted against any Subsidiary Guarantor to enforce its
Subsidiary Guarantee, irrespective of whether any action is brought against the
Company or any other guarantor or whether the Company or any other guarantor is
joined in any such action or actions. The liability of each Subsidiary Guarantor
under its Subsidiary Guarantee herein shall be absolute and unconditional
irrespective of:
(a) any lack of validity or enforceability of this Indenture or the
Securities with respect to the Company or any agreement or instrument relating
thereto;
(b) any change in the time, manner or place of payment of, or in any other
term of, all or any of the Guaranteed Obligations, or any other amendment or
waiver of or any consent to departure from this Indenture, including any
increase in the Guaranteed Obligations resulting from the extension of
additional credit to the Company or otherwise;
(c) the failure to give notice to such Subsidiary Guarantor of the
occurrence of a Default under the provisions of this Indenture or the
Securities;
(d) any taking, exchange, release or nonperfection of any collateral, or
any taking, release or amendment or waiver of or consent to departure from any
other guaranty, for all or any of the Guaranteed Obligations;
(e) any manner of application of collateral, or proceeds thereof, to all or
any of the Guaranteed Obligations, or any manner of sale or other disposition of
any collateral or any other assets of the Company;
(f) any failure, omission, delay by or inability on the part of the Trustee
or the Holders to assert or exercise any right, power or remedy conferred on the
Trustee or the Holders in this Indenture or the Securities;
(g) any change in the corporate structure, or termination, dissolution,
consolidation or merger of the Company or any guarantor (including any other
Subsidiary Guarantor) with or into any other entity, the voluntary or
involuntary liquidation, dissolution, sale or other disposition of all or
substantially all the assets of the Company or any guarantor (including any
other Subsidiary Guarantor), the marshaling of the assets and liabilities of the
Company or any guarantor, the
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receivership, insolvency, bankruptcy, assignment for the benefit of creditors,
reorganization, arrangement, composition with creditors, or readjustment of, or
other similar proceedings affecting the Company or any guarantor (including any
other Subsidiary Guarantor), or any of the assets of any of them;
(h) the assignment of any right, title or interest of the Trustee or any
Holder in this Indenture or the Securities to any other Person; or
(i) any other event or circumstance (including any statute of limitations),
whether foreseen or unforeseen and whether similar or dissimilar to any of the
foregoing, that might otherwise constitute a defense available to, or a
discharge of, the Company or a guarantor (including any other Subsidiary
Guarantor), other than payment in full of the Guaranteed Obligations; it being
the intent of such Subsidiary Guarantor that its obligations hereunder shall not
be discharged except by payment of all amounts owing pursuant to this Indenture
or the Securities and except as otherwise provided in Section 4.11(c).
This Subsidiary Guarantee shall continue to be effective or be reinstated,
as the case may be, if at any time any payment or performance with respect to
any of the Guaranteed Obligations is rescinded or must otherwise be returned by
the Trustee, any Holder or any other Person upon the insolvency, bankruptcy or
reorganization of the Company or otherwise, all as though such payment or
performance had not been made or occurred. Except as expressly set forth in
Sections 4.11(c), 8.01(b) and 10.03, the obligations of each Subsidiary
Guarantor under its Subsidiary Guarantee herein shall not be subject to
reduction, termination or other impairment by any set-off, recoupment,
counterclaim or defense or for any other reason.
SECTION 10.03. Limitation on Liability. Any term or provision of this
Indenture to the contrary notwithstanding, the maximum, aggregate amount of the
Guaranteed Obligations Guaranteed by any Subsidiary Guarantor shall not exceed
the maximum amount that can be hereby Guaranteed without rendering this
Indenture, as it relates to such Subsidiary Guarantor, voidable under applicable
law relating to fraudulent conveyance or fraudulent transfer or similar laws
affecting the rights of creditors generally.
SECTION 10.04. Waivers. Each Subsidiary Guarantor hereby irrevocably
waives, to the extent permitted by applicable law:
(a) promptness, diligence, notice of acceptance and any other notice with
respect to any of the Guaranteed Obligations and this Subsidiary Guarantee;
(b) any requirement that the Trustee, any Holder or any other Person
protect, secure, perfect or insure any Lien or any property subject thereto or
exhaust any right or take any action against the Company or any other Person or
any collateral, or obtain any relief pursuant to this Indenture or pursue any
other available remedy;
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(c) all right to trial by jury in any action, proceeding or counterclaim
arising out of or relating to this Indenture or the Securities;
(d) any defense arising by reason of any claim or defense based upon an
election of remedies by the Trustee or any Holder which in any manner impairs,
reduces, releases or otherwise adversely affects its subrogation, contribution
or reimbursement rights or other rights to proceed against the Company or any
other Person or any collateral; and
(e) any duty on the part of the Trustee or any Holder to disclose to such
Subsidiary Guarantor any matter, fact or thing relating to the business,
operation or condition of the Company and its assets now known or hereafter
known by the Trustee or such Holder.
SECTION 10.05. Waiver of Subrogation and Contribution. Until this Indenture
has been discharged, each Subsidiary Guarantor hereby irrevocably waives any
claim or other right which it may now or hereafter acquire against the Company
or any guarantor (including any other Subsidiary Guarantor) that arise from the
existence, payment, performance or enforcement of such Subsidiary Guarantor's
obligations under its Subsidiary Guarantee herein, including any right of
subrogation, reimbursement, exoneration, contribution, indemnification, any
right to participate in any claim or remedy of the Trustee or any Holder against
the Company or any guarantor or any collateral which the Trustee or any Holder
now has or hereafter acquires, whether or not such claim, remedy or right arises
in equity, or under contract, statute or common law, including the right to take
or receive from the Company, directly or indirectly, in cash or other property
or by setoff or in any other manner, payment or security on account of such
claim or other rights. If any amount shall be paid to such Subsidiary Guarantor
in violation of the preceding sentence and the Guaranteed Obligations shall not
have been paid in full, such amount shall be deemed to have been paid to such
Subsidiary Guarantor for the benefit of, and held in trust for the benefit of,
the Trustee, and the Holders, and shall forthwith be paid to the Trustee for the
benefit of the Holders to be credited and applied to the Guaranteed Obligations,
whether matured or unmatured, in accordance with the terms of this Indenture.
Each Subsidiary Guarantor acknowledges that it will receive direct and indirect
benefits from the financing arrangements contemplated by this Indenture and that
the waivers set forth in this Section 10.05 are knowingly made in contemplation
of such benefits.
SECTION 10.06. No Waiver; Cumulative Remedies. No failure on the part of
the Trustee or any Holder to exercise, and no delay in exercising, any right
hereunder shall operate as a waiver thereof; nor shall any single or partial
exercise of any right hereunder preclude any other or further exercise thereof
or the exercise of any other right. The remedies herein provided are cumulative
and not exclusive of any remedies provided by law. The Trustee and the Holders
shall have all the rights and remedies granted in this Indenture and available
at law or in equity, and these same rights and remedies may be pursued
separately, successively or concurrently against the Company or any Subsidiary
Guarantor, or any collateral.
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SECTION 10.07. Successors and Assigns. Until its Subsidiary Guarantee is
released pursuant to Section 4.11(c), this Article X shall be binding upon each
Subsidiary Guarantor and its successors and assigns and shall enure to the
benefit of the successors and assigns of the Trustee and the Holders and, in the
event of any transfer or assignment of rights by any Holder or the Trustee, the
rights and privileges conferred upon that party in this Indenture and in the
Securities shall automatically extend to and be vested in such transferee or
assignee, all subject to the terms and conditions of this Indenture.
SECTION 10.08. Severability. Any provision of this Article X which is
prohibited, unenforceable or not authorized in any jurisdiction shall, as to
such jurisdiction, be ineffective to the extent of such prohibition,
unenforceability or non-authorization, without invalidating the remaining
provisions hereof or affecting the validity, enforceability or legality of such
provision in any other jurisdiction.
ARTICLE XI
Subordination
SECTION 11.01. Agreement To Subordinate. The Company agrees, and each
Securityholder by accepting a Security agrees, that the indebtedness evidenced
by the Securities is subordinated in right of payment, to the extent and in the
manner provided in this Article XI, to the prior payment of all Senior Debt of
the Company and that the subordination is for the benefit of and enforceable by
the holders of Senior Debt of the Company. The Securities shall in all respects
rank pari passu with all other Senior Subordinated Debt of the Company and only
indebtedness of the Company which is Senior Debt shall rank senior to the
Securities in accordance with the provisions set forth herein. All provisions of
this Article XI shall be subject to Section 11.12.
SECTION 11.02. Liquidation, Dissolution, Bankruptcy. Upon any payment or
distribution of the assets of the Company to creditors upon a total or partial
liquidation or a total or partial dissolution of the Company or in a bankruptcy,
reorganization, insolvency, receivership or similar proceeding relating to the
Company or its property:
(1) holders of Senior Debt of the Company shall be entitled to receive
payment in full of such Senior Debt before Securityholders shall be
entitled to receive any payment or distribution of Principal of, or
premium, if any, or interest on the Securities; and
(2) until the Senior Debt of the Company is paid in full, any payment
or distribution to which Securityholders would be entitled but for this
Article XI shall be made to holders of such Senior Debt as their interests
may appear, except that, so long as the Securityholders are not in the same
or higher class of creditors in such
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liquidation, dissolution or proceeding as the holders of the such Senior
Debt, Securityholders may receive shares of stock and any debt securities
that are subordinated to such Senior Debt to at least the same extent as
the Securities.
SECTION 11.03. Default on Senior Debt. The Company may not pay the
principal of, premium, if any, or interest on, the Securities or make any
deposit pursuant to Section 8.01 and may not repurchase, redeem or otherwise
retire any Securities (collectively, "pay the Securities") if (i) any Senior
Debt of the Company is not paid when due or (ii) any other default on Senior
Debt of the Company occurs and the maturity of such Senior Debt is accelerated
in accordance with its terms unless, in either case, (x) the default has been
cured or waived and any such acceleration has been rescinded or (y) such Senior
Debt has been paid in full. During the continuance of any default (other than a
default described in clause (i) or (ii) of the preceding sentence) with respect
to any Designated Senior Debt pursuant to which the maturity thereof may be
accelerated immediately without further notice (except such notice as may be
required to effect such acceleration) or the expiration of any applicable grace
periods, the Company may not pay the Securities for a period (a "Payment
Blockage Period") commencing upon the receipt by the Company and the Trustee of
written notice (a "Payment Blockage Notice") of such default from the
Representative of such Designated Senior Debt specifying an election to effect a
Payment Blockage Period and ending 179 days thereafter (or earlier if such
Payment Blockage Period is terminated (i) by written notice to the Trustee and
the Company from the Representative which gave such Payment Blockage Notice,
(ii) by repayment in full of such Designated Senior Debt or (iii) because the
default specified in such Payment Blockage Notice is no longer continuing).
Notwithstanding the provisions described in the immediately preceding sentence
(but subject to the provisions contained in the first sentence of this Section),
unless the holders of such Designated Senior Debt or the Representative of such
holders shall have accelerated the maturity of such Designated Senior Debt, the
Company may resume payments (including any missed payments) on the Securities
after the termination of such Payment Blockage Period. Not more than one Payment
Blockage Notice may be given in any consecutive 360-day period, irrespective of
the number of defaults with respect to Designated Senior Debt during such
period; provided, however, that if any Payment Blockage Notice within such
360-day period is given by or on behalf of any holders of any Designated Senior
Debt (other than Bank Debt) (the "Initial Payment Blockage Notice"), the
Representative of the Bank Debt may give another Payment Blockage Notice within
such period; provided further, however, that in no event may the total number of
days during which any Payment Blockage Period or Periods is in effect exceed 179
days in the aggregate during any consecutive 360 day period.
SECTION 11.04. Acceleration of Payment of Securities. If payment of the
Securities is accelerated because of an Event of Default, the Company or the
Trustee shall promptly notify the holders of the Designated Senior Debt (or
their Representatives) of the acceleration.
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SECTION 11.05. When Distribution Must Be Paid Over. If a distribution is
made to Securityholders that because of this Article XI should not have been
made to them, the Securityholders who receive the distribution shall hold it in
trust for holders of Senior Debt of the Company and pay it over to them as their
interests may appear.
SECTION 11.06. Subrogation. After all Senior Debt of the Company is paid in
full and until the Securities are paid in full, Securityholders shall be
subrogated to the rights of holders of such Senior Debt to receive distributions
applicable to such Senior Debt. A distribution made under this Article XI to
holders of Senior Debt of the Company which otherwise would have been made to
Securityholders is not, as between the Company and Securityholders, a payment by
the Company its Senior Debt.
SECTION 11.07. Relative Rights. This Article XI defines the relative rights
of Securityholders and holders of Senior Debt of the Company. Nothing in this
Indenture shall:
(1) impair, as between the Company and Securityholders, the obligation
of the Company, which is absolute and unconditional, to pay Principal of,
premium, if any, and interest on the Securities in accordance with their
terms; or
(2) prevent the Trustee or any Securityholder from exercising its
available remedies upon a Default, subject to the rights of holders of such
Senior Debt of the Company to receive distributions otherwise payable to
Securityholders.
SECTION 11.08. Subordination May Not Be Impaired by Company. No right of
any holder of Senior Debt of the Company to enforce the subordination of the
indebtedness evidenced by the Securities shall be impaired by any act or failure
to act by the Company or by its failure to comply with this Indenture.
SECTION 11.09. Rights of Trustee and Paying Agent. The Company shall give
prompt written notice to the Trustee of any fact known to the Company which
would prohibit the making of any payment to or by the Trustee in respect of the
Securities. Notwithstanding Section 11.03, the Trustee or Paying Agent may
continue to make payments on the Securities and shall not be charged with
knowledge of the existence of facts that would prohibit the making of any such
payments unless, not less than one Business Day prior to the date of such
payment, a Trust Officer of the Trustee receives actual written notice
satisfactory to it that payments may not be made under this Article XI. The
Company, the Registrar or co-registrar, the Paying Agent, a Representative or a
holder of Senior Debt of the Company may give the notice; provided, however,
that, if an issue of Senior Debt of the Company has a Representative, only the
Representative may give the notice.
The Trustee in its individual or any other capacity may hold Senior Debt of
the Company with the same rights it would have if it were not Trustee. The
Registrar and co-registrar and the Paying Agent may do the same with like
rights. The Trustee
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shall be entitled to all the rights set forth in this Article XI with respect to
any Senior Debt of the Company which may at any time be held by it, to the same
extent as any other holder of such Senior Debt; and nothing in Article VII shall
deprive the Trustee of any of its rights as such holder. Nothing in this Article
XI shall apply to claims of, or payments to, the Trustee under or pursuant to
Section 7.07.
SECTION 11.10. Distribution or Notice to Representative. Whenever a
distribution is to be made or a notice given to holders of Senior Debt of the
Company, the distribution may be made and the notice given to their
Representative (if any).
SECTION 11.11. Article XI Not To Prevent Events of Default or Limit Right
To Accelerate. The failure to make a payment pursuant to the Securities by
reason of any provision in this Article XI shall not be construed as preventing
the occurrence of a Default. Nothing in this Article XI shall have any effect on
the right of the Securityholders or the Trustee to accelerate the maturity of
the Securities.
SECTION 11.12. Trust Moneys Not Subordinated. Notwithstanding anything
contained herein to the contrary, payments from money or the proceeds of U.S.
Government Obligations held in trust under Article VIII by the Trustee for the
payment of Principal of and interest on the Securities shall not be subordinated
to the prior payment of any Senior Debt of the Company or subject to the
restrictions set forth in this Article XI, and none of the Securityholders shall
be obligated to pay over any such amount to the Company or any holder of Senior
Debt of the Company or any other creditor of the Company.
SECTION 11.13. Trustee Entitled To Rely. Upon any payment or distribution
pursuant to this Article XI, the Trustee and the Securityholders shall be
entitled to rely (i) upon any order or decree of a court of competent
jurisdiction in which any proceedings of the nature referred to in Section 11.02
are pending, (ii) upon a certificate of the liquidating trustee or agent or
other Person making such payment or distribution to the Trustee or to the
Securityholders or (iii) upon the Representatives for the holders of Senior Debt
of the Company for the purpose of ascertaining the Persons entitled to
participate in such payment or distribution, the holders of the Senior Debt of
the Company and other indebtedness of the Company, the amount thereof or payable
thereon, the amount or amounts paid or distributed thereon and all other facts
pertinent thereto or to this Article XI. In the event that the Trustee
determines, in good faith, that evidence is required with respect to the right
of any Person as a holder of Senior Debt of the Company to participate in any
payment or distribution pursuant to this Article XI, the Trustee may request
such Person to furnish evidence to the reasonable satisfaction of the Trustee as
to the amount of such Senior Debt held by such Person, the extent to which such
Person is entitled to participate in such payment or distribution and other
facts pertinent to the rights of such Person under this Article XI, and, if such
evidence is not furnished, the Trustee may defer any payment to such Person
pending judicial determination as to the right of such Person to receive such
payment. The provisions of Sections 7.01 and 7.02 shall be applicable to all
actions or omissions of actions by the Trustee pursuant to this Article XI.
<PAGE>
75
SECTION 11.14. Trustee To Effectuate Subordination. Each Securityholder by
accepting a Security authorizes and directs the Trustee on his behalf to take
such action as may be necessary or appropriate to acknowledge or effectuate the
subordination between the Securityholders and the holders of Senior Debt of the
Company as provided in this Article XI and appoints the Trustee as
attorney-in-fact for any and all such purposes.
SECTION 11.15. Trustee Not Fiduciary for Holders of Senior Debt. The
Trustee shall not be deemed to owe any fiduciary duty to the holders of Senior
Debt of the Company and shall not be liable to any such holders if it shall
mistakenly pay over or distribute to Securityholders or the Company or any other
Person, money or assets to which any holders of such Senior Debt shall be
entitled by virtue of this Article XI or otherwise. With respect to the holders
of Senior Debt of the Company, the Trustee undertakes to perform or to observe
only such of its covenants or obligations as are specifically set forth in this
Article XI and no implied covenants or obligations with respect to holders of
such Senior Debt shall be read into this Indenture against the Trustee.
SECTION 11.16. Reliance by Holders of Senior Debt on Subordination
Provisions. Each Securityholder by accepting a Security acknowledges and agrees
that the foregoing subordination provisions are, and are intended to be, an
inducement and a consideration to each holder of any Senior Debt of the Company,
whether such Senior Debt was created or acquired before or after the issuance of
the Securities, to acquire and continue to hold, or to continue to hold, such
Senior Debt and such holder of Senior Debt of the Company shall be deemed
conclusively to have relied on such subordination provisions in acquiring and
continuing to hold, or in continuing to hold, such Senior Debt.
ARTICLE XII
Miscellaneous
SECTION 12.01. Trust Indenture Act Controls. If any provision of this
Indenture limits, qualifies or conflicts with another provision which is
required to be included in this Indenture by the TIA, the required provision
shall control.
SECTION 12.02. Notices. Any notice or communication shall be in writing and
delivered in Person or mailed by first-class mail addressed as follows:
<PAGE>
76
if to the Company prior to the Effective Date:
PX Escrow Corp.
35 East 62nd Street
New York, New York 10021
Attention: General Counsel
Telephone: (212) 572-5170
Facsimile: (212) 572-5056
if to the Company from and after the Effective Date or the
Subsidiary Guarantors:
Panavision, Inc.
6219 De Soto Avenue
Woodland Hills, California 91367
Attention: Chief Financial Officer
Telephone: (818) 316-2208
Facsimile: (818) 316-1110
if to the Trustee:
The Bank of New York
101 Barclay Street
Floor 21 West
New York, New York 10286
Attention: Corporate Trust Administration
Telephone: (212) 815-5084
Facsimile: (212) 815-5915
The Company, a Subsidiary Guarantor or the Trustee by notice to the other
parties hereto may designate additional or different addresses for subsequent
notices or communications.
Any notice or communication mailed to a Securityholder shall be sent by
first-class mail to the Securityholder at the Securityholder's address as it
appears on the registration books of the Registrar and shall be sufficiently
given if so mailed within the time prescribed.
Failure to mail a notice or communication to a Securityholder or any defect
in it shall not affect its sufficiency with respect to other Securityholders. If
a notice or communication is mailed to a Securityholder in the manner provided
above, it is duly given, whether or not the addressee receives it.
SECTION 12.03. Communication by Holders with Other Holders. Securityholders
may communicate pursuant to TIA ss. 312(b) with other Securityholders with
respect to their rights under this Indenture or the Securities. The Company, the
<PAGE>
77
Subsidiary Guarantors, the Trustee, the Registrar and anyone else shall have the
protection of TIA ss. 312(c).
SECTION 12.04. Certificate and Opinion as to Conditions Precedent. Upon any
request or application by the Company to the Trustee to take or refrain from
taking any action under this Indenture, the Company shall furnish to the
Trustee:
(1) an Officers' Certificate in form and substance reasonably
satisfactory to the Trustee stating that, in the opinion of the signers,
all conditions precedent, if any, provided for in this Indenture relating
to the proposed action have been complied with; and
(2) an Opinion of Counsel in form and substance reasonably
satisfactory to the Trustee stating that, in the opinion of such counsel,
all such conditions precedent have been complied with;
provided, however, that, in the case of such application or request as to which
the furnishing of such documents, certificates or opinions is specifically
required by any provision of this Indenture relating to such particular
application or request, no additional certificate or opinion need be furnished.
SECTION 12.05. Statements Required in Certificate or Opinion. Each
certificate or opinion with respect to compliance with a covenant or condition
provided for in this Indenture (other than the Officer's Certificate required by
Section 4.12) shall include:
(1) a statement that the Person making such certificate or opinion has
read such covenant or condition;
(2) a brief statement as to the nature and scope of the examination or
investigation upon which the statements or opinions contained in such
certificate or opinion are based;
(3) a statement that, in the opinion of such Person, he has made such
examination or investigation as is necessary to enable him to express an
informed opinion as to whether or not such covenant or condition has been
complied with; and
(4) a statement as to whether or not, in the opinion of such Person,
such covenant or condition has been complied with.
SECTION 12.06. When Securities Disregarded. In determining whether the
Holders of the required Principal Amount of Maturity of Securities have
concurred in any direction, waiver or consent, Securities owned by the Company
or by any Person directly or indirectly controlling or controlled by or under
direct or indirect common control with the Company shall be disregarded and
deemed not to be
<PAGE>
78
Outstanding, except that, for the purpose of determining whether the Trustee
shall be protected in relying on any such direction, waiver or consent, only
Securities which a Trust Officer of the Trustee knows are so owned shall be so
disregarded. Also, subject to the foregoing, only Securities Outstanding at the
time shall be considered in any such determination.
SECTION 12.07. Rules by Trustee, Paying Agent and Registrar. The Trustee
may make reasonable rules for action by or a meeting of Securityholders. The
Registrar and the Paying Agent may make reasonable rules for their functions.
SECTION 12.08. Legal Holidays. If a payment date is a Legal Holiday,
payment shall be made on the next succeeding day that is not a Legal Holiday,
and no interest (if any) shall accrue for the intervening period. If a regular
record date is a Legal Holiday, the record date shall not be affected.
SECTION 12.09. Governing Law. This Indenture and the Securities shall be
governed by, and construed in accordance with, the laws of the State of New York
but without giving effect to applicable principles of conflicts of law to the
extent that the application of the laws of another jurisdiction would be
required thereby.
SECTION 12.10. No Recourse Against Others. A director, officer, employee or
stockholder, as such, of the Company, the Subsidiary Guarantors or the Trustee
shall not have any liability for any obligations of the Company, the Subsidiary
Guarantors or the Trustee under the Securities or this Indenture or for any
claim based on, in respect of or by reason of such obligations or their
creation. By accepting a Security, each Securityholder shall waive and release
all such liability. The waiver and release shall be part of the consideration
for the Issue of the Securities.
SECTION 12.11. Successors. All agreements of the Company in this Indenture
and the Securities shall bind its successors. All agreements of each of the
Subsidiary Guarantors and the Trustee in this Indenture shall bind its
successors.
SECTION 12.12. Multiple Originals. The parties may sign any number of
copies of this Indenture. Each signed copy shall be an original, but all of them
together represent the same agreement. One signed copy is enough to prove this
Indenture.
SECTION 12.13. Table of Contents; Headings. The table of contents,
cross-reference sheet and headings of the Articles and Sections of this
Indenture have
<PAGE>
79
been inserted for convenience of reference only, are not intended to be
considered a part hereof and shall not modify or restrict any of the terms or
provisions hereof.
IN WITNESS WHEREOF, the parties have caused this Indenture to be duly
executed as of the date first written above.
PX ESCROW CORP.
By: /s/ Glenn P. Dickes
---------------------------------------
Name: Glenn P. Dickes
Title: Vice President and Secretary
THE BANK OF NEW YORK, as Trustee
By: /s/ Vivian Georges
---------------------------------------
Name: Vivian Georges
Title: Assistant Vice President
<PAGE>
RULE 144A/REGULATION S APPENDIX
PROVISIONS RELATING TO INITIAL NOTES,
PRIVATE EXCHANGE NOTES
AND EXCHANGE NOTES
1. Definitions
1.1 Definitions. Capitalized terms used herein but not defined in this
Appendix have the meanings ascribed thereto in the Indenture. For the purposes
of this Appendix the following terms shall have the meanings indicated below:
"Depositary" means The Depository Trust Company, its nominees and their
respective successors.
"Initial Purchasers" means Credit Suisse First Boston Corporation and
Schroder & Co. Inc.
"Private Exchange" means the offer by the Company, pursuant to the
Registration Agreement, to the Initial Purchasers to issue and deliver to each
Initial Purchaser, in exchange for the Initial Notes held by the Initial
Purchaser as part of its initial distribution, a like aggregate principal amount
of Private Exchange Notes.
"Purchase Agreement" means the Purchase Agreement, dated February 6, 1998,
among the Company and the Initial Purchasers.
"QIB" means a "qualified institutional buyer" as defined in Rule 144A.
"Registered Exchange Offer" an offer by the Company, pursuant to the
Registration Agreement or otherwise, to certain Holders of Initial Notes, to
issue and deliver to such Holders, in exchange for the Initial Notes, a like
aggregate principal amount of Exchange Notes registered under the Securities
Act.
"Registration Agreement" means the Registration Agreement, dated February
6, 1998, among the Company and the Initial Purchasers.
"Securities Custodian" means the custodian with respect to a Global
Security (as appointed by the Depositary), or any successor person thereto and
shall initially be the Trustee.
"Shelf Registration Statement" means the registration statement issued by
the Company, in connection with the offer and sale of Initial Notes or Private
Exchange Notes, pursuant to the Registration Agreement.
<PAGE>
2
"Transfer Restricted Securities" means Securities that bear or are required
to bear the legend set forth in Section 2.3(b) hereto.
1.2 Other Definitions.
Defined in
Term Section:
---- --------
"Agent Members"..........................................................2.1(b)
"Global Security"........................................................2.1(a)
"Regulation S"...........................................................2.1(a)
"Rule 144A"..............................................................2.1(a)
Unless otherwise specified, all Section references used herein shall refer to
Sections of this Appendix.
2. The Securities
2.1 Form and Dating. The Initial Notes are being offered and sold by the
Company pursuant to the Purchase Agreement.
(a) Global Securities. Initial Notes offered and sold to a QIB in reliance
on Rule 144A under the Securities Act ("Rule 144A") or in reliance on Regulation
S under the Securities Act ("Regulation S"), in each case as provided in the
Purchase Agreement, shall be issued initially in the form of one or more
permanent global Securities in definitive, fully registered form without
interest coupons with the global securities legend and restricted securities
legend set forth in Exhibit A to the Indenture (each, a "Global Security"),
which shall be deposited on behalf of the purchasers of the Initial Notes
represented thereby with the Trustee, at its New York office, as custodian for
the Depositary (or with such other custodian as the Depositary may direct), and
registered in the name of the Depositary or a nominee of the Depositary, duly
executed by the Company and authenticated by the Trustee as hereinafter
provided. The aggregate principal amount of the Global Securities may from time
to time be increased or decreased by adjustments made on the records of the
Trustee and the Depositary or its nominee as hereinafter provided.
(b) Book-Entry Provisions. This Section 2.1(b) shall apply only to a Global
Security deposited with or on behalf of the Depositary.
The Company shall execute and the Trustee shall, in accordance with this
Section 2.1(b), authenticate and deliver initially one or more Global Securities
that (a) shall be registered in the name of the Depositary for such Global
Security or Global Securities or the nominee of such Depositary and (b) shall be
delivered by the Trustee to such Depositary or pursuant to such Depositary's
instructions or held by the Trustee as custodian for the Depositary.
<PAGE>
3
Members of, or participants in, the Depositary ("Agent Members") shall have
no rights under this Indenture with respect to any Global Security held on their
behalf by the Depositary or by the Trustee as the custodian of the Depositary or
under such Global Security, and the Depositary may be treated by the Company,
the Trustee and any agent of the Company or the Trustee as the absolute owner of
such Global Security for all purposes whatsoever. Notwithstanding the foregoing,
nothing herein shall prevent the Company, the Trustee or any agent of the
Company or the Trustee from giving effect to any written certification, proxy or
other authorization furnished by the Depositary or impair, as between the
Depositary and its Agent Members, the operation of customary practices of such
Depositary governing the exercise of the rights of a holder of a beneficial
interest in any Global Security.
(c) Certificated Securities. Except as provided in this Section 2.1 or
Section 2.3 or 2.4, owners of beneficial interests in Global Securities will not
be entitled to receive physical delivery of certificated Securities.
2.2 Authentication. The Trustee shall authenticate and deliver the
Securities in accordance with Section 2.02 of the Indenture.
2.3 Transfer and Exchange.
(a) Transfer and Exchange of Global Securities.
(i) The transfer and exchange of Global Securities or beneficial
interests therein shall be effected through the Depositary, in accordance
with this Indenture (including applicable restrictions on transfer set
forth herein, if any) and the procedures of the Depositary therefor. A
transferor of a beneficial interest in a Global Security shall deliver to
the Registrar a written order given in accordance with the Depositary's
procedures containing information regarding the participant account of the
Depositary to credited with a beneficial interest in the Global Security.
The Registrar shall, in accordance with such instructions instruct the
Depositary to credit to the account of the Person specified in such
instructions a beneficial interest in the Global Security and to debit the
account of the Person making the transfer the beneficial interest in the
Global Security being transferred.
(ii) Notwithstanding any other provisions of this Appendix (other than
the provisions set forth in Section 2.4), a Global Security may not be
transferred as a whole except by the Depositary to a nominee of the
Depositary or by a nominee of the Depositary to the Depositary or another
nominee of the Depositary or by the Depositary or any such nominee to a
successor Depositary or a nominee of such successor Depositary.
(iii) In the event that a Global Security is exchanged for Securities
in definitive registered form pursuant to Section 2.4 of this Appendix or
Section
<PAGE>
4
2.09 of the Indenture, prior to the consummation of a Registered Exchange
Offer or the effectiveness of a Shelf Registration Statement with respect
to such Securities, such Securities may be exchanged only in accordance
with such procedures as are substantially consistent with the provisions of
this Section 2.3 (including the certification requirements set forth on the
reverse of the Initial Notes intended to ensure that such transfers comply
with Rule 144A or Regulation S, as the case may be) and such other
procedures as may from time to time be adopted by the Company.
(b) Legend.
(i) Except as permitted by the following paragraphs (ii), (iii) and
(iv), each Security certificate evidencing the Global Securities (and all
Securities issued in exchange therefor or in substitution thereof) shall
bear a legend in substantially the following form:
"THIS SECURITY (OR ITS PREDECESSOR) AND ANY GUARANTY THEREOF WAS
ORIGINALLY ISSUED IN A TRANSACTION EXEMPT FROM REGISTRATION UNDER THE
UNITED STATES SECURITIES ACT OF 1933 (THE "SECURITIES ACT") AND THIS
SECURITY MAY NOT BE REOFFERED, RESOLD, PLEDGED, ENCUMBERED OR
OTHERWISE TRANSFERRED IN THE ABSENCE OF SUCH REGISTRATION OR AN
APPLICABLE EXEMPTION THEREFROM. EACH PURCHASER OF THIS SECURITY IS
HEREBY NOTIFIED THAT THE SELLER OF THIS SECURITY MAY BE RELYING ON THE
EXEMPTION FROM THE PROVISIONS OF SECTION 5 OF THE SECURITIES ACT
PROVIDED BY RULE 144A AND REGULATION S THEREUNDER.
THE HOLDER OF THIS SECURITY AGREES FOR THE BENEFIT OF THE ISSUER THAT
(A) THIS SECURITY MAY BE REOFFERED, RESOLD, PLEDGED OR OTHERWISE
TRANSFERRED ONLY (i) INSIDE THE UNITED STATES TO A PERSON WHOM THE
SELLER REASONABLY BELIEVES IS A "QUALIFIED INSTITUTIONAL BUYER" (AS
DEFINED IN RULE 144A UNDER THE SECURITIES ACT) IN A TRANSACTION
MEETING THE REQUIREMENTS OF RULE 144A, (ii) OUTSIDE THE UNITED STATES
IN A TRANSACTION IN ACCORDANCE WITH RULE 904 UNDER THE SECURITIES ACT,
(iii) PURSUANT TO AN EXEMPTION FROM REGISTRATION UNDER THE SECURITIES
ACT PROVIDED BY RULE 144 THEREUNDER (IF AVAILABLE), (iv) PURSUANT TO
AN EFFECTIVE REGISTRATION STATEMENT UNDER THE SECURITIES ACT, OR (v)
TO THE ISSUER OR ANY OF ITS SUBSIDIARIES, IN EACH
<PAGE>
5
OF CASES (i) THROUGH (iv) IN ACCORDANCE WITH ANY APPLICABLE SECURITIES
LAWS OF ANY STATE OF THE UNITED STATES, AND (B) THE HOLDER WILL, AND
EACH SUBSEQUENT HOLDER IS REQUIRED TO, NOTIFY ANY PURCHASER OF THIS
SECURITY FROM IT OF THE RESALE RESTRICTIONS REFERRED TO IN (A) ABOVE."
(ii) Upon any sale or transfer of a Transfer Restricted Security
(including any Transfer Restricted Security represented by a Global
Security) pursuant to Rule 144 under the Securities Act, in the case of any
Transfer Restricted Security that is represented by a Global Security, the
Registrar shall permit the Holder thereof to exchange such Transfer
Restricted Security for a certificated Security that does not bear the
legend set forth above and rescind any restriction on the transfer of such
Transfer Restricted Security, if the Holder certifies in writing to the
Registrar that its request for such exchange was made in reliance on Rule
144 (such certification to be in the form set forth on the reverse of the
Security).
(iii) After a transfer of any Initial Notes or Private Exchange Notes
during the period of the effectiveness of a Shelf Registration Statement
with respect to such Initial Notes or Private Exchange Notes, as the case
may be, all require ments pertaining to legends on such Initial Notes or
such Private Exchange Notes will cease to apply, but the requirements
requiring such Initial Notes or such Private Exchange Notes issued to
certain Holders be issued in global form will continue to apply, and
Initial Notes or Private Exchange Notes in global form without legends will
be available to the transferee of the Holder of such Initial Notes or
Private Exchange Notes upon exchange of such transferring Holder's Initial
Notes or Private Exchange Notes or directions to transfer such Holder's
interest in the Global Security, as applicable.
(iv) Upon the consummation of a Registered Exchange Offer with respect
to the Initial Notes pursuant to which Holders of such Initial Notes are
offered Exchange Notes in exchange for their Initial Notes, all
requirements pertaining to such Initial Notes that Initial Notes issued to
certain Holders be issued in global form will continue to apply and Initial
Notes in global form with the restricted securities legend set forth in
Exhibit A to the Indenture will be available to Holders of such Initial
Notes that do not exchange their Initial Notes, and Exchange Notes in
global form will be available to Holders that exchange such Initial Notes
in such Registered Exchange Offer.
(v) Upon the consummation of a Private Exchange with respect to the
Initial Notes pursuant to which Holders of such Initial Notes are offered
Private Exchange Notes in exchange for their Initial Notes, all
requirements pertaining to such Initial Notes that Initial Notes issued to
certain Holders be issued in global form will still apply, and Private
Exchange Notes in global form with the
<PAGE>
6
Restricted Securities Legend set forth in Exhibit A to the Indenture will
be available to Holders that exchange such Initial Notes in such Private
Exchange.
(c) Cancellation or Adjustment of Global Security. At such time as all
beneficial interests in a Global Security have either been exchanged for
certificated Securities, redeemed, repurchased or canceled, such Global Security
shall be returned to the Depositary for cancellation or retained and canceled by
the Trustee. At any time prior to such cancellation, if any beneficial interest
in a Global Security is exchanged for certificated Securities, redeemed,
repurchased or canceled, the principal amount of Securities represented by such
Global Security shall be reduced and an adjustment shall be made on the books
and records of the Trustee (if it is then the Securities Custodian for such
Global Security) with respect to such Global Security, by the Trustee or the
Securities Custodian, to reflect such reduction.
(d) No Obligation of the Trustee.
(i) The Trustee shall have no responsibility or obligation to any
beneficial owner of a Global Security, a member of, or a participant in the
Depositary or other Person with respect to the accuracy of the records of
the Depositary or its nominee or of any participant or member thereof, with
respect to any ownership interest in the Securities or with respect to the
delivery to any participant, member, beneficial owner or other Person
(other than the Depositary) of any notice (including any notice of
redemption) or the payment of any amount, under or with respect to such
Securities. All notices and communications to be given to the Holders and
all payments to be made to Holders under the Securities shall be given or
made only to or upon the order of the registered Holders (which shall be
the Depositary or its nominee in the case of a Global Security). The rights
of beneficial owners in any Global Security shall be exercised only through
the Depositary subject to the applicable rules and procedures of the
Depositary. The Trustee may rely and shall be fully protected in relying
upon information furnished by the Depositary with respect to its members,
participants and any beneficial owners.
(ii) The Trustee shall have no obligation or duty to monitor,
determine or inquire as to compliance with any restrictions on transfer
imposed under this Indenture or under applicable law with respect to any
transfer of any interest in any Security (including any transfers between
or among Depositary participants, members or beneficial owners in any
Global Security) other than to require delivery of such certificates and
other documentation or evidence as are expressly required by, and to do so
if and when expressly required by, the terms of this Indenture, and to
examine the same to determine substantial compliance as to form with the
express requirements hereof.
2.4 Certificated Securities.
<PAGE>
7
(a) A Global Security deposited with the Depositary or with the Trustee as
custodian for the Depositary pursuant to Section 2.1 shall be transferred to the
beneficial owners thereof in the form of certificated Securities in an aggregate
principal amount equal to the principal amount of such Global Security, in
exchange for such Global Security, only if such transfer complies with Section
2.3 and (i) the Depositary notifies the Company that it is unwilling or unable
to continue as Depositary for such Global Security or if at any time such
Depositary ceases to be a "clearing agency" registered under the Exchange Act
and a successor depositary is not appointed by the Company within 90 days of
such notice, or (ii) an Event of Default has occurred and is continuing or (iii)
the Company, in its sole discretion, notifies the Trustee in writing that it
elects to cause the issuance of certificated Securities under this Indenture.
(b) Any Global Security that is transferable to the beneficial owners
thereof pursuant to this Section shall be surrendered by the Depositary to the
Trustee located in the Borough of Manhattan, The City of New York, to be so
transferred, in whole or from time to time in part, without charge, and the
Trustee shall authenticate and deliver, upon such transfer of each portion of
such Global Security, an equal aggregate principal amount of certificated
Initial Notes of authorized denominations. Any portion of a Global Security
transferred pursuant to this Section shall be executed, authenticated and
delivered only in denominations of $1,000 and any integral multiple thereof and
registered in such names as the Depositary shall direct. Any certificated
Initial Note delivered in exchange for an interest in the Global Security shall,
except as otherwise provided by Section 2.3(d), bear the restricted securities
legend set forth in Exhibit A to the Indenture.
(c) Subject to the provisions of Section 2.4(b), the registered Holder of a
Global Security may grant proxies and otherwise authorize any Person, including
Agent Members and Persons that may hold interests through Agent Members, to take
any action which a Holder is entitled to take under this Indenture or the
Securities.
(d) In the event of the occurrence of either of the events specified in
Section 2.4(a), the Company will promptly make available to the Trustee a
reasonable supply of certificated Securities in definitive, fully registered
form without interest coupons.
<PAGE>
EXHIBIT A
[FORM OF FACE OF INITIAL NOTE]
FOR PURPOSES OF SECTION 1273 OF THE INTERNAL REVENUE CODE OF 1986, AS
AMENDED (THE "CODE"), THIS SECURITY HAS ORIGINAL ISSUE DISCOUNT. FOR PURPOSES OF
SECTION 1273 OF THE CODE, THE ISSUE PRICE IS $688.38 AND THE AMOUNT OF ORIGINAL
ISSUE DISCOUNT IS $321.62, IN EACH CASE PER $1,000 PRINCIPAL AMOUNT AT MATURITY
OF THIS SECURITY. FOR PURPOSES OF SECTION 1275 OF THE CODE, THE ISSUE DATE OF
THIS SECURITY IS FEBRUARY 11, 1998. FOR PURPOSES OF SECTION 1272 OF THE CODE,
THE YIELD TO MATURITY (COMPOUNDED SEMI-ANNUALLY) IS 9 5/8%. IN ADDITION, THERE
MAY BE CONTINGENT INTEREST PAYABLE ON THIS SECURITY.
[Global Securities Legend]
UNLESS THIS CERTIFICATE IS PRESENTED BY AN AUTHORIZED REPRESENTATIVE OF THE
DEPOSITORY TRUST COMPANY, A NEW YORK CORPORATION ("DTC"), NEW YORK, NEW YORK, TO
THE COMPANY OR ITS AGENT FOR REGISTRATION OF TRANSFER, EXCHANGE OR PAYMENT, AND
ANY CERTIFICATE ISSUED IS REGISTERED IN THE NAME OF CEDE & CO. OR SUCH OTHER
NAME AS IS REQUESTED BY AN AUTHORIZED REPRESENTATIVE OF DTC (AND ANY PAYMENT IS
MADE TO CEDE & CO., OR TO SUCH OTHER ENTITY AS IS REQUESTED BY AN AUTHORIZED
REPRESENTATIVE OF DTC) ANY TRANSFER, PLEDGE OR OTHER USE HEREOF FOR VALUE OR
OTHERWISE BY OR TO ANY PERSON IS WRONGFUL INASMUCH AS THE REGISTERED OWNER
HEREOF, CEDE & CO., HAS AN INTEREST HEREIN.
TRANSFERS OF THIS GLOBAL SECURITY SHALL BE LIMITED TO TRANSFERS IN WHOLE,
BUT NOT IN PART, TO NOMINEES OF DTC OR TO A SUCCESSOR THEREOF OR SUCH
SUCCESSOR'S NOMINEE AND TRANSFERS OF PORTIONS OF THIS GLOBAL SECURITY SHALL BE
LIMITED TO TRANSFERS MADE IN ACCORDANCE WITH THE RESTRICTIONS SET FORTH IN THE
INDENTURE REFERRED TO ON THE REVERSE HEREOF.
[Restricted Securities Legend]
"THIS SECURITY (OR ITS PREDECESSOR) AND ANY GUARANTY THEREOF WAS ORIGINALLY
ISSUED IN A TRANSACTION
<PAGE>
EXEMPT FROM REGISTRATION UNDER THE UNITED STATES SECURITIES ACT OF 1933 (THE
"SECURITIES ACT") AND THIS SECURITY MAY NOT BE REOFFERED, RESOLD, PLEDGED,
ENCUMBERED OR OTHERWISE TRANSFERRED IN THE ABSENCE OF SUCH REGISTRATION OR AN
APPLICABLE EXEMPTION THEREFROM. EACH PURCHASER OF THIS SECURITY IS HEREBY
NOTIFIED THAT THE SELLER OF THIS SECURITY MAY BE RELYING ON THE EXEMPTION FROM
THE PROVISIONS OF SECTION 5 OF THE SECURITIES ACT PROVIDED BY RULE 144A AND
REGULATION S THEREUNDER.
THE HOLDER OF THIS SECURITY AGREES FOR THE BENEFIT OF THE ISSUER THAT (A)
THIS SECURITY MAY BE REOFFERED, RESOLD, PLEDGED OR OTHERWISE TRANSFERRED ONLY
(i) INSIDE THE UNITED STATES TO A PERSON WHOM THE SELLER REASONABLY BELIEVES IS
A "QUALIFIED INSTITUTIONAL BUYER" (AS DEFINED IN RULE 144A UNDER THE SECURITIES
ACT) IN A TRANSACTION MEETING THE REQUIREMENTS OF RULE 144A, (ii) OUTSIDE THE
UNITED STATES IN A TRANSACTION IN ACCORDANCE WITH RULE 904 UNDER THE SECURITIES
ACT, (iii) PURSUANT TO AN EXEMPTION FROM REGISTRATION UNDER THE SECURITIES ACT
PROVIDED BY RULE 144 THEREUNDER (IF AVAILABLE), (iv) PURSUANT TO AN EFFECTIVE
REGISTRATION STATEMENT UNDER THE SECURITIES ACT, OR (v) TO THE ISSUER OR ANY OF
ITS SUBSIDIARIES, IN EACH OF CASES (i) THROUGH (iv) IN ACCORDANCE WITH ANY
APPLICABLE SECURITIES LAWS OF ANY STATE OF THE UNITED STATES, AND (B) THE HOLDER
WILL, AND EACH SUBSEQUENT HOLDER IS REQUIRED TO, NOTIFY ANY PURCHASER OF THIS
SECURITY FROM IT OF THE RESALE RESTRICTIONS REFERRED TO IN (A) ABOVE."
<PAGE>
No. CUSIP
PX ESCROW CORP.
9 5/8% Senior Subordinated Discount Note Due 2006
Principal Amount at Maturity $______________
PX Escrow Corp., a Delaware corporation, promises to pay to
_______________________________, or registered assigns, the principal sum of
_____________________________ Dollars on February 1, 2006.
Additional provisions of this Security are set forth on the other side of
this Security.
Dated: PX ESCROW CORP.
by ________________________________
Vice President
________________________________
Assistant Secretary
TRUSTEE'S CERTIFICATE OF
AUTHENTICATION
THE BANK OF NEW YORK
as Trustee, certifies that
this is one of the Securities
referred to in the Indenture.
by
____________________________
Authorized Signatory
<PAGE>
[FORM OF REVERSE SIDE OF INITIAL NOTE]
PX ESCROW CORP.
9 5/8% Senior Subordinated Discount Note Due 2006
1. Interest
(a) PX Escrow Corp., a Delaware corporation (such corporation, and its
successors and assigns under the Indenture hereinafter referred to, being herein
called the "Company"), promises to pay to the registered holder of this Security
interest on the Accreted Value of this Security at a rate of 9 5/8% per annum
commencing August 1, 2002. The Accreted Value of this Security will increase in
the manner provided in the Indenture. Interest on this Security shall accrue
from and including the most recent date to which interest has been paid, or if
no interest has been paid, from and including February 1, 2002 through but
excluding the date on which interest is paid. Interest shall be payable
semiannually in arrears on each February 1 and August 1, commencing August 1,
2002. Interest will be computed on the basis of a 360-day year of twelve 30-day
months.
(b) In the event that (1) by the 45th day following the Effective Date (or
if such day is not a Business Day, the first Business Day thereafter), a
registration statement has not been filed with the Securities and Exchange
Commission with respect to the proposed Registered Exchange Offer or the resale
of the Initial Notes, then, the Company promises to pay interest on this
Security from and including the 45th day following the Effective Date until but
excluding the earlier of (i) the date such registration statement is filed and
(ii) the 180th day following the Effective Date (or if such day is not a
Business Day, the first Business Day thereafter), or (2) by the 180th day
following the Effective Date (or if such day is not a Business Day, the first
Business Day thereafter) neither (i) a Registered Exchange Offer is consummated
nor (ii) a Shelf Registration Statement with respect to the resale of the
Initial Notes is declared effective, the Company promises to pay interest on
this Security from and including the 180th day following the Effective Date (or
if such day is not a Business Day, the first Business Day thereafter) until but
excluding the earlier of (i) the consummation of the Registered Exchange Offer,
(ii) the effective date of such Shelf Registration Statement and (iii) the date
that the Initial Notes become freely tradeable, without registration under the
Securities Act, in each case payable in cash semiannually in arrears on February
1 and August 1 commencing August 1, 1998, at a rate per annum equal to 0.50% of
the Accreted Value of this Security as of the Semi-Annual Accrual Date or
interest payment date, as the case may be, immediately preceding the date on
which such interest is payable. Such interest will be computed on the basis of a
360-day year of twelve 30-day months.
<PAGE>
2
(c) In the case of a default in payment of principal of the Notes upon
acceleration, redemption or purchase, the overdue principal shall bear interest
at the rate of 10 5/8% per annum, from the date such amount is due until it is
paid in full. The Company shall pay interest on overdue installments of interest
at the same rate to the extent lawful. Interest on any overdue principal or
installments of interest shall be payable on demand.
2. Method of Payment
The Company will pay interest, if any, referred to in paragraph 1 above
(except defaulted interest) on the Securities to the Persons who are registered
holders of Securities (including Exchange Notes and Private Exchange Notes
issued in respect of Initial Notes pursuant to the Registered Exchange Offer or
the Private Exchange, as the case may be) at the close of business on the
January 15 or July 15 next preceding the applicable interest payment date even
if Securities are canceled after such record date and on or before such interest
payment date. Holders must surrender Securities to a Paying Agent to collect
Principal payments. The Company will pay Principal in money of the United States
that at the time of payment is legal tender for payment of public and private
debts. However, the Company may pay Principal and interest by check payable in
such money; provided, that all payments with respect to Global Securities the
holders of which have given wire transfer instructions to the Company, will be
required to be made by wire transfer of immediately available funds to the
accounts specified by the holders thereof.
3. Paying Agent and Registrar
Initially, The Bank of New York ("Trustee") will act as Paying Agent and
Registrar. The Company may appoint and change any Paying Agent, Registrar or
co-registrar without notice. The Company or any of its domestically incorporated
Wholly Owned Recourse Subsidiaries may act as Paying Agent, Registrar,
co-registrar or transfer agent.
4. Indenture
The Company issued the Securities under an Indenture dated as of February
11, 1998 ("Indenture"), between the Company and the Trustee. The terms of the
Securities include those stated in the Indenture and those made part of the
Indenture by reference to the Trust Indenture Act of 1939 (15 U.S.C. ss.ss.
77aaa-77bbbb) as in effect on the date of the Indenture (the "Act"). Capitalized
terms used herein and not defined herein have the meanings ascribed thereto in
the Indenture. The Securities are
<PAGE>
3
subject to all such terms, and Securityholders are referred to the Indenture and
the Act for a statement of those terms.
The Securities are general unsecured obligations of the Company limited to
$217,903,000 aggregate Principal Amount at Maturity (subject to Section 2.07 of
the Indenture). This Security is one of the Initial Notes referred to in the
Indenture. The Securities include the Initial Notes and any Exchange Notes and
Private Exchange Notes issued in exchange for the Initial Notes pursuant to the
Indenture. The Initial Notes, the Exchange Notes and Private Exchange Notes are
treated as a single class of securities under the Indenture. The Indenture
imposes certain limitations on, among other things, the issuance of debt and
redeemable stock by the Company, the issuance of debt and preferred stock by its
Subsidiaries, the payment of dividends and other distributions on, and
acquisitions or retirements of, the Company's Capital Stock, the sale or
transfer of assets and Subsidiary stock and transactions with Affiliates. In
addition, the Indenture limits the ability of the Company and its Subsidiaries
to restrict distributions and dividends from such Subsidiaries.
5. Optional Redemption
Except as set forth below, the Securities may not be redeemed by the
Company prior to February 1, 2002. On and after such date, the Company may
redeem the Securities in whole at any time or in part from time to time at the
redemption prices listed below (expressed as percentages of Accreted Value as of
the redemption date) for the periods indicated plus accrued and unpaid interest,
if any, to the redemption date (subject to the right of holders of record on the
relevant record date to receive interest due, if any, on the relevant interest
payment date):
if redeemed during the 12-month period commencing on February 1,
Period Redemption Price
- ------ ----------------
2002....................................................... 104.813%
2003....................................................... 103.208%
2004....................................................... 101.604%
2005....................................................... 100.000%
The Securities may be redeemed at the option of the Company at any time as
a whole before February 1, 2002, at a redemption price equal to the sum of (i)
the Accreted Value thereof at the date of redemption, plus (ii) accrued and
unpaid interest, if any, to the date of redemption, plus (iii) the Applicable
Premium at the date of redemption.
<PAGE>
4
Until February 1, 2001, the Company may redeem with, and to the extent the
Company actually receives, the net proceeds of a Public Equity Offering of the
Company or Parent the Securities in part from time to time at redemption price
equal to 109 5/8% of the Accreted Value as of the redemption date plus accrued
interest, if any, to the redemption date (subject to the right of Holders of
record on the relevant record date to receive interest due, if any, on the
relevant interest payment date); provided, however, that at least $141,637,000
aggregate Principal Amount at Maturity of the Securities must remain outstanding
after each such redemption. A "Public Equity Offering" means an underwritten
public offering of common stock of the Company or Parent pursuant to an
effective registration statement under the Securities Act.
6. Mandatory Redemption
In the event that (i) the Assumption is not consummated on or prior to June
30, 1998 or (ii) PX Holding elects to abandon the Transactions or the
Recapitalization Agreement and the Stockholders Agreement are terminated, in any
case, on or prior to June 30, 1998, for any reason, the Company shall redeem all
the Securities at a redemption price in cash equal to the Accreted Value thereof
at the redemption date on (a) July 22, 1998, in the event that the Assumption is
not consummated on or prior to June 30, 1998, or (b) the 20th day (or if such
day is not a Business Day, the next following Business Day) following the
abandonment of the Transactions or the termination of the Recapitalization
Agreement and the Stockholders Agreement, in the event of such abandonment or
termination.
7. Notice of Redemption
Notice of redemption pursuant to paragraph 5 will be mailed at least 30
days but not more than 60 days before the redemption date, and notice of
redemption pursuant to paragraph 6 will be mailed promptly after the occurrence
of the event triggering such redemption, in each case to each Holder of
Securities to be redeemed at his registered address. Securities in denominations
larger than $1,000 Principal Amount at Maturity may be redeemed in part but only
in whole multiples of $1,000 Principal Amount at Maturity. If money sufficient
to pay the redemption price of all Securities (or portions thereof) to be
redeemed on the redemption date is deposited with the Paying Agent on or before
the redemption date and certain other conditions are satisfied, on and after
such redemption date Accreted Value ceases to increase, and interest, if any,
ceases to accrue, on such Securities (or such portions thereof) called for
redemption.
<PAGE>
5
8. Put Provisions
Upon a Change of Control, any Holder of Securities will have the right to
cause the Company to repurchase all or any part of the Securities of such Holder
at a repurchase price equal to the Put Amount of the Securities to be
repurchased plus accrued and unpaid interest, if any, to the date of repurchase,
in each case as provided in, and subject to the terms of, the Indenture.
9. Subsidiary Guarantees
Under certain circumstances, the payment of Principal of and interest, if
any, on the Securities and other Obligations of the Company under the Securities
and the Indenture will be unconditionally and jointly and severally guaranteed
by the Subsidiary Guarantors, if any, pursuant to, and subject to the terms of,
Section 4.11 and Article X of the Indenture.
10. Subordination
The Securities are subordinated to Senior Debt of the Company, as defined
in the Indenture. To the extent provided in the Indenture, Senior Debt of the
Company must be paid before the Securities may be paid. The Company agrees, and
each Securityholder by accepting a Security agrees, to the subordination
provisions contained in the Indenture and authorizes the Trustee to give it
effect and appoints the Trustee as attorney-in-fact for such purpose.
11. Denominations; Transfer; Exchange
The Securities are in registered form without coupons in denominations of
Principal Amount at Maturity of $1,000 and integral multiples of $1,000. A
Holder may transfer or exchange Securities in accordance with the Indenture. The
Registrar may require a Holder, among other things, to furnish appropriate
endorsements or transfer documents and to pay any taxes and fees required by law
or permitted by the Indenture. The Registrar need not register the transfer of
or exchange any Securities selected for redemption (except, in the case of a
Security to be redeemed in part, the portion of the Security not to be redeemed)
or any Securities for a period of 15 days before a selection of Securities to be
redeemed.
<PAGE>
6
12. Persons Deemed Owners
The registered Holder of this Security may be treated as the owner of it
for all purposes.
13. Unclaimed Money
If money for the payment of Principal or interest, if any, remains
unclaimed for two years, the Trustee or Paying Agent shall pay the money back to
the Company at its request unless an abandoned property law designates another
person. After any such payment, Holders entitled to the money must look only to
the Company and not to the Trustee for payment.
14. Defeasance
Subject to certain conditions, the Company at any time may terminate some
or all of its obligations under the Securities and the Indenture if the Company
deposits with the Trustee money or U.S. Government Obligations for the payment
of Principal and interest, if any, on the Securities to redemption or maturity,
as the case may be.
15. Amendment, Waiver
Subject to certain exceptions set forth in the Indenture, (i) the
Indenture, any Subsidiary Guarantee or the Securities may be amended with the
written consent of the Holders of at least a majority in Principal Amount at
Maturity outstanding of the Securities and (ii) any default or noncompliance
with any provision may be waived with the written consent of the Holders of a
majority in Principal Amount at Maturity outstanding of the Securities. Subject
to certain exceptions set forth in the Indenture, without the consent of any
Securityholder, the Company, any Subsidiary Guarantor and the Trustee, as
applicable, may amend the Indenture, any Subsidiary Guarantee or the Securities
to cure any ambiguity, omission, defect or inconsistency, or to comply with
Article V of the Indenture, or to provide for uncertificated Securities in
addition to or in place of certificated Securities, or to add guarantees with
respect to the Securities or to secure the Securities, or to add additional
covenants or surrender rights and powers conferred on the Company, or to provide
for the issuance of the Exchange Notes or Private Exchange Notes, or to comply
with any request of the SEC in connection with qualifying the Indenture under
the Act or to otherwise comply with the Act, to make any change in Article XI
that would limit or terminate the benefits available to any holder of Senior
Debt of the Company or any Subsidiary Guarantor under Article XI (or
Representatives therefor), or to make any change that does not adversely affect
the
<PAGE>
7
rights of any Securityholder. A consent to any amendment or waiver of any
provision in the Indenture or in the Securities by any Holder given in
connection with a tender of such Holder's Securities shall not be rendered
invalid by such tender.
16. Defaults and Remedies
Under the Indenture, Events of Default include (i) default for 30 days in
payment of interest on the Securities; (ii) default in payment of Principal on
the Securities at maturity, upon redemption pursuant to paragraph 5 or paragraph
6 of the Securities, upon declaration or otherwise, or failure by the Company to
redeem or purchase Securities when required; (iii) failure by the Company to
comply with other agreements in the Indenture or the Securities or the Escrow
Agreement, in certain cases subject to notice and lapse of time; (iv) certain
accelerations (including failure to pay within any grace period after final
maturity) of other Debt of the Company or any Significant Subsidiary if the
total principal amount on the portion of such Debt that is accelerated (or so
unpaid) exceeds $10,000,000 and continues for 10 days after the required notice
to the Company; (v) certain events of bankruptcy or insolvency with respect to
the Company or any Significant Subsidiary; (vi) certain judgments or decrees for
the payment of money in excess of $10,000,000; and (vii) a Subsidiary Guarantee
ceasing to be in full force and effect (other than in accordance with the
Indenture) or denial or disaffirmation by a Subsidiary Guarantor of its
obligations under its Subsidiary Guarantee. If an Event of Default occurs and is
continuing, the Trustee or the Holders of at least 25% in Principal Amount at
Maturity of the Securities may declare the Default Amount of all the Securities
to be due and payable immediately. Certain events of bankruptcy or insolvency
are Events of Default which will result in the Default Amount of the Securities
being due and payable immediately upon the occurrence of such Events of Default.
Securityholders may not enforce the Indenture or the Securities except as
provided in the Indenture. The Trustee may refuse to enforce the Indenture or
the Securities unless it receives reasonable indemnity or security. Subject to
certain limitations, Holders of a majority in Principal Amount at Maturity of
the Securities may direct the Trustee in its exercise of any trust or power. The
Trustee may withhold from Securityholders notice of any continuing Default
(except a Default in payment of Principal or interest) if it determines that
withholding notice is in their interest.
17. Trustee Dealings with the Company
Subject to certain limitations imposed by the Act, the Trustee under the
Indenture, in its individual or any other capacity, may become the owner or
pledgee of Securities and may otherwise deal with and collect obligations owed
to it by the
<PAGE>
8
Company or its Affiliates and may otherwise deal with the Company or its
Affiliates with the same rights it would have if it were not Trustee.
18. No Recourse Against Others
A director, officer, employee or stockholder, as such, of the Company, the
Subsidiary Guarantors or the Trustee shall not have any liability for any
obligations of the Company, the Subsidiary Guarantors or the Trustee under the
Securities or the Indenture or for any claim based on, in respect of or by
reason of such obligations or their creation. By accepting a Security, each
Securityholder waives and releases all such liability. The waiver and release
are part of the consideration for the issue of the Securities.
19. Authentication
This Security shall not be valid until an authorized signatory of the
Trustee (or an authenticating agent) manually signs the certificate of
authentication on the other side of this Security.
20. Abbreviations
Customary abbreviations may be used in the name of a Securityholder or an
assignee, such as TEN COM (=tenants in common), TEN ENT (=tenants by the
entireties), JT TEN (=joint tenants with rights of survivorship and not as
tenants in common), CUST (=custodian), and U/G/M/A (=Uniform Gift to Minors
Act).
21. CUSIP Numbers
Pursuant to a recommendation promulgated by the Committee on Uniform
Security Identification Procedures, the Company has caused CUSIP numbers to be
printed on the Securities and has directed the Trustee to use CUSIP numbers in
notices of redemption as a convenience to Securityholders. No representation is
made as to the accuracy of such numbers either as printed on the Securities or
as contained in any notice of redemption and reliance may be placed only on the
other identification numbers placed thereon.
The Company will furnish to any Securityholder upon written request and
without charge to the Securityholder a copy of the Indenture which has in it the
text of this Security in larger type. Requests may be made, prior to the
Effective Date, to: PX Escrow Corp., 35 East 62nd Street, New York, New York
10021, Attention:
<PAGE>
9
Secretary; and from and after the Effective Date, to: Panavision Inc., 6219 De
Soto Avenue, Woodland Hills, California 91367, Attention: Secretary.
<PAGE>
- --------------------------------------------------------------------------------
ASSIGNMENT FORM
To assign this Security, fill in the form below:
I or we assign and transfer this Security to
(Print or type assignee's name, address and zip code)
(Insert assignee's soc. sec. or tax I.D. No.)
and irrevocably appoint ________________ agent to transfer this
Security on the books of the Company. The agent may substitute another
to act for him.
- --------------------------------------------------------------------------------
Date: ____________________ Your Signature: ____________________
- --------------------------------------------------------------------------------
(Sign exactly as your name appears on the other side of this Security)
In connection with any transfer of any of the Securities evidenced by this
certificate occurring prior to the expiration of the period referred to in Rule
144 (k) under the Securities Act after the later of the date of original
issuance of such Securities and the last date, if any, on which such Securities
are owned by the Company or any Affiliate of the Company, the undersigned
confirms that such Securities are being transferred in accordance with its
terms:
CHECK ONE BOX BELOW
(1) |_| to the Company; or
(2) |_| pursuant to an effective registration
statement under the Securities Act of 1933;
or
(3) |_| inside the United States to a "qualified
institutional buyer" (as defined in Rule
144A under the Securities Act of 1933) that
purchases for its own account or for the
account of a qualified institutional buyer
to whom notice is given that such transfer
is being made in reliance on Rule 144A, in
each case pursuant to
<PAGE>
2
and in compliance with Rule 144A under the
Securities Act of 1933; or
(4) |_| outside the United States in an offshore
transaction within the meaning of Regulation
S under the Securities Act in compliance
with Rule 904 under the Securities Act of
1933; or
(5) |_| pursuant to another available exemption
from registration provided by Rule 144 under
the Securities Act of 1933.
Unless one of the boxes is checked, the Trustee will refuse to
register any of the Securities evidenced by this certificate in the
name of any person other than the registered holder thereof;
provided, however, that if box (4) or (5) is checked, the Trustee
may require, prior to registering any such transfer of the
Securities, such legal opinions, certifications and other
information as the Company has reasonably requested to confirm that
such transfer is being made pursuant to an exemption from, or in a
transaction not subject to, the registration requirements of the
Securities Act of 1933, such as the exemption provided by Rule 144
under such Act.
_______________________________
Signature
Signature Guarantee:
________________________________ _______________________________
Signature must be guaranteed Signature
- --------------------------------------------------------------------------------
TO BE COMPLETED BY PURCHASER IF (3) ABOVE IS CHECKED
The undersigned represents and warrants that it is purchasing this Security
for its own account or an account with respect to which it exercises sole
investment discretion and that it and any such account is a "qualified
institutional buyer" within the meaning of Rule 144A under the Securities Act of
1933, and is aware that the sale to it is being made in reliance on Rule 144A
and acknowledges that it has received such information regarding the Company as
the undersigned has requested pursuant to Rule 144A or has determined not to
request such information and that it is aware that the transferor is relying
upon the undersigned's foregoing representations in order to claim the exemption
from registration provided by Rule 144A.
Dated: __________________ _______________________________
NOTICE: To be executed by an
executive officer
<PAGE>
3
[TO BE ATTACHED TO GLOBAL SECURITIES]
SCHEDULE OF INCREASES OR DECREASES IN GLOBAL SECURITY
The following increases or decreases in this Global Security have been
made:
<TABLE>
<CAPTION>
Principal Amount
Amount of Amount of at Maturity of this Signature of
Decrease in Increase in Global Security Authorized Officer
Principal Amount Principal Amount Following such of Trustee or
at Maturity of this at Maturity of this Decrease or Securities
Date of Exchange Global Security Global Security Increase Custodian
- ---------------- --------------- --------------- -------- ---------
<S> <C> <C> <C> <C>
</TABLE>
<PAGE>
EXHIBIT B
[FORM OF FACE OF EXCHANGE NOTE OR PRIVATE EXCHANGE NOTE]
FOR PURPOSES OF SECTION 1273 OF THE INTERNAL REVENUE CODE OF 1986, AS
AMENDED (THE "CODE"), THIS SECURITY HAS ORIGINAL ISSUE DISCOUNT. FOR PURPOSES OF
SECTION 1273 OF THE CODE, THE ISSUE PRICE IS $688.38 AND THE AMOUNT OF ORIGINAL
ISSUE DISCOUNT IS $321.62, IN EACH CASE PER $1,000 PRINCIPAL AMOUNT AT MATURITY
OF THIS SECURITY. FOR PURPOSES OF SECTION 1275 OF THE CODE, THE ISSUE DATE OF
THIS SECURITY IS FEBRUARY 11, 1998. FOR PURPOSES OF SECTION 1272 OF THE CODE,
THE YIELD TO MATURITY (COMPOUNDED SEMI-ANNUALLY) IS 9 5/8%. IN ADDITION, THERE
MAY BE CONTINGENT INTEREST PAYABLE ON THIS SECURITY.
[UNLESS THIS CERTIFICATE IS PRESENTED BY AN AUTHORIZED REPRESENTATIVE OF
THE DEPOSITORY TRUST COMPANY, A NEW YORK CORPORATION ("DTC"), NEW YORK, NEW
YORK, TO THE COMPANY OR ITS AGENT FOR REGISTRATION OF TRANSFER, EXCHANGE OR
PAYMENT, AND ANY CERTIFICATE ISSUED IS REGISTERED IN THE NAME OF CEDE & CO. OR
SUCH NAME AS IS REQUESTED BY AN AUTHORIZED REPRESENTATIVE OF DTC (AND ANY
PAYMENT IS MADE TO CEDE & CO., OR TO SUCH OTHER ENTITY AS IS REQUESTED BY AN
AUTHORIZED REPRESENTATIVE OF DTC), ANY TRANSFER, PLEDGE OR OTHER USE HEREOF FOR
VALUE OR OTHERWISE BY OR TO ANY PERSON IS WRONGFUL INASMUCH AS THE REGISTERED
OWNER HEREOF, CEDE & CO., HAS AN INTEREST HEREIN.
TRANSFERS OF THIS GLOBAL SECURITY SHALL BE LIMITED TO TRANSFERS IN WHOLE,
BUT NOT IN PART, TO NOMINEES OF DTC OR TO A SUCCESSOR THEREOF OR SUCH
SUCCESSOR'S NOMINEE AND TRANSFERS OF PORTIONS OF THIS GLOBAL SECURITY SHALL BE
LIMITED TO TRANSFERS MADE IN ACCORDANCE WITH THE RESTRICTIONS SET FORTH IN OF
THE INDENTURE REFERRED TO ON THE REVERSE HEREOF.]1/
- --------
1/ Bracketed language is the Global Security Legend to be included only in
the Global Securities.
<PAGE>
No. CUSIP
[*/]
PX ESCROW CORP.
9 5/8% Senior Subordinated Discount Exchange Note Due 2006
Principal Amount at Maturity $________________
PX Escrow Corp., a Delaware corporation, promises to pay to
_____________________________, or registered assigns, the principal sum of
_______________________ Dollars on February 1, 2006.
Additional provisions of this Security are set forth on the other side of
this Security.
Dated: PX ESCROW CORP.
by ________________________________
Vice President
________________________________
Assistant Secretary
TRUSTEE'S CERTIFICATE OF
AUTHENTICATION
THE BANK OF NEW YORK
as Trustee, certifies that
this is one of the Securities
referred to in the Indenture.
by
____________________________
Authorized Signatory
- ----------
*/ [If the Security is a Private Exchange Note, add the Restricted Securities
Legend from Exhibit A and replace the Assignment Form included in this Exhibit B
with the Assignment Form included in such Exhibit A.]
<PAGE>
[FORM OF REVERSE SIDE OF EXCHANGE NOTE
AND PRIVATE EXCHANGE NOTE]
PX ESCROW CORP.
9 5/8% Senior Subordinated Discount Exchange Note Due 2006
1. Interest
PX Escrow Corp., a Delaware corporation (such corporation, and its
successors and assigns under the Indenture hereinafter referred to, being herein
called the "Company"), promises to pay to the registered holder of this Security
interest on the Accreted Value of this Security at a rate of 9 5/8% per annum
commencing August 1, 2002 (without duplication of the interest that accrued on
the Initial Note in exchange for which this Security was issued). The Accreted
Value of this Security will increase in the manner provided in the Indenture.
Interest on this Security shall accrue from and including the most recent date
to which interest has been paid on the Initial Notes, the Exchange Notes or the
Private Exchange Notes, as the case may be, or if no interest has been paid,
from and including February 1, 2002 through but excluding the date on which
interest is paid. Interest shall be payable semiannually in arrears on each
February 1 and August 1 and at stated maturity, commencing August 1, 2002.
Interest will be computed on the basis of a 360-day year of twelve 30-day
months. Except as provided above, there will be no periodic payments of
interest.
In the case of a default in payment of principal of the Notes upon
acceleration, redemption or purchase, the overdue principal shall bear interest
at the rate of 10 5/8% per annum, from the date such amount is due until it is
paid in full. The Company shall pay interest on overdue installments of interest
at the same rate to the extent lawful. Interest on any overdue principal or
installments of interest shall be payable on demand.
2. Method of Payment
The Company will pay interest, if any, referred to in paragraph 1 above
(except defaulted interest) on the Securities to the Persons who are registered
holders of Securities at the close of business on the January 15 or July 15 next
preceding the applicable interest payment date even if Securities are canceled
after such record date and on or before such interest payment date. The Company
will pay interest referred to in paragraph 1 of the Initial Notes (except
defaulted interest) on the Initial Notes in exchange for which the Exchange
Notes or Private Exchange Notes were issued to the Persons who, at the close of
business on the January 15 or the July 15 next preceding the applicable interest
payment date, are registered holders of such Initial Notes, if such record date
occurs prior to such exchange, or registered holders of the Exchange Notes
<PAGE>
2
or Private Exchange Notes, if such record date occurs on or after the date of
such exchange, even if such Initial Notes, Exchange Notes or Private Exchange
Notes are canceled after the record date and on or before such interest payment
date. Holders must surrender Securities to a Paying Agent to collect Principal
payments. The Company will pay Principal in money of the United States that at
the time of payment is legal tender for payment of public and private debts.
However, the Company may pay Principal and interest by check payable in such
money; provided, that all payments with respect to Global Securities the holders
of which have given wire transfer instructions to the Company, will be required
to be made by wire transfer of immediately available funds to the accounts
specified by the holders thereof.
3. Paying Agent and Registrar
Initially, The Bank of New York ("Trustee") will act as Paying Agent and
Registrar. The Company may appoint and change any Paying Agent, Registrar or
co-registrar without notice. The Company or any of its domestically incorporated
Wholly Owned Recourse Subsidiaries may act as Paying Agent, Registrar,
co-registrar or transfer agent.
4. Indenture
The Company issued the Securities under an Indenture dated as of February
11, 1998 ("Indenture"), between the Company and the Trustee. The terms of the
Securities include those stated in the Indenture and those made part of the
Indenture by reference to the Trust Indenture Act of 1939 (15 U.S.C. ss.ss.
77aaa-77bbbb) as in effect on the date of the Indenture (the "Act"). Capitalized
terms used herein and not defined herein have the meanings ascribed thereto in
the Indenture. The Securities are subject to all such terms, and Securityholders
are referred to the Indenture and the Act for a statement of those terms.
The Securities are general unsecured obligations of the Company limited to
$217,903,000 aggregate Principal Amount at Maturity (subject to Section 2.07 of
the Indenture). This Security is one of the Exchange Notes or Private Exchange
Notes referred to in the Indenture. The Securities include the Initial Notes,
and any Exchange Notes and Private Exchange Notes issued in exchange for the
Initial Notes pursuant to the Indenture. The Initial Notes, the Exchange Notes
and Private Exchange Notes are treated as a single class of securities under the
Indenture. The Indenture imposes certain limitations on, among other things, the
issuance of debt and redeemable stock by the Company, the issuance of debt and
preferred stock by the Company and its Subsidiaries, the payment of dividends
and other distributions on, and acquisitions or retirements of, the Company's
Capital Stock, the sale or transfer of assets and Subsidiary stock and
transactions with Affiliates. In addition, the Indenture limits the
<PAGE>
3
ability of the Company and its Subsidiaries to restrict distributions and
dividends from such Subsidiaries.
5. Optional Redemption
Except as set forth below, the Securities may not be redeemed by the
Company prior to February 1, 2002. On and after such date, the Company may
redeem the Securities in whole at any time or in part from time to time at the
redemption prices listed below (expressed as percentages of Accreted Value as of
the redemption date) for the periods indicated plus accrued and unpaid interest,
if any, to the redemption date (subject to the right of holders of record on the
relevant record date to receive interest due, if any, on the relevant interest
payment date):
if redeemed during the 12-month period commencing on February 1,
Period Redemption Price
- ------ ----------------
2002..................................................... 104.813%
2003..................................................... 103.208%
2004..................................................... 101.604%
2005..................................................... 100.000%
The Securities may be redeemed at the option of the Company at any time as
a whole before February 1, 2002, at a redemption price equal to the sum of (i)
the Accreted Value thereof at the date of redemption, plus (ii) accrued and
unpaid interest, if any, to the date of redemption, plus (iii) the Applicable
Premium at the date of redemption.
Until February 1, 2001, the Company may redeem with, and to the extent the
Company actually receives, the net proceeds of a Public Equity Offering of the
Company or Parent the Securities in part from time to time at redemption price
equal to 109 5/8% of the Accreted Value as of the redemption date plus accrued
interest, if any, to the redemption date (subject to the right of Holders of
record on the relevant record date to receive interest due, if any, on the
relevant interest payment date); provided, however, that at least $141,637,000
aggregate Principal Amount at Maturity of the Securities must remain outstanding
after each such redemption. A "Public Equity Offering" means an underwritten
public offering of common stock of the Company or Parent pursuant to an
effective registration statement under the Securities Act.
<PAGE>
4
6. Mandatory Redemption
In the event that (i) the Assumption is not consummated on or prior to June
30, 1998 or (ii) PX Holding elects to abandon the Transactions or the
Recapitalization Agreement and the Stockholders Agreement are terminated, in any
case, on or prior to June 30, 1998, for any reason, the Company shall redeem all
the Securities at a redemption price in cash equal to the Accreted Value thereof
at the redemption date on (a) July 22, 1998, in the event that the Assumption is
not consummated on or prior to June 30, 1998, or (b) the 20th day (or if such
day is not a Business Day, the next following Business Day) following the
abandonment of the Transactions or the termination of the Recapitalization
Agreement and the Stockholders Agreement, in the event of such abandonment or
termination.
7. Notice of Redemption
Notice of redemption pursuant to paragraph 5 will be mailed at least 30
days but not more than 60 days before the redemption date, and notice of
redemption pursuant to paragraph 6 will be mailed promptly after the occurrence
of the event triggering such redemption, in each case to each Holder of
Securities to be redeemed at his registered address. Securities in denominations
larger than $1,000 Principal Amount at Maturity may be redeemed in part but only
in whole multiples of $1,000 Principal Amount at Maturity. If money sufficient
to pay the redemption price of all Securities (or portions thereof) to be
redeemed on the redemption date is deposited with the Paying Agent on or before
the redemption date and certain other conditions are satisfied, on and after
such redemption date Accreted Value ceases to increase, and interest, if any,
ceases to accrue, on such Securities (or such portions thereof) called for
redemption.
8. Put Provisions
Upon a Change of Control, any Holder of Securities will have the right to
cause the Company to repurchase all or any part of the Securities of such Holder
at a repurchase price equal to the Put Amount of the Securities to be
repurchased plus accrued and unpaid interest, if any, to the date of repurchase,
in each case as provided in, and subject to the terms of, the Indenture.
9. Subsidiary Guarantees
Under certain circumstances, the payment of Principal of and interest, if
any, on the Securities and other Obligations of the Company under the Securities
and the Indenture will be unconditionally and jointly and severally guaranteed
by the
<PAGE>
5
Subsidiary Guarantors, if any, pursuant to, and subject to the terms of, Section
4.11 and Article X of the Indenture.
10. Subordination
The Securities are subordinated to Senior Debt of the Company, as defined
in the Indenture. To the extent provided in the Indenture, Senior Debt of the
Company must be paid before the Securities may be paid. The Company agrees, and
each Securityholder by accepting a Security agrees, to the subordination
provisions contained in the Indenture and authorizes the Trustee to give it
effect and appoints the Trustee as attorney-in-fact for such purpose.
11. Denominations; Transfer; Exchange
The Securities are in registered form without coupons in denominations of
Principal Amount at Maturity of $1,000 and integral multiples of $1,000. A
Holder may transfer or exchange Securities in accordance with the Indenture. The
Registrar may require a Holder, among other things, to furnish appropriate
endorsements or transfer documents and to pay any taxes and fees required by law
or permitted by the Indenture. The Registrar need not register the transfer of
or exchange any Securities selected for redemption (except, in the case of a
Security to be redeemed in part, the portion of the Security not to be redeemed)
or any Securities for a period of 15 days before a selection of Securities to be
redeemed.
12. Persons Deemed Owners
The registered Holder of this Security may be treated as the owner of it
for all purposes.
13. Unclaimed Money
If money for the payment of Principal or interest, if any, remains
unclaimed for two years, the Trustee or Paying Agent shall pay the money back to
the Company at its request unless an abandoned property law designates another
person. After any such payment, Holders entitled to the money must look only to
the Company and not to the Trustee for payment.
<PAGE>
6
14. Defeasance
Subject to certain conditions, the Company at any time may terminate some
or all of its obligations under the Securities and the Indenture if the Company
deposits with the Trustee money or U.S. Government Obligations for the payment
of Principal and interest, if any, on the Securities to redemption or maturity,
as the case may be.
15. Amendment, Waiver
Subject to certain exceptions set forth in the Indenture, (i) the
Indenture, any Subsidiary Guarantee or the Securities may be amended with the
written consent of the Holders of at least a majority in Principal Amount at
Maturity outstanding of the Securities and (ii) any default or noncompliance
with any provision may be waived with the written consent of the Holders of a
majority in Principal Amount at Maturity outstanding of the Securities. Subject
to certain exceptions set forth in the Indenture, without the consent of any
Securityholder, the Company, any Subsidiary Guarantor and the Trustee, as
applicable, may amend the Indenture, any Subsidiary Guarantee or the Securities
to cure any ambiguity, omission, defect or inconsistency, or to comply with
Article V of the Indenture, or to provide for uncertificated Securities in
addition to or in place of certificated Securities, or to add guarantees with
respect to the Securities or to secure the Securities, or to add additional
covenants or surrender rights and powers conferred on the Company, or to provide
for the issuance of the Exchange Notes or Private Exchange Notes, or to comply
with any request of the SEC in connection with qualifying the Indenture under
the Act or to otherwise comply with the Act, to make any change in Article XI
that would limit or terminate the benefits available to any holder of Senior
Debt of the Company or any Subsidiary Guarantor under Article XI (or
Representatives therefor), or to make any change that does not adversely affect
the rights of any Securityholder. A consent to any amendment or waiver of any
provision in the Indenture or in the Securities by any Holder given in
connection with a tender of such Holder's Securities shall not be rendered
invalid by such tender.
16. Defaults and Remedies
Under the Indenture, Events of Default include (i) default for 30 days in
payment of interest on the Securities; (ii) default in payment of Principal on
the Securities at maturity, upon redemption pursuant to paragraph 5 or paragraph
6 of the Securities, upon declaration or otherwise, or failure by the Company to
redeem or purchase Securities when required; (iii) failure by the Company to
comply with other agreements in the Indenture or the Securities or the Escrow
Agreement, in certain cases subject to notice and lapse of time; (iv) certain
accelerations (including failure to pay within any grace period after final
maturity) of other Debt of the Company or any
<PAGE>
7
Significant Subsidiary if the total principal amount on the portion of such Debt
that is accelerated (or so unpaid) exceeds $10,000,000 and continues for 10 days
after the required notice to the Company; (v) certain events of bankruptcy or
insolvency with respect to the Company or any Significant Subsidiary; (vi)
certain judgments or decrees for the payment of money in excess of $10,000,000;
and (vii) a Subsidiary Guarantee ceasing to be in full force and effect (other
than in accordance with the Indenture) or denial or disaffirmation by a
Subsidiary Guarantor of its obligations under its Subsidiary Guarantee. If an
Event of Default occurs and is continuing, the Trustee or the Holders of at
least 25% in Principal Amount at Maturity of the Securities may declare the
Default Amount of all the Securities to be due and payable immediately. Certain
events of bankruptcy or insolvency are Events of Default which will result in
the Default Amount of the Securities being due and payable immediately upon the
occurrence of such Events of Default.
Securityholders may not enforce the Indenture or the Securities except as
provided in the Indenture. The Trustee may refuse to enforce the Indenture or
the Securities unless it receives reasonable indemnity or security. Subject to
certain limitations, Holders of a majority in Principal Amount of Maturity of
the Securities may direct the Trustee in its exercise of any trust or power. The
Trustee may withhold from Securityholders notice of any continuing Default
(except a Default in payment of Principal or interest) if it determines that
withholding notice is in their interest.
17. Trustee Dealings with the Company
Subject to certain limitations imposed by the Act, the Trustee under the
Indenture, in its individual or any other capacity, may become the owner or
pledgee of Securities and may otherwise deal with and collect obligations owed
to it by the Company or its Affiliates and may otherwise deal with the Company
or its Affiliates with the same rights it would have if it were not Trustee.
18. No Recourse Against Others
A director, officer, employee or stockholder, as such, of the Company, the
Subsidiary Guarantors or the Trustee shall not have any liability for any
obligations of the Company, the Subsidiary Guarantors or the Trustee under the
Securities or the Indenture or for any claim based on, in respect of or by
reason of such obligations or their creation. By accepting a Security, each
Securityholder waives and releases all such liability. The waiver and release
are part of the consideration for the issue of the Securities.
<PAGE>
8
19. Authentication
This Security shall not be valid until an authorized signatory of the
Trustee (or an authenticating agent) manually signs the certificate of
authentication on the other side of this Security.
20. Abbreviations
Customary abbreviations may be used in the name of a Securityholder or an
assignee, such as TEN COM (=tenants in common), TEN ENT (=tenants by the
entireties), JT TEN (=joint tenants with rights of survivorship and not as
tenants in common), CUST (=custodian), and U/G/M/A (=Uniform Gift to Minors
Act).
21. CUSIP Numbers
Pursuant to a recommendation promulgated by the Committee on Uniform
Security Identification Procedures, the Company has caused CUSIP numbers to be
printed on the Securities and has directed the Trustee to use CUSIP numbers in
notices of redemption as a convenience to Securityholders. No representation is
made as to the accuracy of such numbers either as printed on the Securities or
as contained in any notice of redemption and reliance may be placed only on the
other identification numbers placed thereon.
The Company will furnish to any Securityholder upon written request and
without charge to the Securityholder a copy of the Indenture which has in it the
text of this Security in larger type. Requests may be made, prior to the
Effective Date, to: PX Escrow Corp., 35 East 62nd Street, New York, New York
10021, Attention: Secretary; and from and after the Effective Date, to:
Panavision Inc., 6219 De Soto Avenue, Woodland Hills, California 91367,
Attention: Secretary.
<PAGE>
________________________________________________________________________________
ASSIGNMENT FORM
To assign this Security, fill in the form below:
I or we assign and transfer this Security to
(Print or type assignee's name, address and zip code)
(Insert assignee's soc. sec. or tax I.D. No.)
and irrevocably appoint ________________ agent to transfer this Security on the
books of the Company. The agent may substitute another to act for him.
________________________________________________________________________________
Date: ________________ Your Signature: ________________________________________
(Sign exactly as your name appears on the
other side of this Security.)
________________________________________________________________________________
<PAGE>
[TO BE ATTACHED TO GLOBAL SECURITIES]
SCHEDULE OF INCREASES OR DECREASES IN GLOBAL SECURITY
The following increases or decreases in this Global Security have been
made:
<TABLE>
<CAPTION>
Principal Amount
Amount of Amount of at Maturity of this Signature of
Decrease in Increase in Global Security Authorized Officer
Principal Amount Principal Amount Following such of Trustee or
at Maturity of this at Maturity of this Decrease or Securities
Date of Exchange Global Security Global Security Increase Custodian
- ---------------- --------------- --------------- -------- ---------
<S> <C> <C> <C> <C>
</TABLE>
<PAGE>
OPTION OF HOLDER TO ELECT PURCHASE
If you want to elect to have this Security purchased by the Company
pursuant to Section 4.06 or 4.08 of the Indenture, check the box:
|_|
If you want to elect to have only part of this Security purchased by the
Company pursuant to Section 4.06 or 4.08 of the Indenture, state the Principal
Amount at Maturity:
$
Date: ________________ Your Signature: __________________________________
(Sign exactly as your name appears
on the other side of the Security)
Your Signature: __________________________________
(Sign exactly as your name appears
on the other side of the Security)
Signature Guarantee: ___________________________________________________________
(Signature must be guaranteed)
<PAGE>
EXHIBIT C
[FORM OF SUBSIDIARY SUPPLEMENTAL INDENTURE]
SUBSIDIARY SUPPLEMENTAL INDENTURE, dated as of ___________, between
________________, a _____________ (the "Guarantor"), and The Bank of New York,
as trustee under the Indenture referred to below (the "Trustee").
W I T N E S S E T H:
WHEREAS, PX Escrow Corp., a Delaware corporation ("PX Escrow") and the
Trustee heretofore executed and delivered the Indenture, dated as of February
11, 1998 (as heretofore amended and supplemented, the "Indenture"), providing
for the issuance of the 9 5/8% Senior Subordinated Discount Notes Due 2006 (the
"Securities") (capitalized terms used herein but not otherwise defined have the
meanings ascribed thereto in the Indenture);
WHEREAS, pursuant to a Supplemental Indenture dated as of ______________,
Panavision Inc., a Delaware corporation, assumed all of PX Escrow's obligations
under the Indenture and the securities and became the successor Company
thereunder;
WHEREAS, pursuant to Section 4.11 of the Indenture, the Company is required
to cause the Guarantor to execute and deliver to the Trustee this Subsidiary
Supplemental Indenture pursuant to which the Subsidiary Guarantor shall provide
a Guarantee as set forth in Article X of the Indenture;
WHEREAS, Section 9.01(4) of the Indenture provides that the Company and the
Trustee may amend the Indenture and the Securities without notice to or consent
of any Holders of the Securities to add Subsidiary Guarantees; and
WHEREAS, this Supplemental Indenture has been duly authorized by all
necessary corporate action on the part of the Guarantor.
NOW, THEREFORE, in consideration of the premises and for other good and
valuable consideration, the receipt of which is hereby acknowledged, the
<PAGE>
2
Guarantor and the Trustee mutually covenant and agree for the equal and ratable
benefit of the Holders as follows:
ARTICLE I
Agreement to Guarantee
Section 1.1. Agreement to Guarantee. The Guarantor hereby agrees, jointly
and severally with all other Subsidiary Guarantors, irrevocably and
unconditionally, to guarantee the punctual payment when due, whether at Stated
Maturity, by acceleration or otherwise, of all Obligations of the Company under
the Securities and the Indenture on the terms and subject to the conditions set
forth in Article X of the Indenture, which guarantee shall be subordinated in
right of payment to Senior Debt of the Guarantor in the manner provided in such
Article X and shall be subject to automatic release in accordance with the
provisions of Section 4.11(c) of the Indenture.
Section 1.2. Trustee's Acceptance. The Trustee hereby accepts this
Supplemental Indenture and agrees to perform the same under terms and conditions
set forth in the Indenture.
ARTICLE II
Miscellaneous
Section 2.1. Effect of Supplemental Indenture. Upon the execution and
delivery of this Supplemental Indenture by the Guarantor and the Trustee, the
Indenture shall be supplemented in accordance herewith, and this Supplemental
Indenture shall form a part of the Indenture for all purposes, and every Holder
of Securities heretofore or hereafter authenticated and delivered under the
Indenture shall be bound thereby.
Section 2.2. Indenture Remains in Full Force and Effect. Except as
supplemented hereby, all provisions in the Indenture shall remain in full force
and effect.
Section 2.3. Indenture and Supplemental Indenture Construed Together. This
Supplemental Indenture is an indenture supplemental to and implementation of the
Indenture, and the Indenture and this Supplemental Indenture shall henceforth be
read and construed together.
<PAGE>
3
Section 2.4. Confirmation and Preservation of Indenture. The Indenture as
supplemented by this Supplemental Indenture is in all respects confirmed and
preserved.
Section 2.5. Conflict with Trust Indenture Act. If any provision of this
Supplemental Indenture limits, qualifies or conflicts with any provision of the
TIA that is required under the TIA to be part of and govern any provision of
this Supplemental Indenture, the provision of the TIA shall control. If any
provision of this Supplemental Indenture modifies or excludes any provision of
the TIA that may be so modified or excluded, the provision of the TIA shall be
deemed to apply to the Indenture as so modified or to be excluded by this
Supplemental Indenture, as the case may be.
Section 2.6. Severability. In case any provision in this Supplemental
Indenture shall be invalid, illegal or unenforceable, the validity, legality and
enforceability of the remaining provisions shall not in any way be affected or
impaired thereby.
Section 2.7. Benefits of Supplemental Indenture. Nothing in this
Supplemental Indenture or the Securities, express or implied, shall give to any
Person, other than the parties hereto and thereto and their successors hereunder
and thereunder and the Holders of the Securities, any benefit of any legal or
equitable right, remedy or claim under the Indenture, this Supplemental
Indenture or the Securities.
Section 2.8. Successors. All agreements of the Guarantor in this
Supplemental Indenture shall bind its successors except as provided in the
Indenture. All agreements of the Trustee in this Supplemental Indenture shall
bind its successors.
Section 2.9. Certain Duties and Responsibilities of the Trustee. In
entering into this Supplemental Indenture, the Trustee shall be entitled to the
benefit of every provision of the Indenture and the Securities relating to the
conduct or affecting the liability or affording protection to the Trustee,
whether or not elsewhere herein so provided.
Section 2.10. Governing Law. This Supplemental Indenture shall be governed
by, and construed in accordance with, the laws of the State of New York but
without giving effect to applicable principles of conflicts of law to the extent
that the application of the laws of another jurisdiction would be required
thereby.
Section 2.11. Multiple Originals. The parties may sign any number of copies
of this Supplemental Indenture. Each signed copy shall be an original, but all
of them together represent the same agreement. One signed copy is enough to
prove this Supplemental Indenture.
<PAGE>
4
Section 2.12. Headings. The Article and Section headings herein are have
been inserted for convenience of reference only, are not intended to be
considered a part hereof and shall not modify or restrict any of the terms or
provisions hereof.
IN WITNESS WHEREOF, the parties hereto have caused this Supplemental
Indenture to be duly executed as of the date first written above.
[GUARANTOR]
By: ___________________________
Name:
Title:
THE BANK OF NEW YORK,
as Trustee
By: ___________________________
Name:
Title:
<PAGE>
SUPPLEMENTAL INDENTURE
SUPPLEMENTAL INDENTURE, dated as of June 4, 1998, among Panavision Inc., a
Delaware corporation ("Panavision"), PX Escrow Corp., a Delaware corporation
("PX Escrow"), and The Bank of New York, as trustee under the Indenture referred
to below (the "Trustee").
W I T N E S S E T H :
WHEREAS, PX Escrow and the Trustee heretofore executed and delivered the
Indenture, dated as of February 11, 1998 (as heretofore amended and
supplemented, the "Indenture"), providing for the issuance of the 95/8% Senior
Subordinated Discount Notes Due 2006 (the "Securities") (capitalized terms used
herein but not otherwise defined have the meanings ascribed thereto in the
Indenture);
WHEREAS, Section 5.01(c) of the Indenture provides that upon the execution
and delivery by Panavision to the Trustee of this Supplemental Indenture,
Panavision shall be the successor Company under the Indenture and the Securities
and shall succeed to, and be substituted for, and may exercise every right and
power of, the predecessor Company under the Indenture and the Securities and the
predecessor Company shall be discharged from all obligations and covenants under
the Indenture and the Securities;
WHEREAS, Section 9.01(2) of the Indenture provides that the Company and the
Trustee may amend the Indenture and the Securities without notice to or consent
of any Holders of the Securities in order to comply with Article V of the
Indenture; and
WHEREAS, this Supplemental Indenture has been duly authorized by all
necessary corporate action on the part of each of Panavision and PX Escrow.
NOW, THEREFORE, in consideration of the premises and for other good and
valuable consideration, the receipt of which is hereby acknowledged, Panavision,
PX Escrow and the Trustee mutually covenant and agree for the equal and ratable
benefit of the Holders as follows:
ARTICLE I
Assumption by Successor Company
Section 1.1. Assumption of the Securities. Panavision hereby expressly
assumes and agrees promptly to pay, perform and discharge when due each and
every debt, obligation, covenant and agreement incurred, made or to be paid,
performed or discharged by PX Escrow under the Indenture and the Securities.
<PAGE>
2
Panavision hereby agrees to be bound by all the terms, provisions and conditions
of the Indenture and the Securities and that it shall be the successor Company
and shall succeed to, and be substituted for, and may exercise every right and
power of, PX Escrow Corp., as the predecessor Company, under the Indenture and
the Securities.
Section 1.2. Discharge of PX Escrow. PX Escrow is hereby expressly
discharged from all debts, obligations, covenants and agreements under the
Indenture and the Securities.
Section 1.3. Trustee's Acceptance. The Trustee hereby accepts this
Supplemental Indenture and agrees to perform the same under the terms and
conditions set forth in the Indenture.
ARTICLE II
Miscellaneous
Section 2.1. Effect of Supplemental Indenture. Upon the execution and
delivery of this Supplemental Indenture by Panavision, PX Escrow and the
Trustee, the Indenture shall be supplemented in accordance herewith, and this
Supplemental Indenture shall form a part of the Indenture for all purposes, and
every Holder of Securities heretofore or hereafter authenticated and delivered
under the Indenture shall be bound thereby.
Section 2.2. Indenture Remains in Full Force and Effect. Except as
supplemented hereby, all provisions in the Indenture shall remain in full force
and effect.
Section 2.3. Indenture and Supplemental Indenture Construed Together. This
Supplemental Indenture is an indenture supplemental to and in implementation of
the Indenture, and the Indenture and this Supplemental Indenture shall
henceforth be read and construed together.
Section 2.4. Confirmation and Preservation of Indenture. The Indenture as
supplemented by this Supplemental Indenture is in all respects confirmed and
preserved.
Section 2.5. Conflict with Trust Indenture Act. If any provision of this
Supplemental Indenture limits, qualifies or conflicts with any provision of the
TIA that is required under the TIA to be part of and govern any provision of
this Supplemental Indenture, the provision of the TIA shall control. If any
provision of this Supplemental Indenture modifies or excludes any provision of
the TIA that may be so modified or excluded, the provision of the TIA shall be
deemed to apply to the
<PAGE>
3
Indenture as so modified or to be excluded by this Supplemental Indenture, as
the case may be.
Section 2.6. Severability. In case any provision in this Supplemental
Indenture shall be invalid, illegal or unenforceable, the validity, legality and
enforceability of the remaining provisions shall not in any way be affected or
impaired thereby.
Section 2.7. Benefits of Supplemental Indenture. Nothing in this
Supplemental Indenture or the Securities, express or implied, shall give to any
Person, other than the parties hereto and thereto and their successors hereunder
and thereunder and the Holders of the Securities, any benefit of any legal or
equitable right, remedy or claim under the Indenture, this Supplemental
Indenture or the Securities.
Section 2.8. Successors. All agreements of Panavision in this Supplemental
Indenture shall bind its successors. All agreements of the Trustee in this
Supplemental Indenture shall bind its successors.
Section 2.9. Certain Duties and Responsibilities of the Trustee. In
entering into this Supplemental Indenture, the Trustee shall be entitled to the
benefit of every provision of the Indenture and the Securities relating to the
conduct or affecting the liability or affording protection to the Trustee,
whether or not elsewhere herein so provided.
Section 2.10. Governing Law. This Supplemental Indenture shall be governed
by, and construed in accordance with, the laws of the State of New York but
without giving effect to applicable principles of conflicts of law to the extent
that the application of the laws of another jurisdiction would be required
thereby.
Section 2.11. Multiple Originals. The parties may sign any number of copies
of this Supplemental Indenture. Each signed copy shall be an original, but all
of them together represent the same agreement. One signed copy is enough to
prove this Supplemental Indenture.
Section 2.12. Headings. The Article and Section headings herein are have
been inserted for convenience of reference only, are not intended to be
considered a part hereof and shall not modify or restrict any of the terms or
provisions hereof.
<PAGE>
4
IN WITNESS WHEREOF, the parties hereto have caused this Supplemental
Indenture to be duly executed as of the date first written above.
PANAVISION INC.
By: /s/ Jeffrey J. Marcketta
------------------------------------
Name: Jeffrey J. Marcketta
Title: Executive Vice President,
Chief Financial Officer and
Treasurer
PX ESCROW CORP.
By: /s/ Glenn P. Dickes
------------------------------------
Name: Glenn P. Dickes
Title: Vice President and Secretary
THE BANK OF NEW YORK,
as Trustee
By: /s/ Robert A. Massimillo
------------------------------------
Name: Robert A. Massimillo
Title: Assistant Vice President
<PAGE>
PX ESCROW CORP.
9 5/8% Senior Subordinated Discount Notes Due 2006
To Be Assumed By
PANAVISION INC.
REGISTRATION AGREEMENT
February 6, 1998
CREDIT SUISSE FIRST BOSTON CORPORATION
SCHRODER & CO. INC.
c/o CREDIT SUISSE FIRST BOSTON CORPORATION
Eleven Madison Avenue
New York, NY 10010
Dear Sirs:
PX Escrow Corp., a Delaware corporation (the "Issuer"), proposes to issue
and sell to Credit Suisse First Boston Corporation and Schroder & Co. Inc. (the
"Initial Purchasers"), upon the terms set forth in a purchase agreement of even
date herewith (the "Purchase Agreement"), its 9 5/8% Senior Subordinated
Discount Notes Due 2006 (the "Notes"). In connection with the consummation of
the Panavision Recapitalization described in the Offering Circular dated
February 6, 1998 and hereinafter referred to as the "Offering Circular"),
Panavision Inc., a Delaware corporation ("Panavision"), will assume the
obligations of the Issuer under the Notes and the related Indenture. Capitalized
terms used but not specifically defined herein are defined in the Purchase
Agreement. References to the Obligor refer to (x) prior to the Panavision
Assumption (as defined in the Offering Circular), and in the event that either
of the Panavision Recapitalization or the Panavision Assumption is not
consummated, the Issuer, and (y) after the Panavision Assumption, Panavision. As
an inducement to the Initial Purchasers to enter into the Purchase Agreement and
in satisfaction of a condition to your obligations thereunder, the Obligor
agrees with you, for the benefit of the holders of the Notes (including the
Initial Purchasers) (the "Holders"), as follows:
1. Registered Exchange Offer. The Obligor shall, at its cost, prepare and,
not later than 45 days after the Closing Date (defined as the date of the
Panavision
<PAGE>
2
Assumption) (or, if the 45th day is not a business day, the first business day
thereafter), shall file with the Securities and Exchange Commission (the
"Commission") a registration statement (the "Exchange Offer Registration
Statement") on an appropriate form under the Securities Act of 1933 (the "1933
Act"), with respect to a proposed offer (the "Registered Exchange Offer") to the
Holders to issue and deliver to such Holders, in exchange for Notes, a like
principal amount at maturity of debt securities (the "Exchange Notes") of the
Obligor with terms substantially identical in all material respects to the Notes
(except that the Exchange Notes will not contain terms with respect to transfer
restrictions), shall use its best efforts to cause the Exchange Offer
Registration Statement to become effective under the 1933 Act by 150 days after
the Closing Date (or if the 150th day is not a business day, the first business
day thereafter) and shall use its best efforts to keep the Exchange Offer
Registration Statement effective under the 1933 Act until the close of business
on the 180th day following the expiration of the Registered Exchange Offer (such
period being called the "Exchange Offer Registration Period") for use by
Exchanging Dealers (as defined below) as contemplated in Section 3(g) below. The
Obligor shall be deemed not to have used its best efforts to keep the Exchange
Offer Registration Statement effective during the Exchange Offer Registration
Period if the Obligor voluntarily takes any action that would result in
Exchanging Dealers not being able to use such Registration Statement as
contemplated in such Section 3(g), unless (i) such action is required by
applicable law or (ii) such action is taken by the Obligor's in good faith and
for valid business reasons (not including avoidance of the Obligor's obligations
hereunder), including the acquisition or divestiture of assets, so long as the
Obligor promptly thereafter complies with the requirements of Section 3(j)
hereof, if applicable. The Exchange Notes will be issued under the Indenture.
Upon the effectiveness of the Exchange Offer Registration Statement, the
Obligor shall promptly commence the Registered Exchange Offer. The objective of
such Registered Exchange Offer is to enable each Holder electing to exchange
Notes for Exchange Notes (assuming that such Holder is not an affiliate of
Panavision within the meaning of the 1933 Act, acquires the Exchange Notes in
the ordinary course of such Holder's business and has no arrangements with any
person to participate in the distribution of the Exchange Notes) to trade such
Exchange Notes from and after their receipt without any limitations or
restrictions under the 1933 Act and without material restrictions under the
<PAGE>
3
securities laws of a substantial proportion of the several states of the United
States. Notwithstanding the foregoing, the Initial Purchasers and the Obligor
acknowledge that, pursuant to current interpretations by the Commission's staff
of Section 5 of the 1933 Act, and in the absence of an applicable exemption
therefrom, (i) each Holder (including any Initial Purchaser) which is a
broker-dealer electing to exchange Notes, acquired for its own account as a
result of market-making activities or other trading activities, for Exchange
Notes (an "Exchanging Dealer"), is required to deliver a prospectus containing
the information set forth in Annex A hereto on the cover, in Annex B hereto in
"The Exchange Offer" section, and in Annex C hereto in the "Plan of
Distribution" section of such prospectus in connection with a sale of any such
Exchange Notes or Private Exchange Notes (as defined below) received by such
Exchanging Dealer pursuant to the Registered Exchange Offer and (ii) each
Initial Purchaser which elects to sell Exchange Notes acquired in exchange for
Notes constituting any portion of an unsold allotment is required to deliver a
prospectus, containing the information required by Items 507 and/or 508 of
Regulation S-K under the 1933 Act, as applicable, in connection with such a
sale.
If, upon consummation of the Registered Exchange Offer, any Initial
Purchaser holds Notes constituting any portion of an unsold allotment acquired
by it as part of its initial distribution and such Initial Purchaser has
determined upon advice of its outside counsel that it is not eligible to
participate in the Registered Exchange Offer with respect to such Notes, the
Obligor, simultaneously with the delivery of the Exchange Notes pursuant to the
Registered Exchange Offer, shall issue and deliver to such Initial Purchaser
upon the written request of such Initial Purchaser, in exchange (the "Private
Exchange") for the Notes held by such Initial Purchaser, a like principal amount
at maturity of Exchange Notes issued under the Indenture and identical in all
material respects (including the existence of restrictions on transfer under the
1933 Act and the securities laws of the several states of the United States) to
the Notes (the "Private Exchange Notes"; the Notes, the Exchange Notes and the
Private Exchange Notes being hereinafter referred to collectively as the
"Securities"). The Obligor will use reasonable efforts to cause the Private
Exchange Notes to bear the same CUSIP number as the Exchange Notes.
In connection with the Registered Exchange Offer, the Obligor shall:
<PAGE>
4
(a) mail to each Holder a copy of the prospectus forming part of the
Exchange Offer Registration Statement, together with an appropriate letter
of transmittal and related documents;
(b) keep the Registered Exchange Offer open for not less than 30 days
after the date notice thereof is mailed to the Holders (or longer if
required by applicable law);
(c) utilize the services of a depositary for the Registered Exchange
Offer with an address in the Borough of Manhattan, The City of New York;
(d) permit Holders to withdraw tendered Notes at any time prior to the
close of business, New York time, on the last business day on which the
Registered Exchange Offer shall remain open; and
(e) otherwise comply in all respects with all applicable laws.
As soon as practicable after the close of the Registered Exchange Offer or
the Private Exchange, as the case may be, the Obligor shall:
(a) accept for exchange all Notes tendered and not validly withdrawn
pursuant to the Registered Exchange Offer and the Private Exchange;
(b) deliver to the Trustee for cancelation all Notes so accepted for
exchange; and
(c) cause the Trustee promptly to authenticate and deliver to each
Holder of the Notes, either Exchange Notes or Private Exchange Notes, as
the case may be, equal in principal amount at maturity to the Notes of such
Holder so accepted for exchange.
The Indenture will provide that the Exchange Notes will not be subject to
the transfer restrictions applicable to the Notes set forth in the Indenture and
that the Notes, the Exchange Notes and the Private Exchange Notes will
collectively vote and consent together on all matters as one class and that none
of the Notes, the Exchange Notes and the Private Exchange Notes will have the
right to vote or consent as a class separate from one another on any matter.
<PAGE>
5
Notwithstanding any other provisions hereof, the Obligor shall ensure that
(i) any Exchange Offer Registration Statement and any amendment thereto and any
prospectus forming part thereof and any supplement thereto complies in all
material respects with the 1933 Act and the rules and regulations thereunder,
(ii) any Exchange Offer Registration Statement and any amendment thereto does
not, when it becomes effective, contain an untrue statement of a material fact
or omit to state a material fact required to be stated therein or necessary to
make the statements therein not misleading and (iii) any prospectus forming part
of any Exchange Offer Registration Statement, and any supplement to such
prospectus, does not include an untrue statement of a material fact or omit to
state a material fact necessary in order to make the statements therein, in the
light of the circumstances under which they were made, not misleading.
Each Holder participating in the Registered Exchange Offer shall be
required to represent to the Obligor that at the time of the consummation of the
Registered Exchange Offer (i) any Exchange Notes received by such Holder will be
acquired in the ordinary course of business, (ii) such Holder will have no
arrangements or understanding with any person to participate in the distribution
of the Notes or the Exchange Notes within the meaning of the 1933 Act, (iii)
such Holder is not an "affiliate," as defined in Rule 405 of the 1933 Act, of
Panavision or if it is an affiliate, such Holder acknowledges that it must
comply with the registration and prospectus delivery requirements of the 1933
Act to the extent applicable, (iv) if such Holder is not a broker-dealer, that
it is not engaged in, and does not intend to engage in, a distribution of the
Exchange Notes and (v) if such Holder is a broker-dealer, that it will receive
Exchange Notes for its own account in exchange for Notes that were acquired as a
result of market-making activities or other trading activities and that it will
be required to acknowledge that it will deliver a prospectus in connection with
any resale of such Exchange Notes.
2. Shelf Registration. If, (i) because of any change in law or applicable
interpretations thereof by the Commission's staff, the Obligor determines that
it is not permitted to effect the Registered Exchange Offer as contemplated by
Section 1 hereof, (ii) for any other reason the Registered Exchange Offer is not
consummated by the 180th day after the Closing Date (or, if such day is not a
business day, the first business day thereafter), (iii) any Initial Purchaser so
requests with respect to Notes (or
<PAGE>
6
Private Exchange Notes) held by it following consummation of the Registered
Exchange Offer, (iv) any Holder (other than an Initial Purchaser) is not
eligible to participate in the Registered Exchange Offer or, in the case of any
Holder (other than an Exchanging Dealer) or Initial Purchaser that participates
in the Registered Exchange Offer, such Holder or Initial Purchaser does not
receive freely tradeable Exchange Notes in exchange for the exchanged Notes (in
the case of an Initial Purchaser constituting any portion of an unsold
allotment) (it being understood that the requirement that an Initial Purchaser
deliver a prospectus in connection with sales of the Exchange Notes acquired in
the Registered Exchange Offer in exchange for the Notes acquired as a result of
market-making activities or other trading activities, shall not result in such
Exchange Notes not being "freely tradeable" for purposes of this Section 2) or
(v) if the Obligor so elects, the following provisions shall apply:
(a) The Obligor shall, at its cost, as promptly as practicable file with
the Commission and thereafter shall use its best efforts to cause to be declared
effective a shelf registration statement on an appropriate form under the 1933
Act relating to the offer and sale of the Notes by the Holders or the Exchange
Notes or the Private Exchange Notes by the Initial Purchasers, as applicable,
from time to time in accordance with the methods of distribution elected by such
Holders or the Initial Purchasers, as applicable, and set forth in such
registration statement (hereafter, a "Shelf Registration Statement" and,
together with any Exchange Offer Registration Statement, a "Registration
Statement").
(b) The Obligor shall use its best efforts to keep the Shelf Registration
Statement continuously effective in order to permit the prospectus forming part
thereof to be usable by Holders or the Initial Purchasers, as applicable, for a
period of two years from the date the Shelf Registration Statement is declared
effective by the Commission or such shorter period that will terminate when all
the Securities covered by the Shelf Registration Statement have been sold
pursuant to the Registration Statement or when, in the opinion of outside
counsel to the Issuer, which is reasonably satisfactory in form and substance to
counsel for the Initial Purchasers, all such Securities may be sold without
registration under the 1933 Act and unlegended certificates representing the
Securities may be given to the holders thereof (in any such case, such period
being called the "Shelf Registration Period"). The
<PAGE>
7
Obligor shall be deemed not to have used its best efforts to keep the Shelf
Registration Statement effective during the requisite period if the Obligor
voluntarily takes any action that would result in Holders of Securities covered
thereby not being able to offer and sell such Securities during that period,
unless (i) such action is required by applicable law, or (ii) such action is
taken by the Obligor in good faith and for valid business reasons (not including
avoidance of the Obligor's obligations hereunder), including the acquisition or
divestiture of assets, so long as the Obligor promptly thereafter comply with
the requirements of Section 3(j) hereof, if applicable.
(c) Notwithstanding any other provisions hereof, the Obligor shall ensure
that (i) any Shelf Registration Statement and any amendment thereto and any
prospectus forming part thereof and any supplement thereto complies in all
material respects with the 1933 Act and the rules and regulations thereunder,
(ii) any Shelf Registration Statement and any amendment thereto does not, when
it becomes effective, contain an untrue statement of a material fact or omit to
state a material fact required to be stated therein or necessary to make the
statements therein not misleading and (iii) any prospectus forming part of any
Shelf Registration Statement, and any supplement to such prospectus, does not
include an untrue statement of a material fact or omit to state a material fact
necessary in order to make the statements therein, in the light of the
circumstances under which they were made, not misleading.
3. Registration Procedures. In connection with any Shelf Registration
Statement and, to the extent applicable, any Exchange Offer Registration
Statement, the following provisions shall apply:
(a) The Obligor shall (i) furnish to each Initial Purchaser, prior to the
filing thereof with the Commission, a copy of the Registration Statement and
each amendment thereof and each supplement, if any, to the prospectus included
therein and shall use its best efforts to reflect in each such document, when so
filed with the Commission, such comments as the Initial Purchasers reasonably
may propose; (ii) include the information set forth in Annex A hereto on the
cover, in Annex B hereto in "The Exchange Offer" section, and in Annex C hereto
in the "Plan of Distribution" section of the prospectus forming a part of the
Exchange Offer Registration Statement, and include the information set forth in
Annex D hereto in the Letter of Transmittal delivered pursuant to the Registered
Exchange
<PAGE>
8
Offer; (iii) if requested by an Initial Purchaser, include the information
required by Items 507 and/or 508 of Regulation S-K under the 1933 Act, as
applicable, in the prospectus forming a part of the Registration Statement; and
(iv) in the case of a Shelf Registration Statement, include the names of the
Holders who propose to sell Securities pursuant to the Shelf Registration
Statement, as selling security holders.
(b) (1) The Obligor shall advise you (which notice pursuant to clause (ii)
shall be accompanied by an instruction to suspend the use of the prospectus
until the requisite changes have been made, if applicable) and, in the case of a
Shelf Registration Statement, the Holders of Securities included therein, and,
in the case of an Exchange Offer Registration Statement, any Exchanging Dealer
which has provided in writing to the Obligor a telephone or facsimile number or
address for notices, and, if requested by you or any such Holder or Exchanging
Dealer, confirm such advice in writing:
(i) when any Registration Statement and any amendment thereto has been
filed with the Commission and when the Registration Statement or any
post-effective amendment thereto has become effective; and
(ii) of any request by the Commission for amendments or supplements to
the Registration Statement or the prospectus included therein or for
additional information.
(2) The Obligor shall advise you and, in the case of a Shelf Registration
Statement, Holders of Securities included therein, and, in the case of an
Exchange Offer Registration Statement, any Exchanging Dealer which has provided
in writing to the Obligor a telephone or facsimile number or address for
notices, and, if requested by you or any such Holder or Exchanging Dealer,
confirm such advice in writing;
(i) of the issuance by the Commission of any stop order suspending the
effectiveness of the Registration Statement or the initiation of any
proceedings for that purpose;
(ii) of the receipt by the Obligor of any notification with respect to
the suspension of the qualification of the Securities included therein for
<PAGE>
9
sale in any jurisdiction or the initiation or threatening of any proceeding
for such purpose; and
(iii) of the happening of any event that requires the making of any
changes in the Registration Statement or the prospectus so that, as of such
date, the statements therein are not misleading and do not omit to state a
material fact required to be stated therein or necessary to make the
statements therein (in the case of the prospectus, in light of the
circumstances under which they were made) not misleading (which advice
shall be accompanied by an instruction to suspend the use of the prospectus
until the requisite changes have been made).
(c) The Obligor shall make every reasonable effort to obtain the withdrawal
of any order suspending the effectiveness of any Registration Statement at the
earliest possible time.
(d) The Obligor shall furnish to each Holder of Securities included within
the coverage of any Shelf Registration Statement (including any Exchanging
Dealer which so requests in writing or any Initial Purchaser), without charge,
at least one copy of such Shelf Registration Statement and any post-effective
amendment thereto, including financial statements and schedules, and, if the
Holder so requests in writing, all exhibits (including those incorporated by
reference).
(e) The Obligor shall, during the Shelf Registration Period, deliver to
each Holder of Securities included within the coverage of any Shelf Registration
Statement, without charge, as many copies of the prospectus (including each
preliminary prospectus) included in such Shelf Registration Statement and any
amendment or supplement thereto as such Holder may reasonably request; and the
Obligor consents to the use of the prospectus or any amendment or supplement
thereto by each of the selling Holders of Securities in connection with the
offering and sale of the Securities covered by the prospectus or any amendment
or supplement thereto.
(f) The Obligor shall furnish to each Exchanging Dealer or Initial
Purchaser, as applicable, which so requests, without charge, at least one copy
of the Exchange Offer Registration Statement and any post-effective amendment
thereto, including financial statements and schedules, and, if the Exchanging
Dealer or Initial
<PAGE>
10
Purchaser, as applicable, so requests in writing, all exhibits (including those
incorporated by reference).
(g) The Obligor shall, during the Exchange Offer Registration Period,
promptly deliver to each broker-dealer that is the beneficial owner (as defined
in Rule 13d-3 under the Securities Exchange Act of 1934, as amended (the "1934
Act")) of Exchange Notes received by such broker-dealer in the Registered
Exchange Offer (a "Participating Broker-Dealer") and such other persons as may
be required to deliver a prospectus following the Registered Exchange Offer,
without charge, as many copies of the prospectus included in such Exchange Offer
Registration Statement and any amendment or supplement thereto as such person
may reasonably request for delivery by such person in connection with a sale of
Exchange Notes received by it pursuant to the Registered Exchange Offer; and the
Obligor consents to the use of the prospectus or any amendment or supplement
thereto by any such Participating Broker-Dealer or other person as aforesaid.
(h) Prior to any public offering of Securities pursuant to any Shelf
Registration Statement, the Obligor shall register or qualify or cooperate with
the Holders of Securities included therein and their respective counsel in
connection with the registration or qualification of such Securities for offer
and sale under the securities or blue sky laws of such jurisdictions as any such
Holder reasonably requests in writing and do any and all other acts or things
necessary or advisable to enable the offer and sale in such jurisdictions of the
Securities covered by such Shelf Registration Statement; provided, however, that
the Obligor shall not be required to qualify generally to do business in any
jurisdiction where it is not then so qualified or to take any action which would
subject it to general service of process or to taxation in any such jurisdiction
where it is not then so subject.
(i) The Obligor shall cooperate with the Holders of Securities to
facilitate the timely preparation and delivery of certificates representing
Securities to be sold pursuant to any Shelf Registration Statement free of any
restrictive legends and in such denominations and registered in such names as
Holders may request prior to sales of Securities pursuant to such Shelf
Registration Statement.
(j) Upon the occurrence of any event contemplated by paragraph (b)(2)(iii)
above, the Obligor shall promptly prepare a post-effective amendment to the
Registration
<PAGE>
11
Statement or a supplement to the related prospectus or file any other required
document so that, as thereafter delivered to purchasers of the Securities
included therein, the prospectus will not include an untrue statement of a
material fact or omit to state any material fact necessary to make the
statements therein, in the light of the circumstances under which they were
made, not misleading. If the Obligor notifies the Initial Purchasers, the
Holders and any known Exchanging Dealer in accordance with paragraphs (1)(ii) or
(2)(i) through (iii) of Section 3(b) above to suspend the use of the prospectus
until the requisite changes to the prospectus have been made, then the Initial
Purchasers, the Holders and any such Participating Broker-Dealers shall suspend
use of such prospectus.
(k) Not later than the effective date of the applicable Registration
Statement, the Obligor shall provide a CUSIP number for the Notes, the Exchange
Notes or the Private Exchange Notes, as the case may be, and provide the
applicable trustee with certificates for the Notes, the Exchange Notes or the
Private Exchange Notes, as the case may be, in a form eligible for deposit with
The Depository Trust Company.
(l) The Obligor shall comply with all applicable rules and regulations of
the Commission and shall make generally available to its security holders as
soon as practicable after the effective date of the applicable Registration
Statement an earnings statement satisfying the provisions of Section 11(a) of
the 1933 Act.
(m) The Obligor shall cause the Indenture to be qualified under the Trust
Indenture Act of 1939, as amended, in a timely manner. In the event that such
qualification would require the appointment of a new trustee under the
Indenture, the Obligor shall appoint a new trustee thereunder pursuant to the
applicable provisions of the Indenture.
(n) The Obligor may require each Holder of Securities to be sold pursuant
to any Shelf Registration Statement to furnish to the Obligor such information
regarding the holder and the distribution of such Securities as the Obligor may
from time to time reasonably require for inclusion in such Registration
Statement, and the Obligor may exclude from such Registration Statement the
Securities of any Holder that fails to furnish such information within a
reasonable time after receiving such request.
<PAGE>
12
(o) The Obligor shall enter into such customary agreements (including if
requested an underwriting agreement in customary form) and take all such other
action, if any, as any Holder shall reasonably request in order to facilitate
the disposition of the Securities pursuant to any Shelf Registration Statement.
(p) In the case of any Shelf Registration Statement, the Obligor shall (i)
make reasonably available for inspection by the Holders, and any underwriter
participating in any disposition pursuant to a Registration Statement, and any
attorney, accountant or other agent retained by the Holders or any such
underwriter, all relevant financial and other records, pertinent corporate
documents and properties of the Obligor and (ii) cause the Obligor's officers,
directors and employees to supply all relevant information reasonably requested
by the Holders or any such underwriter, attorney, accountant or agent in
connection with any such Registration Statement.
(q) In the case of any Exchange Offer Registration Statement, the Obligor
shall (i) make reasonably available for inspection by the Initial Purchasers,
but in each case only in such firm's capacity as an Exchanging Dealer and with
the express understanding that each such firm shall be acting solely for itself
and not on behalf of any other party, including any other Exchanging Dealer, all
relevant financial and other records, pertinent corporate documents and
properties of the Obligor and (ii) cause the Obligor's officers, directors and
employees to supply all information reasonably requested by any of them.
(r) In the case of any Shelf Registration Statement, the Obligor, if
requested by any Holder, shall cause (x) its counsel to deliver an opinion
relating to the Securities included within the coverage of such Shelf
Registration Statement in customary form, (y) its officers to execute and
deliver all customary documents and certificates requested by any underwriters
of the Securities and (z) its independent public accountants to provide to the
selling Holders and any underwriter therefor a comfort letter in customary form.
(s) In the case of any Exchange Offer Registration Statement, the Obligor,
if requested by the Initial Purchasers, but in each case only in such firm's
capacity as an Exchanging Dealer and with the express understanding that each
such firm shall be acting solely for
<PAGE>
13
itself and not on behalf of any other party, including any other Exchanging
Dealer, in connection with any prospectus delivery as contemplated in paragraph
(g) above, shall use its best efforts to cause, on and as of the effective date
of the Exchange Offer Registration Statement, (x) its counsel to deliver an
opinion relating to the Exchange Offer Registration Statement and the Exchange
Notes in customary form, (y) its officers to execute and deliver all customary
documents and certificates requested and (z) its independent public accountants
to provide a comfort letter in customary form, subject to receipt of appropriate
documentation (including the delivery of a customary representation letter), as
contemplated by Statement on Auditing Standards No. 72.
(t) If a Registered Exchange Offer or a Private Exchange is to be
consummated, upon delivery of the Notes by Holders to the Obligor (or to such
other person as directed by the Obligor) in exchange for the Exchange Notes or
the Private Exchange Notes, as the case may be, the Obligor shall mark, or
caused to be marked, on the Notes so exchanged that such Notes are being
canceled in exchange for the Exchange Notes or the Private Exchange Notes, as
the case may be; in no event shall the Notes be marked as paid or otherwise
satisfied.
(u) The Obligor shall pay interest on the Notes for failure to comply with
its obligations under Section 1 or Section 2, as applicable, in accordance with
the terms of the Securities.
4. Registration Expenses. The Obligor shall bear all expenses incurred in
connection with the performance of its obligations under Sections 1, 2 and 3
hereof and, in the event of any Shelf Registration Statement, shall reimburse
the Holders for the reasonable fees and disbursements of one firm or counsel
designated by the Holders of a majority in principal amount at maturity of the
Securities to be registered thereunder to act as counsel for the Holders in
connection therewith, and, in the case of any Exchange Offer Registration
Statement, shall reimburse the Initial Purchasers, as applicable, for the
reasonable fees and disbursements of counsel in connection therewith.
5. Indemnification. (a) In the event of a Shelf Registration or in
connection with any prospectus delivery pursuant to a Registered Exchange Offer
by an Exchanging Dealer as contemplated in Section 3(g) above, the Obligor shall
indemnify and hold harmless each Holder and each
<PAGE>
14
person, if any, who controls such Holder within the meaning of Section 15 of the
1933 Act or Section 20 of the 1934 Act as follows:
(i) against any and all loss, liability, claim, damage and expense
whatsoever, as incurred, arising out of any untrue statement or alleged
untrue statement of a material fact contained in any such Registration
Statement or any prospectus forming part thereof or the omission or alleged
omission therefrom of a material fact required to be stated therein or
necessary to make the statements therein (in the case of any prospectus, in
the light of the circumstances under which they were made) not misleading;
(ii) against any and all loss, liability, claim, damage and expense
whatsoever, as incurred, to the extent of the aggregate amount paid in
settlement of any litigation, or any investigation or proceeding by any
governmental or regulatory agency or body, commenced or threatened, or of
any claim whatsoever based upon any such untrue statement or omission, or
any such alleged untrue statement or omission; and
(iii) against any and all expense whatsoever, as incurred (including,
subject to Section 5(c) hereof, the fees and disbursements of counsel
chosen by the indemnified party reasonably incurred in investigating,
preparing or defending against any litigation, or any investigation or
proceeding by any governmental or regulatory agency or body, commenced or
threatened, or any claim whatsoever based upon any such untrue statement or
omission, or any such alleged untrue statement or omission);
provided, however, that (i) this indemnity shall not apply to any loss,
liability, claim, damage or expense to the extent arising out of any untrue
statement or omission or alleged untrue statement or omission made in reliance
upon and in conformity with written information furnished to the Obligor by the
indemnified party expressly for use in such Registration Statement and (ii) such
indemnity with respect to any preliminary prospectus shall not enure to the
benefit of any Holder (or any person controlling such Holder) from whom the
person asserting any such loss, claim, damage or liability purchased the
Securities which are the subject thereof if such person did not receive a copy
of the final prospectus (or the final prospectus as supplemented) at or prior to
the confirmation of the sale of such Securities to
<PAGE>
15
such person and (A) the untrue statement or omission of a material fact
contained in such preliminary prospectus was corrected in the final prospectus
(or the final prospectus as supplemented) and (B) such Holder had previously
been furnished by or on behalf of the Obligor (prior to the date of mailing by
such Holder of the applicable confirmation) with a sufficient number of copies
of the final prospectus as so amended or supplemented.
(b) In the event of a Shelf Registration Statement, each Holder shall
indemnify and hold harmless the Obligor, its directors and officers and each
person, if any, who controls the Obligor within the meaning of Section 15 of the
1933 Act or Section 20 of the 1934 Act against any and all loss, liability,
claim, damage and expense described in the indemnity contained in Section 5(a)
hereof, as incurred, but only with respect to untrue statements or omissions, or
alleged untrue statements or omissions, made in the Registration Statement (or
any amendment or supplement thereto) in reliance on and in conformity with
written information furnished to the Obligor by such Holder expressly for use in
the Registration Statement (or in such amendment or supplement); provided,
however, that no such Holder shall be liable for any indemnity claims hereunder
in excess of the amount of net proceeds received by such Holder from the sale of
Securities pursuant to the Registration Statement.
(c) Each indemnified party shall give notice as promptly as reasonably
practicable to each indemnifying party of any action commenced against it in
respect of which indemnity may be sought hereunder, but failure to so notify an
indemnifying party shall not relieve such indemnifying party from any liability
which it may have otherwise than on account of this indemnity agreement, except
to the extent actually prejudiced thereby. If any such claim or action shall be
brought against an indemnified party, the indemnified party shall notify the
indemnifying party thereof, the indemnifying party shall be entitled to
participate therein and, to the extent that it wishes, jointly with any other
similarly notified indemnifying party, to assume the defense thereof with
counsel reasonably satisfactory to the indemnified party. After notice from the
indemnifying party to the indemnified party of its election to assume the
defense of such claim or action, the indemnifying party shall not be liable to
the indemnified party under this Section 5 for any legal or other expenses
subsequently incurred by the indemnified party in connection with the defense
thereof (other than reasonable costs of
<PAGE>
16
investigation); provided, however, if the defendants in any such action include
both an indemnified party and an indemnifying party and the indemnified party
shall have reasonably concluded that there may be legal defenses available to it
or other indemnified parties that are different from or additional to those
available to the indemnifying party, the indemnified party or parties under this
Section 5 shall have the right to employ not more than one counsel to represent
them and, in that event, the fees and expenses of not more than one such
separate counsel shall be paid by the indemnifying party, as such expenses are
incurred. No indemnifying party shall be liable for any settlement effected
without its written consent. An indemnifying party shall not, without the prior
written consent of the indemnified party, settle or compromise or consent to the
entry of any judgment with respect to any pending or threatened claim, action,
suit or proceeding in respect of which indemnification or contribution may be
sought hereunder (whether or not the indemnified parties are actual or potential
parties to such claim or action) unless such settlement, compromise or consent
includes an unconditional release of each indemnified party from all liability
arising out of such claim, action, suit or proceeding.
(d) To provide for just and equitable contribution in circumstances in
which the indemnity provided for in Sections 5(a) through (c) hereof is for any
reason held to be unenforceable by the indemnified parties although applicable
in accordance with its terms, the Obligor and the applicable Holder or Holders
shall contribute to the aggregate losses, liabilities, claims, damages and
expenses of the nature contemplated by said indemnity incurred by the Obligor
and such Holder or Holders, as incurred, in such proportions that the Obligor is
responsible for that portion represented by the percentage that the aggregate
consideration received by the Obligor from the sale by it of the Notes bears to
the aggregate accreted value of Securities sold by such Holder and such Holder
is responsible for the balance; provided, however, that no person found guilty
of fraudulent misrepresentation (within the meaning of Section 11(f) of the 1933
Act) by a court of competent jurisdiction shall be entitled to contribution from
any person who was not guilty of such fraudulent misrepresentation. For purposes
of this Section 5, each person, if any, who controls a Holder within the meaning
of Section 15 of the 1933 Act or Section 20 of the 1934 Act shall have the same
rights to contribution as such Holder and each director and officer of the
Obligor and
<PAGE>
17
each person, if any, who controls the Obligor within the meaning of Section 15
of the 1933 Act or Section 20 of the 1934 Act shall have the same rights to
contribution as the Obligor.
(e) The agreements contained in this Section 5 shall survive the sale of
the securities pursuant to a Registration Statement and shall remain in full
force and effect, regardless of any termination or cancelation of this Agreement
or any investigation made by or on behalf of any indemnified party.
7. Underwritten Registrations. (a) "Transfer Restricted Securities" means
each Security until (i) in the case of a Note, the date on which such Transfer
Restricted Security has been exchanged by a person other than a broker-dealer
for a freely transferrable Exchange Note in the Registered Exchange Offer, (ii)
in the case of an Exchange Note, following the exchange by a broker-dealer in
the Registered Exchange Offer of a Transfer Restricted Security for an Exchange
Note, the date on which such Exchange Note is sold to a purchaser who receives
from such broker-dealer on or prior to the date of such sale a copy of the
prospectus contained in the Exchange Offer Registration Statement, (iii) the
date on which such Transfer Restricted Security has been effectively registered
under the 1933 Act and disposed of in accordance with the Shelf Registration
Statement or (iv) the date on which such Transfer Restricted Note is distributed
to the public pursuant to Rule 144 under the 1933 Act or is saleable pursuant to
Rule 144(k) under the 1933 Act.
(b) If any of the Transfer Restricted Notes covered by any Shelf
Registration are to be sold in an underwritten offering, the investment banker
or investment bankers and manager or managers that will administer the offering
("Managing Underwriters") will be selected by the Holders of a majority in
aggregate principal amount of such Transfer Restricted Securities to be included
in such offering.
No person may participate in any underwritten registration hereunder unless
such person (i) agrees to sell such person's Transfer Restricted Securities on
the basis reasonably provided in any underwriting arrangements approved by the
persons entitled hereunder to approve such arrangements and (ii) completes and
executes all questionnaires, powers of attorney, indemnities,
<PAGE>
18
underwriting agreements and other documents reasonably required under the terms
of such underwriting arrangements.
8. Release of Issuer. Upon the consummation of the Panavision Assumption,
the Issuer shall be discharged from all obligations and covenants under this
Agreement.
9. Miscellaneous. (a) Amendment and Waivers. The provisions of this
Agreement may not be amended, modified or supplemented, and waivers or consents
to departures from the provisions hereof may not be given, unless the Obligor
has obtained the written consent of Holders of a majority in aggregate principal
amount at maturity of the Securities.
(b) Notices. All notices and other communications provided for or permitted
hereunder shall be made in writing by hand-delivery, first-class mail, telex,
telecopier, or air courier guaranteeing overnight delivery:
(i) if to a Holder, at the most current address given by such Holder
to the Obligor in accordance with the provisions of this Section 9(b),
which address initially is, with respect to each Holder, the address of
such Holder maintained by the Registrar under the Indenture, with a copy in
like manner to the Initial Purchasers;
(ii) if to the Initial Purchasers, initially at the respective
addresses set forth in the Purchase Agreement with copies to the parties
specified therein;
(iii) if to the Issuer, initially at its address set forth in the
Purchase Agreement, with copies to the parties specified therein; and
(iv) if to Panavision, to the attention of the Secretary at 6219 De
Soto Avenue, Woodland Hills, CA 91367-2602.
All such notices and communications shall be deemed to have been duly given
when received.
The Initial Purchasers, the Issuer or Panavision by notice to the other may
designate additional or different addresses for subsequent notices or
communications.
<PAGE>
19
(c) Successors and Assigns. Subject to Section 8, this Agreement shall be
binding upon the Obligor and its successors and assigns.
(d) Counterparts. This agreement may be executed in any number of
counterparts and by the parties hereto in separate counterparts, each of which
when so executed shall be deemed to be an original and all of which taken
together shall constitute one and the same agreement.
(e) Headings. The headings in this agreement are for convenience of
reference only and shall not limit or otherwise affect the meaning hereof.
(f) Governing Law and Time. THIS AGREEMENT SHALL BE GOVERNED BY AND
CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK BUT WITHOUT
GIVING EFFECT TO APPLICABLE PRINCIPLES OF CONFLICTS OF LAWS TO THE EXTENT THAT
THE APPLICATION OF THE LAWS OF ANOTHER JURISDICTION WOULD BE REQUIRED THEREBY.
Specified times of day refer to New York City time.
(g) Severability. If any one or more of the provisions contained herein, or
the application thereof in any circumstance, is held invalid, illegal or
unenforceable, the validity, legality and enforceability of any such provision
in every other respect and of the remaining provisions contained herein shall
not be affected or impaired thereby.
(h) Securities Held by the Obligor. Whenever the consent or approval of
Holders of a specified percentage of principal amount at maturity of Securities
is required hereunder, Securities held by the Obligor or its affiliates (other
than subsequent Holders of Securities if such subsequent Holders are deemed to
be affiliates solely by reason of their holdings of such Securities) shall not
be counted in determining whether such consent or approval was given by the
Holders of such required percentage.
(i) No Inconsistent Agreements. Neither the Issuer nor Panavision have, as
of the date hereof, entered into, nor shall it, on or after the date hereof,
enter into, any agreement with respect to its securities that is inconsistent
with the rights granted to the Holders herein or otherwise conflicts with the
provisions hereof.
(j) Copies of Agreement. The Obligor shall provide a copy of this Agreement
to prospective purchasers
<PAGE>
20
of Notes identified to them by the Initial Purchasers upon request.
<PAGE>
21
Please confirm that the foregoing correctly sets forth the agreement
between the Issuer and you.
Very truly yours,
PX ESCROW CORP.
by /s/ Glenn P. Dickes
-----------------------
Name: Glenn P. Dickes
Title: Vice President
CONFIRMED AND ACCEPTED
as of the date first above written:
CREDIT SUISSE FIRST BOSTON CORPORATION
SCHRODER & CO. INC.
by Credit Suisse First Boston Corporation
by
----------------------------
Name:
Title:
<PAGE>
Please confirm that the foregoing correctly sets forth the agreement
between the Issuer and you.
Very truly yours,
PX ESCROW CORP.
by
-----------------------
Name:
Title:
CONFIRMED AND ACCEPTED
as of the date first above written:
CREDIT SUISSE FIRST BOSTON CORPORATION
SCHRODER & CO. INC.
by Credit Suisse First Boston Corporation
by /s/ Eldad Coppens
----------------------------
Name: ELDAD COPPENS
Title: DIRECTOR
<PAGE>
ANNEX A TO
REGISTRATION AGREEMENT
Each broker-dealer that receives Exchange Notes for its own account
pursuant to the Exchange Offer must acknowledge that it will deliver a
prospectus in connection with any resale of such Exchange Notes. The Letter of
Transmittal states that by so acknowledging and by delivering a prospectus, a
broker-dealer will not be deemed to admit that it is an "underwriter" within the
meaning of the 1933 Act. This Prospectus, as it may be amended or supplemented
from time to time, may be used by a broker-dealer in connection with resales of
Exchange Notes received in exchange for the Notes where such Notes were acquired
by such broker-dealer as a result of market-making activities or other trading
activities. The Obligor has agreed that, for a period of 180 days after the
Expiration Date (as defined herein), it will make this Prospectus available to
any broker-dealer for use in connection with any such resale. See "Plan of
Distribution".
A-1
<PAGE>
ANNEX B TO
REGISTRATION AGREEMENT
Each broker-dealer that receives Exchange Notes for its own account in
exchange for the Notes, where such Notes were acquired by such broker-dealer as
a result of market-making activities or other trading activities, must
acknowledge that it will deliver a prospectus in connection with any resale of
such Exchange Notes. See "Plan of Distribution".
B-1
<PAGE>
ANNEX C TO
REGISTRATION AGREEMENT
PLAN OF DISTRIBUTION
Each broker-dealer that receives Exchange Notes for its own account
pursuant to the Exchange Offer must acknowledge that it will deliver a
prospectus in connection with any resale of such Exchange Notes. This
Prospectus, as it may be amended or supplemented from time to time, may be used
by a broker-dealer in connection with resales of Exchange Notes received in
exchange for Existing Notes where such Existing Notes were acquired as a result
of market making activities or other trading activities. The Obligor has agreed
that for a period of 180 days after the Expiration Date, it will make this
Prospectus, as amended or supplemented, available to any broker-dealer for use
in connection with any such resale. In addition, until , 199 , all dealers
effecting transactions in the Exchange Notes may be required to deliver a
prospectus. 1/
The Obligor will not receive any proceeds from any sale of Exchange Notes
by broker-dealers. Exchange Notes received by broker-dealers for their own
account pursuant to the Exchange Offer may be sold from time to time in one or
more transactions in the over-the-counter market, in negotiated transactions,
through the writing of options on the Exchange Notes or a combination of such
methods of resale, at market prices prevailing at the time of resale, at prices
related to such prevailing market prices or negotiated prices. Any such resale
may be made directly to purchasers or to or through brokers or dealers who may
receive compensation in the form of commissions or concessions from any such
broker-dealer and/or the purchasers of any such Exchange Notes. Any
broker-dealer that resells Exchange Notes that were received by it for its own
account pursuant to the Exchange offer and any broker or dealer that
participates in a distribution of such Exchange Notes may be deemed to be an
"underwriter" within the meaning of the 1933 Act and any profit on any such
resale of Exchange Notes and any commissions or concessions received by any such
persons may be deemed to be underwriting compensation under the 1933 Act. The
Letter of Transmittal states that by acknowledging that it will deliver and by
delivering a prospectus, a broker-dealer will not be deemed to admit that it is
an "underwriter" within the meaning of the 1933 Act.
- ----------
1/ The legend required by Item 502(e) of Regulation S-K must appear on the
back page of the Exchange Offer Prospectus.
C-1
<PAGE>
For a period of 180 days after the Expiration Date, the Obligor will
promptly send additional copies of this Prospectus and any amendment or
supplement to this Prospectus to any broker-dealer that requests such documents
in the Letter of Transmittal. The Obligor has agreed to pay all expenses
incident to the Exchange Offer other than commissions or concessions of any
brokers or dealers and will indemnify the holders of the Notes (including any
broker-dealers) against certain liabilities, including liabilities under the
1933 Act.
C-2
<PAGE>
ANNEX D TO
REGISTRATION AGREEMENT
Rider A
o CHECK HERE IF YOU ARE A BROKER-DEALER AND WISH TO RECEIVE 10 ADDITIONAL
COPIES OF THE PROSPECTUS AND 10 COPIES OF ANY AMENDMENTS OR SUPPLEMENTS
THERETO.
Name: _________________________________________________________________
Address: _________________________________________________________________
_________________________________________________________________
Rider B
If the undersigned is not a broker-dealer, the undersigned represents that it is
not engaged in, and does not intend to engage in, a distribution of Exchange
Notes. If the undersigned is a broker-dealer that will receive Exchange Notes
for its own account in exchange for Notes, it represents that the Notes to be
exchanged for Exchange Notes were acquired by it as a result of market-making or
other trading activities and acknowledges that it will deliver a prospectus in
connection with any resale of such Exchange Notes; however, by so acknowledging
and by delivering a prospectus, the undersigned will not be deemed to admit that
it is an "underwriter" within the meaning of the 1933 Act.
D-1
<PAGE>
EXHIBIT 12.1
PANAVISION INC.
COMPUTATION OF RATIO OF EARNINGS TO FIXED CHARGES
(IN THOUSANDS OF DOLLARS)
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
--------------------------------------------------- PRO FORMA
1993 1994 1995 1996 1997 1997
------- ------- ------- ------- ------- ---------
<S> <C> <C> <C> <C> <C> <C>
Fixed Charges
Interest expense............................ $ 5,716 $ 6,043 $ 7,213 $ 8,182 $ 6,869 $39,339
Portion of rents deemed to be interest...... 590 598 750 1,053 2,018 2,018
Amortization of debt issuance costs......... -- -- -- 262 251 1,531
------- ------- ------- ------- ------- ---------
Total Fixed Charges.................... $ 6,306 $ 6,641 $ 7,963 $ 9,497 $ 9,138 $42,888
------- ------- ------- ------- ------- ---------
------- ------- ------- ------- ------- ---------
Earnings (Loss)
Income (loss) before income taxes........... $ 3,758 $ 8,921 $ 6,938 $16,807 $28,740 ($3,716)
Fixed charges............................... 6,306 6,641 7,963 9,497 9,138 42,888
------- ------- ------- ------- ------- ---------
Total Earnings......................... $10,064 $15,562 $14,901 $26,304 $37,878 $39,172
------- ------- ------- ------- ------- ---------
------- ------- ------- ------- ------- ---------
Ratio of earnings to fixed charges............ 1.6x 2.3x 1.9x 2.8x 4.1x (a)
</TABLE>
- ------------------
(a) For the pro forma year ended December 31, 1997, the deficiency of earnings
to fixed charges was $3,716.
<PAGE>
PANAVISION INC.
COMPUTATION OF RATIO OF EARNINGS TO FIXED CHARGES
(IN THOUSANDS OF DOLLARS)
<TABLE>
<CAPTION>
THREE MONTHS
ENDED
MARCH 31, PRO FORMA
----------------- ---------
1997 1998 1998
------ ------- ---------
<S> <C> <C> <C>
Fixed Charges
Interest expense............................................................... $ 956 $ 2,294 $10,243
Portion of rents deemed to be interest......................................... 426 461 461
Amortization of debt issuance costs............................................ 51 71 383
------ ------- ---------
Total Fixed Charges......................................................... $1,433 $ 2,826 $11,087
------ ------- ---------
------ ------- ---------
Earnings (Loss)
Income (loss) before income taxes.............................................. $5,173 $ 3,635 ($4,626)
Fixed charges.................................................................. 1,433 2,826 11,087
------ ------- ---------
Total Earnings.............................................................. $6,606 $ 6,461 $ 6,461
------ ------- ---------
------ ------- ---------
Ratio of earnings to fixed charges............................................... 4.6x 2.3x (a)
</TABLE>
- ------------------
(a) For the pro forma three months ended March 31, 1998, the deficiency of
earnings to fixed charges was $4,626.
<PAGE>
EXHIBIT 23.1
CONSENT OF ERNST & YOUNG LLP, INDEPENDENT AUDITORS
We consent to the reference to our firm under the caption 'Experts' and to the
use of our report dated February 13, 1998, in the Registration Statement (Form
S-1) and related Prospectus of Panavision Inc. for the registration of
$217,903,000 of 9 5/8% Senior Subordinated Discount Exchange Notes Due 2006.
ERNST & YOUNG LLP
Los Angeles, California
July 15, 1998
<PAGE>
EXHIBIT 23.2
CONSENT OF COOPERS & LYBRAND, CHARTERED ACCOUNTANTS
We consent to the reference to our firm under the caption 'Experts' and to the
use of our report dated August 7, 1997 with respect to the combined financial
statements of Film Services Group of Panavision Inc., in the Registration
Statement (Form S-1) and related Prospectus of Panavision Inc. for the
registration of $217,903,000 of 9 5/8% Senior Subordinated Discount Exchange
Notes Due 2006.
COOPERS & LYBRAND
Chartered Accountants
July 17, 1998
London, United Kingdom
<PAGE>
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that the undersigned hereby
constitutes and appoints each of Jeffrey J. Marcketta, Christopher M.R.
Phillips, Glenn P. Dickes and Joram C. Salig or any of them, each acting alone,
his true and lawful attorney-in-fact and agent, with full power of
substitution, for him and in his name, place and stead, in any and all
capacities, in connection with the Panavision Inc. (the "Corporation")
Registration Statement on Form S-1 or Form S- 4, as applicable (the
"Registration Statement") under the Securities Act of 1933, as amended (the
"Securities Act"), including, without limiting the generality of the fore
going, to sign the Registration Statement in the name and on behalf of the
Corpo ration or on behalf of the undersigned as a director or officer of the
Corporation, to sign any amendments and supplements relating thereto (including
post-effective amendments) under the Securities Act and to sign any instrument,
contract, docu ment or other writing of or in connection with the Registration
Statement and any amendments and supplements thereto (including post-effective
amendments) and to file the same, with all exhibits thereto, and other
documents in connection therewith, including this power of attorney, with the
Securities and Exchange Commission and any applicable securities exchange or
securities self-regulatory body, granting unto said attorneys-in-fact and
agents, each acting alone, full power and authority to do and perform each and
every act and thing requisite and necessary to be done in and about the
premises, as fully to all intents and purposes as he might or could do in
person, hereby ratifying and confirming all that said attorneys-in-fact and
agents, each acting alone, or his substitute or substitutes, may lawfully do or
cause to be done by virtue hereof.
IN WITNESS HEREOF, the undersigned has signed these presents
this 17th day of July, 1998.
/s/ Howard Gittis
---------------------------
Howard Gittis
<PAGE>
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that the undersigned hereby
constitutes and appoints each of Jeffrey J. Marcketta, Christopher M.R.
Phillips, Glenn P. Dickes and Joram C. Salig or any of them, each acting alone,
his true and lawful attorney-in-fact and agent, with full power of
substitution, for him and in his name, place and stead, in any and all
capacities, in connection with the Panavision Inc. (the "Corporation")
Registration Statement on Form S-1 or Form S- 4, as applicable (the
"Registration Statement") under the Securities Act of 1933, as amended (the
"Securities Act"), including, without limiting the generality of the fore
going, to sign the Registration Statement in the name and on behalf of the
Corpo ration or on behalf of the undersigned as a director or officer of the
Corporation, to sign any amendments and supplements relating thereto (including
post-effective amendments) under the Securities Act and to sign any instrument,
contract, docu ment or other writing of or in connection with the Registration
Statement and any amendments and supplements thereto (including post-effective
amendments) and to file the same, with all exhibits thereto, and other
documents in connection therewith, including this power of attorney, with the
Securities and Exchange Commission and any applicable securities exchange or
securities self-regulatory body, granting unto said attorneys-in-fact and
agents, each acting alone, full power and authority to do and perform each and
every act and thing requisite and necessary to be done in and about the
premises, as fully to all intents and purposes as he might or could do in
person, hereby ratifying and confirming all that said attorneys-in-fact and
agents, each acting alone, or his substitute or substitutes, may lawfully do or
cause to be done by virtue hereof.
IN WITNESS HEREOF, the undersigned has signed these presents
this 17th day of July, 1998.
/s/ Joseph P. Page
------------------------------
Joseph P. Page
<PAGE>
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that the undersigned hereby
constitutes and appoints each of Jeffrey J. Marcketta, Christopher M.R.
Phillips, Glenn P. Dickes and Joram C. Salig or any of them, each acting alone,
his true and lawful attorney-in-fact and agent, with full power of
substitution, for him and in his name, place and stead, in any and all
capacities, in connection with the Panavision Inc. (the "Corporation")
Registration Statement on Form S-1 or Form S- 4, as applicable (the
"Registration Statement") under the Securities Act of 1933, as amended (the
"Securities Act"), including, without limiting the generality of the fore
going, to sign the Registration Statement in the name and on behalf of the
Corpo ration or on behalf of the undersigned as a director or officer of the
Corporation, to sign any amendments and supplements relating thereto (including
post-effective amendments) under the Securities Act and to sign any instrument,
contract, docu ment or other writing of or in connection with the Registration
Statement and any amendments and supplements thereto (including post-effective
amendments) and to file the same, with all exhibits thereto, and other
documents in connection therewith, including this power of attorney, with the
Securities and Exchange Commission and any applicable securities exchange or
securities self-regulatory body, granting unto said attorneys-in-fact and
agents, each acting alone, full power and authority to do and perform each and
every act and thing requisite and necessary to be done in and about the
premises, as fully to all intents and purposes as he might or could do in
person, hereby ratifying and confirming all that said attorneys-in-fact and
agents, each acting alone, or his substitute or substitutes, may lawfully do or
cause to be done by virtue hereof.
IN WITNESS HEREOF, the undersigned has signed these presents
this 17th day of July, 1998.
/s/ Kenneth Ziffren
--------------------------
Kenneth Ziffren
<PAGE>
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that the undersigned hereby
constitutes and appoints each of Jeffrey J. Marcketta, Christopher M.R.
Phillips, Glenn P. Dickes and Joram C. Salig or any of them, each acting alone,
his true and lawful attorney-in-fact and agent, with full power of
substitution, for him and in his name, place and stead, in any and all
capacities, in connection with the Panavision Inc. (the "Corporation")
Registration Statement on Form S-1 or Form S- 4, as applicable (the
"Registration Statement") under the Securities Act of 1933, as amended (the
"Securities Act"), including, without limiting the generality of the fore
going, to sign the Registration Statement in the name and on behalf of the
Corpo ration or on behalf of the undersigned as a director or officer of the
Corporation, to sign any amendments and supplements relating thereto (including
post-effective amendments) under the Securities Act and to sign any instrument,
contract, docu ment or other writing of or in connection with the Registration
Statement and any amendments and supplements thereto (including post-effective
amendments) and to file the same, with all exhibits thereto, and other
documents in connection therewith, including this power of attorney, with the
Securities and Exchange Commission and any applicable securities exchange or
securities self-regulatory body, granting unto said attorneys-in-fact and
agents, each acting alone, full power and authority to do and perform each and
every act and thing requisite and necessary to be done in and about the
premises, as fully to all intents and purposes as he might or could do in
person, hereby ratifying and confirming all that said attorneys-in-fact and
agents, each acting alone, or his substitute or substitutes, may lawfully do or
cause to be done by virtue hereof.
IN WITNESS HEREOF, the undersigned has signed these presents
this 17th day of July, 1998.
/s/ William C. Scott
--------------------------
William C. Scott
<PAGE>
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that the undersigned hereby
constitutes and appoints each of Jeffrey J. Marcketta, Christopher M.R.
Phillips, Glenn P. Dickes and Joram C. Salig or any of them, each acting alone,
his true and lawful attorney-in-fact and agent, with full power of
substitution, for him and in his name, place and stead, in any and all
capacities, in connection with the Panavision Inc. (the "Corporation")
Registration Statement on Form S-1 or Form S- 4, as applicable (the
"Registration Statement") under the Securities Act of 1933, as amended (the
"Securities Act"), including, without limiting the generality of the fore
going, to sign the Registration Statement in the name and on behalf of the
Corpo ration or on behalf of the undersigned as a director or officer of the
Corporation, to sign any amendments and supplements relating thereto (including
post-effective amendments) under the Securities Act and to sign any instrument,
contract, docu ment or other writing of or in connection with the Registration
Statement and any amendments and supplements thereto (including post-effective
amendments) and to file the same, with all exhibits thereto, and other
documents in connection therewith, including this power of attorney, with the
Securities and Exchange Commission and any applicable securities exchange or
securities self-regulatory body, granting unto said attorneys-in-fact and
agents, each acting alone, full power and authority to do and perform each and
every act and thing requisite and necessary to be done in and about the
premises, as fully to all intents and purposes as he might or could do in
person, hereby ratifying and confirming all that said attorneys-in-fact and
agents, each acting alone, or his substitute or substitutes, may lawfully do or
cause to be done by virtue hereof.
IN WITNESS HEREOF, the undersigned has signed these presents
this 17th day of July, 1998.
/s/ John S. Farrand
-----------------------------
John S. Farrand
<PAGE>
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that the undersigned hereby
constitutes and appoints each of Christopher M.R. Phillips, Glenn P. Dickes and
Joram C. Salig or any of them, each acting alone, his true and lawful
attorney-in-fact and agent, with full power of substitution, for him and in his
name, place and stead, in any and all capacities, in connection with the
Panavision Inc. (the "Corpora tion") Registration Statement on Form S-1 or Form
S-4, as applicable (the "Reg istration Statement") under the Securities Act of
1933, as amended (the "Securities Act"), including, without limiting the
generality of the foregoing, to sign the Regis tration Statement in the name
and on behalf of the Corporation or on behalf of the undersigned as a director
or officer of the Corporation, to sign any amendments and supplements relating
thereto (including post-effective amendments) under the Securi ties Act and to
sign any instrument, contract, document or other writing of or in con nection
with the Registration Statement and any amendments and supplements thereto
(including post-effective amendments) and to file the same, with all exhibits
thereto, and other documents in connection therewith, including this power of
attor ney, with the Securities and Exchange Commission and any applicable
securities ex change or securities self-regulatory body, granting unto said
attorneys-in-fact and agents, each acting alone, full power and authority to do
and perform each and every act and thing requisite and necessary to be done in
and about the premises, as fully to all intents and purposes as he might or
could do in person, hereby ratifying and con firming all that said
attorneys-in-fact and agents, each acting alone, or his substitute or
substitutes, may lawfully do or cause to be done by virtue hereof.
IN WITNESS HEREOF, the undersigned has signed these presents
this 17th day of July, 1998.
/s/ Jeffrey J. Marcketta
----------------------------
Jeffrey J. Marcketta
<PAGE>
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that the undersigned hereby
constitutes and appoints each of Jeffrey J. Marcketta, Glenn P. Dickes and
Joram C. Salig or any of them, each acting alone, his true and lawful
attorney-in-fact and agent, with full power of substitution, for him and in his
name, place and stead, in any and all capacities, in connection with the
Panavision Inc. (the "Corporation") Registration Statement on Form S-1 or Form
S-4, as applicable (the "Registration Statement") under the Securities Act of
1933, as amended (the "Securities Act"), including, without limiting the
generality of the foregoing, to sign the Registration Statement in the name and
on behalf of the Corporation or on behalf of the under signed as a director or
officer of the Corporation, to sign any amendments and supplements relating
thereto (including post-effective amendments) under the Securi ties Act and to
sign any instrument, contract, document or other writing of or in con nection
with the Registration Statement and any amendments and supplements thereto
(including post-effective amendments) and to file the same, with all exhibits
thereto, and other documents in connection therewith, including this power of
attor ney, with the Securities and Exchange Commission and any applicable
securities ex change or securities self-regulatory body, granting unto said
attorneys-in-fact and agents, each acting alone, full power and authority to do
and perform each and every act and thing requisite and necessary to be done in
and about the premises, as fully to all intents and purposes as he might or
could do in person, hereby ratifying and con firming all that said
attorneys-in-fact and agents, each acting alone, or his substitute or
substitutes, may lawfully do or cause to be done by virtue hereof.
IN WITNESS HEREOF, the undersigned has signed these presents
this 17th day of July, 1998.
/s/ Christopher M.R. Phillips
-----------------------------------
Christopher M.R. Phillips
<PAGE>
================================================================================
FORM T-1
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
STATEMENT OF ELIGIBILITY
UNDER THE TRUST INDENTURE ACT OF 1939 OF A
CORPORATION DESIGNATED TO ACT AS TRUSTEE
CHECK IF AN APPLICATION TO DETERMINE
ELIGIBILITY OF A TRUSTEE PURSUANT TO
SECTION 305(b)(2) |__|
----------
THE BANK OF NEW YORK
(Exact name of trustee as specified in its charter)
New York 13-5160382
(State of incorporation (I.R.S. employer
if not a U.S. national bank) identification no.)
48 Wall Street, New York, N.Y. 10286
(Address of principal executive offices) (Zip code)
----------
PANAVISION INC.
(Exact name of obligor as specified in its charter)
Delaware 13-3593063
(State or other jurisdiction of (I.R.S. employer
incorporation or organization) identification no.)
625 Madison Avenue
New York, New York 10022
(Address of principal executive offices) (Zip code)
----------
9-5/8% Senior Subordinated
Discount Exchange Notes due 2006
(Title of the indenture securities)
================================================================================
<PAGE>
1. General information. Furnish the following information as to the
Trustee:
(a) Name and address of each examining or supervising authority to
which it is subject.
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------------
Name Address
- ----------------------------------------------------------------------------------------
<S> <C>
Superintendent of Banks of the State of 2 Rector Street, New York,
New York N.Y. 10006, and Albany, N.Y. 12203
Federal Reserve Bank of New York 33 Liberty Plaza, New York,
N.Y. 10045
Federal Deposit Insurance Corporation Washington, D.C. 20429
New York Clearing House Association New York, New York 10005
</TABLE>
(b) Whether it is authorized to exercise corporate trust powers.
Yes.
2. Affiliations with Obligor.
If the obligor is an affiliate of the trustee, describe each such
affiliation.
None.
16. List of Exhibits.
Exhibits identified in parentheses below, on file with the Commission,
are incorporated herein by reference as an exhibit hereto, pursuant to
Rule 7a-29 under the Trust Indenture Act of 1939 (the "Act") and 17
C.F.R. 229.10(d).
1. A copy of the Organization Certificate of The Bank of New York
(formerly Irving Trust Company) as now in effect, which
contains the authority to commence business and a grant of
powers to exercise corporate trust powers. (Exhibit 1 to
Amendment No. 1 to Form T-1 filed with Registration Statement
No. 33-6215, Exhibits 1a and 1b to Form T-1 filed with
Registration Statement No. 33-21672 and Exhibit 1 to Form T-1
filed with Registration Statement No. 33-29637.)
4. A copy of the existing By-laws of the Trustee. (Exhibit 4 to
Form T-1 filed with Registration Statement No. 33-31019.)
-2-
<PAGE>
6. The consent of the Trustee required by Section 321(b) of the
Act. (Exhibit 6 to Form T-1 filed with Registration Statement
No. 33-44051.)
7. A copy of the latest report of condition of the Trustee
published pursuant to law or to the requirements of its
supervising or examining authority.
-3-
<PAGE>
SIGNATURE
Pursuant to the requirements of the Act, the Trustee, The Bank of New
York, a corporation organized and existing under the laws of the State of New
York, has duly caused this statement of eligibility to be signed on its behalf
by the undersigned, thereunto duly authorized, all in The City of New York, and
State of New York, on the 15th day of July, 1998.
THE BANK OF NEW YORK
By: /S/ MARY JANE SCHMALZEL
-----------------------
Name: MARY JANE SCHMALZEL
Title: VICE PRESIDENT
<PAGE>
Exhibit 7
Consolidated Report of Condition of
THE BANK OF NEW YORK
of 48 Wall Street, New York, N.Y. 10286
And Foreign and Domestic Subsidiaries,
a member of the Federal Reserve System, at the close of business March 31, 1998,
published in accordance with a call made by the Federal Reserve Bank of this
District pursuant to the provisions of the Federal Reserve Act.
Dollar Amounts
ASSETS in Thousands
Cash and balances due from depos-
itory institutions:
Noninterest-bearing balances and
currency and coin ................. $ 6,397,993
Interest-bearing balances .......... 1,138,362
Securities:
Held-to-maturity securities ........ 1,062,074
Available-for-sale securities ...... 4,167,240
Federal funds sold and Securities pur-
chased under agreements to resell... 391,650
Loans and lease financing
receivables:
Loans and leases, net of unearned
income .................36,538,242
LESS: Allowance for loan and
lease losses ..............631,725
LESS: Allocated transfer risk
reserve..........................0
Loans and leases, net of unearned
income, allowance, and reserve 35,906,517
Assets held in trading accounts ...... 2,145,149
Premises and fixed assets (including
capitalized leases) ................ 663,928
Other real estate owned .............. 10,895
Investments in unconsolidated
subsidiaries and associated
companies .......................... 237,991
Customers' liability to this bank on
acceptances outstanding ............ 992,747
Intangible assets .................... 1,072,517
Other assets ......................... 1,643,173
-----------
Total assets ......................... $55,830,236
===========
LIABILITIES
Deposits:
In domestic offices ................ $24,849,054
Noninterest-bearing ......10,011,422
Interest-bearing .........14,837,632
In foreign offices, Edge and
Agreement subsidiaries, and IBFs ... 15,319,002
Noninterest-bearing .........707,820
Interest-bearing .........14,611,182
Federal funds purchased and Securities
sold under agreements to repurchase. 1,906,066
Demand notes issued to the U.S.
Treasury ........................... 215,985
Trading liabilities .................. 1,591,288
Other borrowed money:
With remaining maturity of one year
or less .......................... 1,991,119
With remaining maturity of more than
one year through three years...... 0
With remaining maturity of more than
three years ...................... 25,574
Bank's liability on acceptances exe-
cuted and outstanding .............. 998,145
Subordinated notes and debentures .... 1,314,000
Other liabilities .................... 2,421,281
-----------
Total liabilities .................... 50,631,514
-----------
EQUITY CAPITAL
Common stock ......................... 1,135,284
Surplus .............................. 731,319
Undivided profits and capital
reserves ........................... 3,328,050
Net unrealized holding gains
(losses) on available-for-sale
securities ......................... 40,198
Cumulative foreign currency transla-
tion adjustments ................... ( 36,129)
------------
Total equity capital ................. 5,198,722
------------
Total liabilities and equity
capital ............................ $ 55,830,236
-===========
I, Robert E. Keilman, Senior Vice President and Comptroller of the
above-named bank do hereby declare that this Report of Condition has been
prepared in conformance with the instructions issued by the Board of Governors
of the Federal Reserve System and is true to the best of my knowledge and
belief.
Robert E. Keilman
We, the undersigned directors, attest to the correctness of this Report
of Condition and declare that it has been examined by us and to the best of our
knowledge and belief has been prepared in conformance with the instructions
issued by the Board of Governors of the Federal Reserve System and is true and
correct.
-
Thomas A. Renyi |
Alan R. Griffith | Directors
J. Carter Bacot |
-
<PAGE>
LETTER OF TRANSMITTAL
PANAVISION INC.
OFFER FOR ALL OUTSTANDING 9 5/8% SENIOR SUBORDINATED DISCOUNT
NOTES DUE 2006 IN EXCHANGE FOR 9 5/8% SENIOR SUBORDINATED DISCOUNT
EXCHANGE NOTES DUE 2006 PURSUANT TO THE PROSPECTUS, DATED , 1998
THE EXCHANGE OFFER WILL EXPIRE AT 5:00 P.M. NEW YORK CITY TIME, ON
1998, UNLESS EXTENDED (THE 'EXPIRATION DATE'). TENDERS MAY BE WITHDRAWN PRIOR
TO 5:00 P.M., NEW YORK CITY TIME, ON THE EXPIRATION DATE
The Exchange Agent for the Exchange Offer is:
THE BANK OF NEW YORK
By Hand or Overnight Delivery:
The Bank of New York
101 Barclay Street
Corporate Trust Services Window,
Ground Floor
New York, New York 10286
Attn: Reorganization Section
Facsimile Transmissions:
(Eligible Institutions Only)
(212) 815-6339
To Confirm by Telephone
or for Information call:
(212)
Attn:
By Registered or Certified Mail:
The Bank of New York
101 Barclay Street, Floor 7E
New York, New York 10286
Attn: Reorganization Section
------------------------
DELIVERY OF THIS INSTRUMENT TO AN ADDRESS OTHER THAN AS SET FORTH ABOVE, OR
TRANSMISSION OF INSTRUCTIONS VIA FACSIMILE OTHER THAN AS SET FORTH ABOVE, WILL
NOT CONSTITUTE A VALID DELIVERY.
The undersigned acknowledges that he or she has received and reviewed the
Prospectus, dated , 1998 (the 'Prospectus'), of Panavision Inc.
(the 'Company'), and this Letter of Transmittal (the 'Letter'), which together
constitute the Company's offer (the 'Exchange Offer') to exchange an aggregate
principal amount at maturity of up to $217,903,000 9 5/8% Senior Subordinated
Discount Exchange Notes due 2006 (the 'New Notes') which have been registered
under the Securities Act of 1933, as amended, of the Company for a like
principal amount of the issued and outstanding 9 5/8% Senior Subordinated
Discount Notes due 2006 (the 'Old Notes') of the Company from the holders
thereof.
For each Old Note accepted for exchange, the holder of such Old Note will
receive a New Note having a principal amount at maturity equal to that of the
surrendered Old Note. Because the New Notes will be treated as a continuation of
the Old Notes, which were issued at an original issue discount ('Original Issue
Discount') for federal income tax purposes, the New Notes will have Original
Issue Discount that shall accrue from February 11, 1998, the date of original
issuance of the Old Notes. If the Exchange Offer is not consummated by December
1, 1998, interest will accrue on the Old Notes (in addition to the accrual of
Original Issue Discount) from and including such date until but excluding the
date of consummation of the Exchange Offer payable in cash semiannually in
arrears on February 1 and August 1, commencing February 1, 1999, at a rate per
annum equal to .50% of the Accreted Value (as defined in the Prospectus) of the
Old Notes as of the August 1 or February 1 immediately preceding such interest
payment date. Holders of Old Notes accepted for exchange will be deemed to have
waived the right to receive any other payments or accrued interest on the Old
Notes. The Company reserves the right, at any time or from time to time, to
extend the Exchange Offer at its discretion, in which event the term 'Expiration
Date' shall mean the latest time and date to which the Exchange Offer is
extended. The Company shall notify the holders of the Old Notes of any extension
by oral or written notice prior to 9:00 A.M., New York City time, on the next
business day after the previously scheduled Expiration Date.
This Letter is to be completed by a holder of Old Notes either if
certificates are to be forwarded herewith or if a tender of certificates for Old
Notes, if available, is to be made by book-entry transfer to the account
maintained by the Exchange Agent at The Depository Trust Company (the
'Book-Entry Transfer Facility') pursuant to the procedures set forth in 'The
Exchange Offer--Book-Entry Transfer' section of the Prospectus and an Agent's
Message (as defined herein) is not delivered. Holders of Old Notes whose
certificates are not immediately available, or who are unable to deliver their
certificates or confirmation of the book-entry tender of their Old Notes into
the Exchange Agent's account at the Book-Entry Transfer Facility (a 'Book-Entry
Confirmation') and all other documents required by this Letter to the Exchange
Agent on or prior to the Expiration Date, must tender their Old Notes according
to the guaranteed delivery procedures set forth in 'The Exchange
Offer--Guaranteed Delivery Procedures' section of the Prospectus. See
Instruction 1. Delivery of documents to the Book-Entry Transfer Facility does
not constitute delivery to the Exchange Agent.
<PAGE>
The undersigned has completed the appropriate boxes below and signed this
Letter to indicate the action the undersigned desires to take with respect to
the Exchange Offer.
List below the Old Notes to which this Letter relates. If the space
provided below is inadequate, the certificate numbers and principal amount of
Old Notes should be listed on a separate signed schedule affixed hereto.
<TABLE>
<CAPTION>
DESCRIPTION OF OLD NOTES
NAME AND ADDRESS OF REGISTERED
HOLDER(S)
(PLEASE FILL IN, IF BLANK) 1 2 3
AGGREGATE PRINCIPAL
PRINCIPAL AMOUNT
AMOUNT AT AT
CERTIFICATE MATURITY OF MATURITY
NUMBER(S)* OLD NOTE(S) TENDERED**
<S> <C> <C> <C>
TOTAL
</TABLE>
* Need not be completed if Old Notes are being tendered by book-entry
transfer.
** Unless otherwise indicated in this column, a holder will be deemed to have
tendered ALL of the Old Notes represented by the Old Notes indicated in
column 2. See Instruction 2. Old Notes tendered must be in denominations of
principal amount at maturity of $1,000 and any integral multiple thereof.
See Instruction 1.
/ / CHECK HERE IF TENDERED SHARES ARE BEING DELIVERED BY BOOK-ENTRY TRANSFER
MADE TO THE ACCOUNT MAINTAINED BY THE EXCHANGE AGENT WITH THE BOOK-ENTRY
TRANSFER FACILITY AND COMPLETE THE FOLLOWING:
Name of Tendering Institution _____________________________________________
Account Transaction Code
Number --------------------------- Number ------------------------------
By crediting Old Notes to the Exchange Agent's Account at the Book-Entry
Facility in accordance with the Book-Entry Transfer Facility's Automated
Tender Offer Program ('ATOP') and by complying with applicable ATOP
procedures with respect to the Exchange Offer, including transmitting an
Agent's Message to the Exchange Agent in which the holder of Old Notes
acknowledges and agrees to be bound by the terms of this Letter, the
participant in ATOP confirms on behalf of itself and the beneficial owners
as if it had completed the information required herein and executed and
transmitted this Letter to the Exchange Agent.
/ / CHECK HERE IF TENDERED OLD NOTES ARE BEING DELIVERED PURSUANT TO A NOTICE
OF GUARANTEED DELIVERY SENT TO THE EXCHANGE AGENT AND COMPLETE THE
FOLLOWING:
Name(s) of Registered Holder(s) ____________________________________________
Window Ticket Number (if any) ______________________________________________
Date of Execution of Notice of Guaranteed Delivery _________________________
Name of Institution which guaranteed delivery ______________________________
<PAGE>
IF DELIVERED BY BOOK-ENTRY TRANSFER, COMPLETE THE FOLLOWING:
Account Transaction Code
Number Number
------------------------- -----------------------------
/ / CHECK HERE IF YOU ARE A BROKER-DEALER AND WISH TO RECEIVE 10 ADDITIONAL
COPIES OF THE PROSPECTUS AND 10 COPIES OF ANY AMENDMENTS OR SUPPLEMENTS
THERETO:
Name:
---------------------------------------------------------------------
Address:
------------------------------------------------------------------
------------------------------------------------------------------
If the undersigned is not a broker-dealer, the undersigned represents that
it is not engaged in, and does not intend to engage in, a distribution of New
Notes. If the undersigned is a broker-dealer that will receive New Notes for its
own account in exchange for Old Notes, it represents that the Old Notes to be
exchanged for New Notes were acquired by it as a result of market-making or
other trading activities and acknowledges that it will deliver a prospectus
meeting the requirements of the Securities Act of 1933, as amended, in
connection with any resale of such New Notes; however, by so acknowledging and
by delivering a prospectus, the undersigned will not be deemed to admit that it
is an 'underwriter' within the meaning of the Securities Act of 1933, as
amended.
PLEASE READ THE ACCOMPANYING INSTRUCTIONS CAREFULLY
<PAGE>
- --------------------------------------------------------------------------------
Ladies and Gentlemen:
Upon the terms and subject to the conditions of the Exchange Offer, the
undersigned hereby tenders to the Company the aggregate principal amount at
maturity of Old Notes indicated above. Subject to, and effective upon, the
acceptance for exchange of the Old Notes tendered hereby, the undersigned hereby
sells, assigns and transfers to, or upon the order of, the Company all right,
title and interest in and to such Old Notes as are being tendered hereby.
The undersigned hereby represents and warrants that the undersigned has
full power and authority to tender, sell, assign and transfer the Old Notes
tendered hereby and that the Company will acquire good and unencumbered title
thereto, free and clear of all liens, restrictions, charges and encumbrances and
not subject to any adverse claim when the same are accepted by the Company. The
undersigned hereby further represents that any New Notes acquired in exchange
for Old Notes tendered hereby will have been acquired in the ordinary course of
business of the person receiving such New Notes, whether or not such person is
the undersigned, that neither the holder of such Old Notes nor any such other
person has an arrangement or understanding with any person to participate in the
distribution of such New Notes and that neither the holder of such Old Notes nor
any such other person is an 'affiliate,' as defined in Rule 405 under the
Securities Act of 1933, as amended (the 'Securities Act'), of the Company.
The undersigned also acknowledges that this Exchange Offer is being made in
reliance on interpretations by the staff of the Securities and Exchange
Commission (the 'SEC'), as set forth in no-action letters issued to third
parties, that the New Notes issued in exchange for the Old Notes pursuant to the
Exchange Offer may be offered for resale, resold and otherwise transferred by
holders thereof (other than any such holder that is an 'affiliate' of the
Company within the meaning of Rule 405 under the Securities Act), without
compliance with the registration and prospectus delivery provisions of the
Securities Act, provided that such New Notes are acquired in the ordinary course
of such holders' business and such holders have no arrangement with any person
to participate in the distribution of such New Notes. However, the Company does
not intend to request the SEC to consider, and the SEC has not considered the
Exchange Offer in the context of a no-action letter and there can be no
assurance that the staff of the SEC would make a similar determination with
respect to the Exchange Offer as in other circumstances. If the undersigned is
not a broker-dealer, the undersigned represents that it is not engaged in, and
does not intend to engage in, a distribution of New Notes and has no arrangement
or understanding to participate in a distribution of New Notes. If any holder is
an affiliate of the Company or is engaged in or intends to engage in or has any
arrangement or understanding with respect to the distribution of the New Notes
to be acquired pursuant to the Exchange Offer, such holder (i) could not rely on
the applicable interpretations of the staff of the SEC and (ii) must comply with
the registration and prospectus delivery requirements of the Securities Act in
connection with any resale transaction. If the undersigned is a broker-dealer
that will receive New Notes for its own account in exchange for Old Notes, it
represents that the Old Notes to be exchanged for the New Notes were acquired by
it as a result of market-making or other trading activities and acknowledges
that it will deliver a prospectus in connection with any resale of such New
Notes; however, by so acknowledging and by delivering a prospectus, the
undersigned will not be deemed to admit that it is an 'underwriter' within the
meaning of the Securities Act.
The undersigned will, upon request, execute and deliver any additional
documents deemed by the Company to be necessary or desirable to complete the
sale, assignment and transfer of the Old Notes tendered hereby. All authority
conferred or agreed to be conferred in this Letter and every obligation of the
undersigned hereunder shall be binding upon the successors, assigns, heirs,
executors, administrators, trustees in bankruptcy and legal representatives of
the undersigned and shall not be affected by, and shall survive, the death or
incapacity of the undersigned. This tender may be withdrawn only in accordance
with the procedures set forth in 'The Exchange Offer--Withdrawal Rights' section
of the Prospectus.
Unless otherwise indicated in the box entitled 'Special Issuance
Instructions' below, please deliver the New Notes (and, if applicable,
substitute certificates representing Old Notes for any Old Notes not exchanged)
in the name of the undersigned or, in the case of a book-entry delivery of Old
Notes, please credit the account indicated above maintained at the Book-Entry
Transfer Facility. Similarly, unless otherwise indicated in the box entitled
'Special Delivery Instructions' below, please send the New Notes (and, if
applicable, substitute certificates representing Old Notes for any Old Notes not
exchanged) to the undersigned at the address shown above in the box entitled
'Description of Old Notes.'
<PAGE>
THE UNDERSIGNED, BY COMPLETING THE BOX ENTITLED 'DESCRIPTION OF OLD NOTES'
ABOVE AND SIGNING THIS LETTER, WILL BE DEEMED TO HAVE TENDERED THE OLD NOTES AS
SET FORTH IN SUCH BOX ABOVE.
<TABLE>
<S> <C>
SPECIAL ISSUANCE INSTRUCTIONS SPECIAL DELIVERY INSTRUCTIONS
(SEE INSTRUCTIONS 3 AND 4) (SEE INSTRUCTIONS 3 AND 4)
To be completed ONLY if certificates for Old Notes To be completed ONLY if certificates for Old Notes not
not exchanged and/or New Notes are to be issued in the exchanged and/or New Notes are to be sent to someone
name of and sent to someone other than the person or other than the person or persons whose signature(s)
persons whose signature(s) appear(s) on this Letter appear(s) on this Letter above or to such person or
above, or if Old Notes delivered by book-entry transfer persons at an address other than shown in the box
which are not accepted for exchange are to be returned by entitled 'Description of Old Notes' on this Letter above.
credit to an account maintained at the Book-Entry
Transfer Facility other than the account indicated above. Mail: New Notes and/or Old Notes to:
Issue: New Notes and/or Old Notes to: Name
-----------------------------------------------------
Name(s) (PLEASE TYPE OR PRINT)
--------------------------------------------------
(PLEASE PRINT)
------------------------------------------------------
Address (PLEASE TYPE OR PRINT)
--------------------------------------------------
Address
---------------------------------------------------
- ---------------------------------------------------------
(INCLUDE ZIP CODE)
-----------------------------------------------------------
(INCLUDE ZIP CODE)
(COMPLETE SUBSTITUTE FORM W-9)
/ / Credit unexchanged Old Notes delivered by book-entry
transfer to the Book-Entry Transfer Facility account
set forth below.
- ----------------------------------------------------------
(BOOK-ENTRY TRANSFER FACILITY
ACCOUNT NUMBER, IF APPLICABLE)
</TABLE>
<PAGE>
IMPORTANT: THIS LETTER OR A FACSIMILE HEREOF OR AN AGENT'S MESSAGE IN LIEU
HEREOF (TOGETHER WITH THE CERTIFICATES FOR OLD NOTES OR A BOOK-ENTRY
CONFIRMATION AND ALL OTHER REQUIRED DOCUMENTS OR THE NOTICE OF GUARANTEED
DELIVERY) MUST BE RECEIVED BY THE EXCHANGE AGENT PRIOR TO 5:00 P.M., NEW YORK
CITY TIME, ON THE EXPIRATION DATE.
PLEASE READ THIS ENTIRE LETTER OF TRANSMITTAL
CAREFULLY BEFORE COMPLETING ANY BOX ABOVE.
PLEASE SIGN HERE
(TO BE COMPLETED BY ALL TENDERING HOLDERS)
(COMPLETE ACCOMPANYING SUBSTITUTE FORM W-9 ON REVERSE SIDE)
Dated: ------------------------------ ------------------------------- , 1998
x ------------------------------ ------------------------------- , 1998
x ------------------------------ ------------------------------- , 1998
SIGNATURE(S) OF OWNER(S) DATE
Area Code and Telephone
Number:
-----------------------------------------------------------------
If a holder is tendering any Old Notes, this Letter must be signed by the
registered holder(s) as the name(s) appear(s) on the certificate(s) for the Old
Notes or by any person(s) authorized to become registered holder(s) by
endorsements and documents transmitted herewith. If signature is by a trustee,
executor, administrator, guardian, officer or other person acting in a fiduciary
or representative capacity, please set forth full title. See Instruction 3.
Name(s): ----------------------------------------------------------------
(PLEASE TYPE OR PRINT)
Capacity: ---------------------------------------------------------------
Address: ----------------------------------------------------------------
- -------------------------------------------------------------------------
- ------------------------------------------------------------------------
(INCLUDING ZIP CODE)
SIGNATURE GUARANTEE (IF REQUIRED BY INSTRUCTION 3)
Signature(s) Guaranteed by
an Eligible
Institution: -----------------------------------------------------------
(AUTHORIZED SIGNATURE)
- ------------------------------------------------------------------------
(TITLE)
- ------------------------------------------------------------------------
(NAME AND FIRM)
Date: ------------------------------------------------------------------ , 1998
<PAGE>
INSTRUCTIONS
FORMING PART OF THE TERMS AND CONDITIONS OF THE EXCHANGE OFFER FOR THE
9 5/8% SENIOR SUBORDINATED DISCOUNT NOTES DUE 2006 IN EXCHANGE FOR
9 5/8% SENIOR SUBORDINATED DISCOUNT EXCHANGE NOTES DUE 2006
1. DELIVERY OF THIS LETTER AND NOTES; GUARANTEED DELIVERY PROCEDURES. This
letter is to be completed by noteholders either if certificates are to be
forwarded herewith or if tenders are to be made pursuant to the procedures for
delivery by book-entry transfer set forth in 'The Exchange Offer--Book-Entry
Transfer' section of the Prospectus and an Agent's Message is not delivered.
Certificates for all physically tendered Old Notes, or Book-Entry Confirmation,
as the case may be, as well as a properly completed and duly executed Letter (or
manually signed facsimile hereof) and any other documents required by this
Letter, must be received by the Exchange Agent at the address set forth herein
on or prior to the Expiration Date, or the tendering holder must comply with the
guaranteed delivery procedures set forth below. Old Notes tendered hereby must
be in denominations of principal amount at maturity of $1,000 and any integral
multiple thereof. The term 'Agent's Message' means a message, transmitted to the
Book-Entry Transfer Facility and received by the Exchange Agent and forming a
part of the Book-Entry Confirmation, which states that the Book-Entry Transfer
Facility has received an express acknowledgement from the tendering Participant
that such Participant has received and agrees to be bound by this Letter and
that the Company may enforce this Letter against such Participant.
Noteholders whose certificates for Old Notes are not immediately available
or who cannot deliver their certificates and all other required documents to the
Exchange Agent on or prior to the Expiration Date, or who cannot complete the
procedure for book-entry transfer on a timely basis, may tender their Old Notes
pursuant to the guaranteed delivery procedures set forth in 'The Exchange
Offer--Guaranteed Delivery Procedures' section of the Prospectus. Pursuant to
such procedures, (i) such tender must be made through an Eligible Institution,
(ii) prior to the Expiration Date, the Exchange Agent must receive from such
Eligible Institution a properly completed and duly executed Letter (or a
facsimile thereof or an Agent's Message in lieu thereof) and Notice of
Guaranteed Delivery, substantially in the form provided by the Company (by
telegram, telex, facsimile transmission, mail or hand delivery), setting forth
the name and address of the holder of Old Notes and the amount of Old Notes
tendered, stating that the tender is being made thereby and guaranteeing that
within three New York Stock Exchange ('NYSE') trading days after the date of
execution of the Notice of Guaranteed Delivery, the certificates for all
physically tendered Old Notes, or a Book-Entry Confirmation, and any other
documents required by the Letter will be deposited by the Eligible Institution
with the Exchange Agent, and (iii) the certificates for all physically tendered
Old Notes, in proper form for transfer, or Book-Entry Confirmation, as the case
may be, and all other documents required by this Letter, are received by the
Exchange Agent within three NYSE trading days after the date of execution of the
Notice of Guaranteed Delivery.
The method of delivery of this Letter, the Old Notes and all other required
documents is at the election and risk of the tendering holders, but the delivery
will be deemed made only when actually received or confirmed by the Exchange
Agent. If Old Notes are sent by mail, it is suggested that the mailing be made
sufficiently in advance of the Expiration Date to permit delivery to the
Exchange Agent prior to 5:00 p.m., New York City time, on the Expiration Date.
See 'The Exchange Offer' section of the Prospectus.
2. PARTIAL TENDERS (NOT APPLICABLE TO NOTEHOLDERS WHO TENDER BY BOOK-ENTRY
TRANSFER). If less than all of the Old Notes evidenced by a submitted
certificate are to be tendered, the tendering holder(s) should fill in the
aggregate principal amount at maturity of Old Notes to be tendered in the box
above entitled 'Description of Old Notes--Principal Amount at Maturity
Tendered.' A reissued certificate representing the balance of nontendered Old
Notes will be sent to such tendering holder, unless otherwise provided in the
appropriate box on this Letter, promptly after the Expiration Date. ALL OF THE
OLD NOTES DELIVERED TO THE EXCHANGE AGENT WILL BE DEEMED TO HAVE BEEN TENDERED
UNLESS OTHERWISE INDICATED.
<PAGE>
3. SIGNATURES ON THIS LETTER; BOND POWERS AND ENDORSEMENTS; GUARANTEE OF
SIGNATURES. If this Letter is signed by the registered holder of the Old Notes
tendered hereby, the signature must correspond exactly with the name as written
on the face of the certificates without any change whatsoever.
If any tendered Old Notes are owned of record by two or more joint owners,
all of such owners must sign this Letter.
If any tendered Old Notes are registered in different names on several
certificates, it will be necessary to complete, sign and submit as many separate
copies of this Letter as there are different registrations of certificates.
When this Letter is signed by the registered holder or holders of the Old
Notes specified herein and tendered hereby, no endorsements of certificates or
separate bond powers are required. If, however, the New Notes are to be issued,
or any untendered Old Notes are to be reissued, to a person other than the
registered holder, then endorsements of any certificates transmitted hereby or
separate bond powers are required. Signatures on such certificate(s) must be
guaranteed by an Eligible Institution.
If this Letter is signed by a person other than the registered holder or
holders of any certificate(s) specified herein, such certificate(s) must be
endorsed or accompanied by appropriate bond powers, in either case signed
exactly as the name or names of the registered holder or holders appear(s) on
the certificate(s) and signatures on such certificate(s) must be guaranteed by
an Eligible Institution.
If this Letter or any certificates or bond powers are signed by trustees,
executors, administrators, guardians, attorneys-in-fact, officers of
corporations or others acting in a fiduciary or representative capacity, such
persons should so indicate when signing, and, unless waived by the Company,
proper evidence satisfactory to the Company of their authority to so act must be
submitted.
ENDORSEMENTS ON CERTIFICATES FOR OLD NOTES OR SIGNATURES ON BOND POWERS
REQUIRED BY THIS INSTRUCTION 3 MUST BE GUARANTEED BY A FIRM WHICH IS A MEMBER OF
A REGISTERED NATIONAL SECURITIES EXCHANGE OR A MEMBER OF THE NATIONAL
ASSOCIATION OF SECURITIES DEALERS, INC. OR BY A COMMERCIAL BANK OR TRUST COMPANY
HAVING AN OFFICE OR CORRESPONDENT IN THE UNITED STATES (AN 'ELIGIBLE
INSTITUTION').
SIGNATURES ON THIS LETTER NEED NOT BE GUARANTEED BY AN ELIGIBLE
INSTITUTION, PROVIDED THE OLD NOTES ARE TENDERED: (I) BY A REGISTERED HOLDER OF
OLD NOTES (WHICH TERM, FOR PURPOSES OF THE EXCHANGE OFFER, INCLUDES ANY
PARTICIPANT IN THE BOOK-ENTRY TRANSFER FACILITY SYSTEM WHOSE NAME APPEARS ON A
SECURITY POSITION LISTING AS THE HOLDER OF SUCH OLD NOTES) WHO HAS NOT COMPLETED
THE BOX ENTITLED 'SPECIAL ISSUANCE INSTRUCTIONS' OR 'SPECIAL DELIVERY
INSTRUCTIONS' ON THIS LETTER, OR (II) FOR THE ACCOUNT OF AN ELIGIBLE
INSTITUTION.
4. SPECIAL ISSUANCE AND DELIVERY INSTRUCTIONS. Tendering holders of Old
Notes should indicate in the applicable box the name and address to which New
Notes issued pursuant to the Exchange Offer and/or substitute certificates
evidencing Old Notes not exchanged are to be issued or sent, if different form
the name or address of the person signing this Letter. In the case of issuance
in a different name, the employer identification or social security number of
the person named must also be indicated. Holders tendering Old Notes by
book-entry transfer may request that Old Notes not exchanged be credited to such
account maintained at the Book-Entry Transfer Facility as such noteholder may
designate hereon. If no such instructions are given, such Old Notes not
exchanged will be returned to the name or address of the person signing this
Letter.
5. TAX IDENTIFICATION NUMBER. Federal income tax law generally requires
that a tendering holder whose Old Notes are accepted for exchange must provide
the Company (as payor) with such holder's correct Taxpayer Identification Number
('TIN') on Substitute Form W-9 below, which in the case of a tendering holder
who is an individual, is his or her social security number. If the Company is
not provided with the current TIN or an adequate basis for an exemption, such
tendering holder may be subject to a $50 penalty imposed by the Internal Revenue
Service. In addition, delivery to such tendering holder of New Notes may be
subject to backup withholding in an amount equal to 31% of all reportable
payments made after the exchange. If withholding results in an overpayment of
taxes, a refund may be obtained.
EXEMPT HOLDERS OF OLD NOTES (INCLUDING, AMONG OTHERS, ALL CORPORATIONS AND
CERTAIN FOREIGN INDIVIDUALS) ARE NOT SUBJECT TO THESE BACKUP WITHHOLDING AND
REPORTING REQUIREMENTS. SEE THE ENCLOSED GUIDELINES OF CERTIFICATION OF TAXPAYER
IDENTIFICATION NUMBER ON SUBSTITUTE FORM W-9 (THE 'W-9 GUIDELINES') FOR
ADDITIONAL INSTRUCTIONS.
<PAGE>
To prevent backup withholding, each tendering holder of Old Notes must
provide its correct TIN by completing the Substitute Form W-9 set forth below,
certifying that the TIN provided is correct (or that such holder is awaiting a
TIN) and that (i) the holder is exempt from backup withholding, or (ii) the
holder has not been notified by the Internal Revenue Service that such holder is
subject to backup withholding as a result of a failure to report all interest or
dividends or (iii) the Internal Revenue Service has notified the holder that
such holder is no longer subject to backup withholding. If the tendering holder
of Old Notes is a nonresident alien or foreign entity not subject to backup
withholding, such holder must give the Company a completed Form W-8, Certificate
of Foreign Status. These forms may be obtained from the Exchange Agent. If the
Old Notes are in more than one name or are not in the name of the actual owner,
such holder should consult the W-9 Guidelines for information on which TIN to
report. If such holder does not have a TIN, such holder should consult the W-9
Guidelines for instructions on applying for a TIN, check the box in Part 2 of
the Substitute Form W-9 and write 'applied for' in lieu of its TIN. Note:
Checking this box and writing 'applied for' on the form means that such holder
has already applied for a TIN or that such holder intends to apply for one in
the near future. If such holder does not provide its TIN to the Company within
60 days, backup withholding will begin and continue until such holder furnishes
its TIN to the Company.
6. TRANSFER TAXES. The Company will pay all transfer taxes, if any,
applicable to the transfer of Old Notes to it or its order pursuant to the
Exchange Offer. If however, New Notes and/or substitute Old Notes not exchanged
are to be delivered to, or are to be registered or issued in the name of, any
person other than the registered holder of the Old Notes tendered hereby, or if
tendered Old Notes are registered in the name of any person other than the
person signing this Letter, or if a transfer tax is imposed for any reason other
than the transfer of Old Notes to the Company or its order pursuant to the
Exchange Offer, the amount of any such transfer taxes (whether imposed on the
registered holder or any other persons) will be payable by the tendering holder.
If satisfactory evidence of payment of such taxes or exemption therefrom is not
submitted herewith, the amount of such transfer taxes will be billed directly to
such tendering holder.
EXCEPT AS PROVIDED IN THIS INSTRUCTION 6, IT WILL NOT BE NECESSARY FOR
TRANSFER TAX STAMPS TO BE AFFIXED TO THE OLD NOTES SPECIFIED IN THIS LETTER.
7. WAIVER OF CONDITIONS. The Company reserves the absolute right to waive
satisfaction of any or all conditions enumerated in the Prospectus.
8. NO CONDITIONAL TENDERS. No alternative, conditional, irregular or
contingent tenders will be accepted. All tendering holders of Old Notes, by
execution of this Letter, shall waive any right to receive notice of the
acceptance of their Old Notes for exchange.
Neither the Company, the Exchange Agent nor any other person is obligated
to give notice of any defect or irregularity with respect to any tender of Old
Notes nor shall any of them incur any liability for failure to give any such
notice.
9. MUTILATED, LOST, STOLEN OR DESTROYED OLD NOTES. Any holder whose Old
Notes have been mutilated, lost, stolen or destroyed should contact the Exchange
Agent at the address indicated above for further instructions.
10. REQUESTS FOR ASSISTANCE OR ADDITIONAL COPIES. Questions relating to
the procedure for tendering, as well as requests for additional copies of the
Prospectus and this Letter, may be directed to the Exchange Agent, at the
address and telephone number indicated above.
11. INCORPORATION OF LETTER OF TRANSMITTAL This Letter shall be deemed to
be incorporated in and acknowledged and accepted by any tender through the
Book-Entry Transfer Facility's ATOP procedures by any Participant on behalf of
itself and the beneficial owners of any Old Notes so tendered.
<PAGE>
TO BE COMPLETED BY ALL TENDERING HOLDERS
(SEE INSTRUCTION 5)
PAYOR'S NAME: FIRST TRUST NATIONAL ASSOCIATION
<TABLE>
<S> <C>
SUBSTITUTE
FORM W-9
DEPARTMENT OF THE TREASURY
INTERNAL REVENUE SERVICE
PAYOR'S REQUEST FOR
TAXPAYER
IDENTIFICATION
NUMBER ('TIN')
AND CERTIFICATION PART 1 -- PLEASE
PROVIDE YOUR TIN IN TIN:
THE BOX AT RIGHT AND Social security number or
CERTIFY BY SIGNING Employer Identification Number
AND DATING BELOW
PART 2--TIN Applied
For / /
CERTIFICATION: UNDER THE PENALTIES OF PERJURY, I
CERTIFY THAT:
(1) the number shown on this form is my correct
Taxpayer Identification Number (or I am waiting for
a number to be issued to me).
(2) I am not subject to backup withholding either
because: (a) I am exempt from backup withholding or
(b) I have not been notified by the Internal Revenue
Service (the 'IRS') that I am subject to backup
withholding as a result of a failure to report
all interest or dividends, or (c) the IRS has
notified me that I am no longer subject to
backup withholding, and
(3) any other information provided on this form is
true and correct.
SIGNATURE DATE
--------------- ----------------
You must cross out item (2) of the above certification if you have been notified
by the IRS that you are subject to backup withholding because of underreporting
of interest or dividends on your tax return and you have not been notified by
the IRS that you are no longer subject to backup withholding.
</TABLE>
YOU MUST COMPLETE THE FOLLOWING CERTIFICATE IF YOU CHECKED THE BOX IN PART 2 OF
SUBSTITUTE FORM W-9
CERTIFICATE OF AWAITING TAXPAYER IDENTIFICATION NUMBER
I certify under penalties of perjury that a taxpayer identification number has
not been issued to me, and either (a) I have mailed or delivered an application
to receive a taxpayer identification number to the appropriate Internal Revenue
Service Center or Social Security Administration Office or (b) I intend to mail
or deliver an application in the near future. I understand that if I do not
provide a taxpayer identification number by the time of the exchange, 31 percent
of all reportable payments made to me thereafter will be withheld until I
provide a number.
SIGNATURE DATE
---------------------------- ---------------------------
<PAGE>
NOTICE OF GUARANTEED DELIVERY FOR
PANAVISION INC.
This form or one substantially equivalent hereto must be used to accept the
Exchange Offer of Panavision Inc. (the 'Company') made pursuant to the
Prospectus, dated , 1998 (the 'Prospectus'), if certificates for the
outstanding 9 5/8% Senior Subordinated Discount Notes due 2006 (the 'Old Notes')
are not immediately available or if the procedure for book-entry transfer cannot
be completed on a timely basis or time will not permit all required documents to
reach the Company prior to 5:00 p.m., New York City time, on the Expiration Date
of the Exchange Offer. Such form may be delivered or transmitted by telegram,
telex, facsimile transmission, mail or hand delivery to First Trust National
Association (the 'Exchange Agent') as set forth below. In addition, in order to
utilize the guaranteed delivery procedure to tender Old Notes pursuant to the
Exchange Offer, a completed, signed and dated Letter of Transmittal (or
facsimile thereof) must also be received by the Exchange Agent prior to 5:00
p.m., New York City time, on the Expiration Date. Capitalized terms not defined
herein are defined in the Prospectus.
The Exchange Agent for the Exchange Offer is:
THE BANK OF NEW YORK
By Hand or Overnight Delivery:
The Bank of New York
101 Barclay Street
Corporate Trust Services Window,
Ground Floor
New York, New York 10286
Attn: Reorganization Section
Facsimile Transmissions:
(Eligible Institutions Only)
(212) 815-6339
To Confirm by Telephone
or for Information call:
(212)
Attn:
By Registered or Certified Mail:
The Bank of New York
101 Barclay Street, Floor 7E
New York, New York 10286
Attn: Reorganization Section
DELIVERY OF THIS INSTRUMENT TO AN ADDRESS OTHER THAN AS SET FORTH ABOVE, OR
TRANSMISSION OF INSTRUCTIONS VIA FACSIMILE OTHER THAN AS SET FORTH ABOVE, WILL
NOT CONSTITUTE A VALID DELIVERY.
<PAGE>
Ladies and Gentlemen:
Upon the terms and conditions set forth in the Prospectus and the
accompanying Letter of Transmittal, the undersigned hereby tenders to the
Company the principal amount of Old Notes set forth below, pursuant to the
guaranteed delivery procedure described in 'The Exchange Offer--Guaranteed
Delivery Procedures' section of the Prospectus.
<TABLE>
<S> <C>
Principal Amount at Maturity of Old Notes Tendered:*
$
-----------------------------
Certificate Nos. (if available): If Old Notes will be delivered by book-entry transfer to The
Depository Trust Company, provide account number.
Account Number
----------------------------- -----------------------------
Total Principal Amount at Maturity Represented
by Old Notes Certificate(s):
$
-----------------------------
</TABLE>
* Must be in denominations of principal amount at maturity of $1,000 and any
integral multiple thereof.
ALL AUTHORITY HEREIN CONFERRED OR AGREED TO BE CONFERRED SHALL SURVIVE THE
DEATH OR INCAPACITY OF THE UNDERSIGNED AND EVERY OBLIGATION OF THE UNDERSIGNED
HEREUNDER SHALL BE BINDING UPON THE HEIRS, PERSONAL REPRESENTATIVES, SUCCESSORS
AND ASSIGNS OF THE UNDERSIGNED.
PLEASE SIGN HERE
X
------------------------------------------------------ ----------------
X
------------------------------------------------------ ----------------
Signature(s) of Owner(s) Date
or Authorized Signatory
Area Code and Telephone Number:______________________________
Must be signed by the holder(s) of Old Notes as their name(s) appear(s) on
certificates for Old Notes or on a security position listing, or by person(s)
authorized to become registered holder(s) by endorsement and documents
transmitted with this Notice of Guaranteed Delivery. If signature is by a
trustee, executor, administrator, guardian, attorney-in-fact, officer or other
person acting in a fiduciary or representative capacity, such person must set
forth his or her full title below.
PLEASE PRINT NAME(S) AND ADDRESS(ES)
Name(s):
-----------------------------------------------------------------------
- --------------------------------------------------------------------------------
Capacity:
----------------------------------------------------------------------
Address(es):
-------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<PAGE>
GUARANTEE
The undersigned, a member of a registered national securities exchange, or
a member of the National Association of Securities Dealers, Inc., or a
commercial bank or trust company having an office or correspondent in the United
States, hereby guarantees that the certificates representing the principal
amount of Old Notes tendered hereby in proper form for transfer, or timely
confirmation of the book-entry transfer of such Old Notes into the Exchange
Agent's account at The Depository Trust Company pursuant to the procedures set
forth in 'The Exchange Offer--Guaranteed Delivery Procedures' section of the
Prospectus, together with a properly completed and duly executed Letter of
Transmittal (or a manually signed facsimile thereof) with any required signature
guarantee and any other documents required by the Letter of Transmittal, will be
received by the Exchange Agent at the address set forth above, no later than
three New York Stock Exchange trading days after the date of execution hereof.
Name of Firm:
------------------------------------------------------------------
Address:
-----------------------------------------------------------------------
- --------------------------------------------------------------------------------
(Zip Code)
Area Code and
Telephone No.:
-----------------------------------------------------------------
- --------------------------------------------------------------------------------
(Authorized Signature)
Name:
--------------------------------------------------------------------------
(Please Type or Print)
Title:
-------------------------------------------------------------------------
Dated: , 1998
------------------------------------------------------------------
NOTE: DO NOT SEND CERTIFICATES FOR OLD NOTES WITH THIS FORM. CERTIFICATES FOR
OLD NOTES SHOULD ONLY BE SENT WITH YOUR LETTER OF TRANSMITTAL.
<PAGE>
PANAVISION INC.
OFFER FOR ALL OUTSTANDING 9 5/8% SENIOR SUBORDINATED DISCOUNT NOTES DUE 2006 IN
EXCHANGE FOR 9 5/8% SENIOR SUBORDINATED DISCOUNT EXCHANGE NOTES DUE 2006
TO: BROKERS, DEALERS, COMMERCIAL BANKS,
TRUST COMPANIES AND OTHER NOMINEES:
Panavision Inc., (the 'Company') is offering, upon and subject to the terms
and conditions set forth in the Prospectus, dated , 1998 (the
'Prospectus'), and the enclosed Letter of Transmittal (the 'Letter of
Transmittal'), to exchange (the 'Exchange Offer') the Company's 9 5/8% Senior
Subordinated Discount Exchange Notes due 2006, which have been registered under
the Securities Act of 1933, as amended, for the Company's outstanding 9 5/8%
Senior Subordinated Discount Notes due 2006 (the 'Old Notes'). The Exchange
Offer is being made in order to satisfy certain obligations of the Company
contained in the Registration Agreement, dated February 6, 1998, by and among
the Company and the initial purchasers referred to therein.
We are requesting that you contact your clients for whom you hold Old Notes
regarding the Exchange Offer. For your information and for forwarding to your
clients for whom you hold Old Notes registered in your name or in the name of
your nominee, or who hold Old Notes registered in their own names, we are
enclosing the following documents:
1. Prospectus dated , 1998;
2. The Letter of Transmittal for your use and for the information of
your clients;
3. A Notice of Guaranteed Delivery to be used to accept the Exchange
Offer if certificates for Old Notes are not immediately available or time
will not permit all required documents to reach the Exchange Agent prior to
the Expiration Date (as defined below) or if the procedure for book-entry
transfer cannot be completed on a timely basis;
4. A form of letter which may be sent to your clients for whose
account you hold Old Notes registered in your name or the name of your
nominee, with space provided for obtaining such clients' instructions with
regard to the Exchange Offer; and
5. Guidelines for Certification of Taxpayer Identification Number on
Substitute Form W-9.
YOUR PROMPT ACTION IS REQUESTED. THE EXCHANGE OFFER WILL EXPIRE AT 5:00
P.M., NEW YORK CITY TIME, ON , 1998, UNLESS EXTENDED BY
THE COMPANY (THE 'EXPIRATION DATE'). OLD NOTES TENDERED PURSUANT TO THE EXCHANGE
OFFER MAY BE WITHDRAWN AT ANY TIME BEFORE THE EXPIRATION DATE.
To participate in the Exchange Offer, a duly executed and properly
completed Letter of Transmittal (or facsimile thereof), with any required
signature guarantees and any other required documents, should be sent to the
Exchange Agent and certificates representing the Old Notes should be delivered
to the Exchange Agent, all in accordance with the instructions set forth in the
Letter of Transmittal and the Prospectus.
If holders of Old Notes wish to tender, but it is impracticable for them to
forward their certificates for Old Notes prior to the expiration of the Exchange
Offer or to comply with the book-entry transfer procedures on a timely basis, a
tender may be effected by following the guaranteed delivery procedures described
in the Prospectus under 'The Exchange Offer--Guaranteed Delivery Procedures.'
The Company will, upon request, reimburse brokers, dealers, commercial
banks and trust companies for reasonable and necessary costs and expenses
incurred by them in forwarding the Prospectus and the related documents to the
beneficial owners of Old Notes held by them as nominee or in a fiduciary
capacity. The Company will pay or cause to be paid all stock transfer taxes
applicable to the exchange of Old Notes pursuant to the Exchange Offer, except
as set forth in Instruction 6 of the Letter of Transmittal.
<PAGE>
Any inquiries you may have with respect to the Exchange Offer, or requests
for additional copies of the enclosed materials, should be directed to The Bank
of New York, the Exchange Agent for the Old Notes, at its address and telephone
number set forth on the front of the Letter of Transmittal.
Very truly yours,
PANAVISION INC.
NOTHING HEREIN OR IN THE ENCLOSED DOCUMENTS SHALL CONSTITUTE YOU OR ANY
PERSON AS AN AGENT OF THE COMPANY OR THE EXCHANGE AGENT, OR AUTHORIZE YOU OR ANY
OTHER PERSON TO USE ANY DOCUMENT OR MAKE ANY STATEMENTS ON BEHALF OF EITHER OF
THEM WITH RESPECT TO THE EXCHANGE OFFER, EXCEPT FOR STATEMENTS EXPRESSLY MADE IN
THE PROSPECTUS OR THE LETTER OF TRANSMITTAL.
Enclosures
2
<PAGE>
PANAVISION INC.
OFFER FOR ALL OUTSTANDING 9 5/8% SENIOR SUBORDINATED DISCOUNT NOTES DUE 2006 IN
EXCHANGE FOR 9 5/8% SENIOR SUBORDINATED DISCOUNT EXCHANGE NOTES DUE 2006
To Our Clients:
Enclosed for your consideration is a Prospectus, dated , 1998
(the 'Prospectus'), and the related Letter of Transmittal (the 'Letter of
Transmittal'), relating to the offer (the 'Exchange Offer') of Panavision Inc.
(the 'Company'), to exchange the Company's 9 5/8% Senior Subordinated Discount
Exchange Notes due 2006, which have been registered under the Securities Act of
1933, as amended, for the Company's outstanding 9 5/8% Senior Subordinated
Discount Notes due 2006 (the 'Old Notes') upon the terms and subject to the
conditions described in the Prospectus and the Letter of Transmittal. The
Exchange Offer is being made in order to satisfy certain obligations of the
Company contained in the Registration Agreement, dated February 6, 1998, by and
among the Company and the initial purchasers referred to therein.
This material is being forwarded to you as the beneficial owner of the Old
Notes carried by us in your account but not registered in your name. A TENDER OF
SUCH OLD NOTES MAY ONLY BE MADE BY US AS THE HOLDER OF RECORD AND PURSUANT TO
YOUR INSTRUCTIONS.
Accordingly, we request instructions as to whether you wish us to tender on
your behalf the Old Notes held by us for your account, pursuant to the terms and
conditions set forth in the enclosed Prospectus and Letter of Transmittal.
Your instructions should be forwarded to us as promptly as possible in
order to permit us to tender the Old Notes on your behalf in accordance with the
provisions of the Exchange Offer. The Exchange Offer will expire at 5:00 p.m.,
New York City time, on , 1998, unless extended by the Company.
Any Old Notes tendered pursuant to the Exchange Offer may be withdrawn at any
time before the Expiration Date.
Your attention is directed to the following:
1. The Exchange Offer is for any and all Old Notes.
2. The Exchange Offer is subject to certain conditions set forth in
the Prospectus in the section captioned 'The Exchange
Offer--Certain Conditions to the Exchange Offer.'
3. Any transfer taxes incident to the transfer of Old Notes from the
holder to the Company will be paid by the Company, except as
otherwise provided in the Instructions in the Letter of
Transmittal.
4. The Exchange Offer expires at 5:00 p.m., New York City time, on
, 1998, unless extended by the Company.
If you wish to have us tender your Old Notes, please so instruct us by
completing, executing and returning to us the instruction form on the back of
this letter. THE LETTER OF TRANSMITTAL IS FURNISHED TO YOU FOR INFORMATION ONLY
AND MAY NOT BE USED DIRECTLY BY YOU TO TENDER OLD NOTES.
<PAGE>
INSTRUCTIONS WITH RESPECT TO
THE EXCHANGE OFFER
The undersigned acknowledge(s) receipt of your letter and the enclosed
material referred to therein relating to the Exchange Offer made by Panavision
Inc. with respect to its Old Notes.
This will instruct you to tender the Old Notes held by you for the account
of the undersigned, upon and subject to the terms and conditions set forth in
the Prospectus and the related Letter of Transmittal.
Please tender the Old Notes held by you for my account as indicated below:
<TABLE>
<S> <C>
AGGREGATE PRINCIPAL AMOUNT AT MATURITY OF OLD NOTES
---------------------------------------------------
9 5/8% Senior Subordinated Discount Notes due 2006....
|_| Please do not tender any Old Notes held by you for
my account.
Dated: , 1998
---------------------------------------- ---------------------------------------------------
Signature(s)
---------------------------------------------------
---------------------------------------------------
---------------------------------------------------
---------------------------------------------------
Please print name(s) here
---------------------------------------------------
---------------------------------------------------
---------------------------------------------------
Address(es)
---------------------------------------------------
Area Code and Telephone Number
---------------------------------------------------
Tax Identification or Social Security No(s).
</TABLE>
None of the Old Notes held by us for your account will be tendered unless
we receive written instructions from you to do so. Unless a specific contrary
instruction is given in the space provided, your signature(s) hereon shall
constitute an instruction to us to tender all the Old Notes held by us for your
account.
2
